In this article we have identified the ten major problems
which should be avoided when obtaining working capital and
business cash advances based on credit card processing. As
noted below, it is not necessary to accept any of these
business finance difficulties.
Credit card processing and small 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 processing. These benefits will
increase measurably if a number of common business cash
advance problems can be successfully avoided.
Even thriving small businesses frequently need more working
capital than they can borrow from a bank. One of the most
important commercial financing needs for any business is
ensuring that short-term cash requirements are successfully
met. This is frequently a difficult task.
The use of a viable business cash advance strategy has
become an increasingly important business finance 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 working
capital advances.
Most merchants have documented credit card processing
activity and sales volume. This documentation of processing
activity and sales volume is a financial asset, since up to
$300,000 and more can typically be obtained via a business
cash advance based on future sales volume.
Before employing this strategy for working capital business
cash advances, 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.
First, many lenders will attempt to charge closing costs.
Business owners should realize that this is an unnecessary
transaction cost for business cash advances when dealing
with a truly reputable provider of working capital
financing based on credit card factoring.
Second, many lenders for these services also charge
up-front fees. This is also a transaction cost that can and
should be avoided, and with the best programs there will
not be any up-front fees.
Third, a number of business cash advance programs require
collateral. This is an unnecessary requirement to be
avoided by business owners seeking credit card financing.
Fourth, some lenders will require financial statements and
tax returns for all business cash advances. Such additional
documentation requirements should only be necessary for
larger working capital advances.
Fifth, monthly fixed payments to repay merchant cash
advances are imposed by some providers. The preferred
approach is to avoid such fixed payment requirements.
Sixth, some providers impose a fixed term for repayment.
This requirement to pay off the business cash advance over
a fixed term should be avoided.
Seventh, many programs for working capital business cash
advances require that a business have at least two years of
operating history to qualify. While many business owners
can meet such a requirement, a more practical standard for
newer businesses is a minimum of one year in business.
Eighth, most business cash advance providers require credit
scores of at least 680. In today's difficult economic
climate, this can be a challenging requirement. It is
feasible to obtain this kind of working capital financing
with scores around 500.
Ninth, for merchants needing larger business cash advances,
it will be disappointing to learn that many programs are
limited to a maximum of $25,000 to $50,000. Providers that
are better capitalized for this business finance strategy
will be able to accommodate an advance of $300,000 and
higher.
Tenth, many providers will require 12 to 24 months of
documented credit card sales of $12,000 to $25,000 or more.
A more practical possibility for business owners will
involve a transaction history with six months of $5,000 or
more.
It is not likely that all ten of the obstacles described
above will be pertinent for all business owners. Business
borrowers are likely to experience several of these
problems if they are considering a business cash advance
that uses credit card factoring and credit card processing.
Can all ten credit card finance obstacles discussed above
be avoided? There are indeed viable credit card receivables
programs which avoid all of the problems described. For any
business owner considering this approach to working capital
financing, it is probably worth repeating that it is not
necessary to accept any of these problems in order to
obtain business cash advances based on future sales.
----------------------------------------------------
Learn how to avoid mistakes with commercial loans and find
out about business cash management strategies - Steve Bush
is a small business loans expert =>
AEX Commercial Financing Group [
http://aexcommercialfinancing.com ]
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