Small Business Bank Loans Waning

According to the results of the NSBA’s 2008 Small & Mid-Sized Business Survey, the number of small businesses using bank loans for financing has reached a record low point. The NSBA’s Survey data shows that in 2008 only 28% of the polled small business owners used a bank loan to answer working capital needs, down from a high of 45%, set back in 1993.

What does this mean?
Based on this number, it is easy to infer that getting money for a small business is increasingly challenging for many business owners. Or, at the very least, it suggests that traditional lending channels are not answering all the needs of today’s small business owner.

In either case, it means if you are a small business owner seeking capital, you will most likely need to look beyond the traditional methods of business financing. Knowing more about all of your options will help you to move forward when (or if) the battle to secure a traditional method of financing is threatening to slow your momentum.

Why is it changing?
Modern businesses are unique, and their needs diverse. The old school, “one-size-fits-all” approach to handling business costs is not always going to work anymore. Bank loans can be restrictive and many businesses will simply not be able to qualify.

New business models require a fresh approach to some common situations. This, in turn, is encouraging more business owners to look beyond the banks to discover better ways to handle working capital needs.

What should a business owner do?
The best plan is to be prepared. This means, if the stats are saying that bank loans are becoming harder to arrange, the smart business owner is going to know what other capital options might be applicable.

A Merchant Cash Advance is one answer that many owners find to be flexible and appropriate to many situations. Knowing when and how to use this funding is one way to create a distinct business advantage. When a bank loan is not the best option on the table, perhaps a Merchant Cash Advance offers a smart way to handle your business’ immediate working capital needs.

What do you think? Have you personally found it difficult to get a bank loan for your small business?

Using a Merchant Cash Advance to Fuel Growth

While there can be many uses for a Merchant Cash Advance, the best are those that directly fuel small business growth. Ideally, you want to use the money you receive to create or build on an opportunity to make more money.

There are many examples of this seen in published Merchant Cash Advance success stories. If you own a restaurant, you can add seating, or perhaps expand your hours of operation. Add a new piece of kitchen equipment or expand the floor plan to accommodate more guests. Because of the increasing costs of food and fuel, many restaurateurs are considering menu revisions or concept repositioning to stay competitive and profitable in today’s economy.

A retail store could expand product lines or invest in new marketing. Create advertising that brings in new customers, or offer new services to your existing clientele. Increase the amount of products in your store or add another check-out counter.

An automotive repair or after-market installation business could invest in new equipment or training that offers more services to the clientele. It could buy a new truck and radios or cell phones to provide emergency services.

In each example, the business invests in a way to increase revenue generating activities, and this is a smart way to spend the proceeds of a Merchant Cash Advance. Use the money to create or take advantage of an opportunity and you are typically using it wisely.

Look At the Long Run
If you are considering applying for a Merchant Cash Advance, as like any important decision, you should identify how it will benefit you in the long run. Merchant Cash Advances are more expensive than other forms of raising working capital, such as loans or leases. If a long-term return is not clear, you may want to reexamine your motives for choosing this option. It’s best to match your need to the right type of funding whenever possible.

A Merchant Cash Advance is best used to invest in progress. Because this is not typically the most inexpensive option to evaluate, the ends should clearly justify the means. When they do, a Merchant Cash Advance can often be used as a smart and simple solution for securing the capital to begin many growth strategies.

What do you think?
Are estimating long-term results an integral part of your project planning?

How Would You Spend It?

How would you spend the proceeds of a business cash advance? It certainly is a question worth considering. According to the results of a recent survey conducted by the NSBA: “Businesses impaired by an inability to access financing would grow their business if additional capital was available.” [view a pdf of the entire survey here]

The study goes on to identify the first three actions business owners would take if they were able to obtain additional working capital:
36% would invest in advertising
30% would hire additional employees
24% would invest in new plant or equipment
19% would increase inventory
18% would invest in ecommerce
13% would invest in increasing benefits to employees
11% would invest in research and development
8% would open new stores or branches
(statistics taken from 2008 NSBA Small and Mid-Sized Business Survey)

These results show that many small business owners are thinking about growth strategies in 2008, and many are simply waiting for a good way to address the costs of getting started. A Merchant Cash Advance could be just the thing to bring these strategies to life.

Investing in Tomorrow, Today
The smartest way to use a Merchant Cash Advance is to invest in growth strategies. In making the business stronger (through new inventory, additional employees, new equipment) and more accessible (through advertising, etc.) there is a greater chance for increased revenue. With a Merchant Cash Advance:

• You can act quickly. Some strategies have a timely aspect and a Merchant Cash Advance application won’t bog you down in paperwork. Keep it simple, and you can keep moving forward.
• You are free to spend the money on any business need. If you have envisioned a detailed growth strategy, a Merchant Cash Advance could handle one aspect of your plan or could cover the costs of various related efforts.
• You can access cash as needed. A Merchant Cash Advance is a potentially renewable source of working capital. So if you need some money now and more money later, a Merchant Cash Advance can make it easy to get what you need. Have cash in hand in as little as 72 hours if you are using an approved processor.

Be Careful, and Have a Plan
A Merchant Cash Advance, like any method of raising working capital, works best as a part of a carefully thought out plan…and it is not for every business.

Before any business enters into any working capital arrangement, it should lay out a plan for what the arrangement will cost the business, to what purposes the funds will be put, and what the business expects to get. If the plan anticipates (in detail) an attractive “ROI” or return on investment after taking into account all of the expenses associated with raising the working capital, then the working capital arrangement is much more likely to strengthen the business over the long term. This helps to justify the costs of the capital raise.

It’s true that it often takes money to make money. Though some small business owners think that a loan may be the only option to get working capital, it often pays to dig a little deeper. If you are processing regular credit and debit card sales, realizing your 2008 growth strategies may be closer and easier than you think.

What do you think?
If money were no object, what would your small business do to grow?