Merchant cash advances

Why banks are making it more difficult to obtain a business loan? More small businesses are turning to Merchant Cash Advance Providers for business funding.

Merchant cash advances

During the past several months banks commercial financing or lending has taken a downturn due to some adverse banking developments. These difficulties were greatly linked to losses on large commercial property loans resulting in higher loan delinquency rates. This ultimately led to a significant reduction in bank equity capital and a subsequent decline in small business financing.

Small Business Funding

So-called toxic assets caused banks to shrink habitual lending because of a shortage of capital. The rising number of ensuing home foreclosures caused a domino effect encompassing various investments that were related to home loans. These stealthy bank investments are known today as toxic assets; assets having lost much of their value.

Many small business owners are crying unfairness, since the consensus among them is that they were not the cause of these intricacies and are now unjustly suffering the consequences. As banks ceased making many loans (among them small business financing), the federal government provided funding in order to assist various banks so that their operations could continue. The logical outcome of such a move would be to have more funds available to resume normal lending by banks. However, to the contrary, banks were in fact hoarding cash to meet future financial commitments; among those, the ability to repay funds supplied by the federal government more expeditiously. This created a backlash of criticism by some individuals who claimed that these "taxpayers- backed funds" were being used to keep on dishing out excessive bonuses and compensation to their senior managers.

The impact on small business

Regardless of the veracity of these claims, small business owners were definitely feeling the brunt of the crisis. Unfortunately, due to the lack of normal business financing, many small business loan defaults will occur. Children entering a hospital or clinic are more vulnerable to the looming diseases and dangerous bacteria found there. An analogy can be drawn from the condition of the small business in the US. Small businesses are predominantly open to the elements of recessions, fiscal policy and the ups and downs of the banking sector. A particular study cited by the SBA indicates capital strain at small banks, happened to be mostly harmful to the performance of small businesses. In this regard, small business owners are now pressed to find alternative forms of financing (merchant advance loans for instance) for their operations.

What small business can do to offset these negative developments?

With the growing unwillingness of banks to provide business lines of credit coupled with their demands for collateral, many small business owners are resorting to merchant cash advance providers. They refer to this option as Plan B of their strategy goal. This in fact turns out to be an excellent means of obtaining working capital through the use of credit card processing. Paramount Merchant Funding is a dependable source of merchant cash advances in the New York area. These firms help business persons who would otherwise be hard pressed to obtain loans through the traditional methods. Without doubt, companies like these have been instrumental in stimulating employment nationwide.

Merchant cash advances

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