Credit Card Receivables Key Terms

Learn some of the terms commonly associated with credit card receivables

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.

 

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

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