Banks Continue To Limit Small Business Financing

Over the past few years, merchant cash advances have become known as a “saving grace” of sorts for small to medium-sized businesses. As banks continue to make their lending policies increasingly restricting, businesses owners in Canada are becoming more aware of the merchant cash advance's role in assisting the economy.

It is becoming more and more apparent that merchant cash advances are viewed as a source of extra capital for business owners who banks consider to be “risky”. While this point of view may be growing in popularity, it is important to note that the hesitancy of banks to provide funding only strains the Canadian economy further.

Merchant cash advances, on the other hand, have provided several so-called “risky” businesses with the extra capital needed to increase the liklihood of their successes. Utilizing the much-needed financing for such ventures as renovation, expansion or advertising, many businesses have found themselves in a position to flourish as opposed to flunk – even during the current economic downturn.

It was at this time last year that the New York Times printed an article entitled “Worried Banks Sharply Reduce Business Loans”. The piece set off a flurry of panic among several business owners in Canada. In the article, writer Peter S. Goodman notes that companies who were expecting to expand or renovate were forced to put their plans on hold while looking to secure additional financing.

Speaking to Drew Greenblatt, president of Marlin Steel Wire Products, Goodman writes that had Greenblatt been afforded the $300,000 he was hoping to secure from his Wachovia bank, the expansion of his business would have easily added “three new jobs to an economy hungry for work”.

“We're saying no to almost everybody”, Greenblatt recalls being told by “the same bank that had been aggressively marketing loans to him for years”.

Evidently, the ever-growing fear of lending shared by banks across the continent is only serving as an ironic deterent to economic growth. One year later, on July 7, 2009, Wendell Sherk's article “Banks Cutting Back Credit To Business” from CreditLawNetwork.com confirmed this observation.

He writes that banks have been “pulling back” on providing businesses with credit lines over the past year, estimating that those “issued during 2008 could be less than 50% of those issued in prior years”.

“When that reduction is measured in hundreds of billions of dollars”, he continues, “it represents a serious reduction in credit available to businesses”.

Merchant cash advances work to increase a business' potential to expand and prosper. By becoming an increasingly popular source of alternative funding, the merchant cash advance may soon be recognized as a key ingredient in the recipe for setting the Canadian economy back on the right course.