Business Cash Advance and Credit Card Processing Strategies

Merchant Warehouse |

December 7, 2010

In this article we will help identify key difficulties when seeking business cash advances and working capital with the use of credit card processing. It is extremely important that business owners realize that they are not obliged to accept any of the key credit card factoring problems as unsolvable.

Business loan strategies and credit card processing are closely interlinked in several ways. Business owners should not look past the substantial working capital benefits that will occur in their business if they use effective and coordinated credit card factoring and processing. The most commonly found cash advance problems that occur in businesses can easily be avoided, and then the business retains the ability, and flexibility, to maximize the return on their capital.

Strategic Thinking

Even the business that seems to be thriving can, in reality, need more working capital than they can borrow from banks. The most important commercial financing needs for any business are the short-term cash requirements that must be successfully met, often in a scheduled manner. This is frequently a difficult task, as revenues ebb and flow in every industry, some more so than others.

Businesses have had to incorporate more viable cash advance strategies in the last several years, and the economic uncertainties in the world today will make these approaches a life and death matter for some. Using anticipated credit card revenue as collateral has become an extremely important financial tool for many businesses that have been faced with a short-term cash shortfall. But there are ways to do it right, and lenders are much more apt to assist a well-organized, well-managed and well-prepared business than any other.

Document Those Sales

Many merchants have documented their credit card processing activity and sales volume for the express purpose of using the data as a lever in loan applications, even beyond their use as a backup for a factoring arrangement. Tens of thousands to millions of dollars can be obtained, by companies ranging from the corner store to Sears, using a business cash advance based on future sales, so documentation of all payment card revenues is, in fact, a valuable financial asset.

Business owners should realize that there are several recurring problems that should be anticipated prior to using this strategy for working capital business cash advances. There are indeed viable credit card receivables programs, which can help businesses avoid many of the cash management problems discussed above.

To pay off the cash advance, credit card processing needs to continue with at least the volume that was in evidence when the loan was taken. In fact, there is no better time to institute new cost cutting and efficiency measures, as well as new growth plans. A new marketing plan, new product introduction or other business building activity should aim at increasing sales and profits so that the loan does not become a burden. You can employ the assistance of your merchant account provider’s customer service department, but you should also speak with a knowledgeable business financial planner. Continued success in credit card processing, with low fraud and chargeback losses, will keep you in the black.

Be Careful

As with any financial dealing, be careful and read every word before signing on the dotted line. Also, never piggyback loans. That is, if you are having difficulty repaying the loan, do not borrow more money to do so. If you run into cash flow problems even after the cash advance is obtained, you must seek solutions in the area of cutting expenses, while still working to increase sales, as well as your profits on each sale. The latter is accomplished, of course, by achieving efficiency in all company departments and operations. This is as true for a two-person ecommerce business as it is for a Fortune 500 firm.

For the savvy business owners that are considering this approach to working capital financing, it is worth their while to get good advice, talk to their bankers, consider all alternatives and have a written plan for meeting or exceeding the loan repayment requirements. In order to obtain business cash advances based on future sales, it is critical that the loan applicant be thoroughly prepared and present the prospective lender a copy of the strategic plan. Avoiding the pitfalls of unwise cash advances and inefficient credit card processing will be the key factor in success or failure in these ventures.