Credit card factoring is a relatively new financial tool available to small to midsize businesses.  Sometimes referred to as a business cash advance or a merchant loan, it’s slightly different from traditional factoring.  In a traditional factoring arrangement, a business has provided a product or service to a customer, who will pay for that product or service within a certain period of time, usually 30, 60 or 90 days.  Once the product or service has been provided to the satisfaction of the customer, the business may decide that it doesn’t want to wait 90 days to get paid, so they enlist the services of a third party called a “factor”.  Let’s say the invoice amount is $10,000.  The factor may offer to buy the right to collect that $10,000 by paying $9,500 to the business upfront.  The business is willing to pay $500 to have access to his $10,000 right away, and the factor is willing to wait 90 days to get paid because they stand to earn $500 on their $9,500 investment.

Credit card factoring works similarly.  The main difference is that instead of buying the right to receive payments for a receivable that already exists, the merchant loan provider is buying the right to collect payments receivables that don’t exist yet, or future receivables (specifically, future revenues from credit card processing transactions).  There is significantly more risk involved simply because there’s no guarantee that the future receivables being purchased will ever come to fruition.  For that reason, the cost of this type of factoring is significantly higher.  That same $10,000 in receivables may only earn $8,000 for the business.

Because these receivables don’t exist yet, the way that the factor gets paid back is also very different from traditional factoring.  The business instructs its credit card processor to assign a small percentage of every sale to the balance on its contract.  That percentage can range from 5% to 25%, depending on how much future receivables the business is selling.  The percentage is also fixed, so the rate at which the balance gets paid back fluctuates with its credit card revenue.  Let’s say that the percentage agreed upon by the business and the factoring company is 10%.  If the business does $100 in credit card sales, the credit card processor will pay $10 to the factor, and forward the remaining $90 to the business like normal.  Likewise, the business may process $1,000 in sales the next day, in which case the processor will pay $100 to the factor and send $900 to the business.  And if the business doesn’t have any credit card sales the following day, then the factor doesn’t get paid anything.  These merchant loans can take anywhere from just a few months to 18 months to pay back completely, but no matter how long it takes, the amount purchased by the factor doesn’t change.  This type of financing has a fixed cost, so it does not get more expensive over time.  This is why merchant loans are great alternatives to traditional business loans.

The key to finding the best deal on your merchant loan is to let people compete for your business.  There’s a huge advance to working with an account representative at Sure Payment Solutions because we know the industry and have close relationships with the industry’s leading merchant loan providers.  The Sure Payment Solutions staff has helped facilitate over 100 million dollars in business cash advance transactions since 2006.  Give us a call today for a free quote.

The Holidays are once again upon us.  Black Friday has come and gone and many business owners are in full-on “get through the holidays” mode.  With millions of Americans hitting the street and the computer looking for the perfect gifts for loved ones, business owners have a lot to worry about at this time of year.  “Do I have enough inventory?” “Am I properly staffed to handle the excess business?” “Have I done enough advertising to draw the holiday crowds to my business?”

There are different concerns for different business owners, but one thing is for certain, most concerns in the minds of business owners involve spending money to make money.  That’s where we come in.  The holiday season is the most important time to secure funding for your business because it’s money that can be used to bolster your holiday season (pulling in more profits) or money to have in reserve for when the holidays are over and business slows down to a crawl again.

It’s funny how American commerce has evolved over the years to have this one month of absolute consumer insanity followed by a near pause in the spending of most American consumers in January and February.  And moreover, many business owners resist the temptation of taking cash at this time believing if they need some cash flow help in january, they will be able to get it when business slows down.  Unfortunately, most lenders are reluctant to lend in January due to a concern with the lull in business making it more difficult to secure funding after the holidays.

So it’s encouraged to sure up any funding you may think you need before the holidays are over.  Now is the time to take out a line of credit, or a business cash advance, or a small business loan to make a final push for the holidays or prepare for the post-holiday lull.  Sure Payment Solutions understands what business owners go through during this time and we are here to help make sure you never have to worry about the ups and downs of business.  Simply fill out a form on this website or call us today at (800) 991-3917.

Over the past 6 – 12 months the small business lending community has seen a significant shift in lending programs to these ACH debit programs.  These programs are set up in a couple of different ways, but the common denominator is that they are all paid back by the lending company debiting payments directly out of the borrowers bank account on a daily basis.  Some companies do this by setting up a fixed daily payment that is agreed upon before the funds are sent out, while others agree to debit a fixed percentage of all deposits made into the bank account (also agreed upon upfront).

Unlike traditional lending programs, these are based heavily on the specific cash flow of the borrower’s business.  Daily payments are a blessing for some business owners and a curse for others.  Many business owners have trouble managing large monthly payments and having the lender debit their bank everyday is more manageable from a planning standpoint.  The payments are smaller and more frequent so it is easier to plan for them to be a part of everyday business, while a once a month payment can come at an inopportune time and late fees can accrue quickly.  The business owner is also generally in charge of making sure the payment is made, not the other way around.

