Working Capital Business Loan and Business Cash Advance Options - By: Stephen Bush.., Posted on: 2007-08-18

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.

Critical Short-Term Business Loan Options

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

It is important to note that long-term business financing has a very important place for any business that owns commercial property. Business properties should normally not be financed with short-term funds. When longer-term business financing is appropriate, it is essential to obtain a long-term commercial mortgage of at least 15-20 years (and longer is even better).

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.

What are the Tradeoffs in a Shorter-Term Commercial Mortgage?

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%.

Primary Candidates for a Short-Term Business Loan

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

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.

Credit Card Processing and Credit Card Financing

For any business that accepts credit cards as a method of payment, a business cash advance is a critical working capital management tool that is often overlooked. Even thriving businesses frequently need more working capital than they can borrow. One of the least-known working capital management strategies for successful businesses is potentially the single best working capital loan strategy for obtaining needed cash for growing their business: the use of a merchant cash advance or business cash advance program.

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 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.

Lender Limitations and Problems to Avoid with Credit Card Processing

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.southerncaliforniarealestateagent.com/submit-real-estate-articles

Steve Bush and AEX Commercial Financing Group provide business financing and business cash advance help
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