Working capital loans for today's retail businesses are increasingly hard to come by. While there is significantly talk regarding helping "main street" in the media and politics, the reality is that the most cost effective working capital for business is definitely an SBA or Bank loan. Unfortunately, the restricted credit environment by which we find ourselves means the majority of these loans are not being approved for the retail businesses that need them most.

This leaves many retailers within the unfortunate position of going with a merchant cash advance from their credit card processing company. These cash advances for working-capital will often be billed as "convenient" and "unsecured" ways for business owner cash advance people to get "quick cash". The truth of the matter is, most cash advance companies do secure their loans via a UCC filing against the business. While it may not be within the owners personal credit, for many small retailers, having a UCC filing against their business is not much different. It really is a lien which is placed on the business until the advance is repaid.

What is usually left out is the fact that cash advance businesses are not regulated by the government as loans. It means that they can be free to charge interest, or factor rates, of 50% or higher. Even on a short-term working capital loan, this is a staggering quantity of interest. Routinely, since it is just not a true loan, the MCA company has the choice of changing the rate at any time throughout the repayment process. These advances are often described as high upfront fees, as well as the requirement to change payment processors and/or buy new equipment from the provider. They additionally may have high "holdback" or daily payment rates that represent a real burden for many companies.

In the majority of cases the active commercial loan companies due to this specialized form of commercial funding are limiting working capital loans to businesses that are current in their debt payments and are showing a net profit (according to recent bank statements). If both of these conditions are met, new commercial loans can frequently be obtained to refinance lines of credit and term loans that have been cancelled or recalled by many lenders. For businesses not qualified for commercial financing using both of these requirements, you will find alternative funding sources such as business cash advance programs.

Many small business owners also rely upon personal lines of credit to finance some of their business operations. There have been many reports of widespread cancellations and reductions of these lending programs as well, especially those involving lenders which have received a multi-billion dollar cash infusion from USA taxpayer money that was intended to facilitate the lending of money to businesses and consumers.

Personal and business lines of credit have been eliminated in several cases by loan companies due to a reduced ability to pay by borrowers and deteriorating business conditions. As reported in the Working-capital Journal, a high percentage of borrowers, on the contrary, had a superb payment history for many recent credit line reductions or cancellations.

In the meantime, there are actually banks prepared to make working capital loans. The most significant examples are (for the most part, anyway) not banks that have received bailout funds. Generally, these commercial lenders have been ready to provide working-capital financing, either in the type of new business financing or refinancing lines of credit and term loans that have been recalled or cancelled by other lenders.

Because it basically indicates that bailout funds happen to be given (so far) to lenders who primarily have a history of making bad loans (practically all loan companies receiving bailout funds to date), the lending activities described above are a serious concern to many observers. By this point, little attention has been given to loan companies with a healthy balance sheet in federal attempts to get more funds in to the hands of consumers and businesses.