Merchant Capital - Obtain The Best Provider Of Merchant Capital

Common sources of merchant capital have been gutted by the economic recession of the past three years

. Many lenders have either ceased operating, or have reduced 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 entrepreneurs credit report has significantly deteriorated as they deal with with less customer traffic and increased costs associated with carrying overhead and inventory. However, to see the Internet, one would think that a plethora of options are out there. The question is, for the average merchant, how cost effective and prudent are these choicesin 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 payment history. If the business is not carrying a high debt load, these loans are an option. However, the interest expense and fees may be much higher than a regular commercial bank loan. Check with your local commercial mortgage lender.

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. Disbursements can ocurr in as little as 7 days. However, the merchant may also have to switch credit card processors, pay for equipment and pay factor (interest) rates as high as 50% for the loan. The money 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 situations 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.

by: Neal Coxworth

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