Still feeling the squeeze with the big banks? Your business is not alone. Although the overall number of small business loans issued has grown, the amounts of these small business loans have shrunk. The good news is that small business owners are finding alternative lending sources.

The U.S. Small Business Administration released a report in July showing an uptick in the number of small business loans from July 2012 to July 2013; the agency defines small business loans as bank loans less than $1 million. That’s the good news.

The not-so-good news is that the amount of those loans has shrunk. The Wall Street Journal published this article citing the SBA report, which states the total value of outstanding small business loans actually decreased over the same time period. A few causes are in play: banks are still cautious about lending, small businesses are worried about taking on debt, and small businesses are switching to alternative lending sources.

Merchant Capital Advance Industry Shows Increased Competition

The merchant cash advance industry got its start in the late 1990s, and the industry has grown ever more competitive. Today, more than 50 merchant cash advance companies are competing for your attention. Restaurants, retail shops, and the service industry are prime customers for merchant cash advance companies because these small businesses generate sales through credit cards, which is how the merchant cash advance provider gets repaid.

But with so many merchant capital advance companies out there, the industry has been hit with some misconceptions and some providers who engaged in some unethical practices. They’re the exception, not the rule, but it still pays to do your homework. So what should a small business owner look for when considering a merchant cash advance?

1. Industry expertise: Find a cash advance partner who has decades of experience in the small business financing industry. While the merchant cash advance industry is still young, small business loans are not. Partners who understand the ever-changing small business and financing landscape are invaluable contributors to your business success.

2. Direct funding: Some merchant cash advance companies act as a “middle man” between the business and the actual funding source. Be wary of these arrangements; they add unnecessary costs and length to your cash advance timelines. Instead, look for companies that fund their own advances.

3. Full disclosure: Securing a cash advance can be a savvy business decision, but you need to understand the terms and repayment plans. Make sure your cash advance company provides you with a full understanding of repayment terms and conditions; anything less than full disclosure should be a cause for concern.

Although it’s not easy to go through traditional channels to get the small business financing you need for your restaurant expansion or other capital project, you do have alternative options for your business cash flow. The merchant cash advance industry has grown for a good reason—it’s filling a need for small businesses and doing so well. Finding the right partner simply takes extra care on your part.