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The Larger Economy and Merchant Cash Advance Industry Are Linked

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As interconnected as the global financial system has become, its difficult to see, sometimes, exactly how each part interacts with the other parts. Even the experts are sometimes confused and confounded to explain how it all works.

The merchant cash advance industry is one small part of that giant whole. But for the merchants that rely on merchant cash advances for business funding, its an important part--and having some idea how the other parts impact this part is a good idea.

The Stock Market

Wall Street is a long way from the Main Street of many American towns physically, but financially, Wall Street is everybodys neighbor at this point. Nevertheless, the impact of the stock markets trials and tribulations on the availability of merchant cash advances is not necessarily direct cause-and-effect.

Rather, the stock market is a wealth indicator, and when its way up, money comes and goes quite easily, because people (and corporations) are seeing the values of their investments go up. Therefore, theyre more likely to lend.

A merchant cash advance, though not a loan, is not totally unlike a loan in the sense that it entails risk. When the stock market is up, risk is no big deal.

When its down, well, risk is a big deal.

Interest Rates

The Federal Reserve recently lowered the rate on the so-called "Fed Funds Rate" to zero percent. In other words, the government is now promoting no interest loans.

Again, although a merchant cash advance is not a loan, per se, the rates on loans do make a difference in the availability and terms of merchant cash advance products.

For one thing, if merchants can readily obtain bank loans at low interest rates and favorable terms, they wont choose a merchant cash advance as quickly. Or at least they wont need one because they cant get a regular bank loan.

For another thing, though, and to the contrary effect, low interest rates indicate that the government is trying to prop up a struggling economy. In a struggling economy, merchants are facing the prospect of going out of business.

Such times, such as now, are when merchant cash advances prove their worth as a business funding product.

Unemployment

Unemployment, although it may not seem logical to say so, is probably the most important macroeconomic factor affecting the merchant cash advance industry and the merchants that rely on it.

After all, unemployment hits the merchants where it hurts: in their customers wallets. When people are unemployed, their disposable income obviously drops--and so does their consumption of merchant wares.

Especially for the restaurant industry, which commonly employs merchant cash advances as a business funding option, a severe drop in the incomes of customers can make a devastating dent in a restaurants bottom line.

California, for example, recently crossed the ten percent threshold for unemployed people in the state. If that rate keeps going up, its only natural that people will frequent restaurants less frequently.

In such a scenario, merchant cash advances provide a valuable lifeline to restaurant owners who feel they can make a go of it, but are currently hurting.

Source

Huffington Post

This article is provided by VendorSeek.com



Articles by VendorSeek.com
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