All owners of small businesses need cash for improving their existing facilities, purchasing better equipments and paying for expenses related to expanding their businesses. The first thing that comes to anyone’s mind is loans that are offered by common lenders like banks. The disadvantages of approaching these lenders are the time taken for processing your loan request and the actual process itself which may not be as simple as it may sound. The solution in this case is merchant funding. It is the other source of money for retailers in addition to banks. The process involved in this method is offering capital keeping the future card receivables in mind.

Merchant funding will purchase the future receivables with a discount and depending upon Visa/Master Card receivables (V/MC), the advance cash that the merchant becomes eligible for is determined. A set percentage is then deducted on a daily basis from the V/MC receivable.

This means that the deducted amount is not a fixed amount and it varies based on the receivable of that particular day.

There are many questions that a business owner will have in mind once he understands the concept of merchant funding. The first thing is related to his qualifying criteria. Merchant funding is extended to those businesses that have been in the market for at least two years. There is a minimum cap on the monthly revenue through VISA/Master card too and it can be around $2000. This has to be proved by producing last six months’ revenue statements. Another important condition is that the merchant should not be bankrupt. Another criterion is that the merchant should not be part of a lien or judgment. After submitting the required documents, it takes less than 7 days for allocating the funds.

Once these basic requirements are met, the merchant will be interested to know the maximum funding amount that he can apply for. This is directly related to the V/MC volume on a monthly basis. Deductions are done automatically every month using a card processor that deducts a percentage of the receipts. It will become necessary to change card processors and a processor whose rates match with the current one is use can be finalized.

Unlike a loan that uses fixed agreed upon period for repayment, six months future receivables are normally used. After 6 months, if the repayment is not met fully, there is actually no penalty that is imposed on the merchant; it is sufficient if the merchant just stays in business. Also, there is no need to replace the POS terminal and its associated software. This is true because there are partners of merchant funding organisations who can support all card processors.

Another fact that merchant fund seekers will be happy to know is that a good credit record is not normally needed since other criteria govern the Underwriting. There is an option of being qualified to receive more funds too and it must be availed by merchants who are in a business that requires pumping funds periodically till it reaches a particular level. Contact one of our helpful account representatives to assist you in the setup of a high risk merchant account or offshore merchant account for a high risk merchant.