What Is Credit Card Factoring?
Though credit card factoring is not technically classified as a “loan” or “debt”, funding comes in the form of a lump sum. The amount you’re approved for is based on the revenue you draw from credit and debit card transactions.
But instead of making fixed payments at the same frequency, the amount is paid back via a fixed percentage of future debit and credit card sales. Payments are only deducted when you make credit card sales, so you don’t have to worry about making substantial payments during a slow month. In fact, you don’t technically have to worry about remembering to make payments at all, since deductions are made automatically through your credit card processor after each sale. Most business owners batch out their transactions daily, and therefore make payments at the end of each day.
Fees for credit card factoring stem from two percentages: The “factor rate” and a “retrieval rate.” The factor rate is similar to interest on a traditional business loan, since it increases the amount you owe. The retrieval rate helps you figure out how much money from your daily sales you’d be paying the business lender until the total amount is paid back in full.
What Do I Need Credit Card Factoring For?
A major advantage of credit card factoring is versatility. You can use credit card factoring for both short-term and long-term investments, or simply to cover business expenses during a rough patch. Some borrowers use credit card factoring to consolidate and pay off the existing debts that gave them bad credit in the first place.
Either way, your main objective should be to increase or stabilize revenue because payments for credit card factoring are directly tied to sales.
Common investments that are ideal for credit card factoring include bulk inventory orders, marketing campaigns, increases in staff or new equipment. You could also use credit card factoring to capitalize on a sudden, expensive opportunity that would otherwise make it difficult to pay monthly expenses on time.
The payment system of credit card factoring makes it one of the few business funding programs capable of financing long-term initiatives amid fluctuations in cash flow. You could even argue that factoring your credit card sales transforms a slow period from a weakness into a strength.
Let’s Start Our Partnership Today!
Now that you don’t have to scramble for cash to pay your bills, you can use this time to ensure a strong performance in the months to follow or tackle crucial tasks that have been on your back burner. Apply now to see how much you qualify for!