Business owners, especially thos that ow retail establishments, are having a hard time finding a source to get a loan for business. Many banks are holding onto their capital and making only the absolute minimum of loans as they attempt to recover from still-record losses on commercial loans.
However, there are options out there for the intrepid retail owner who needs working capital to continue operations or expand to cover a new area or market.
- Bank/SBA Loan – This type of loan is always going to be the best deal for any small or medium sized business owner. The rates are the most competitive and the terms are usually some of the best in the commercial marketplace. Unfortunately, many retail businesses don’t qualify for this type of loan given the current credit conditions, and the credit of their businesses. Check your local bank or the SBA website for more info. You will also need to provide a high level of documentation and be prepared for 60-90 days before funds are disbursed.
- Merchant Cash Advance– These “advances”, usually made by a retailers credit card processing company, are easy and require low documentation. They also usually fund quickly. Unfortunately, the interest rates on these “advances” can be as high as 50%. Many merchant cash advance companies also require a retailer to switch processors and purchase new swipe equipment as a condition of receiving funds. High upfront fees and high daily payment rates can also be a financial nightmare. A merchant cash advance is not regulated as a loan, and therefore there is no upward legal limit on rates and fees being charged.
- Credit Card Receivable Financing – This business loan combines the quick funding and low documentation advantages of a cash advance with interest rates that are 50-80% lower on average. There are no upfront fees, no requirements to purchase equipment, and this regulated business loan usually funds in 7-10 business days with loan amounts up to $500,000 and credit scores as low as 550.
In today’s challenging business world, it is hard, but not impossible, to get a loan for business, even if your business credit situation is less than perfect. The important thing to remember is to read all documents before signing, and make sure you know exactly how much your capital will cost you once you get approved. Don’t only look at the daily payment rate, make sure you calculate what the total cost of funds is and offset this with what revenue, if any, the loan will help bring in.