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Business Cash Advance And Business Financing Choices
By Stephen Bush
Even though longer-term business financing techniques might be appropriate for many circumstances, there are some important short-term business loan options that will be less costly in producing improved credit card financing and commercial mortgage results for business owners. Short-term commercial financing choices can be misunderstood because of a preference by many business owners for long-term working capital management programs.

Two Important Short-Term Business Financing Choices

Possibly the two most important short-term business financing approaches are short-term credit card financing programs and commercial property loan programs. Although both business loan and commercial mortgage programs are applicable to most business owners, these strategies are often misunderstood and misused.

Commercial Real Estate Loan Short-term Programs

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.

Nevertheless there will be business loan scenarios where long-term commercial real estate financing is not the best option. When this is the case, a business owner needs to realize that there are practical business financing choices.

When is Short-Term Business Financing Preferable?

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.

The avoidance of business loan prepayment fees and lockout fees fees in some short-term business financing programs is an important benefit of these short-term commercial mortgage approaches. The absence of these potential fees could produce a savings of up to 20% or more if the business property is sold during the period which would have involved lockout fees in a longer-term commercial 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 most likely candidates for a short-term commercial mortgage loan are office, retail, multi-family, warehouse and mixed-use commercial properties. The time period typically covered by a short-term commercial real estate loan is six months to three years.

Limited Lenders to Implement Short-Term Business Financing

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

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.

Primary possibilities to take advantage of this business financing program are service and retail businesses. This credit card processing and credit card financing strategy uses credit card receivables to determine the amount of a merchant cash advance.

Credit Card Financing Based on Credit Card Processing Programs

This working capital management strategy is also known as "credit card factoring". Many businesses have relied upon a working capital loan strategy called "receivables factoring" or "receivables financing" which allows them to sell their future receivables at a discount.

Very few retail and service businesses can properly document their accounts receivable to acquire business financing. Smaller service businesses and retail stores are not likely to have receivables for a business loan.

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.

Avoiding Problems with Credit Card Financing and Lender Limitations

As with any successful working capital management strategy, there will typically be only a small number of commercial lenders who are effective at implementing the working capital loan strategy properly. There are also a number of problems to be avoided with business cash advance programs, so choosing the appropriate provider of this working capital management service is extremely important to any business owner considering a business cash advance program.

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

Contact Stephen A. Bush at AEX Credit Card Processing Programs for business cash advance strategies
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