Cash is King! That is the mantra for most business owners. We wouldn't be in business if we didn't want to make money. Just as famous in the line, "It takes money to make money." Best laid plans will not always cover all contingencies, so what is a merchant/business owner to do when commercial lending is tight and emergency funds are needed? One solution may be sell to future receivables.

I will briefly discuss the following:

• What is it?
• How do I get it?
• How much can I get?
• How quick can I get it?
• How does it work?
• Will this work for me?

What Is It?

There are currently several different companies offering to purchase future receivables. Specifically, I offer two similar programs in which investors will purchase a percentage of your credit card receivables (Visa ^©and Mastercard ^© only). The future credit card swipes are purchased at a discount with a set percentage set a side to repay the advanced amount. Wow, what a mouthful. Lets look at a quick example.

• I am a restaurant owner, and my pizza oven just went on strike. I need cash to make major repairs or replace the oven, cash I do not have handy. So, I get together my most recent credit card statements and fill out a quick, one-page application. Based on a multiple of my average monthly V/MC volume, I agree to sell $20,000 of my future credit card sales in exchange for cash now. Within 3-10 business days, money is wired into my business bank account, and then a small percentage of each credit card swipe goes towards repaying my advance amount. This percentage is FIXED, and when I swipe less, I pay less.

The process is really quite convenient, unlike traditional commercial lending. This is NOT a loan product, this is a purchase of future receivables. What does that mean? It means that investors look at the predicted future receivable based on the average of the last four months of Visa Mastercard sales and offer to purchase those receivables. Some categories are restricted, such as seasonal merchants, internet only merchants and adult-related products.

How Much Can I Get?

Funding amounts vary based on type of business. Approved purchases are multiples of your average monthly volume. Maximums are between $250,000 and $300,000, but the average advance I see is anywhere from $10,000 to $80,000. This reflects the businesses I prospect more than the limitations of the program. I am, after all, a small business consultant.

How Quick Can I Get It?

The streamlined process can allow funds to be wired into your business account anywhere from 3-10 business days. Complete information and four months of processing statements are required (feel free to black-out merchant ID numbers if you feel more comfortable).  The best feature of this program is the quick funding, especially considering the commercial nature of this product. I can have money in your bank before all  your commercial paperwork has been completed and reviewed by your financial institution.

HERE IS THE FINE PRINT. You and your business must not be in a current bankruptcy or foreclosure. You must be a merchant in good standing with Visa and Mastercard, and cannot be in a restricted line of business. Other criteria include a minimum monthly processing volume, both revenue and transactions, and there must be time remaining on your commercial lease.

Now the good news. There are no personal guarantees, no liens filed against your business, and these will not show up against your personal or business credit reports. Again, these are not loan products.

BEFORE you receive funding, you will have several options to choose from, including funding amounts and payback percentages. There are also caps built in to limit the amount paid back each month ao that it does not exceed preset limits. Also, since there is a fixed payback percentage, if your monthly volume is lower, you will be repaying less. Although designed to be paid back within certain timeframes, there are no financial penalties for repaying later, as long as you abide by your agreement (ie. you continue to accept credit cards, etc.). 

Receivables Funding does not work for all businesses. Considerations include:

• Your business profit margin must support the ability to repay the given percentage
• You must not be a seasonal merchant
• There is a minimum average volume( typically $4000 - $5000 per month, at least 15 daily batches per month and a maximum average ticket )
• Must be a brick-and-mortar business
• Lease must include enough time to cover the repayment period