Credit Card Receivables Financing. What is It?

by : Robert Jacobs

Credit card receivables financing overview. The funding source offers financing to retail merchants by providing an advance on future credit card sales for the purpose of purchasing inventory, equipment, supplies, etc...

If the retailer accepts credit cards as a form of payment, there is a high probability that they will qualify for credit card receivables financing. Business owners with credit scores of 500 and higher are usually accepted. Based upon the results of a short due-diligence period, the merchant is advanced the funds to purchase inventory, equipment or supplies, etc., needed for their business. The funding cycle is typically 14 days or less for qualified businesses.

The merchant then has from 30-days up to 6-months to pay off the advance through their credit card receivables. The financing company, along with its credit card processor, manages the merchants processing and withholds a small percentage of the merchants credit card sales until the advance funding, plus a fee, is automatically paid to the funding source.

Credit card receivables financing is a form of accounts receivable financing, utilizing a merchant's cash stream from credit card sales as a means of automated repayment. In essence, cash is advanced to the business, and an automated system is set up to repay the cash advance through withholding from credit card transactions - repaying a portion of the cash advance every time a customer makes a purchase.

The fee is based upon: credit worthiness, length of time in business, length of lease, monthly credit card volume, average monthly sales volume and past business history.

Does your business qualify for credit card receivables financing? Qualifying for a $3,000 to $300,000 advance on future credit card sales is easier than you might think:

1. Do your customers use credit cards to pay for their purchases?
2. Have you been in business for at least 12 months?
3. Can you provide current merchant processing statements from the past 6 months with at least $4,000 per month in credit card sales? (with the last 6 months of Bank Statements, can qualify for larger amounts)
4. No open tax liens, judgements or bankruptcies?
5. Acceptable personal and business credit?
6. Good standing with landlord with at least 1 year remaining on the lease?

In summary, credit card receivables financing is an innovative system of funding, designed especially for the small retailer. If the business owner does not qualify for a line of credit with the bank, or has maxed out their existing line of credit with the bank, or wishes to preserve their line of credit with the bank, these type of programs are available to nearly any business that has been open at least 12 months with monthly credit card sales averaging at least $4,000.