Categories
Lending Merchant Cash Advances

Merchant Cash Advances

Merchant Cash Advances (MCA) have been an available form of financing for years now.  They are not your typical bank financing but can provide valuable cash flow to a business quickly and on a short-term basis.  In this environment of COVID, banks have become more conservative and retail store locations are under more scrutiny, this form of financing can prove to be a difference maker.  In many instances, to apply for an MCA, a 1-page application is required, verification of 2-3 months of bank statements and a most recent merchant statement are all that is needed to start the process.

MCA’s are not a loan but an advance lump sum payment in exchange for future credit/debit sales.  The lender will request bank statements to evaluate the business cash flow, determine the funding amount and a repayment plan.  Typically funding on this type of financing can be completed in 48-72 hours.  Repayment plans are a daily debit to the business account for a specific dollar amount, for a set number of days/months.  The language associated with MCA’s is not what you would see in traditional bank lending either.  Instead of interest rates you will likely see buy and sell rates or factor rates.  An example would be as follows: you may receive a factor rate of 1.4, which would translate to every $1 received by the business would pay back an additional $0.40 for the use of the funds. 

What has driven the popularity of MCA’s is larger banks have started to shift away from these smaller loans.  An unfortunate consequence of the 2010 Dodd-Frank Act was that small business lending became less profitable for banks.   Traditional bank lending is going to evaluate business cash flow, credit scores and collateral.  That process could take a month or more and requires a significant level of effort to get there.  When options for small businesses are limited, like they are today, all options should be on the table. 

The key for any business is the level of trust you have for those you are working with.  Still Water Solutions has the experience and the network that we trust to help you.  We are always available for a conversation to discuss what your needs are and the appropriate path.  Having worked with business owners for years now we know your time is valuable, and we want to help you make determinations as quickly as possible. 

Please do not hesitate to reach out for a conversation.  We want to be an asset to you and your business. 

If you would like to apply for a financing request please visit here.

Categories
Lending

Business Loan Applications – The Basics

Anyone that has ever applied for a business loan or line knows it can be a long and cumbersome process.  The key to shortening the process and smoothing it out, really goes to how you start the process.  A complete and concise financial package will go a long way.  Much of the back and forth between borrower and lender, that slows the process down, is related to needing additional information, specific documents not being completed and the bank not wavering on anything, because they need to meet all their regulatory standards.  When pulling a financial package together there are some standard items that are nearly always asked for.  Here are a few of those items:

  1. Personal tax returns
  2. Business tax returns
  3. Personal financial statement
  4. Aging AR/AP’S
  5. YTD Balance Sheet and Income statements
  6. Business Debt Schedule

Depending on your request, whether it be a loan, line, real estate or business acquisition there will be some documents specific to that request.   Disclosing potential issues also assists in keeping the process moving ahead.  Bankruptcy, other ownership interests, certain financial transactions can cause additional questions and also bring into doubt the potential borrower’s character as well, if not disclosed early on.  

The most effective way to start the application process is to ensure you have a complete package, have all the documents completed fully and disclose anything that might be questioned during underwriting and respond quickly to bank inquires. 

If you are starting this process or new to it, reach out for a conversation. With 15 years in banking, I am familiar with the banks, how they operate and can assist in the process. 

Categories
COVID -19

PPP – Round 2 Resources

In an effort to simplify the process and help business owners gather information about the new round of PPP in 2021 we will be providing links to training resources and other information as it becomes available.

Update 2/11: Round 2 of PPP is off to a slow start but here are the top national lenders by net dollars lent thru 1/31/21, according to the SBA website. Below is an article detailing some additional information on Round 2 of the PPP.

https://publc.com/content/Businesses-arent-flocking-to-this-round-of-PPP-loans.20856141

Additional notes for this Second Round of PPP, per information gathered from www.SBA.gov:

  1. The maximum loan amount for Second Draw PPP is 2.5x average monthly 2019 or 2020 payroll costs up to $2 million. For Accommodation and Food Services, the max Second Draw PPP is 3.5x average monthly 2019 or 2020 payroll costs up to $2 million
  2. To qualify you also need to demonstrate a reduction of gross receipts of at least 25% between comparable quarters in 2019 and 2020.
  3. The First Round usage will have used or will use the full amount for authorized usages.
  4. Must have less than 300 employees.

Looking for Lenders is a tool provided by the SBA: https://www.sba.gov/funding-programs/loans/lender-match

Update 1/26: SBA is having issues around accepting applications from banks. Patience while going through the process.

Banks press Treasury, SBA to fix ‘systemic’ small business loan glitches – POLITICO

https://www.facebook.com/stillwatersolutions/photos/a.117929726804883/137069471557575/