One of the hardest parts of running a business is continually gaining access to cash when it’s needed. While some businesses use lines of credit and loans to fund business endeavors, others cannot qualify for this type of financing. Businesses who have a hard time borrowing money from the traditional paths may find it necessary to pursue these types of credit card processing loans. These credit card processing loans are sometimes easier to qualify for and can provide the cash flow that businesses need to be successful.

Credit Card Processing Loans

These loans are sometimes referred to as merchant cash advances as well. The basic idea behind this type of loan is that a company comes in and gives a cash advance or loan to a business that has a sufficient amount of credit card receipts. Once the loan is given, the lender sets up its own credit card terminal in the business. After the credit card terminal is set up, it sends a percentage of the transaction back to the lender each time a sale is paid for with a credit or debit card. In this way, the loan is paid back with small amounts every time a payment is made to the business.

Benefits

Using loans against credit card processing sales is beneficial for many businesses because it does not depend on the credit profile that they have developed over time. If the business has a bad credit history, it can still qualify for this type of loan. The main thing that a lender is looking at in this instance is a sufficient amount of credit card sales on a monthly basis. If the credit card sales are there, then the loan can usually be approved.

Another advantage of using this type of loan is that it makes paying back the money borrowed easier. The business does not have to worry about making regular monthly payments to repay the loan as it would with a traditional commercial lending arrangement. Instead, the loan is paid back a little bit every time someone makes a purchase on a credit card or debit card. This means that the loan is only technically be repaid when the business receives money. Other lending arrangements do not take into consideration how much money the business has received recently. This makes borrowing against credit card sales an attractive proposition that many businesses are getting involved with.

Considerations

Those who plan on borrowing money against their credit card sales should do a little bit of shopping around to make sure that they are getting the best deal available. Otherwise, the business may end up paying too much for the loan that they need for cash flow purposes.

When running a business, figuring out how to pay the bills can be a challenge. Even if you have plenty of sales, it can be difficult to get the cash flow in line so that your bills are paid when they are supposed to be paid. If cash flow is a problem for your business, merchant account loans can help fill in the financial gap. These loans can be very affordable and easy to qualify for, depending on your situation.

Merchant Account Loans

The basic idea behind this type of loan or cash advance is very simple. You work with a merchant lender who is willing to extend you a certain amount of cash to use as an advance. At that point, you set up a credit card terminal to accept payments from your customers. Every time you accept a credit card payment with your terminal, a small percentage of that transaction will go back to the merchant cash advance lender. By doing this, you pay back the advance a little bit at a time over an extended period.

Advantages

One of the biggest advantages of using this type of arrangement is that you do not have to worry about making a monthly payment on a loan. With a traditional loan, you have to make monthly payments regardless of what you have any money coming in or not. With merchant account loans, you do not have to make any payments. Your loan is paid back a little bit every time you accept a payment. By using a strategy, your only really paying anything when you have money to do it.

Another advantage of using this type of loan is that it is not dependent on your credit. If you’re unable to qualify for a traditional bank loan, you can usually still get a merchant cash advance. That’s because these advances are based on whether you receive enough money and credit card receipts over the course of a month. If you get enough credit card payments regularly, you should be able to qualify for this type of advance.

Considerations

While you should consider using this type of advance if you’re having trouble with cash flow, you should review the terms of the arrangement closely. These loans do cost money, so you should make sure that you get the best deal when you ultimately decide to sign up for a cash advance.

Do a little bit of shopping around to see what is available in this market. At that point, you’ll be able to get the money at the most affordable rate and then start using it to grow your business. In some cases, it can be a valuable tool to use even if you just want to keep the doors open and stay in operation.

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.

Credit card processing loans feature numerous similarities with bank loans, though it is most important to consider the differences that they have. After all, it is such differences that make a credit card processing loan a much more attractive method of assisting a business with funding for a merchant who does not exactly meet the requirements that a bank requires in order to successfully get a loan.

Requirements

The requirements to obtain a credit card processing loan are minimal, simple and easy to reach. Qualifying for a credit card advance requires that the merchant has at least another year going on the lease for the business, does not have a single unresolved bankruptcy, has had his or her business going for at least six months and regularly processes at least $3,500 in credit card sales each month.

Benefits

When one is looking to receive credit card processing loans, there are a number of benefits that simply do not come with a standard bank loan. These include a 48 hour approval, automatic eligibility for renewal, funding in as few as five business days, the ability to use the funds in any way that the applicant desires, as well as the fact that the funds are provided as an unsecured form of business funding, meaning there is no need to put up a large asset as collateral in order to receive the funds.

Repayments

With a bank loan, it is generally required that a person repay the loan through fixed monthly payments until the loan is fully repaid. However, this is not the case with a credit card processing loan. The repayment method here generally takes the responsibility and places it with the loaner, taking the weight off of the shoulders of the debtor. The loaner will generally deduct a small percentage from the credit card sales made on a daily basis until the entire advance has been paid off. This is a method of repayment that is practically not felt, and it also allows the purchase by each customer to pay off the entire advance.

Borrowing Limits

Due to the business portion of the loan, it may not be possible to take as large an advance that is equal to the entire credit line of an individual. The amount of working capital that can be made available through a credit card processing loan depends largely on a business’s monthly or annual revenue. Approval amounts and repayment terms are always calculated within the confines of the business’s ability to repay the purchased amount. When one takes out the merchant cash advance, then the cash will almost immediately be provided, taking as little as five business days after the 48 hour approval.

Fees

The exact fees will vary depending on the lending institution. The fees may appear to be expensive to some, but the benefits that come along with this type of business funding far outweigh the cost, as evidenced by the number of business owners acquiring working capital through these types of programs. One must keep in mind that it all comes out from that daily percentage of the credit card processes of each day, so it will still go just as unnoticed as the rest of the repayment.

To start your own business, you need a great idea, solid business plan and money to get your idea off the ground. There are many options that your business has when it comes to getting the money it needs, but merchant services loans might be the best way to get the money needed. Why should a new business consider this type of loan?

Easy To Get

Merchant services loans are a cash advance for businesses that have little to no credit history, or have credit issues in the past. Most applications are going to be approved, which is good when you have to make payroll, or you want to spend more money marketing your product. Spend more time worrying about marketing your company and less time worrying about how your credit could potentially hold you back.

Unsecured Loan

The best part of getting this type of loan is that you do not have to put up any collateral. Whenever a loan is tied to an asset, it can be harder to get out of the loan should anything happen. This is because your creditor can simply seize the asset and sell it off for the cash. When you get a merchant loan, you get the benefit of an unsecured loan without having to have the higher credit score that is usually required to have your loan be unsecured.

No Set Loan Repayments

One of the more flexible features of a merchant loan is that you don’t have any set repayment terms to deal with. You pay the money back as your revenues grow, so you don’t feel pressured to make payments before your company is ready to pay back loans. Taking larger orders, and generating more revenue, can be difficult if your business is lacking the money to do so. If your company is new and growing, this can be a great way to grow your business while being able to focus on your company instead of your finances.

Your business needs time and money to grow into the best company it can be. When you know you have a source of working capital that can fit your needs and allow your company to pay its obligations on time, it will become a stronger company in the long run. Over time, as the company obtains a longer credit history and more positive credit history, it will qualify for more traditional financing. However, a merchant service loan can be a great option until that point is reached.