Let the Borrower Beware
Capstone Business Funding, LLC prides itself on providing funding for its clients that run viable businesses but are in need of working capital and will grow as a result of funding. Unfortunately, there are new lenders who pop up every day to take advantage of the latest trends in high yield lending that do not always have their client’s best interests at heart.
The most recent trend is called “Merchant Cash Advance”. This segment of the lending industry dates back to the early 1990’s, but did not hit widespread acceptance until about five years ago.
When the Merchant Cash Advance business began, it was a method of providing liquidity to retail businesses that did not have significant assets that could be pledged to a bank in exchange for a line of credit. The idea was to make an advance to a business in exchange for an assignment of the credit card receipts that were typical for the business. For example, if a restaurant had monthly sales of $500,000 and needed $300,000, the Merchant Advance lender would structure a payment of $15,000 to $17,000 twice a week for 12 to 16 weeks. These payments did not starve the company of its cash flow and as long as business was consistent and stable, the business owner who could not get a loan anywhere else had access to a willing lender. If all went well, the lender would be paid back and the restaurateur could return to the lender at a later date and borrow again. If the lender was not paid back, the company would be pursued by the lender to the extent the lender thought it prudent. With this method, more than the entire portfolio losses on one account could be covered by gains on many other accounts.
18 years later the business has now morphed into a high risk high return lending process with full recourse. In the Sunday Bergen Record, the newspaper highlights the trials and tribulations of borrowers who fall prey to unscrupulous lenders in this market. Like all businesses, there are those who operate ethically and those who are only in it for the money. The Bergen Record article highlights what the pitfalls are of getting in bed with the bad apples of the industry. The article also explains why so many companies are entering the space and what their backgrounds might be.
Capstone Business Funding, LLC prides itself as a factor whose objective is to help its clients grow. Unlike the merchant cash advance companies, we are able to factor sums from millions to hundreds of thousands with no personal guaranties or the pledging of real property, automobiles, etc.
Capstone specializes in Single Invoice Factoring (“Spot Factoring”) for firms in need of immediate cash. Single Invoice Factoring provides flexible, no contract invoice selling in exchange for working capital from Capstone Business Funding, LLC.
The next time you are looking for business funding solutions, be careful. Our process may take five business days while theirs only takes one hour, but we will help you grow your business through our funding process. Depending on whom you contract with in that business could mean the end of yours.
For more information on how Capstone can help, please email email@example.com or call 347-821-3400 to speak with a representative today.