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How to Garner Small Business Financing in a Dour Economic Climate

These are, without question, the worst economic times the country has faced in a very long time. And, especially given that the nature of this “Great Recession” was fueled in large part by a runaway credit bubble that eventually collapsed in on itself, it is little surprise that many people and businesses with good credit are finding it difficult to obtain financing for a variety of reasons. Whether your revenues are up or down, a loan at the right time can be just want your small business needs to take advantage of a growth opportunity, or to weather the current fiscal storm that is ravaging so much of the world’s economy.

One of the problems stems from the fact that banks and lenders are sitting on liquid money because they are deathly afraid of further economic contraction, coupled with the fact that there may still be a glut of foreclosures in the offing. Remember, all of those five year ARMs are one of the root causes of this bubble, and the peak year for signing ARMs by suspect home buyers was 2006. And those buyers in 2006 were among the shadiest, and the no look loans that they took out were among the worst both structurally and documentation wise. And then, of course, add five years to 2006 and what do you get?

That’s right, a fairly bleak home market and lending forecast for the year 2011.

With that said, though, there are a number of ways to obtain financing, but be forewarned that it will cost borrowers, even those with great credit, substantially more in interest than it ordinarily would. Also, there are number of government loan programs available, but depending upon your situation, that may be a worse proposition than taking out a high interest private small business loan.

And, remember that in hard economic times like this, do not take out financing to meet basic operating expenses such as payroll, operation costs or production costs. Use financing for expansion purposes, to purchase new equipment that will streamline the operations of your business, or if you can find a low enough interest rate, to transfer existing debt.

If you find that you need a loan to cover operating costs, strongly consider slashing your operating costs instead. Because, if business does not pick up, and I point to the 2006-2011 ARMs point referenced above, you will not only be stuck with the same bad financial situation that you are in now, but you will have the added costs of servicing the loan.

The New Wave in Small Business Financing

This is HUGE. This is tsunami in the making. Small business financing is on the brink of tapping into billions and billions of dollars that previously shut it out.

The signs are quiet. One venture capital firm announced that it had just funded an internet startup for $250,000. Another announced it had just brought in a new partner whose previous background was in angel investment. A third announced it would be sending a senior partner to a business plan competition.

Don’t get me wrong. Every one of these things has happened many times before. But this time it is different. This time they are announcing it.

One of the closest guarded secrets in venture capital is that venture capital firms do indeed make small investments, and have for as long as anyone can remember. These small loans are typically made to startups that just need a jolt of cash to get to the first stage, to give them breathing room to get a prototype made or have a marketing study completed. The venture firm typically takes a first option on future investments for these small investments, plus a bit of stock or interest or whatever.

The reasoning behind the small investments was never to make money, and these investments didn’t make money. If everything worked out okay, the small company could apply for significant venture funding when the time came.

Well, now there’s a new kid on the block.

This time the expectation is that these small investments WILL make a return, a goodly return in fact.

This time the small investments are aimed squarely at internet startups. That’s right – that industry that drove the venture capital industry to the dotcom disaster is back with a vengeance. Seems like the internet and venture capital are two lovers that just can’t stay away from each other for too long.

And this time it makes a lot of sense. Most internet businesses can begin easily with way less than a million in investment. Some need no more than a couple of programmers and a marketing person. With the right concept, the success comes rapidly and the internet business becomes self-sustaining in no time at all. And, if you take a look at the internet roster, you will see a long list of very successful companies that started on next to nothing.

This is the success that the venture capital companies are going after. Percentage-wise, there are huge profits to be made.

Smart venture capital companies are streamlining the application process. One, in fact, only requires the approval of one partner for investments up to $250,000.

The business plans for these internet companies will be like none other. No 200-page bound treatises here. Nope.

Short. Sharp. Nimble. A presentation that demonstrates the entrepreneur’s grasp of the industry and its rapidly evolving nature is the business plan of the day.

An online demo is essential.

And the power to turn all the equipment off and look the venture investor in the eye is also essential.

Those entrepreneurs who can provide vision and knowledge are sitting in a pot of jam. There are literally billions and billions of dollars waiting for you. Go get it.

Merchant Cash Advance – An Alternative To Small Business Financing

Generally, small businesses look for different sources of financing and sometimes there are chances that they might be rejected of a bank loan. In such a case, the merchant cash advance can be the great alternative to them. If the business is in immediate need for cash and if there is a cash flow problem, this can be the great alternative to them. Even though, some years ago, banks were somewhat liberal, after the recession, credit has gotten tighter. Recently, the banks, irrespective of whether they are small or large, are recommended to increase their lending to small businesses for stimulating the economy and to speed up their recovery process. Do you know, how a merchant cash advance works? Let us find here:

When a company gets a merchant cash advance, the trade is something connected with the procurement and selling of future credit card income. Here, no regular fixed payments will be required by the company. A certain percentage of money from the credit card sales is collected on a daily basis by the lender. The collection will continue until the lender gets back the money they have given along with the premium. Generally, the financier will try to collect the advance money within a year.

One important thing that attracts companies towards this option is that, when they have a slow sales, they will be making a lower level of payment as their credit card income will be lower during this period. Another feature is that there is no due date pressure for the borrowers. It can be paid off when enough credit card sales are made and also no collateral security is needed to get this type of finance.

Actually, it is not a loan and it is just an advance of money against the future credit card sales. Attractive merchant cash advance rates are provided by some financing companies for helping out small businesses, who can pay off the money when their credit card sales increases. They provide this type of financing under different packages for smaller businesses to select from. Some of them are offered at very low rates like 1.25-1.29 and even at the rate of 1.39 and these rates depend on the package selected by the small business owners.

So, select a company that offers attractive merchant cash advance rates and enjoy a considerable return from the proceeds. When you are in immediate need of some cash, this can be a great alternative.