Credit Card Factoring – How Can It Help Your Business?

Many of you may already know what credit card factoring is. For those who don’t; it is the process in which an investor (factor) purchases a portion of your future, unprocessed credit card sales at a discounted rate. Who in turn advances you a lump sum of money that you pay back over an extended period using a percentage of your daily credit card sales.

Did you catch all that? Here is a more detailed description of what credit card factoring is;

• They are frequently referred to a merchant cash advance or a merchant loan.
• A business factor pays for a portion of your future credit card sales at a discounted rate. The amount is based upon your businesses proven record of monthly credit card sales.

Hypothetically; if your business makes $10K in monthly credit card sales, a factor might advance you $25K.

• The factor will then set up your credit card processing machine to use a small percentage of your daily credit card sales to automatically pay back the advanced amount. Keep in mind that you retain 100% of your cash sales.
• Because a percentage of your daily credit card sales are used; the amount you pay back is different each day. This is referred to as a flexible pay back schedule. On slow days you pay back less, on busy days you might pay more. It works with the flow of your business so as not to create too much strain on your business and to insure a successful payback.
• Generally, the merchant cash advance is set up so that your advance is paid back in approximately 6 – 9 months. Of course this is just a target. The amount of time it takes to pay it back depends on how well your business performs.These are particularly beneficial for businesses that are unable to get a bank loan or if they cannot wait the time it takes for a bank loan to be processed.

What can credit card factoring do for your business?

Here are a few examples of why you might consider getting a merchant cash advance;

• You need working capital for your business and you’ve been turned down by the bank,
• An opportunity has presented itself and you cannot wait the several weeks it takes for the bank to process your loan.
• You like the freedom of having additional working capital when you need it.

Here is something to think about; what would your business do if it had access to an additional $5K to $500K?

This is what some of the businesses that we’ve funded did with the money we gave them;

• The caught up on some of their outstanding debt before it had a negative impact their credit.
• They used the money to expand or remodel their business.
• They expanded their current marketing strategy to go after new markets.
• They invested their money to open a new business location.
• They bought out an existing business partner.

Looking at the list; do you notice what all of these things have in common? They used their merchant cash advance and invested it in a way that will have a positive effect on their business for many years to come. How does your business fit into this list? How would you invest in your business?

Credit Card Factoring is Expensive

Credit card factoring is expensive compared to other types of loans, but if you factor in the potential loss your business might suffer without the money. Or if you consider what you stand to gain with the additional funding; it could be one of the best business decisions you’ve made all year.

Receivables factoring has been around for many years. Credit card factoring in its present form has been around a relatively short time. It is an industry that is growing quickly and for good reason when you consider our current economy. Please use the following link to learn more about credit card factoring.

What can Credit Card Factoring do for your business?
Credit Card Factoring Information

Credit Card Factoring

Many of you may already know what credit card factoring is. For those who don’t; it is process in which an investor (factor) purchases a portion of your future, unprocessed credit card sales at a discounted rate.

Invoice Factoring

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Controlling your accounts receivable factoring costs is based on three main components – the time it takes to collect invoices, the volume of invoices factored, and the creditworthiness of your customers. Each of these issues is important in establishing how much you will pay to factor your invoices, but there are ways to control your costs.

Time

Part of the financial risk that incurs when purchasing an account receivable is related to the time it takes for a bill to be paid. Time is therefore an important commodity that can affect your fee: the longer an invoice is outstanding, the higher the fee. (A 60-day invoice would consequently cost more than a 30-day invoice.) You can reduce your time-related costs in two key ways: 1) Factor customers that pay their bills quickly. 2) Send invoices only when you absolutely need money. By retaining your invoices for a while after you provide the services/goods to your customer, you will decrease the amount of time a factoring company owns the account receivable, which will decrease your fee.

Volume

Volume refers to the total amount of money that is factored each month. Opposite from time, higher volume means lower fees, while lower volume means higher fees. Eventually, you can lower your fees by factoring larger dollar amounts and larger invoices. Also, long-term relationships that result in factoring large cumulative dollars can result in lower fees.

Customer Creditworthiness

Unlike a bank loan, the ability to factor is dependent on your customer’s creditworthiness, not your own. Therefore, the factoring company is assuming risk based on your customer’s credit history, which affects your fee; marginal credit means higher fees, while good credit means lower fees. The most straightforward way to decrease your fee is to factor invoices due from customers with good credit history. While most factoring companies will only factor customers who have acceptable credit, those who have better credit will be less expensive. While other variables can affect the factoring fee, time, volume and credit are the most significant components thata factoring companywill evaluate. By carefully usingaccounts receivable factoring services you can minimize your costs.

Author: Philip Cohen

Philip Cohen is the founder and president of PRN Funding, LLC, which is an extraordinarily focused niche player in the healthcare staffing invoice financing market place. Through a process known as factoring, PRN Funding provides business owners with the financial resources needed to grow and effectively compete in the industry. With no minimums or fixed terms, PRN Funding provides medical staffing agencies with flexible and immediate access to capital. We give you the freedom to factor what you want, when you want, whom you want, for as long as you want. Prior to founding PRN Funding, Mr. Cohen was an executive officer of The MRC Group, a national provider of Medical Transcription Services. Contact Philip Cohen at toll-free 866.776.5407 or via email at pcohen@prnfunding.com Please visit PRN Funding, LLC on the web at http://www.prnfunding.com

Article Source: http://EzineArticles.com/?expert=Philip_Cohen

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