New Approach To Business Lending Emphasizes Success

Saturday, March 1, 2008

rBusiness News and Notes New Approach To Business Lend ing Em phasizes Success (NAPSA}—Small businessesoften find they can’t get the credit they deserve—or need. Many consumers might be surprised to learn that an estimated seven out of 10 small businesses in America don’t qualify for traditional bank loans and must look elsewherefor capital. : eye If we give small businesses the economywill thrive. ondeckcapital.com. os E: os 4 | : Se i Ree ph a” Ke e This can sometimes mean tak- ing on high-priced alternatives to stay afloat. For example, Merchant Cash Advances—also known as MCAs—let a lender purchase a merchant’s future credit card sales at a discount. This can result in interest rates of more than 150 percent APR. Somesee these as a form of predatory lending, and as a result, 1,000 U.S. mayors have recently passed a resolution denouncing MCAsaltogether. Now, one company is working to change all that with what it describes as a new approach to small-business lending. The company—On Deck Capital—looks beyond a small-business owner’s personal credit score, studying the performanceof the business, its bank activity, transaction data, business credit and other data to evaluate the overall health of the business. Through this model, it is able to double the number of businesses that can access affordable loans. According to the company’s founder, Mitch Jacobs, “Everyone agrees that well-run small businesses drive our economy, but unfortunately, the evaluation ment for men, women and students explored MCAsas a form of financing after banks rejected her loan requests. She turned down their predatory offers and selected Jacobs’ company after realizing that she would have lost 25 percent of her daily credit card sales to the cash advance. She said that she found On Deck’s pricing to be much more straightforward and liked the fact that there were no strings attached. PS tools they need to succeed, our model employed by traditional lenders is designed to identify the challenges a business faces, not their successes.” “Some clients are using their loans to maintain their business during this difficult time, but most are using it to grow, open new locations and pursue the American dream. If we give small businesses the tools they need to succeed, our economy will thrive,” said Jacobs. For example, one individual who owns a mail-order businessselling fishing gear saw sales growing after four years in business. Unfortunately, his loan applications were continuously denied by banks. He found On Deck Capital after searching for alternative loan options and was approved for a $50,000 loan within days. In another case, the owner of a store specializing in soccer equip- To learn more, visit www. Simple Steps to Take Before Applying for a Loan e Prepare fordiligence. — Have your bank statements, payment processing statements, tax returns and other information ready. Research potentiallenders. — Apply to lenders that work with businesses of yourprofile. — Determineif they can meet your needs in terms of amount, timing, etc. Review yourcredit report to be sureit is accurate. — If not, take necessary actions fo make sure errors are corrected and yourcredit score reflects the changes. e Be smart with existing credit. — Be sure to paybills on time and don’t go into overdratt. — Show lenders you are creditworthy. @)

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