Credit card factoring is an alternative approach to acquiring funds for your business. In the financial crises that we are dealing today, very few banks and lending institutions are granting loans, most of which require extensive qualifications, like credit check and submission of documents.
Factoring services qualify businesses that have credit card receivables, invoice receivables, account receivables and other factors that create cash flow for businesses.
Today, some of the businesses that have good cash flow for credit card factoring loans are bars, restaurants, and service providers, such as salons and auto shops, and retail stores. The good thing about this approach is the insignificance of the merchants credit score.
What matters, to get approval for factoring services is the stores history of credit card sales. To qualify, your business should be in existence for at least 6 months. You have no unresolved bankruptcies. And, you should have one year remaining on lease.
Factoring is suitable for any business needing cash advance with the absence of unnecessary hassles, so common in small business loans. If your business is making credit card transactions of a minimum of $5,000, you could get approved for up to $500,000.
The credit card receivable factoring allows you to get cash advance based on future sales. Invoice factoring refers to the sale of approved invoices for immediate cash advance.
Credit card factoring can optimize the sales on your credit cards. It does so in two methods. First, the amount processed in monthly credit card sales determines the size of your business cash advance.
The financing company examines your monthly average sales of credit cards through your receipts. The data determines how much the company is willing to advance you. Depending on the value of your credit card receipts, you can be approved of $5,000 minimum.
Second, as soon as you received your merchant cash advance, the payments are deducted automatically from your daily credit card sales. The deduction is a small percentage-around 10%-20%– of your sales, so your business continues to thrive.
The advantages to using credit card factoring are many. The application process itself is short and easy. There is no financial support needed to supplement your application.
Because the financing companies do not rely on your credit history, the approval takes only 24 hours, as compared to loans which will take usually weeks or at times, even months.
Factoring is an unsecured cash advance. It requires no collateral besides your credit card receipts. However, on the other part of credit card factoring are few downsides. Because the cash advance is secured by your credit card sales, all your future credit card receipts are owned by the financing company.
If your cash flow is not enough, your business could lack money to cover the ongoing operating expenses and factoring agreement. To stay on top of your expenses, you may continuously use credit card factoring.