Monday, November 22, 2010
Bridging the gap between alternative funding and traditional bank financing, Capital Access Network Inc. launched NewLogic Business Loans Inc., a commercial lending subsidiary specializing in loans to restaurants, service providers and retail businesses. Operating as a California-licensed commercial lender, the company will initially offer its services in 38 states and plans to expand loan coverage to include all 50 states in the near future.
"We believe that there is a great need in the market, especially now, for a relatively easy way for merchants to access the capital they need to grow their business as the economy starts to turn the corner," said Mark Lorimer, Chief Marketing Officer at CAN. "Commercial lending is not robust right at the moment. We've decided that this is the appropriate time to enter the market with a product that serves small and mid-sized businesses."
According to Federal Reserve Chairman Ben Bernanke's July 2010 testimony before Congress, lending contracted significantly during the recession, with outstanding loans to small businesses dropping from more than $710 billion in the second quarter of 2008 to $670 billion in the first quarter of 2010. And after several years of rapidly declining numbers, Small Business Association-backed loans have just recently begun to rebound for the first time since 2007.
"In the general economic downturn in 2008 and 2009, our loan production took a hit accordingly," stated David Hall, Public Affairs Specialist for the SBA. "For example, in 2007 we had about 99,000 loans, in 2008 it dropped almost 30 percent to 69,000, and 44,000 in 2009. In 2010, we saw it increase to almost 53,000. That's on our flagship loan program, which is called the 7(a) Loan Guarantee Program, the most general of our loan programs."
While traditional loans may require extensive paperwork and time to process, NewLogic said it can process most loans in about two weeks. "Because of the fact that we use data collected by the parent company over 12 years of doing daily remittance transactions, we are not reliant on the credit scores of the owners of the business," Lorimer said. "We base our decision on the performance of the business." The company uses a proprietary predictive scoring model for its loans.
To qualify for a NewLogic loan, merchants must operate a brick-and-mortar location that has been under the same ownership for at least two years, be current with lease or mortgage payments, and process a monthly minimum of $5,000 in credit and debit card sales. Borrowers can qualify for up to $150,000 per location, with a predetermined monthly payment amount and fixed maturity date.
Daily "mini payments" through the company's daily remittance platform help merchants manage cash flow. "With our product, the merchant pays a little bit each day, as opposed to having a big monthly payment at the end of the month," Lorimer said. Merchants have the option of a fixed payment amount that is debited each weekday from the merchant's bank account or they can tie payments to processing, where daily payments fluctuate with business cash flow.
Lorimer believes the product can solve problems for both existing merchant customers and prospects who need capital, thus enabling ISOs and merchant level salespeople to provide a solution. "With the processing powered payment option, it's a natural extension of their processing," Lorimer said. "Our contract requires the merchant to stay with the processor that they're using during the life of the contract."
Lorimer suggested that now is the time to think about expansion again. "The people that are going to dominate their regional markets are emerging now and finding those opportunities, and we want to provide them the capital to get there," he said.
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