Lending outside the box

Don Fitch used to be able to secure money at the “snap of his fingers.” But ever since the economy tanked, it’s become an increasing challenge to get a loan – more than 10 percent of small business owners expressed increased difficulty in getting credit, according to a survey from the National Federation of Independent Business.

“In November 2009, we started looking at some different venues and came across Merchant Cash & Capital,” says Fitch, who co-owns, along with Shirley Hatten, Jamestown Feed & Seed and Lawn Center in Norge., Va. “They take a percentage of your credit card sales to pay back your debt.”

Since its inception, Merchant Cash & Capital (MCC) has provided funding to more than 7,500 merchants and currently funds approximately 2,000 small businesses nationwide. By “buying” a fixed percentage of future credit card revenues and advancing that money up front, the company provides a unique type of funding that avoids some of the hassles that may be associated with a more traditional loan. Once the capital is available, MCC begins to collect an agreed-upon percentage of the daily credit card sales until the loan is fully repaid. It eliminates the need to write a monthly check and there’s no risk of late fees. Funds are automatically transferred with current credit card batches.

MCC CEO Stephen Sheinbaum says it’s an opportunity that’s well positioned for landscape business owners. “Landscaping is an industry that has a great deal of seasonality to it,” he says. “We understand the ebbs and flows that come with this type of business and can provide them with the working capital they need in the offseason, understanding that spring will come and revenues will eventually pick up again.”

Securing capital during some down time is exactly what Fitch says he needed to do. “It was our slow period and we really needed some funding,” he says.

“We used the money to do some exterior work and upgrade our facility. Our feeling is that as we come out of this recession we’re going to be rocking and rolling. We invested money into our product when nobody else did – maybe because they couldn’t afford to. We’ve already started to see a difference in doing that.”

One of the things that Fitch liked most about the MCC process was how quickly cash was available. “It was our experience that if you put in the request for the loan on Monday, you’re funded by Friday,” he says.

The fast timing was one of the main reasons Fitch chose to go this route instead of a bank loan. “We didn’t need to provide a ton of documentation and go through a long process, basically promising our first born,” Fitch adds, laughing.

The biggest downside, says Fitch, is the interest. His arrangement with MCC allowed them to take 17 cents on the dollar of credit card sales. “You’re definitely going to be paying a lot more interest than you would on a conventional loan,” he says. “But it comes out on a daily basis and if you’re doing well with credit card sales, you’ll pay it back quickly.”

Fitch says his best advice to other landscape business owners who might be considering this type of loan is to do your homework.

“You have to do some research and make sure you can work with the numbers,” he says. “If you’re unsure, I might suggest starting out small and seeing how it works for you before taking out a bigger loan. But for us, we did start out with a big loan and it worked well.” 

The author is a frequent contributor to Lawn & Landscape.