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Business Cash Advance and Business Financing Choices

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.

Critical Short-Term Business Loan Options

Two of the most overlooked short-term working capital business loan strategies are short-term commercial mortgage loan programs and business cash advance programs in conjunction with credit card processing. Both of these business financing options are relevant for most business owners but are frequently misunderstood.

Programs for Short-term Commercial Real Estate Financing

A long-term business loan is appropriate for many businesses that own commercial property. Business properties should normally be financed with a combination of short-term and long-term funds. When a longer-term commercial mortgage is viable, it is preferable to secure long-term business financing, preferably for 30 years.

However there will be many commercial mortgage loan situations in which longer-term business financing is not appropriate for the business owner. In such circumstances it is important for a business owner to realize that there are viable short-term working capital management options.

When a Short-Term Commercial Property Loan is Appropriate

It is prudent to explore short-term business loan choices for business owners who want to refinance or sell the property within a short time frame. Appropriate short-term business financing will have more reasonable "lockout" fees and prepayment penalties than typically required with a long-term commercial real estate loan.

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.

Short-Term Commercial Mortgage Limitations

There are some trade-offs that need to be understood if a business owner chooses shorter-term business financing even though prepayment fees will usually be avoided with a short-term business loan. When short-term commercial real estate financing is a realistic option, the loan-to-value will usually be no higher than 70%, the commercial mortgage will not be readily available for special purpose business properties such as golf courses and the interest rate will frequently be in the range of about 12%.

Most Likely Short-Term Business Financing Candidates

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.

Limited Lenders to Implement Short-Term Business Financing

Business borrowers should be prepared for the shortage of lenders who can implement a short-term business loan effectively. There are many difficulties to be avoided with short-term business financing, and selecting a viable commercial lender is of critical importance when obtaining short-term commercial real estate financing.

Working Capital Management and Business Cash Advance Programs

Even successful business owners often require more business financing than they can obtain from a bank. For any business that accepts credit cards, working capital financing based on credit card processing is an effective but frequently-overlooked commercial financing tool. A relatively unknown commercial loan technique is probably the best business financing strategy to satisfy unusual cash requirements: using credit card processing to obtain a business cash advance.

The most likely candidates to benefit from this working capital loan strategy are retail stores, service businesses, restaurants and bars. This highly-effective working capital management strategy uses an under-utilized business asset (credit card receivables) to obtain business cash advances based upon a merchant's sales volume.

Credit Card Processing and Credit Card Financing

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.

Most small businesses cannot adequately document their receivables in order to qualify for this kind of working capital loan. Many other small businesses (such as restaurants, bars, retail stores and service businesses noted above) simply do not have such receivables to rely upon as a working capital management tool.

Businesses accepting credit cards have substantiated credit card sales volume. The documented sales volume becomes an asset to commercial financing for the business. A merchant cash advance up to $300,000 is available based on business sales volume.

The working capital loan time period covered by a business cash advance is typically 12 months or less. For businesses that desire to continue the merchant cash advance program beyond this period, it is usually an easy matter to get an additional working capital cash advance once the initial one has been completed.

Avoiding Problems with Credit Card Financing and Lender Limitations

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: http://www.find-investment-advice.com

About Stephen A. Bush: Stephen provides working capital loan and business financing advice. Free Commercial Mortgage and Business Loan reports from AEX
This article is available as a unique content article with free reprint rights.

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