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The difficult economy increasingly is motivating merchants to seek funding from cash-advance providers because traditional bank-lending options are more difficult to acquire, according to industry insiders. Merchant cash-advance companies advance funds to merchants in exchange for future card receivables. "I think there is more of a demand for products such as merchant cash advances in this particular market," says Adil Moussa, an analyst with Boston-based consulting firm Aite Group LLC. "Some card networks and issuers have pulled the rug from small businesses by lowering their credit limits on cards or loans after the economy deteriorated." During the recession, merchant cash-advance provider AdvanceMe Inc. has seen an "uptick" in merchants looking for funding, says Mark Lorimer, chief marketing officer for the Kennesaw, Ga.-based company. "Since the banks have tightened [lending] during the credit crunch, [some merchants] have looked hard to seek out more sources for financing," says Lorimer. "In the past, they may not have looked past their local bank." A recent National Small Business Association survey found small businesses also relied more heavily on credit cards for business financing during the first four months of this year (CardLine, 5/13).
