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We are highlighting ten key difficulties to avoid when seeking business cash advances and working capital using credit card processing. It is especially important for business owners to realize that it is not necessary to accept any of the ten credit card factoring problems.

Credit card processing and small business loan strategies are closely connected in many ways. Business owners should not overlook the substantial working capital benefits which will accrue to their business by effectively coordinating credit card factoring and processing. If the ten most common business cash advance problems can be avoided, the total business benefits will be maximized.

Even thriving small businesses frequently need more working capital than they can borrow from a bank. One of the most important commercial financing needs for any business is ensuring that short-term cash requirements are successfully met. This is frequently a difficult task.

The use of a viable business cash advance strategy has become an increasingly important business finance tool for many businesses faced with a potential short-term cash shortfall. There are a number of common problems (noted below) to anticipate and avoid when businesses use credit card processing to acquire working capital advances.

Most merchants have documented credit card processing activity and sales volume. Since up to $300,000 and more can typically be obtained using a business cash advance based on future sales, documentation of processing activity is a valuable financial asset.

Businesses should realize that there are several recurring problems that should be anticipated prior to using this strategy for working capital business cash advances. Ten common credit card receivables problems that business owners should avoid when employing this strategy are highlighted below.

First, many lenders will attempt to charge closing costs. Business owners should realize that this is an unnecessary transaction cost for business cash advances when dealing with a truly reputable provider of working capital financing based on credit card factoring.

Second, many lenders for these services also charge up-front fees. With the best programs there are not likely to be any up-front fees, and this is a transaction cost that can and should be avoided.

Third, many programs for business cash advances have collateral requirements. For business owners seeking credit card financing, this is an unnecessary requirement and should be avoided.

Fourth, some lenders will require financial statements and tax returns for all business cash advances. Such additional documentation requirements should only be necessary for larger working capital advances.

Fifth, monthly fixed payments to repay merchant cash advances are imposed by some providers. The preferred approach is to avoid such fixed payment requirements.

Sixth, some providers impose a fixed term for repayment. This requirement to pay off the business cash advance over a fixed term should be avoided.

Seventh, many business finance programs require businesses to have at least two years of operating history to qualify for working capital business cash advances. While many business owners can meet such a requirement, a more practical standard for newer businesses is a minimum of one year in business.

Eighth, most providers of business cash advances currently require credit scores of 680 or higher. For many business owners, this can be an insurmountable requirement in the current economic climate. It is feasible to obtain this kind of working capital financing with scores around 500.

Ninth, for merchants needing larger business cash advances, it will be disappointing to learn that many programs are limited to a maximum of $25,000 to $50,000. Providers that are better capitalized for this business finance strategy will be able to accommodate an advance of $300,000 and higher.

Tenth, quite a few programs require up to 24 months of credit card sales of $25,000 or higher. A more practical possibility for business owners will involve a transaction history with six months of $5,000 or more.

It would be unusual for all of the obstacles described above to be relevant for all businesses. Business borrowers are likely to experience several of these problems if they are considering a business cash advance that uses credit card factoring and credit card processing.

Can all ten credit card finance obstacles discussed above be avoided? There are indeed viable credit card receivables programs which avoid all of the problems described. For any business owner considering this approach to working capital financing, it is probably worth repeating that it is not necessary to accept any of these problems in order to obtain business cash advances based on future sales.

Learn about avoiding working capital management mistakes and find out about commercial loans finance strategies – Stephen Bush is a business loans expert => AEX Commercial Funding and Small Business Cash Management

photo credit: guspim

When times get tough like they are now, businesses small and large run into cash flow problems. To make ends meet, most look to the financing of invoices for needed cash flow relief. If you are thinking along these lines, there is a key issue to consider.

Selling one’s invoices, known as “factoring”, is a process that has been around for a very long time. For as far back as money has existed, one party has offered to pay another an advance on monies due from yet another party. On a personal level, these are often known as payroll advances.

The decision to finance business invoices is a more complicated one. The primary issue is the cost involved. Some businesses run large profit margins and some do not. For those that have health profit margins, factoring almost always makes sense when it comes to resolving cash flow issues. For those with smaller profit margins, it is a more difficult issue to figure out.

As with any form of financing, factoring costs money. The fee is highly negotiable, but there is always going to be a fee. The thing that causes many businesses difficulty is trying to figure out that fee. In most factoring cases, the fee is determined on a sliding scale using time as the key variable. Let’s take a closer look.

Most invoices are due payable net 30. This means your client has 30 days to pay. When a factoring company buys the invoice, they will quote you a fee for that period of time. What happens, however, if the client takes longer to pay the invoice? The factoring company will charge a larger percentage of the invoice the longer it takes to get payment. The fee might go up slightly each day or every few days. The exact process is different with every company.

Now, assume you are quoted a fee of 3 percent if the invoice is paid on time and the fee goes up 1 percent for every 5 days payment is late. After 60 days, you are looking at a 9 percent fee! This can be a problem if your profit margin is only 8 percent because you will be losing money on the deal. In some situations, losing money on factoring is not a huge issue because it is more important to have cash on hand. This is often the case when the economy is in bad shape, but it is not a situation you want to continually experience.

Selling your invoices for cash flow relief is a fairly straightforward process. Just make sure to crunch the numbers so that you don’t run into a situation where you are continually losing money on the transactions.

Stephen Teak is with http://www.FactoringCompanyInformation.com – providing accounts receivable factoring for businesses large and small. Get cash for your business fast.