Online loans and merchant cash advance offers will come for business owners as banks tighten credit access, but there are big risks with these funding options.
Banks are tightening credit standards and that means less loan availability for Main Street business owners, who struggle to access credit in even booming economies.
"Some people say you shouldn't have a credit card, but it's not the credit card. It's how you use the credit card. The same is true with online financing," said Nicole Davis, founder and principal of Butler-Davis Tax & Accounting LLC.Online loans Many lenders may also require a personal guarantee, which can be debilitating in a default and can also impact the owner's ability to qualify for a personal loan, such as a mortgage. A secured loan could be more advantageous because the rate will likely be lower and the lender might not require a personal guarantee, Miskowitz said.With a merchant cash advance, companies borrow money against their future sales and pay it back as these sales are generated, often over three to 18 months.
"This is not a scroll-down-and-accept-the-terms-situation," said Will Luckert, president of Corpay, a corporate payments company. "There can be a number of tricky things buried in the terms and conditions," Luckert said. Also look at online customer reviews and browse for regulatory actions against the funding company, said Waseem Daher, chief executive and cofounder of Pilot, which specializes in bookkeeping, tax, and CFO services for high-growth technology startups.
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