Firm cashes in on credit crunch

Scarce lending to small businesses has spurred action from the federal government. But, Chris Kille, president of Commersense, says that he has the answer.

Commersense, a Tampa-based merchant services firm, offers cash for small businesses in exchange for a cut in credit card transactions. The credit crunch has been a big help to the firm, as it has seen revenues quadruple over the past two years.

The typical process the company follows in evaluating a company applying for a cash advance includes Kille's staff looking over the company's financial statements. “They have to have been in business for three months and have a credit score of 500,” he says.

Within 72 hours, Kille says he can make the decision to approve the advance — his firm currently has outstanding cash advances with 40 businesses.

The agreement between Commersense and the business to which it provides cash is unique, Kille says. Instead of relying on the small business to make interest payments on their own, Commersense takes a stake in the Visa and Mastercard charges of roughly 5% or 10%. “The agreement usually lasts between six months and a year,” Kille tells Coffee Talk. “When the principal and interest are paid off we relinquish our stake.”

On the rates that the company charges, Kille refused to go into detail, saying instead that if a business needs $20,000 in cash his firm will likely charge $3,000 on top of the principal for a six-month period.

Kille's firm works with high-risk businesses and prefers retailers that enjoy a hefty mark-up. Recently, a liquor store in Boston accepted a cash advance of $250,000 and turned it into sales of $2.2 million.

Ironically, if 2012 brings in a healthy economy, Commersense could have a rocky path ahead. Says Kille: “I definitely want to see the economy improve, but [Commersense] will probably lose revenue.”