Credit card receivable financing is an alternative method of securing working capital. When you use this type of funding, you are selling a portion of your future sales, determined by credit card receivable factoring, to a provider. The benefit is that people who can't get traditional financing can get this type of funding. The downside is that it costs more than traditional methods of infusing cash.

With this type of financing, often called a merchant cash advance, you won't need to jump through the hoops to prove your credit worthiness. Because credit card receivable financing is not viewed as a loan, the cost for the funds varies drastically. When you consider credit card receivables pricing and costs, you will want to look at the following components:

1. Find credit card receivable financing services from companies that don't charge an application fee.

2. Determine what the financing charges, sometimes called origination fees, will be before signing paperwork.

3. Evaluate the receivable percentage and shop around for the best rate.

Action Steps
The best contacts and resources to help you get it done

Look for companies that offer credit card receivable financing with no application fee

When it comes to credit card receivables pricing and costs, you want to consider any application or upfront fees. Most legitimate companies will not charge you anything up front, but when a company does charge, the fees vary based on the company's policy. Some companies use a set fee, but others charge a percentage of the advanced amount as the application fee.

I recommend: The Los Angeles Times provides an article on how to evaluate providers of credit card receivables. It includes advice on companies that charge an application fee. Discount Merchant Funding will purchase your credit card receivables with no application fees or fixed payments. It takes a percentage of future credit card payments directly from your sales until you repay the loan. Rapid Advance offers a no cost/no obligation quote, so you will know up front what the application fee will be. The company discloses all of its fees and charges before you agree to the loan.

Find out the origination fee for funding credit card receivables

Providers of credit card receivable funds make money by charging an origination fee, sometimes referred to as finance charges. The amount for this fee will vary depending on your business situation and the risk involved for the company to provide you with the funds.

I recommend: Lion Communications offers a break down of credit card receivables funding, including information on the origination fee that it charges. Crown Financial Services covers the basics of finances charges used in factoring credit card receivables funding.

Know the receivable rate for credit card receivable financing

An interest rate is a term that only applies to a loan, so many providers will use the term receivable rate to identify the percentage of your sales that the provider will take to repay the advance. This is a prominent part of pricing and costs for this type of funding. Most sources site a receivable rate of 26 to 30 percent of your sales. In some cases, a provider may include its financing charges in the percentage.

I recommend: Strategiesforsmallbusiness.com offers an overview of the typical interest rate charged for financing credit card receivables. It also gives an example of how to add the credit card fees to the payment to determine the total amount being deducted from your sales. BusinessWeek provides an article on how merchant cash advances work and includes a break down of the interest rate and how it compares to an annual percentage rate (APR).

Credit card receivables, also known as credit card factoring, is a viable source of financing to small businesses unable to receive traditional loans. Credit card receivable services take a look at a business's credit card sales to determine its feasibility, then advance capital based on predicted future credit card sales. Unlike traditional lenders, providers of credit card receivables consider a business's future credit card sales an asset. These companies purchase a percentage of predicted credit card sales at a discounted rate. When it is time for credit card processors to collect on credit card sales, they are directed to transfer a predetermined fixed percentage along to the credit card factoring companies.

Credit card receivable financing services provide cash advances up to $300,000, which small business owners can use to expand operations, fund marketing efforts or put toward other business needs. Whether you are a restaurant owner, a retailer or an entrepreneur in general, you can take advantage of credit card receivable factoring specifically for your business.

1. Find credit card factoring for restaurants.

2. Find credit card factoring for retailers.

3. Find credit card factoring for service providers and entrepreneurs.

Action Steps
The best contacts and resources to help you get it done

Get credit card receivable financing for restaurants

When factoring credit card receivables, credit card financing services particularly look to restaurants because restaurants tend to process a lot of credit card sales. Some providers don't even require a fixed rate schedule and will allow a flexible payment scale based on monthly sales. If you are a restaurateur, find one of the many credit card receivable factoring services that specifically offer restaurant cash advances.

