If you own an auto repair service business and you have been looking for cash to expand, good luck. Many businesses, not just auto repair have felt the frustration of the banking woes in a way that makes it difficult for any business to get cash. Banks just aren’t lending. So little that it has turned into a major talking point for pundits, voters, and politicians on the campaign trail with many asking the gov’t to step in and somehow get money flowing to small businesses.
Banks aren’t lending for many reasons. The primary reason is the substantial losses most banks have taken by underwriting bad or risky loans. They basically lent money to people that had no business getting money. The housing market had a spillover effect that impacted the rest of the financial markets and now they are gun shy.
So what do you do if you are a small auto repair business and need to add another bay to your garage. You know this bay will increase revenues dramatically but you need the money to do it.
What are your funding options?
Go to a bank. You can but the outcome will likely be no. If you go that route, expect the banker to require at least a 725 FICO and two years of tax returns.
Friends and family. You may not have a partner now but you will if you take this route. Even though you only wanted a loan they will for some reason think they now have equity in your business. So unless you want a partner, think again.
Merchant cash advance. This can be a great option for many businesses. It is not a loan but more of an advance of future credit card sales. These companies take a look at your credit card sales and based on what you processed in the past few months, use that as an indication of what you will do in the near future. They will usually lend you an amount equal to your monthly volume. They will take a small percentage out of your daily credit card sales to pay it back. The amount is usually between 8-25% and is typically paid back in around 6 months.
Underwriting guidelines
The underwriting guidelines for a merchant cash advance are very simple. Typically they include providing the following:
Four months of merchant statements
Four months of bank statements
Copy of business lease
Copy of driver’s license
That is about it. Some companies can have your funds to you in just a few days with much less hassle than a bank. So if you need funds, consider a merchant cash advance.
Rob Labutis is a frequent writer on the subject of merchant cash advance and business cash advance. He has a deep knowledge of the industry which can be helpful to get a better understanding of the underwriting process and costs associated with these products.
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