What Is Credit Card Receivable Financing?

If your company is seeking or has been turned down for a small business loan, an unsecured line of credit, unsecured business financing, or other short-term business financing to use as “working capital” you may have heard of Credit Card Receivable Financing (CCRF) – but you’re not quite sure what it is. CCRF is an alternative funding solution that many existing businesses are able to use when they don’t qualify for traditional bank financing.

Credit Card Receivable Financing is a fast, easy and convenient way of getting working capital or a short-term business loan for a business that has accepted credit cards as payment for its goods or services for at least the previous six months. Unfortunately, it is not available for start-up loans, start-up funding, new business loans as will be explained later in this article.

However, many business owners still don’t fully understand the difference between Merchant Cash Advances (or business cash advances) and Credit Card Receivable Financing. The reason is they are very similar in the requirements to qualify, term length and repayment method – but they are different.

While both are known as a form of credit card receivables funding, the primary (and most important) difference is; a Merchant Cash Advance (MCA) is the actual “purchase” of your future credit card receivables at a discounted rate. It is unsecured financing, but it’s not classified as a loan. Much like “Accounts Receivable Financing” the same concept applies, that is; your business sells its receivables at a discount for cash that you need now and you agree to repay the funds from future revenues. Since this is a purchase of future credit card sales the company providing the funding is not required to give an established rate of interest. In fact they cannot even call what is charged interest, it’s called “the cost of money” and the amount charged can vary based on factors having to do with your business. (Those factors will be discussed in another article specifically related to Merchant Cash Advances).

With CCRF the business still uses future credit sales as a basis on which the lender will determine the amount of funding, but the difference is that CCRF is a true regulated “business loan” and as such the qualifications are slightly more involved but the costs are usually 50-80% less than most MCA’s.

When attempting to secure any type of business loan, unsecured business credit line, or business financing many new small business owners will try to qualify for CCRF because of the savings benefit it offers. In fact, many owners who currently have a MCA will use CCRF to pay off the existing advance because of how much they are able to save on the costs of money.

Another advantage of CCRF is, in the first few years many businesses are unable to establish a credit history that banks will require to qualify for loans. With CCRF as payments are made the business owner can make sure those payments, to an unsecured business loan, are reported to credit agencies so that a history of repayment is being made. This can potentially improve the credit score and possibly help in future bank loan applications. In addition, there could be tax advantages that your accountant may be familiar with regarding interest payment and so forth.

With both CCRF and MCA the amount of funding that you receive depends on your monthly credit card sales. And funding typically ranges between 100 to 150% of your monthly credit card sales average. For example, if your businesses monthly Visa/MasterCard sales average is $10,000 lenders can fund $10,000 to as high as $15,000 for the normal six to twelve month terms that are offered. Remember, this unsecured business loan is short-term working capital so don’t expect a 36 or 60 month payment term.

To qualify, your business must have processed at least $3,000 in Visa/MasterCard transactions each month for the previous six months, be in business for minimum of one year, have a minimum FICO score of 540 or greater, have at least one year remaining on your business lease or own the property and no open bankruptcies, foreclosures or liens (some liens with payments plans may be OK). There is no collateral required and the term is usually six to twelve months.

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What is CCRF
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FICO score – increasing FICO credit score using fair Isaac Scoring machine

Your FICO rating is a essential component of handling your finances. that is the variety utilized by the credit bureaus to determine how desirable your credit score is. The FICO scoring device can look like pretty complex in case you do not know the way it works. then again, in case you recognize how your FICO score is calculated, you can without problems discover methods to keep a very good rating or repair a horrific one. knowledge your FICO credit score is fundamental to retaining right credit score and maintaining yourself afloat.the first a part of understanding how the FICO scoring device works is to understand what qualifies as a good credit score score. the best score you may receive is 850. The high-quality variety is between 720 and 850, with scores from 675 as much as 719 nevertheless representing precise credit score. rankings underneath 675 may have problem getting excellent terms on cash borrowed, and beneath 620, it is able to be tough to get credit score in any respect. A score of 300 is the lowest of the FICO rating ladder.Your FICO credit score rating is made up of more than a few of factors. Thirty-5 percent of your credit score score is based on how punctual you are with payments. Any price over thirty days late may be pronounced to the credit score bureaus and lower your score. Thirty percentage of your score is likewise based totally on your general debt — the ratio of revolving debt, like credit card balances, to to be had revolving credit, which include your credit score restrict.every other fifteen percentage of your credit score score is based on the duration of your credit score history from the time you first borrowed cash to the present. Ten percent is based totally on the forms of credit you use. a few sorts are weighted extra heavily. The final ten percentage of your FICO rating is determined by means of how a lot credit score you’ve got used these days.some unique elements that can have an effect on your FICO credit rating consist of cash you owe due to a courtroom judgment or tax lien. these can carry a completely big credit score penalty. when you have greater than a specific wide variety of patron finance credit money owed, you may additionally discover that your rating is impacted negatively. The number of credit assessments made lately also can decrease your rating, although the credit score bureaus do allow for a certain quantity of tests in a particular window of time, such as may arise whilst you are shopping for the quality price on a loan.There are 3 important credit score reporting companies in the america: Equifax, Experian, and TransUnion. they all document credit score a little otherwise, meaning that it is crucial to get a record from every to get an correct photo of your credit score. Any US resident has the right to request a replica of his or her report from every employer once a year. you may do this through thru the net, thru a toll free name, or by way of mailing an Annual credit document Request form. This report does now not contain your FICO score. however, you may choose to purchase that credit score rating for a small price at the time you get admission to your record.

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