I recommend: FastUpFront provides restaurants unsecured cash advances of up to $250,000 without a long application process or a fixed payment rate. RestaurantFactoring.com provides up to $300,000 in as little as 10 days with low processing rates.

Obtain credit card receivable financing for retailers

Credit card factoring services provide retailers advances for the same reason they provide advances to restaurants - lots of credit card sales.

I recommend: Merchant Resources International offers unsecured cash advances of up to $500,000 to merchants with a quick online application process. Merchant Advance Corp. provides cash advances to businesses that have been operating at least six months and that accept basic credit cards, including Visa, MasterCard and American Express.

Find credit card receivable financing for service providers and entrepreneurs

Since 92% of small businesses can't get money from banks for various reasons, credit card receivable financing is especially useful to service providers and other small entrepreneurs as a quick alternative funding resource.

I recommend: Advance Factor provides businesses with cash advances of up to $250,000 to existing businesses in operation at least three months and that accept credit cards, excluding home-based businesses. Bad credit is not an obstacle. Orbit Merchant Solutions offers advances against basic credit cards to seasonal and non-seasonal businesses that process $3,000 a month or more and have been operating at least a year and a half.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Don't confuse credit card factoring with accounts receivable factoring, where invoices - not credit card receivables - are purchased at a discount before their due date in exchange for cash payment. Businesses use this funding for quick capital as well.

Credit card receiving, which is also known as credit card factoring, refers to the process of obtaining money or a loan based on future credit card transactions. In essence, the company is receiving the loan on projected sales. Those sales are tabulated by the prior history of credit card processors.

Take the time to learn about some of the key terms associated with credit card factoring and the process of obtaining the loan. Here are some of those terms along with some informational resources to help get you started.

Action Steps
The best contacts and resources to help you get it done

Credit card sales

Credit card sales, in terms of credit card factoring, is the basis for determining the credit card sales of a restaurant over a period of time. Mean, median and other financial statistics are drawn from the credit card sales, determining the amount of the loan.

I recommend: Go to the website for QSR Magazine for an informative article which discusses the process of credit card receivables and how a loan can be based off future sales.

Discount rate

The discount rate is the interest you'll pay on each credit card authorization to pay back your small business loan. For instance, if there is a $100 transaction and the discount rate is 20%, then only $80 would be kept by the business until the balance of the loan is paid off. It should be noted that any credit card processing fee would be paid on top of this amount.

I recommend: Go to the website for Strategies for Small Business for an example page of how the "discount rate" is calculated during the credit card receivables process.

Credit check

The credit check refers to the process of providing the credit factoring company with a credit history for the business. This will detail everything from sales, to debts, to monthly expenses and more. The credit factoring company will then determine if they can provide a loan based on the financial picture of the entire company. The corporation Tax ID number will be used to run the credit check.

I recommend: Visit the website for Merchant Credit Advance.com for more information on the credit check process usually required for obtaining a loan versus credit card receivables.

Factor

The factor refers to the company that provides the loan based on credit card receivables. They are in essence the 'bank' in the loan obtained through the credit card receivables process.

I recommend: Check out an article from the Houston Business Journal that discusses the process that the factor follows in negotiating and processing a credit card receivables loan when working with a retail outlet.

Cash advance loan

The cash advance loan refers to the term factoring companies often use when describing the type of loan obtained while using the credit card receivables method. This is because the factoring company supplies cash in 'advance' of future credit card sales.

I recommend: Visit the website for Online Check.com for additional information on a cash advance loan and the terms it might entail.

Credit card processors

Credit card processors refer to the actual companies that process or perform credit card transactions for a retail location. Credit card factoring companies often work with certain credit card processors in order to tie together fees.

I recommend: Go to the website for Advance Me.com for additional information on how credit card processors affect the credit card factoring process.