Credit card processing and business loan strategies are closely connected in many ways. Business owners should not overlook the substantial working capital benefits which will accrue to their business by effectively coordinating credit card factoring and credit card processing. These benefits will increase measurably if a number of common business cash advance and credit card processing problems can be successfully avoided.
Even the most successful businesses regularly need more financial resources than they can get via a working capital business loan. Perhaps the single most important commercial loan goal for any business is to successfully meet day-to-day cash requirements. This can be an impossible task if working capital is not properly managed.
The use of a viable business cash advance strategy has become an increasingly important commercial financing tool for many businesses faced with a potential short-term cash shortfall. However, as noted below there are a number of potential problems to be anticipated and avoided when businesses use credit card processing to seek a business cash advance.
Credit Card Processing and Credit Card Financing
Most merchants have documented credit card processing activity and sales volume. This documentation of credit card processing activity and sales volume is a financial asset, since up to $300,000 can typically be obtained via a business cash advance based on future credit card sales and sales volume.
Business Loan Recommendations for Credit Card Processing and Business Cash Advances
Before employing this strategy, businesses should realize that there are several recurring potential problems that they need to anticipate. Ten common credit card receivables problems that business owners should avoid when employing this strategy are highlighted below. Preferred/Recommended business cash advance requirements are shown after each potential credit card processing and credit card financing problem.
(1) Business Cash Advance and Credit Card Processing Problem to Avoid: Closing costs. Preferred and highly recommended business cash advance requirement: No closing costs.
(2) Credit Card Factoring and Credit Card Processing Difficulty: Initial up-front fees. Suggested merchant cash advance and credit card receivables requirement: Up-front fees not required.
(3) Credit Card Factoring and Credit Card Processing Difficulty: Collateral required. Suggested merchant cash advance and credit card receivables requirement: No collateral requirements.
(4) Business Cash Advance and Credit Card Processing Problem to Avoid: Financial statements required. Preferred and highly recommended business cash advance requirement: Financial statements required only when a large business cash advance is desired.
(5) Business Cash Advance and Credit Card Processing Problem to Avoid: Fixed payments to pay off the business cash advance. Preferred and highly recommended business cash advance requirement: No fixed payments.
(6) Credit Card Factoring and Credit Card Processing Difficulty: Pay off the business cash advance over a fixed term. Suggested merchant cash advance and credit card receivables requirement: No fixed term for repayment required.
(7) Credit Card Processing and Credit Card Financing Obstacle to Anticipate and Eliminate: Several years in business required to qualify. Recommended and preferred credit card factoring requirement: one year in business.
(8) Business Cash Advance and Credit Card Processing Problem to Avoid: high credit scores (680 to 700 or higher) required to qualify. Preferred and highly recommended business cash advance requirement: Credit scores of 500 or better.
(9) Credit Card Factoring and Credit Card Processing Difficulty: Business cash advance limited to $50,000. Suggested merchant cash advance and credit card receivables requirement: Maximum cash advance of $300,000.
(10) Credit Card Factoring and Credit Card Processing Difficulty: 12 to 24 months of credit card sales required. Suggested merchant cash advance and credit card receivables requirement: Most recent six months at $5,000 or more in sales.
Can the Business Cash Advance Problems Listed Above Really Be Avoided?
Yes. There are credit card factoring programs which bypass all ten of the obstacles listed. It is unwise to accept any of these difficulties when using credit card sales to qualify for a business cash advance.
Of course, not all of these potential problems will be relevant to each commercial borrower. Most commercial borrowers will encounter at least 2-3 of these problems if they are reviewing business cash advance programs that use credit card receivables and credit card processing as the basis for obtaining short term business loans.
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