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Cash Advances are Replacing Bank Loans & Commercial Lines of Credit

I walked into my meeting with the bank loan officer to get a commercial line of credit for my business and after that meeting it continued to reinforce to me that the days of small businesses getting a business loan is over. Even the bank loan officer agreed that his hands are so tied now with regulations that in order for him to loan money to a business, he needs to have 100% liquid collateral to back up the loan.  “If I had cash lying around, I told him, I wouldn’t need the loan”.

A PERFECT PERSON TO GIVE A BUSINESS LOAN TO

I have an 800 credit score (super high), I have a sizable net worth, and I have been running my own business for 20 years, successfully. The fact of the matter, the loan officer told me, is that the days of a bank giving a small business loans based on a business plan, a great credit score or even based on character is over. They will only give a line of credit that matches exactly the liquid collateral you have and you can’t take your collateral for a multiplier effect (so if I have $100,000 in collateral and ask the bank to give me $150,000, they will not do it).

WHY LENDING HAS CHANGED

The reason why lending has changed is because of the great recession and federal regulators don’t want to see defaults anymore. All loans must be backed up by collateral so that if the loan goes bust, the bank has it tied to an asset which will allow the bank to recoup its losses. In addition, regulators force banks to not overvalue the assets like it did with houses that appraised for ridiculous values in the past.

TO FILL THE VOID IN COMES CASH ADVANCE BUSINESSES

Cash advance businesses, like Financing Solutions (www.fundmypayroll.com), are now the companies funding small businesses and the benefit to the small business is that it is faster, easier and requires little to no assets. A cash advance company is providing a fast business loan that even when the banks were giving out “Character” loans, still took forever to get approved and if you have ever dealt with a traditional Factor, you know that that is a long term commitment. 

WHAT A CASH ADVANCE BUSINESS LOOKS FOR TO APPROVE YOU

A cash advance business wants to hear your story. It wants to hear why you want the money, what your track record is, what your business results have been, how you are going to pay the financing back, how much receivables do you have outstanding. These are all the questions that a bank might have asked 100 years ago.

WHAT YOU WILL NEED FOR A CASH ADVANCE APPROVAL

All cash advance companies are different. Some will do a telephone interview with you and some will ask for you to fill out a questionnaire first. Most will want you to send bank statements, tax returns and other business documents but that usually is only after you have been approved. If you are going to be interviewed you should know your yearly sales, net profit, accounts receivable (who owes you money), accounts payable ( who you owe money to), if you accept credit cards how much monthly CC you usually see and if you know what your personal credit score. Almost all of the questions will be easy to answer and in most cases you will get your approval in 24 hours with funding in 3 days or less. In some cases the interview, approval and funding can be done in 24 hours.

PAYING BACK THE FINANCING

There basically two types of cash advance companies. Merchant funding companies will take a predetermined/agreed % of your credit card transactions where as other cash advance companies will  do an automatic small, daily payment from your bank account for an agreed period of time. In both cases the money provided to you should only be used for a short period of time to really help your business through a problem. The financing isn’t as cheap as a bank but considering the time a bank takes to make a decision, the approval process that they now use, and the fact that small business really have nowhere else to turn, cash advance companies are where small businesses are turning to for funds.

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