Still, the daily payments are more difficult for other business owners who rely on their everyday cash flow to purchase inventory and manage bills, and a monthly payment is more palatable.  However, the lending community has shifted to this model because it puts the control in their hands, and they are likely to know about a problem more quickly than they would with a once a month payment schedule.  This type of lending has quickly replaced merchant cash advances as the primary business funding alternative to a traditional bank loan product.  It can work for a much broader audience and doesn’t require anything in regards to merchant accounts and merchant processing history.

In fact, many cash advance providers have begun offering a program in line with this need to better serve a wider variety of clients.  It has proven to be a productive program on both ends and many business owners who qualify for traditional loans or merchant cash advances are opting for these daily ach debit programs.  They are more difficult to qualify for than traditional cash advance programs, but many business owners like that it has nothing to do with their credit card processing.  Furthermore it allows those cash advance providers to reach businesses where credit cards are not a primary form of payment, which has opened the doors to increase the lending pool by a great margin.

If you’re a business owner and are interested in getting some money for your business, then inquire about our loan programs, particularly the ach debit based loans so that you too will have a chance to take advantage of the newest loan product available on the market today.

This week marks the first time business owners will receive their credit card processing statements and have something new to look at in a long time.  For some, the October 2011 processing statement will reveal vast savings passed through from the Durbin Amendment automatically, while others will look at their October 2011 processing statement expectantly only to be disappointed and find that they have paid the same as they did in September.  As if credit card pricing and costs were not complicated enough, this new amendment adds an additional layer of complexity that we will attempt to break down.

I mentioned above that some people will see instant savings.  The business owners who are seeing changes in their rates are most likely on an interchange plus pricing model, this pricing model maintains a fixed markup above cost on every transaction, and since the Durbin Amendment essentially lowered “cost” on debit and check card transactions, the savings are built in to the existing pricing structure.

For those business owners who are on a tiered pricing model, the savings will not be instant or passed along in the same way.  If you look at your statement, and you can’t tell much of a difference in how much you are being charged, then chances are you have not received any discount owed to you from the Durbin Amendment.  The best way to achieve this goal is to establish a new contract with new pricing that will pass along the Durbin savings.  At Sure Payment Solutions, we have been preparing for the Durbin Amendment to go into effect and are prepared with a variety of tools to help business owners understand their rates and just how much money they can save.

The full effect expected from the Durbin Amendment has yet to take shape, but it is clear that from a consumer standpoint, Debit cards are not what they used to be.  Banks have begun charging monthly fees and usage fees to card holders to offset some of the losses suffered by the cap on interchange fees for debit and check card categories.  Historically, Debit cards were a cheap and easy alternative to carrying cash, but now that there is a cost associated, it is likely that debit cards will become increasingly less popular.  The snowball effect from this essentially reduces the effectiveness of the Durbin Amendment as fewer consumers use debit cards, fewer merchants accept them (despite the savings) and suddenly all the “good” Durbin did will be null and void.

At this point there is very little we can do to change any of that.  Instead, what we can do is ensure that our clients receive the best and lowest rates available thanks to the Durbin Amendment.  The average customer is saving hundreds of dollars every month and all it takes is a simple phone call.  Account representatives will be standing by to speak with you.  Let us analyze your October statement with you and we’ll be able to tell you if you’re getting the Durbin Savings already or not.  From there, its simply your decision whether or not you want to take advantage of this historic amendment or allow it to pass on by.

In the beginning of October the Durbin Amendment affecting debit card rates went into effect.  The Durbin Amendment was a much debated topic in the merchant processing space over the past year or so as there was a lot of speculation that it would hurt banks, which when passed along, would hurt consumers and consequently eliminate the benefit intended for small businesses.  While it has only been a few weeks and most large banks have yet to initiate major changes to their card issuing, it is likely that this will have a domino effect, though probably not as severe as initially anticipated.

So the question we are getting asked by many of our clients and prospective clients is “What does Durbin mean for me?”  There are many sales organizations out there calling small businesses claiming that the durbin amendment is going to save you tons of money if you just switch to their processing services.  Its important to be careful of these companies as they are using this new amendment to acquire your account with no intention of saving you any money.  However, the durbin amendment does mean savings for you.

As discussed in many of our previous posts, there are two primary methods of billing for merchant services: Interchange Plus pricing, and 3-tier pricing.  If you are on Interchange Plus pricing, then the durbin amendment savings will passed through to you automatically and you won’t have to do anything.  However, if you are on a 3-tier pricing model, then you may be eligible to save some money.  Specifically, the Durbin Amendment has affected the cost of running debit and check cards.  The transaction cost and percentage that visa/mc are allowed to charge has been reduced greatly but these savings will not be passed through to you unless you adjust your pricing to interchange, or speak with a representative about establishing a new tiered pricing rate for your check and debit cards.

This may be a little confusing, but at the end of the day, you may be able to receive some savings on your merchant processing, and we will be able to help you determine what kind of savings you are eligible for or if they are already built in based on your current pricing structure.  No matter what it’s a good idea to get a pricing analysis done even if you think you’re already receiving your savings.  Our trained account representatives are standing by to discuss your credit card processing rates and help you cash in on extra savings so fill out a form on our website today or call us at 800-991-3917 to get started.