Credit Card Processing Solutions and Merchant Cash Advances

The use of credit card processing solutions to improve business financing is often overlooked by commercial borrowers. With recent economic volatility and cash flow fluctuations for businesses everywhere, business owners are beginning to seek credit card processing advice as a key ingredient in working capital management improvements. One of the potential benefits is reducing outlays for one of the highest variable expenses with a business accepting credit cards. It will often be possible to obtain additional working capital that can be used for payment of other business expenses even though credit card processing costs cannot be reduced.

Merchant cash advance programs are among the short-term financing options related to recent credit card processing volume. This business finance option is also referred to as a working capital advance, business cash advance and credit card financing. Once approved, a business owner will receive a fixed amount of cash, and the advance will be gradually paid back as credit card transactions are processed. A prudent business funding process will typically require two to three weeks. Merchant financing can exhibit several (avoidable) problems if not executed properly, but the strategy has proven to be an effective commercial financing approach to obtain operating cash quickly for small businesses. Business cash advance and credit card factoring programs are not the same, and the differences are significant in many cases.

Evaluating the possibility of refinancing commercial loans as a quick source of working capital is one obvious alternative for many business owners in their search for business financing which can provide timely cash flow. While there might be good reasons to pursue such a strategy, the fees, profit and loss issues and length of time to obtain cash from refinancing business debt mean that this option is not always practical. A small business owner may be able to obtain working capital financing that is sufficient to make refinancing unnecessary if they have enough credit card processing transactions. The shorter time period required to obtain cash (two weeks or less) is an additional relevant advantage of obtaining a short-term working capital loan instead of refinancing a long-term commercial loan (which can often take two months or longer).

To realize the biggest possible cost reduction as well as produce immediate cash flow, some working capital management strategies will make the replacement of a credit card processor appropriate. As just noted, however, there are several alternative business financing options which will result in more working capital for a business without impacting the current credit card processing arrangement.