Why Title Loans Make Sense For Small Businesses

February 4, 2012

While driving down the road, you probably see many of the familiar businesses that are advertised all over. You may see Wal-Mart, Target, Shell, McDonalds and various other household names. However, if you pay attention, you’ll notice that most of the businesses that you see are small businesses.

According to the Small Business Administration, 99.9 percent of business in the United States in 2009 were small businesses. This means that, of the 27.5 million businesses out there, approximately 27,472,500 of them are small businesses. That represents a huge market of potential borrowers.

With this in mind, millions of small businesses will require some form of lending. According to the Cato Institute, many such businesses do not have access to small business loans and rely on consumer credit, such as title loans. Even if they do qualify for small business loans, the terms are not always favorable to short-term borrowers, such as businesses that are seasonal or volatile.

Supporting this assertion is the amount of small businesses that use title loans. According to the Cato Institute, 25 to 30 percent of the title loan customer base is comprised of small businesses. Obviously, many such businesses feel that this is their best option for borrowing.

Title Loans Help Volatile and Seasonal Small Businesses

To illustrate this, consider a landscaping business in which the owner and 3 employees cut grass and perform other gardening activities. Such businesses tend to operate mostly in the warmer months, meaning that their borrowing needs are geared toward short-term loans.

Additionally, depending on factors such as the weather and the local economy, some months and years will be better than others for many small businesses. Weather patterns are not controlled by landscapers or construction companies and, if employees must be paid during a week of heavy rain, the small business owner will need some cash quickly. As soon as the weather clears up, the business can continue operating and generate enough revenue to pay back the loan. Thus, small business loans (if available) may not work well for such businesses, as they are for longer terms and require a lengthier underwriting process.

Title Loans Save Business Owners Time

A traditional small business loan will almost certainly take days or weeks to complete. The lender will check the business owner’s credit and require an overall lengthy process before lending it’s money. This does not work well for a busy business owner who needs cash quickly.

To get around this, a small business owner can take out a title loan. He or she can pledge the title of a vehicle in exchange for a small loan to pay an immediate expense. For example, a contractor who needs cement to finish a new porch could go to a title lender, pledge a vehicle as collateral, and walk away with enough money to buy cement in under an hour. Try doing that at a traditional lender!

A Vehicle is Often a Small Business Owner’s Most Valuable Asset

Small Businesses usually don’t operate out of huge box stores (like Wal-Mart) or have a fleet of company trucks. Many of them operate using a single vehicle. Think of a landscaping business that uses a single van as an example.

As some small businesses do not qualify for or have an interest in small business loans, title loans are a viable alternative. The business uses it’s most valuable asset – a vehicle – as collateral for the loan. When more revenues come in, the business can pay the loan back quickly and minimize interest charges – and keep the vehicle.

Conclusion

A title loan can be a great way for a small business to pay it’s employees, buy enough supplies and keep it’s doors open. If you own a small business, this is an option that you should strongly consider.

At Car Cash Loans, you’ll get as low as $500 or as much as $50,000 to meet your business needs. Also, you’ll be in and out quickly, so you won’t have to waste half of your day dealing with a banker.

Be sure to make every effort to pay your payments ahead of schedule, and do not let them fall behind. If you do so, your business will continue to operate and you’ll keep your interest expense down. That doesn’t sound so bad, does it?