If you’ve read any content on the First American Merchant Blog or Website, you’ve seen us tout the fact the merchant cash advances are a lot more hassle-free than traditional bank loans. Not only is there less paperwork and turnaround time, but a higher chance of approval.
This might lead you to wonder why banks won’t support small businesses. Sure, there’s more risk, but that usually pays off, doesn’t it?
We’ve put together some information so that you can see further into banks’ reasoning when it comes to rejecting small business loans.
Banks loan money so that they can profit off the interest. This being the case, they only lend to people and businesses that they deem as a good investment. They want to make sure they’ll get the money they lend back, along with the interest owed.
In today’s economy, everyone seems to think they can run a business, even if they can’t. This increase in entrepreneurs hasn’t led to an increase in success, which means that a higher percentage of small businesses will fail. Banks loan money based on risk factors. With the current economy, small companies are a high risk. That means that unless you have a history of financial success, or some super compelling aspect of your business, you are less likely to obtain a loan than in years past.
So why do we advance money to small businesses? Well, part of it is because merchant cash advances aren’t loans. There is no interest, just a fee. This means that across the board, it’s easier to predict how much we will get back. With no minimum payments, it is easier for business owners to pay back the advance at a rate convenient for them. They pay more when sales are high, and less when sales are low.
We do take a risk. If the company fails, we stand to take a loss. But merchant cash advances aren’t meant to be a desperate measure. We strive to work with our customers so that they have a pleasant experience and want to take money out again when necessary. We want to see businesses grow and become more successful, so we give our customers the information they need to determine if they can really afford the advance and if it’s the right choice for them.
Running a small business is a lot of work. Sometimes you just don’t have the financial history or credit requirements that the banks want. Or maybe you just don’t have the time to wait for the bank to decide if they’re willing to give you a chance. That doesn’t mean you can’t get your money. Look into our merchant cash advance options and other business financing plans. We understand small businesses and do our best to make sure everyone ends up happy.