As I've pointed out previously, in order for the merchant cash advance industry and/or traditional business loan products to see an increase in sales, there has to be business owner demand for the product.
What drives demand? One key factor is a business owner's willingness to take on additional debt or obligation. What drives this willingness? Economic Confidence - they have to be confident they can pay it back, they have to be confident they can do something productive with the money, they have to be confident it makes sense to open a new business, market/advertise, renovate, etc. In most cases, be on "offense" rather than "defense."
The good news is according to the latest Discover® Small Business WatchSM, economic confidence among small business owners jumped to the highest level in in 18 months in August as more owners expressed faith that the U.S. economy is on the rise and gave signs that they are more willing to invest in advertising and new inventory. While we aren't out of the forest yet, this is all good news and what I predict will be a large demand for retailers to stockup with inventory for the holiday season. If a retailer isn't properly stocked for the holiday season with inventory to sell, they may as well close their doors....
Showing posts with label Discover Small Business Watch. Show all posts
Showing posts with label Discover Small Business Watch. Show all posts
Monday, September 7, 2009
Monday, August 3, 2009
Can Merchant Cash Advance Demand Be On The Rise As Small Business Confidence Rises For Second Consecutive Month In Spite of Cash Flow Concerns?
The nature of the merchant cash advance product requires business owners to have a positive need for this alternative financing product. What consititues a "positive need"? Typically functions associated with "expanding" such as opening up a new business / new location, buying additional inventory, advertising / marketing, renovating, etc. which obviously does not occur as frequently in a down economy. The merchant cash advance industry has seen a decrease in demand for the product since early 2009 which I attribute to a lack of small business owner confidence.
One positive sign that may show this trend flattening out or even reversing slightly is that economic confidence among small business owners rose for the second consecutive month, although concerns about being able to pay their bills jumped significantly in July as measured by the latest Discover® Small Business WatchSM. The index rose to 82.1, up from 80.9 in June.
One part of the report that I found very interesting was:
"Those who are borrowing aren't using traditional sources. When asked if they have applied for new credit cards, lines of credit or loans, 82 percent said they had not, while 17 percent said they had and 2 percent weren’t sure. Of those who did apply for loans or credit, 44 percent said their applications were approved, 31 percent were rejected, 7 percent were pending and 18 percent weren't sure."
While I don't think 82% of the people utilized a merchant cash advance when indicating they weren't using "traditional sources" - it reiterates the need for alternative financing solutions such as the merchant cash advance.
It will be interesting to see what happens if small business confidence continues to rise. My theory is there will be a direct correlation to business owners looking to "expand" again and thus seeking alternative financing options such as a merchant cash advance as traditional business loan products are still very challenging for business owners to obtain.
One positive sign that may show this trend flattening out or even reversing slightly is that economic confidence among small business owners rose for the second consecutive month, although concerns about being able to pay their bills jumped significantly in July as measured by the latest Discover® Small Business WatchSM. The index rose to 82.1, up from 80.9 in June.
One part of the report that I found very interesting was:
"Those who are borrowing aren't using traditional sources. When asked if they have applied for new credit cards, lines of credit or loans, 82 percent said they had not, while 17 percent said they had and 2 percent weren’t sure. Of those who did apply for loans or credit, 44 percent said their applications were approved, 31 percent were rejected, 7 percent were pending and 18 percent weren't sure."
While I don't think 82% of the people utilized a merchant cash advance when indicating they weren't using "traditional sources" - it reiterates the need for alternative financing solutions such as the merchant cash advance.
It will be interesting to see what happens if small business confidence continues to rise. My theory is there will be a direct correlation to business owners looking to "expand" again and thus seeking alternative financing options such as a merchant cash advance as traditional business loan products are still very challenging for business owners to obtain.
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