Why Businesses Choose Credit Card Factoring

Maybe your business needs cash to take advantage of an once-in-a-lifetime opportunity. Maybe it’s because you need new office or warehouse space and cash reserves are low. Or maybe, like a lot of businesses today, your business is having a hard time covering its own expenses and is currently running the risk of having gaps in its cash flow. Whatever the reason, businesses of every size need to borrow or otherwise obtain cash from time to time.

Cover the Lag in Payments with Credit Card Financing

Why Businesses Choose Credit Card FactoringCredit card receivables factoring is a popular choice for many retail, restaurant or service businesses, or businesses that rely greatly on customer credit card use. While credit cards like Visa and MasterCard can offer a lot to the customer in terms of convenience and letting them purchase high-cost items they might not otherwise be able to, credit card purchases can cause their own problems for businesses who accept them. Because there is generally a lag from the time customers swipes their credit cards to the time your company actually gets paid, your business is routinely at risk for cash flow troubles.

Factoring Credit Card Offers More Flexibility Than Term Loans

Credit card financing lets you overcome this lag by providing you with cash payment up front and then taking out a percentage of all future credit card payments. Many businesses find this payback method more attractive as with credit card factoring they do not have to pay back large lump sums. It is also worth mentioning that credit card receivables financing is flexible and moves at the pace of your sales cycle. That is, when you have more sales, it collects more. When you have fewer sales, it collects less. Many term bank loans, for instance require the same payback amount no matter what your sales look like.

With corporate and neighborhood banks’ lending less than they used to, more and more retailers are turning to credit card factoring companies to secure they money they need to get them through the rough patches. Credit card factoring may cost more than a traditional loan from a bank, but when those business loans are unavailable, Credit card financing has turned out to be a viable alternative for many companies.

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About the Author:

Robert Bernfeld started in the commercial finance industry in 1974. His early years included positions with Aetna Business Credit and Foothill Group. During the next thirty five years. Mr. Bernfeld established both equipment leasing and accounts receivable factoring companies. He partnered in founding Business Facilitators, Inc. in 1999. Mr Bernfeld graduated from the University of California, Riverside in 1974 and received his Juris Doctorate from Loyola University School of Law in 1977.

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