Factoring Your Business’s Credit Card Receivables?
March 5, 2009 by Accounts Receivable Factoring
Filed under About Factoring
Does your business process credit card transactions monthly? If so, and you are in need of short term capital, consider factoring as an option. While credit card factoring is less common than factoring with receivables or invoices, it is still a viable financing option for businesses to consider. Understanding the concept, the advantages and the process is an important step for any business seeking capital to take.
What is Credit Card Factoring?
Credit card factoring, otherwise called merchant factoring, is a growing method to obtain business cash. While credit card factoring is available in a variety of businesses, the most common industry to leverage the concept is the restaurant sector. Credit card factoring offers a business the opportunity to sell their future credit card transactions. It is a reputable way for a business to receive fast cash for their credit card receivables. By working with a factoring company, the business can receive cash advances for their credit card transactions. The factoring company will require a fee per the transaction and it may take a few days up to a few weeks, but this is significantly faster than most traditional business loan methods.
Business Requirements
There are generally some criteria that the business must meet in order to utilize credit card factoring as a financing strategy. One of the first things that is a requirement is the minimum amount of credit card processing per month; typically this amount is some where between $3,000 and $7,000 per month. Also, many credit card factoring companies will also want to review a history of credit card transactions to see a viable trend and will prefer to work with established businesses, not businesses that have only been operating for a year or less. Also, businesses that are operated in the home are generally not eligible for credit card factoring.
Advantages of Credit Card Factoring
There are a variety of reasons as to why a business would want to leverage this financing option, including:
* The business can utilize the funds from the transaction for whatever purposes they desire. Some business loans are restrictive in the methods that the financing can be utilized, creating an interest among many business owners to have a more flexible option.
* The strategy is virtually available to any business type and any business that accepts credit card payments.
* It is a short term loan program, paid back quickly through standard credit card payments that the business receives.
* Businesses don’t have to place collateral in order to receive the financing.
* Quicker payment receipt for credit card transactions, allowing the business to pay for invoices, payroll or other expenditures quicker than waiting for the merchant services payment as well as to be advanced an amount based on the typical credit card activity for the business.
* This financing strategy is invisible to customers.
* A business or personal credit score is not often required as the loan is based upon the average credit card transactions for the business.
* It is a vital cash management tool for small businesses.
* Businesses have the opportunity to borrow as much as $300,000 and more from this strategy.
Credit Card Factoring- The Process
If your business is ready to evaluate credit card factoring as an option, the first step is to pull data from your merchant services account. You will want to review at least 3-6 months of your business’s credit card activity. Look for patterns and look for the averages. Once you have this information readily available, you will need to search for a credit card factoring company. While there are a number of factoring companies available, they don’t all specifically work with credit card factoring.
As you create a list of possible companies to work with, be sure to have a list of questions to ask each one. Be sure to ask each company which credit card companies they will factor, what percentage they offer up front and if there are any restrictions. Look for the fees that are charged per transaction, determine the amount of time that it will take to fund once you have submitted to them your company’s information, look for and read past customer reviews, read the fine print of the contract and request to speak with someone directly. As you compare companies, you will be able to select the one that offers the pricing, turn around and services that your business needs.
Once you have selected the company that you are going to work with, most credit card factoring companies will actually begin to manage your credit card processing systems to ensure that they are paid back. What this means is that the money coming into your business via credit cards will go to pay back the factoring company directly as they collect on their advance. This process is simple, easy to set up and automatic which makes this a beneficial process for both the business owner and the factoring company.
If your business is seeking short term capital, consider credit card factoring to leverage the assets that you already have. By doing so, you will be able to quickly access the much needed cash flow for your business without going through the hassles of traditional financing.
Thanks to Thomas McCarthy for contributing this article to our Factoring blog:
What is Credit Card Factoring?
Credit card factoring, otherwise called merchant factoring, is a growing method to obtain business cash. While credit card factoring is available in a variety of businesses, the most common industry to leverage the concept is the restaurant sector. Credit card factoring offers a business the opportunity to sell their future credit card transactions. It is a reputable way for a business to receive fast cash for their credit card receivables. By working with a factoring company, the business can receive cash advances for their credit card transactions. The factoring company will require a fee per the transaction and it may take a few days up to a few weeks, but this is significantly faster than most traditional business loan methods.
Business Requirements
There are generally some criteria that the business must meet in order to utilize credit card factoring as a financing strategy. One of the first things that is a requirement is the minimum amount of credit card processing per month; typically this amount is some where between $3,000 and $7,000 per month. Also, many credit card factoring companies will also want to review a history of credit card transactions to see a viable trend and will prefer to work with established businesses, not businesses that have only been operating for a year or less. Also, businesses that are operated in the home are generally not eligible for credit card factoring.
Advantages of Credit Card Factoring
There are a variety of reasons as to why a business would want to leverage this financing option, including:
* The business can utilize the funds from the transaction for whatever purposes they desire. Some business loans are restrictive in the methods that the financing can be utilized, creating an interest among many business owners to have a more flexible option.
