My sister is a small business proprietor of a video rental shop. On a monthly basis, over half of her clients pay with a credit card. The business itself has been in business for the last ten years, so it has been well established. Until this past year, the business has realized profits every year, so in a lending perspective, it had relatively little risk. Because of the tough economy this past year, my sister went to the bank to investigate about a working capital business loan. This was the second time she had applied for a loan, and the first loan had been returned on time, so we did not think she would be denied. Four weeks later we heard back from the bank and found out that they felt her business was too risky, so they were not going to provide a loan. They said we were welcome to reapply in six months, but we required the funds now so that was not an option.
We did not have a credit line at our disposal, so we needed to find a source of cash and this had to be done rapidly. She had multiple bills that were coming due and any delayed payment would have been disastrous because the vendor would not send her inventory. This would have angered many customers and hindered our business operations. After an deep search, we discovered credit card factoring. A.K.A. a merchant advance. This procedure gave us the funds we needed to fulfill our vendors. So how does it play out?
The first step was to be certified with the company to receive the cash advances. Credit card factoring does as its name implies and focuses on the business’ credit card lot. Most lending companies require at least five thousand dollars per month in credit card sales. Once you meet this requisite, it is relatively easy to receive funds. We receive the finances from the lender and repayment is made automatically whenever we resolve the credit card lot. For any small business seeking funds, this is a great way to find monetary resources for your business.
