Merchant Capital - Locate The Best Type Of Merchant Capital

Common sources of merchant capital have been reduced by the economic fallout of the past several years

. Many lenders have either ceased operating, or have withdrawn their credit lines and approval standards to the point where the vast majority of applicants do not posses the credit quality for approval. Added to this fact is the reality that many retailers credit history has significantly deteriorated as they stufggle with less customer traffic and increased costs associated with carrying overhead and inventory. However, to see the Internet, one would think that a host of options are out there. The question is, for the average merchant, how cost effective and good are these optionsin terms of replacing the traditional sources of merchant capital they once had?

Hard Money Loans - These types of loans may be a great choice for those merchants or business people who are long on equity in the business, but short on good credit history. If the business is not carrying a high debt load, these loans are possible choice. However, the interest rates and fees may be commensurately higher than a large commercial bank loan. Check with your local commercial mortgage banker.

Mezzanine Financing - For small and medium public or private companies that have issued stock, this is akin to a second mortgage, or secondary loan secured by the stock of the company. This can be a useful choice for those companies that qualify. Check with a commercial mortgage or specialty financing source

Merchant Cash Advance- These high rate, high fee, unregulated "advances" have one main advantage in that they are quick and require relatively low documentation. Advances can ocurr in as little as 7 days. However, the merchant may also have to switch credit card processors, purchase equipment and pay factor (interest) rates as high as 50% for the money. The advance is secured against future credit card receivables.

Credit Card Receivable Financing- This alternative to the Cash Advance features quick fundings with interest rates that are normally 50% less expensive on average with no upfront fees and no requirements to switch card processors or buy equipment. Tough credit scenarios can be worked with and working capital loan amounts of up to 500K are available.

Retailers and entrepreneurs will need to really do their homework before selecting the merchant capital source that is right for them. With many claims and counter-claims being made on the Internet, asking the right questions is key before making any decision that could have long term consequences to health of your business.

Merchant Capital - Locate The Best Type Of Merchant Capital

By: Neal

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