Business factoring is a scarcely used financial method that gives necessary funding to business owners via their credit card processor. A very little amount of business owners realize that they have this choice and go straight to family or a bank when they need funds to pay for expansions, repairs or upgrades of their stock and equipment. If you are an entrepreneur in need of funds fast, you should look into this method of merchant loans as well.
The thought behind factoring is a bit like selling futures. You, as the entrepreneur, agree to sell future credit card receipts at a cheaper price to the factoring company. The working capital is given now in exchange for future receipts in the next several months.
These agreements are most commonly for the near term, rarely more than one year, and are a great way for a merchant with a verifiable credit card sales track record to get necessary funding.
Unlike a conventional loan, in which the repayment term is set for the duration of the loan, a factoring arrangement takes into consideration the truth that in almost every business there are great months and bad ones. Your payment is directly tied to your credit card receipts, as a portion, not a set number.
If you have chosen to pay a 10 percent daily capture and you receive 8,000 dollars one month, your payment that month comes out to 800 dollars. In following month you may charge 10,000 dollars and pay 1,000 dollars. This flexibility is a great thing for a growing company though restaurant financing.
An extra benefit of business factoring is the quickness, short time in which the cash turns up in your possession. While a bank may take several months to make a decision and then tell you how you use the funds when and if they give it to you, with a factoring arrangement, you will have the cash in about a few working days, and you can apply it to whatever you see fit.