Today a very successful business owner from Key West Florida worked with us to get a cash infusion for his business to help bridge him for the next two weeks until the Holidays hit and the Cruise season starts. The Owner has an internationally renowned dessert shop and has been showcased and featured on several Reality Shows as well as won National contests for his specialty products. We spoke today about the frustration he has faced in applying for traditional financing through financial institutions that he has long standing relationships with. I liked his comment when we were talking about small business loans. “The small to medium business owner has a better chance of melting a pile of rocks by staring at them, than he/she does getting a bank to loan them cash.”
Fast Merchant Advance has been part of the Merchant Cash Advance industry almost from the inception of the alternative working capital programs. In those days it was just a few of us with very finite amounts of investment dollars. Today we have major institutions like Wells Fargo, Bank of America and the largest Hedge Fund companies on Wall Street investing their resources. For them its an easy decision, much lower risk of default then a traditional loan because of how the payback is structured. Also they waited many years to watch how companies like Fast Merchant Advance progressed, we were the beta tests and pilot programs for them. A merchant seeking working capital today can go through the tenacious process of applying for a business loan and expect to receive funding in about 45 days IF they can get approved. Our program offers a 75% approval on every submitted contract within 3 days. We have 4 essential requirements for approval:
- A FICO score above 500
- Current with Landlord
- Open tax liens must be on a re-pay program.
- Bankruptcy or foreclosure must be closed for at least 12 months.
To put things into perspective we require 6 months credit card processing statements and 4 months of bank statements plus a one page application for submitting a request. A Bank or traditional financial Institution has a litany of contracts, required documents, and forms that needs to be filled out, that it becomes a job onto itself just to get through everything. And the bottom line is if a Merchant doesn’t have at east a 650 plus credit score, 300% collateral, a strong personal guarantee signer, and a clean record from ANY prior bankruptcy, liens, or foreclosures they don’t really stand a chance!
(By the way, unlike a Bank we do not need any collateral, traditional personal guarantee signers, or impeccable credit history track record.)
So lets address the “Elephant” standing in the middle of the room.
1) “BUT THE COST OF A CASH ADVANCE IS SO EXPENSIVE, ITS NOT FAIR TO THE MERCHANT!”
Ignoring the fact that Factoring is a concept that our great grandfathers invented and used to build the corporate infrastructure of our great country 150 years ago, around the time when the Industrial revolution began. Instead lets look at a more modern example:
If you happen to be a business owner reading this blog right now, I want to ask you to answer me truthfully on this question. — If I took a $100.00 bill out from my wallet right now and handed it to you and said. “Would you sell me $125.00 worth of Pizza’s if I came into your shop 8 months from today’s date in exchange for this $100.00 bill right now?” The value of that $100.00 put to use today versus the actual food costs of the $25 “add-on” (which is about $5) makes it a no-brainier. So we simply take that to the next level and say, “How about if I handed you $100,000.00 in cash right now in exchange for $125,000.00 of food 8 months from now?”
2) “YOU ARE TAKING ADVANTAGE OF A DESPERATE MERCHANT WITH THOSE HIGH RATES!
So here is the reality – If a company is behind in rent, has a history of ending bank balances always in the red, is not paying suppliers, has a FICO score of under 500 and has a tax lien over them we will not give them a merchant cash advance.
Its not that we ONLY work with companies that are solvent and solid, on occasion we will approve a merchant that is behind on rent and we then send the cash advance directly to the Landlord to pay the rent off – or we wire the money to the IRS to pay off the tax lien for the merchant.
Our ideal merchant is a business owner that is looking to grow their business by buying more inventory, invest in a solid marketing and advertising campaign, or expanding the business premises or opening a new location. It takes money to make money, and it is in our interest to ensure we only provide funding to merchants that have a good chance of success. If they fail, we don’t get paid. So we take the risk assessment very seriously.
Yes, if you compare us to a traditional lending source we look very expensive, but that’s comparing apples to oranges. Our program will not work for everyone, but we have many success stories that resulted in the difference between a merchant filing Chapter 11 or keeping their doors open.
In the case of my friend in key West, we took his call last Friday and he will have $20,000.00 in cash in his hands by the end of the day tomorrow. He knows it’s expensive, in fact he said to me, “I understand this is hard money.” But he also knows that he will make a better return on it when the orders start slamming him for pre-Thanksgiving and he has the supplies needed to meet that demand.
He sad to me, “4 years ago when my wife and I were struggling to get by we would cry ourselves to sleep at night worrying how we would make it through another week paying employees and meeting our bills. Today I can tell you last year we did over $1.3mm in sales. If we had to rely on getting working capital from a Bank I can tell you now, Both her and I would be working regular jobs on some one else’s payroll!”
At the end of the day, our product has grown from a small microcosm industry 10 years ago to a major player in the re-building of our nations core economy. We get the money into the hands of the people that need it to grow business.