* The strategy is virtually available to any business type and any business that accepts credit card payments.
* It is a short term loan program, paid back quickly through standard credit card payments that the business receives.
* Businesses don’t have to place collateral in order to receive the financing.
* Quicker payment receipt for credit card transactions, allowing the business to pay for invoices, payroll or other expenditures quicker than waiting for the merchant services payment as well as to be advanced an amount based on the typical credit card activity for the business.
* This financing strategy is invisible to customers.
* A business or personal credit score is not often required as the loan is based upon the average credit card transactions for the business.
* It is a vital cash management tool for small businesses.
* Businesses have the opportunity to borrow as much as $300,000 and more from this strategy.
Credit Card Factoring- The Process
If your business is ready to evaluate credit card factoring as an option, the first step is to pull data from your merchant services account. You will want to review at least 3-6 months of your business’s credit card activity. Look for patterns and look for the averages. Once you have this information readily available, you will need to search for a credit card factoring company. While there are a number of factoring companies available, they don’t all specifically work with credit card factoring.
As you create a list of possible companies to work with, be sure to have a list of questions to ask each one. Be sure to ask each company which credit card companies they will factor, what percentage they offer up front and if there are any restrictions. Look for the fees that are charged per transaction, determine the amount of time that it will take to fund once you have submitted to them your company’s information, look for and read past customer reviews, read the fine print of the contract and request to speak with someone directly. As you compare companies, you will be able to select the one that offers the pricing, turn around and services that your business needs.
Once you have selected the company that you are going to work with, most credit card factoring companies will actually begin to manage your credit card processing systems to ensure that they are paid back. What this means is that the money coming into your business via credit cards will go to pay back the factoring company directly as they collect on their advance. This process is simple, easy to set up and automatic which makes this a beneficial process for both the business owner and the factoring company.
If your business is seeking short term capital, consider credit card factoring to leverage the assets that you already have. By doing so, you will be able to quickly access the much needed cash flow for your business without going through the hassles of traditional financing.
Thanks to Thomas McCarthy for contributing this article to our Factoring blog:
Thomas McCarthy has designed, developed & implemented financial systems for many years. Thomas was a Factoring customer for over 7 years prior becoming a business owner and webmaster.
Download our FREE EBook “Growing Your Company Without Debt” learn how Invoice Factoring may be right for your company at: http://www.dfsfactoring.com
Staffing Services Receivables Factoring
February 21, 2009 by Accounts Receivable Factoring
Filed under About Factoring
Is your staffing services company in need of short term cash flow? Staffing services companies, just like other businesses, go through various growth phases during their lifetime. Each business phase can require additional cash flow, and in some cases, the business may not have the cash on hand. This shortage can cause the business owner to seek financing options; however there can be challenges associated with trying to obtain financing quickly.
In the staffing services industry, there can be delays in the receipt of the compensation due to your company. As the clients that your business is working with are not paying their employees directly, your staffing services company is responsible for making payroll. While delays are a part of business operations, your staffing services company will still need to make payroll for your employees, and if these delays are substantial, it can cause your business to be in a short term cash crunch.
Lack of working capital is the largest cause of business failure, as small businesses can often simply not afford to bridge the gaps in cash flow if things don’t go as they have planned. Business owners can seek traditional methods of financing through their personal banker, through applying for personal loans or even cash advances from company credit cards to meet shortages. However, these options are not always available, they can take several weeks to fund and many business owners have already exhausted these options. Factoring is a viable financing option for staffing services companies to capitalize on their receivables for the much needed cash that their business needs quickly.
Understanding Staffing Services Receivables Factoring
In the staffing services industry, it is common to have a long list of accounts receivables owed, for the services that your company has provided. These accounts receivables are a valuable asset that you can leverage through the financing option of factoring. Factoring is not a business loan, but it is a cash advance on the business’s accounts receivable assets.
When you apply to establish a relationship with a factoring company, the acceptance of your company is not established based upon the company’s credit, but upon the credit of the companies that owe you money in the form of accounts receivable. The reason for this is that the factoring company is actually going to purchase your receivables from you at a discount. The company is therefore interested in the payment history of the companies that owe your staffing services company money.
The factoring company typically pays between 75-80% of the total invoices owed to you in advance, and then they take over the responsibility of collecting the full amount from the company that owes you. Once the factoring company collects upon the invoice, they will pay you the difference owed, minus any of their applicable fees.
Most factoring companies will charge a fee that is based upon the credit risk of the companies that owe your business money and the time frame that it takes the company to pay the invoice amount. If the company pays their invoice within 30 days, the fee that the factoring company will charge is often several percentage points less than if it takes 60-120 days for the company to pay your invoice. Average factoring fees will range from 1-6%, so be sure to evaluate all of your options prior to establishing a relationship with a factoring company.
How Does Factoring Benefit Staffing Services Companies?
