Merchant Credit Card Processing Loans | The Fundamentals

Merchant Credit Card Processing Loans

merchant credit card processing loans

Many business owners have, over the years, trusted the mainstream bank loans to fund their businesses. This has, however, sidelined the small business owners with little to no collateral for the loans. However, with merchant credit card processing loans, it is now possible for entrepreneurs to secure quick funding for their startups based on their credit card sales.

Merchant credit card processing loans are cash advances from a finance company given to merchants in exchange for a portion of their credit sales, together with an agreed-upon fee.

What are Merchant Credit Card Processing Loans?

Business owners can apply for the funding online. It is a fast and almost effortless process with guaranteed and instant results. The bar for eligibility is usually set considerably low to allow access to even those with low credit scores. So you need not worry about the chance that you might not qualify. The financers will retrieve their money by taking a percentage of your credit sales, within an agreed time frame.

Factor Rates

Merchant credit card processing loans are given on a factor rate as opposed to the traditional interest rates basis. A factor rate is basically the amount you pay to borrow a loan. The usual rate ranges from 1.14 to 1.48. If, for instance, you borrowed $10,000, your total repayment will be calculated as $10,000 x 1.48, to give you a total of $14,800. The total amount to be repaid remains constant regardless of the duration of payment. The use of factor rates has, however, proven such loans to be a bit more expensive.

Duration of Payment

The time allowed for payment is relatively reasonable. It can take only four months or even as long as 18 months to repay the loan in full. The daily or monthly rate is constant, so it is easy for any business owners to evaluate how the reimbursement will affect their business.

Merchants with a higher fixed credit percentage rate will take a shorter time to repay their loans but will put up with slower cash flow during that period.

Is it worth it?

If you’re considering merchant credit card processing loans, keep in mind that it will most definitely take a toll on your daily credit card sales. However, the fixed repayment rate is a plus, because you will not have to worry about paying accrued late fees.

While the loan is very easily accessible, it is also the most expensive on the market. Take time to evaluate and decide whether it is what’s best for your business.

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