Short-Term Business Finance Options:

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 business finance choices can be misunderstood because of a preference by many business owners for long-term working capital management programs.

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.

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 and business finance options.

If a business owner plans to sell or refinance their business within a few years, it is preferable to explore short-term business finance options. The best short-term business loan will have minimal prepayment penalties in comparison to terms commonly included with long-term commercial real estate financing.

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 business finance 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.

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%.

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.

There will typically be a very small number of commercial lenders who are effective at implementing the short-term commercial mortgage loan strategy properly. There are also a number of problems to be avoided with short-term working capital business finance programs for a commercial mortgage loan, so choosing an appropriate provider is extremely important to any business owner considering a short-term commercial mortgage loan program.

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.

Primary possibilities to take advantage of this business finance 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.

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.

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 commercial financing repayment requirement for a working capital cash advance is normally under 12 months. For merchants that need the business cash advance program for a longer time, the merchant cash advance can be renewed on a recurring basis.

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 business finance 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 loan service is extremely important to any business owner considering a business cash advance program.

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