If your company is seeking or has been turned down for a small company loan, an unsecured line of credit, unsecured company financing, or other short-term company financing to use as "working capital" you may have heard of Credit Card Receivable Financing (Ccrf) - but you're not quite sure what it is. Ccrf is an alternative funding solution that many existing businesses are able to use when they don't qualify for original bank financing.
Credit Card Receivable Financing is a fast, easy and suitable way of getting working capital or a short-term company loan for a company that has standard credit cards as cost for its goods or services for at least the former six months. Unfortunately, it is not available for start-up loans, start-up funding, new company loans as will be explained later in this article.
Credit Card Cash Advance
However, many company owners still don't fully understand the contrast in the middle of Merchant Cash Advances (or company cash advances) and Credit Card Receivable Financing. The infer is they are very similar in the requirements to qualify, term distance and repayment recipe - but they are different.
While both are known as a form of credit card receivables funding, the original (and most important) contrast is; a Merchant Cash Advance (Mca) is the actual "purchase" of your future credit card receivables at a discounted rate. It is unsecured financing, but it's not classified as a loan. Much like "Accounts Receivable Financing" the same plan applies, that is; your company sells its receivables at a reduction for cash that you need now and you agree to repay the funds from future revenues. Since this is a purchase of future credit card sales the company providing the funding is not required to give an established rate of interest. In fact they cannot even call what is expensed interest, it's called "the cost of money" and the estimate expensed can vary based on factors having to do with your business. (Those factors will be discussed in another article specifically connected to Merchant Cash Advances).
With Ccrf the company still uses future credit sales as a basis on which the lender will resolve the estimate of funding, but the contrast is that Ccrf is a true regulated "business loan" and as such the qualifications are slightly more complex but the costs are ordinarily 50-80% less than most Mca's.
When attempting to secure any type of company loan, unsecured company credit line, or company financing many new small company owners will try to qualify for Ccrf because of the savings benefit it offers. In fact, many owners who currently have a Mca will use Ccrf to pay off the existing advance because of how much they are able to save on the costs of money.
Another benefit of Ccrf is, in the first few years many businesses are unable to form a credit history that banks will need to qualify for loans. With Ccrf as payments are made the company owner can make sure those payments, to an unsecured company loan, are reported to credit agencies so that a history of repayment is being made. This can potentially improve the credit score and perhaps help in future bank loan applications. In addition, there could be tax advantages that your accountant may be well-known with about interest cost and so forth.
With both Ccrf and Mca the estimate of funding that you receive depends on your monthly credit card sales. And funding typically ranges in the middle of 100 to 150% of your monthly credit card sales average. For example, if your businesses monthly Visa/MasterCard sales midpoint is ,000 lenders can fund ,000 to as high as ,000 for the general six to twelve month terms that are offered. Remember, this unsecured company loan is short-term working capital so don't expect a 36 or 60 month cost term.
To qualify, your company must have processed at least ,000 in Visa/MasterCard transactions each month for the former six months, be in company for minimum of one year, have a minimum Fico score of 540 or greater, have at least one year remaining on your company lease or own the asset and no open bankruptcies, foreclosures or liens (some liens with payments plans may be Ok). There is no collateral required and the term is ordinarily six to twelve months.
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What Is credit Card Receivable Financing? Credit Card Cash Advance
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