Business Funding Secrets
Business Funding Secrets

How to Use Your Merchant Account To

Easily Access Business Funding

by Brad MacLiver, authorship and profile at: Google

 

If your small business has a credit card merchant account did you know you could use your future credit card transactions to access business financing today? Many business owners are familiar with factoring, or accounts receivable financing, where a business sells an invoice/receivable that they will collect in 30-60 days for cash they can use today. Easily accessing financing up to $150,000 (sometimes more) can be accomplished with a similar concept using the business owner’s credit card merchant account.

 

Unlike traditional bank loans, funds from merchant account advances can be obtained through a streamlined application process with quick approval. Because this type of financing is not tied to the company’s physical assets it is considered off balance sheet financing. Cash can be accessed by small business owners when they sell a fixed amount of future credit card transactions at a discount.

 

Discounts are simply another way of charging an interest rate. Traditional bank loans add a compounding interest rate to the principal and the total sum repaid is larger the farther out the loan is extended. With merchant account advances there is a fixed fee instead of a compounding interest rate. The business owner determines the amount of money the company requires then the total funding amount with the fee is calculated. The amount for the fee will be subtracted (called discounting) from the total amount to be repaid, and the remainder (the amount needed by the business) is provided to the owner.

 

With merchant account advances the repayment is made through the automated merchant account system, which deducts a small percentage as sales are processed. Owners don’t need to worry about writing monthly checks, or meeting strict payment deadlines. Because the funding and payments are determined by the merchant account’s sales revenue, business equity and collateral are not tied up with this type of financing, and if the business has seasonal trends, or a slower sales month, the business owner does not need to worry about paying a fixed monthly payment.


Benefits of using merchant account financing is that the system is automated, with no fixed payments or time line, and the application process does not require red tape or credit checks. Small businesses can use this funding method once, or in regular intervals.

 

Merchant account advances can be used to buy seasonal merchandise, pay off high interest rate loans, complete partner buy-outs, meet unexpected expenses, repair equipment, etc.  Also, considering upcoming changes to the tax law it may be used beneficially to purchase new equipment now instead of waiting until next year.

 

Section 179 of the U.S. Tax Code allows businesses the ability to currently deduct up to $250,000 of equipment expenses. Next year this may be reduced to only $25,000. For tax strategies, it is advisable for all business owners to contact their CPA and determine if there is an advantage to purchasing equipment this year compared to next year.

 

Can you negotiate a discounted purchase price for equipment and supplies if you pay the vendor cash? Knowing cash can be quickly accessed from their merchant account will assist the purchase decision.

 

When you want to learn more about how merchant account advances can be used to finance your business contact rosie.farmer@firstdata.com.

 

This article was contributed to the Business Funding Secrets Newsletter by: Rosie Farmer, Account Executive, First Data Merchant Services, rosie.farmer@firstdata.com


 

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Business Funding Secrets provides business lending secrets, tips, and techniques for business owners seeking business loans and venture capital. You can access important business funding information when you subscribe today to the Business Funding Secrets Newsletter at: www.BusinessFundingSecrets.com     

 

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