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For many businesses owners, due to credit issues or other common obstacles, borrowing money during tough times, or to help expand a business can be difficult. There is a new alternative to traditional lending practices that is becoming very popular in situations like these. Credit card factoring is the selling of a company's current accounts receivable, at a discount, to a lender or third party, who assumes the credit risk of the account debtors and collects the funds as the debtors or customers settle accounts. Since nearly all businesses accept payment via credit card and debit card, many finance companies offer loans to businesses against future credit card sales.
Instead of fixed repayment terms, repayment is calculated by the lender and the business from the beginning, so repayment can be more gradual than traditional loan payments. In other words, the lending company purchases an agreed percentage of future sales until the loan is repaid in full. Factoring commission is usually 1 to 3 per cent of the face value of the accounts receivable factored. The interest period on advances may be 2 to 4 per cent higher than the prime rate.
Like traditional business loans, funds can be used for any business needs, including inventory, remodeling, emergencies, or buying out a partner. Usually, in order to approve a loan, lenders will require to run the business owner’s personal credit. They will also documentation to satisfy certain criteria such as gross revenue, proof of ownership (Articles of Incorporation, corporate tax returns, business license), and time in business.
In many cases, once a loan is approved, funding can take place in as quickly as 10-14 days.
Instead of fixed repayment terms, repayment is calculated by the lender and the business from the beginning, so repayment can be more gradual than traditional loan payments. In other words, the lending company purchases an agreed percentage of future sales until the loan is repaid in full. Factoring commission is usually 1 to 3 per cent of the face value of the accounts receivable factored. The interest period on advances may be 2 to 4 per cent higher than the prime rate.
Like traditional business loans, funds can be used for any business needs, including inventory, remodeling, emergencies, or buying out a partner. Usually, in order to approve a loan, lenders will require to run the business owner’s personal credit. They will also documentation to satisfy certain criteria such as gross revenue, proof of ownership (Articles of Incorporation, corporate tax returns, business license), and time in business.
In many cases, once a loan is approved, funding can take place in as quickly as 10-14 days.