Jul 30

What is Merchant Funding and How Does it Work?

Merchant funding is a simplified funding solution to serve businesses. Understand the in's and out's of this process with our detailed explanation.

There are times when a golden opportunity comes, and you need to strike while the iron’s hot. However, in scenarios when quick financing is required, traditional loans may take too long. Merchant funding is the perfect solution for moments like this. It’s a simplified funding service that provides a lump sum and is paid back via the business’s credit card sales deposits and the owner’s credit.

Also known as merchant cash advance, merchant funding is a flexible alternative to the traditional small-business loan that you’d normally get from a bank. As an added bonus, the risk is much more manageable for business owners.

How Merchant Funding Works

For traditional loans, banks base approval on the business’s credit score. But for merchant cash advance, funding is approved based on the business’s creditworthiness via the evaluation of several factors but most importantly, the potential credit card transactions, including payments via online accounts like PayPal. 

Since the funder works with the card terminal provider directly, they can get a grasp of how many card transactions are processed by the business on average. This eliminates the need for credit checks or bank statement reviews.

The Benefits of Merchant Funding

There are many reasons why business owners opt for merchant funding to finance their growth and expansion efforts. Here are some advantages of a merchant cash advance:

Painlessly Fast and Easy – Because you don’t have to go through the pain of checking credit scores and bank statements, you can get funded quickly to meet any urgent financial obligations or leverage on unique opportunities.

Convenient and Fits Your Budget – The merchant cash advance is paid off with a slice of daily card sales plus a fee, so it conveniently fits into your daily operations and your budget.

Flexible and Risk-Free Alternative – You can get the funding you need without having to put up collateral, so you don’t compromise your business.

Merchant funding can be an excellent alternative for businesses who need speedy financial support but aren’t in a position to take risks. 

Who Can Benefit from Merchant Funding?

Merchant funding is suitable for most businesses that have a consumer-facing aspect and deal with card transactions – restaurants, retail, convenience stores, and e-commerce shops that accept card payments. It’s a viable alternative for businesses that require funding but have limited assets or limited credit scores. It’s also the perfect financing solution for niche or seasonal businesses that are approaching a peak and need speedy capital in anticipation of the influx.

This type of merchant funding can be used to finance urgent requirements and growth opportunities. Here are some examples of how merchant funding can be used:

Restaurants: You can quickly secure funding to rent a food truck (plus necessary equipment) to serve the spectators who attend local games and community events. You can also use it to finance seasonal expansions such as a catering subunit for special events.

Retail: Consider using a cash advance to contract additional manpower and implement a queuing system to better manage the influx of customers during the holidays or end-of-season sales. These peak times of year can become incredibly stressful otherwise.

Special services: Salons and barbershops also experience peak periods such as the weekends, prom season, and graduation season. To service more clients during these high-demand times, consider using merchant funding to hire temporary personnel and rent extra equipment until business settles down again.

Niche businesses: Flower shops and costume shops may be open all year long, but they are most in demand for Valentine’s Day and Halloween respectively. Merchant cash advances can be used by these businesses to stock up on inventory and offer limited-edition products.

Get the Funding You Need with True POS Merchant Funding

True POS is a trusted one-stop-shop for business and payment processing solutions. Given the nature of merchant funding, which is evaluated via the business’s card terminal, the card processing must be with True POS. If you’re not with us yet, no worries! We make the transition seamless and easy so that it doesn’t interrupt your business operations.

In order to qualify for merchant funding, your business must meet a few requirements first. The criteria for True POS’s merchant funding are:

  • - The business category must be retail, restaurant, or service business.
  • - The business must process a minimum of $4,000 in credit card sales every month.
  • - The business must have been in operation for over a year, and still have one year on the lease.
  • - The business is of good standing, is not bankrupt, and does not have any open judgments.

Trying new services and resources can be confusing and overwhelming, especially money-related ones. And that’s normal! After all, your business is your brainchild, your pride, and the result of countless hours of work and effort. It’s more than natural to want to ensure that you’re making the right decision and that each step is done correctly.

At True POS, understand your concerns and are here for you each step of the way. Our staff is located across the country and us always ready to help you out. We pride ourselves in providing excellent, unparalleled customer service that makes things easier for you. We’re with you all the way – from setting up to ongoing maintenance, you can count on us to have your back.

Wondering if merchant funding is a good choice for you? We can help. Reach out to us today and let’s talk more, or request a free quote from us online.

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