Business Cash Advance and Business Financing Choices

By: Stephen Bush..

Although long-term business loan options are frequently appropriate, there are several short-term working capital and commercial mortgage possibilities that will be much more effective for business owners in achieving successful commercial financing and credit card processing results. Short-term working capital business loan options are often overlooked because of an apparent preference for long-term business financing.

Short-Term Commercial Loan and Credit Card Processing Choices

The most critical short-term commercial financing techniques typically include short-term merchant cash advance and credit card processing programs and commercial real estate loan programs. Both working capital management approaches are frequently a source of confusion for business owners.

Commercial Real Estate Loan Short-term Programs

A long-term commercial mortgage is possible for most businesses that involve commercial property. Businesses should not normally be totally financed with short-term funds. When a longer-term commercial property loan is desired, a long-term commercial mortgage of at least 15-20 years is suggested.

There will probably be many business financing circumstances for which a longer-term commercial mortgage is not desirable for the business. In these situations a business owner should understand that there are workable short-term business loan alternatives.

When to Consider a Short-Term Commercial Mortgage Business Loan

For business owners who expect to sell or refinance their commercial property within one to five years, it is especially advisable to explore short-term commercial mortgage loan programs. The most appropriate short-term working capital loan will have little or no prepayment penalties and "lockout" fees normally associated with longer-term commercial mortgage loans.

While we will not attempt to describe the technical aspects of commercial loan prepayment fees and lockout fees in this article, we will note that the absence of such fees in most short-term commercial mortgage loan programs is a very positive aspect of these short-term working capital management options. The lack of such penalty fees could easily translate to a savings of 10% to 30% or more if a business owner needs to sell their commercial property during the time period which would have triggered prepayment fees and lockout fees in a traditional longer-term commercial mortgage loan.

Limitations of a Short-Term Commercial Mortgage Business Loan

Substantial penalty fees will often be avoided with a short-term commercial real estate loan, but there are some important trade-offs to understand beforehand if a business owner wants a shorter-term commercial mortgage loan. When a short-term business loan is a possibility, the likely business financing will not include special purpose businesses such as funeral homes, the interest rate will frequently be in the range of 12% to 13% and the loan-to-value will typically less than 70%.

Best Possibilities for a Short-Term Commercial Mortgage

The maximum time period for a short-term commercial mortgage is usually three years. The most likely candidates for a short-term business loan are mixed-use, retail, office, multi-family and warehouse properties.

Short-Term Commercial Mortgage Business Loan Lender Limitations

There are numerous problems to avoid with short-term commercial mortgage programs, so selecting a lender is critical to business owners wanting a short-term business loan. Unfortunately there are very few lenders who are capable of executing short-term business financing successfully.

Credit Card Processing and Credit Card Financing

An underutilized commercial financing strategy for businesses is possibly the best commercial loan strategy to secure cash for their business: a business cash advance using credit card processing. Credit card financing and credit card processing are effective business financing tools that are usually overlooked by any business accepting credit cards as a customer payment method.

Retail and service businesses accepting credit cards can usually benefit from this business loan program. This credit card factoring strategy uses monthly sales volume and credit card receivables to secure a business cash advance.

Credit Card Financing Based on Credit Card Processing Programs

This business financing technique is called "credit card financing". Some business owners might have used a business loan technique referred to as "receivables factoring" to sell future receivables at a discount and receive immediate cash.

Many service and retail businesses cannot document business receivables to obtain a business loan. Businesses such as bars and restaurants do not typically have receivables to use for business financing.

Many smaller businesses do have credit card sales activity and sales volume. The credit card sales activity becomes a financial resource for business financing. A working capital advance of $250,000 to $300,000 and higher is possible based on credit card sales and monthly sales volume.

A business financing merchant cash advance must usually be paid back in less than 12 months. For business owners that want to renew the working capital cash advance program, it is typically possible to get more working capital after payback of the initial advance.

Lender Problems and other Limitations with Credit Card Factoring

There will usually be only a few business financing sources that are regularly successful at executing the credit card financing and credit card processing. There are key difficulties to avoid with a working capital cash advance, and selecting an effective funding source is essential to any merchant needing a merchant cash advance.

Copyright 1995-2007 AEX Commercial Financing Group and Stephen Bush. All Rights Reserved.

Article Source: Loan Info Center

Stephen Bush provides candid advice for commercial loan - commercial mortgage and business financing - business opportunity situations
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