Factoring benefits many different kinds of industries, particularly industries such as staffing services, that have a need for quick cash flow turn around time. One of the singled largest expenses for a staffing services company is its payroll. Outsourcing your team of employees to other companies is the fundamental basis of your business model, and why everything could be going smoothly, if a client takes longer than expected to pay their invoice to your company, you could be in a position where you are required to fund your payroll without the necessary financial resources. If this is the case, things can become challenging financially for your staffing services company quickly.
Factoring provides payroll funding options for staffing services companies who are in need of quick cash flow. When you have an invoice that you would like to receive quick funding on, you can submit it to the factoring company that you have established a relationship with. The factoring company will typically issue you the needed capital within 48 hours of the invoice being submitted. This payroll factoring will allow your company to receive capital quickly so that you can meet your financial obligations on time. Also, payroll factoring can allow you take job opportunities with larger companies that have a standard invoice payment practice that is longer than smaller companies. Overall, establishing a factoring relationship will provide your staffing services company the funding that it needs to remain viable and to expand.
Staffing factoring can provide much needed cash flow quickly to your business, without extending additional credit. Also, staffing factoring can solve finance issues when your business is unable to obtain additional credit lines from other financing sources.
Thanks to Thomas McCarthy for contributing this article to our Factoring blog:
In the staffing services industry, there can be delays in the receipt of the compensation due to your company. As the clients that your business is working with are not paying their employees directly, your staffing services company is responsible for making payroll. While delays are a part of business operations, your staffing services company will still need to make payroll for your employees, and if these delays are substantial, it can cause your business to be in a short term cash crunch.
Lack of working capital is the largest cause of business failure, as small businesses can often simply not afford to bridge the gaps in cash flow if things don’t go as they have planned. Business owners can seek traditional methods of financing through their personal banker, through applying for personal loans or even cash advances from company credit cards to meet shortages. However, these options are not always available, they can take several weeks to fund and many business owners have already exhausted these options. Factoring is a viable financing option for staffing services companies to capitalize on their receivables for the much needed cash that their business needs quickly.
Understanding Staffing Services Receivables Factoring
In the staffing services industry, it is common to have a long list of accounts receivables owed, for the services that your company has provided. These accounts receivables are a valuable asset that you can leverage through the financing option of factoring. Factoring is not a business loan, but it is a cash advance on the business’s accounts receivable assets.
When you apply to establish a relationship with a factoring company, the acceptance of your company is not established based upon the company’s credit, but upon the credit of the companies that owe you money in the form of accounts receivable. The reason for this is that the factoring company is actually going to purchase your receivables from you at a discount. The company is therefore interested in the payment history of the companies that owe your staffing services company money.
The factoring company typically pays between 75-80% of the total invoices owed to you in advance, and then they take over the responsibility of collecting the full amount from the company that owes you. Once the factoring company collects upon the invoice, they will pay you the difference owed, minus any of their applicable fees.
Most factoring companies will charge a fee that is based upon the credit risk of the companies that owe your business money and the time frame that it takes the company to pay the invoice amount. If the company pays their invoice within 30 days, the fee that the factoring company will charge is often several percentage points less than if it takes 60-120 days for the company to pay your invoice. Average factoring fees will range from 1-6%, so be sure to evaluate all of your options prior to establishing a relationship with a factoring company.
How Does Factoring Benefit Staffing Services Companies?
Factoring benefits many different kinds of industries, particularly industries such as staffing services, that have a need for quick cash flow turn around time. One of the singled largest expenses for a staffing services company is its payroll. Outsourcing your team of employees to other companies is the fundamental basis of your business model, and why everything could be going smoothly, if a client takes longer than expected to pay their invoice to your company, you could be in a position where you are required to fund your payroll without the necessary financial resources. If this is the case, things can become challenging financially for your staffing services company quickly.
Factoring provides payroll funding options for staffing services companies who are in need of quick cash flow. When you have an invoice that you would like to receive quick funding on, you can submit it to the factoring company that you have established a relationship with. The factoring company will typically issue you the needed capital within 48 hours of the invoice being submitted. This payroll factoring will allow your company to receive capital quickly so that you can meet your financial obligations on time. Also, payroll factoring can allow you take job opportunities with larger companies that have a standard invoice payment practice that is longer than smaller companies. Overall, establishing a factoring relationship will provide your staffing services company the funding that it needs to remain viable and to expand.
Staffing factoring can provide much needed cash flow quickly to your business, without extending additional credit. Also, staffing factoring can solve finance issues when your business is unable to obtain additional credit lines from other financing sources.
Thanks to Thomas McCarthy for contributing this article to our Factoring blog:
Thomas McCarthy has designed, developed & implemented financial systems for many years. Thomas was a Factoring customer for over 7 years prior becoming a business owner and webmaster.
Download our FREE EBook “Growing Your Company Without Debt” learn how Invoice Factoring may be right for your company at: http://www.dfsfactoring.com
