Working Capital Financing and Credit Card Processing

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.

We are highlighting ten key difficulties to avoid when seeking business cash advances and working capital using credit card processing. It is especially important for business owners to realize that it is not necessary to accept any of the ten credit card factoring problems.

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. 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 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 for these services charge up-front fees. This is a transaction cost that can and should be avoided, and with the best programs there will not be any up-front fees.

Second, many lenders will also 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.

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, some providers impose a fixed term for repayment. This requirement to pay off the business cash advance over a fixed term should be avoided.

Sixth, monthly fixed payments to repay merchant cash advances are imposed by some providers. The preferred approach is to avoid such fixed payment requirements.

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, 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.

Ninth, most business cash advance providers require credit scores of at least 680. In today's difficult economic climate, this can be a challenging requirement. Nevertheless it is feasible to obtain this kind of working capital financing with lower scores.

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 at least $5,000.

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.

It is not likely that all ten of the obstacles described above will be pertinent for each business owner. However, 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. Therefore it is advisable to learn as much as possible about these potential difficulties.

Business Cash Advances
Overview of problems to avoid with commercial loans.