Credit Card Factoring, A CEO’S Source for Working Capital
Have you ever tried to apply for a small business loan for your business? It is almost impossible. With the mounds of paperwork and narrow guidelines it is not surprising. There are other choices for short-term financing, and among the best are merchant loans. Let's take a look at what is different between a bank loan and small credit card factoring.
Paperwork Required
Small Business Loan: You can expect to need an amazing credit score, over 2 years of business history, personal financial statements, tax returns, monthly cash flow predictions and a real business plan. If you have been in business for a while, anticipate needing several references from other business people in the community. The paperwork alone can kill your hopes of approval right from the start. Most new companies will not contain these conditions for at least 2-3 years.
Credit Card Factoring: Sales records detailing merchant processing receipts for six months that exhibit a specific income level, typically around $5,000 per month, a decent credit report and a verification of rent. This limited amount of paperwork let's many new businesses obtain the working capital they need. Any business that accepts credit cards and has been operating for 6 months should have these conditions.
Amount Available
Small Business Loan: Bank loans can vary tremendously. Since repayment terms are normally based on a fixed amount per month, the bank won't loan more than it assumes you can comfortably pay back. Nearly all banks only qualify you for a portion of what they have requested, so plan to ask for more than you truly want and do your best to negotiate a longer repayment period.
Credit Card Factoring: Typical loans range from $5,000 to $1,000,000 per location. To be approved for a large amount of financing you will have to prove an ability to pay them off based upon credit card sales, not your credit rating. This is a factoring agreement after all, and will be paid off as a percentage of your credit card sales each day. During a bad month you will pay less, in a really good month, you'll pay more of it off. This flexibility is a true asset in the real world.
Paperwork Required
Small Business Loan: You can expect to need an amazing credit score, over 2 years of business history, personal financial statements, tax returns, monthly cash flow predictions and a real business plan. If you have been in business for a while, anticipate needing several references from other business people in the community. The paperwork alone can kill your hopes of approval right from the start. Most new companies will not contain these conditions for at least 2-3 years.
Credit Card Factoring: Sales records detailing merchant processing receipts for six months that exhibit a specific income level, typically around $5,000 per month, a decent credit report and a verification of rent. This limited amount of paperwork let's many new businesses obtain the working capital they need. Any business that accepts credit cards and has been operating for 6 months should have these conditions.
Amount Available
Small Business Loan: Bank loans can vary tremendously. Since repayment terms are normally based on a fixed amount per month, the bank won't loan more than it assumes you can comfortably pay back. Nearly all banks only qualify you for a portion of what they have requested, so plan to ask for more than you truly want and do your best to negotiate a longer repayment period.
Credit Card Factoring: Typical loans range from $5,000 to $1,000,000 per location. To be approved for a large amount of financing you will have to prove an ability to pay them off based upon credit card sales, not your credit rating. This is a factoring agreement after all, and will be paid off as a percentage of your credit card sales each day. During a bad month you will pay less, in a really good month, you'll pay more of it off. This flexibility is a true asset in the real world.
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