What Are Credit Card Processing Loans?
Credit card processing loans are a fast, convenient way for businesses to access capital based on their future credit card sales. These cash advances loan against a percentage of a business’s daily credit card sales volume to provide funding in as soon as 24 hours.
How Does Credit Card Processing Loans Work?
Essentially, the lender advances a lump sum and then collects a fixed percentage of daily credit card sales from the merchant until the loan is paid back – kind of like making payments over time. The repayment amount may vary day-to-day depending on sales volume.
These loans appeal to a wide range of businesses, from retailers to restaurants, salons, dentists, medical practices, and more. They allow access to capital without having to take out a bank loan or rely on high-interest online lenders.
Benefits of Credit Card Processing Loans for Your Business
Taking out a credit card processing loan can provide some key advantages when you need funding fast. Some of the benefits includes:
1. Quick Access to Capital
The main benefit of these loans is the speed at which you can access cash. Funds are usually deposited into your account within 24-48 hours of approval.
You don’t even need good credit to qualify in most cases, making these loans accessible for more business owners.
2. Flexible Repayment
With a credit card processing loan, repayment comes directly out of your daily card sales at a fixed percentage.
This automated repayment means you don’t have to worry about missing payments or accruing interest.
3. No Collateral Required
Unlike traditional bank loans, you won’t have to put up any business assets as collateral.
These loans are instead repaid from future credit card sales, so no personal guarantee is required.
4. Continue Accepting Cards
You don’t need to switch processors or close your merchant services account. You can continue accepting credit cards as usual throughout repayment.
While these loans aren’t right for every situation, they can provide a valuable source of funding in a pinch.
Just be sure to read the fine print to understand the repayment terms and total fees.
But when you need access to working capital fast, a credit card processing loan can definitely fit the bill.
Types of Credit Card Processing Loans Available
When you need fast funding for your business, there are a few different types of credit card processing loans to consider:
1. Business Cash Advance Loans
These loans provide you with a lump sum of cash upfront. The amount is based on a percentage of your future credit card sales, which will then be deducted from your daily batch payments until the loan is repaid. The repayment comes directly out of your credit card receipts.
2. Merchant Cash Advance Loans
Similar to a business cash advance, a merchant cash advance provides an upfront sum you can use for any business need. The loan is repaid by deducting a fixed percentage from your daily credit card sales.
3. Working Capital Loans
With a working capital loan, you receive a lump sum and repay it over a fixed time period in predictable installment payments. This loan type can provide more flexible options for repayment.
4. Equipment Financing Loans
As the name suggests, this type of loan allows you to purchase equipment, software services, or hardware for your business. It spreads payments out over time so you can acquire vital business necessities without paying everything upfront.
When exploring credit card processing loan options, be sure to compare interest rates, terms, fees, and qualifications across multiple lending companies.
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This will allow you to find the best loan for your specific business situation and repayment abilities. The right financing can provide a valuable cash infusion when you need it most.
How to Qualify for a Credit Card Processing Loan
- As a merchant, you may qualify for a credit card processing loan if you process at least $5,000 per month in credit card sales. The lender uses your past processing volume as proof that you will continue to generate revenue to pay back the loan.
- Most providers require you to have been in business for at least 9 months to apply. They want to see that you have an established processing history and that your business is stable. Newer businesses may still qualify by providing detailed financial projections.
- Personal credit scores are also evaluated, typically requiring a minimum score around 600. But many lenders focus more heavily on your business’s processing history rather than personal credit when approving these cash advance products.
- Finally, your credit card processing statements are reviewed to calculate a potential loan amount and terms. Most providers will offer loans between $2,000 and $250,000 with flexible 3 to 18 month repayment terms
Reputable providers have simple applications and can preapprove you in minutes. Make sure to ask about origination fees, early repayment options, and other terms before signing.
If you process credit transactions and need fast, flexible business financing, a credit card cash advance loan can be a great option to consider when extra funds are needed quickly.
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How to Apply for a Credit Card Processing Loan
Follow these steps for the best chance at getting approved:
- Gather your business documents. Lenders will want to verify certain information about your business like how long you’ve been operating, your processing volume and sales history.
- Have 2 years of your credit card processing statements handy. Your last 3 months of bank statements may also be requested.
- Check your credit score. Most lenders will pull your personal and/or business credit reports. They usually look for scores above 600 to qualify. Pay down balances and correct any errors on your reports first if needed.
- Research lenders. Compare offers from several credit card cash advance companies to find the best rates and terms. Some top lenders include Rapid Finance, Credibly and Fundbox.
- Complete the application. You’ll fill out a short online form with basic information about yourself, your business and the loan amount desired. Approval often takes just 1 business day.
- Accept the offer. If approved, you’ll get a term sheet detailing the loan amount, fees, repayment schedule and other stipulations. Make sure you understand and agree to all terms before signing.
- Get funded fast. Once finalized, the loan funds are deposited directly into your business checking account, usually within 2-3 days.
Getting a cash advance or bridge loan against future credit card sales can quickly provide the working capital you need to purchase inventory, hire staff or undertake marketing campaigns. With low fixed daily payments, these financing options offer more flexibility than traditional bank loans.