If you own an auto repair service business and you have been looking for cash to expand, good luck. Many businesses, not just auto repair have felt the frustration of the banking woes in a way that makes it difficult for any business to get cash. Banks just aren’t lending. So little that it has turned into a major talking point for pundits, voters, and politicians on the campaign trail with many asking the gov’t to step in and somehow get money flowing to small businesses.
Banks aren’t lending for many reasons. The primary reason is the substantial losses most banks have taken by underwriting bad or risky loans. They basically lent money to people that had no business getting money. The housing market had a spillover effect that impacted the rest of the financial markets and now they are gun shy.
So what do you do if you are a small auto repair business and need to add another bay to your garage. You know this bay will increase revenues dramatically but you need the money to do it.
What are your funding options?
Go to a bank. You can but the outcome will likely be no. If you go that route, expect the banker to require at least a 725 FICO and two years of tax returns.
Friends and family. You may not have a partner now but you will if you take this route. Even though you only wanted a loan they will for some reason think they now have equity in your business. So unless you want a partner, think again.
Merchant cash advance. This can be a great option for many businesses. It is not a loan but more of an advance of future credit card sales. These companies take a look at your credit card sales and based on what you processed in the past few months, use that as an indication of what you will do in the near future. They will usually lend you an amount equal to your monthly volume. They will take a small percentage out of your daily credit card sales to pay it back. The amount is usually between 8-25% and is typically paid back in around 6 months.
The underwriting guidelines for a merchant cash advance are very simple. Typically they include providing the following:
Four months of merchant statements
Four months of bank statements
Copy of business lease
Copy of driver’s license
That is about it. Some companies can have your funds to you in just a few days with much less hassle than a bank. So if you need funds, consider a merchant cash advance.
Reading your merchant statement and finding the rates and fees you’re being charged can be like playing “Where’s Waldo?”. One reason is because there are nearly as many different statement formats as there are merchant acquiring companies. Also, because of how competitive the industry has become, many monthly statements don’t completely disclose the rates being charged. And sometimes they are completely hidden.
I know of banks that don’t even send a statement out. If a merchant wants details of what they paid they have to logon to an online account to find it.
It’s War Out There!
One reason for this is the competitiveness. You have to remember that credit and debit cards make up part of a 2 trillion dollar industry. Money is like a magnet – it attracts Most merchants are being contacted continually by competing processors trying to get them to switch processors, by promising “lower rates”, etc.
So, to prevent a sales agent from another processing company from taking a merchant away – some processors make it as hard as possible for a competitor’s sales rep to walk in to a business, analyze a merchant statement, and do an ‘apples for apples’ comparison.
That being said, there are still some basic keys to look for when reading your statement. Here’s what I look for in analyzing a merchant statement, in order:
One: The pricing structure – how has the account been set up? Which pricing model does it employ? Is it using tiers (e.g. 3-tier; 4-tier, etc.) or – is it using “Interchange Plus”? (NOTE: most merchants are on a tier pricing model, which, in my opinion guarantees they’re being overcharged. Also, there are other pricing structures but tier pricing is by far the most common)
Two: The monthly fees (sometimes called “Other”) – next, I look to see what the monthly fees are. This can include: a statement fee; monthly service fee; account maintenance fee (normally, you’d only see one of these although I’ve seen two – or, you may see the equivalent fee but using a different term); PCI fee; batch fee; and gateway or access fees. Any miscellaneous, but not monthly fees can also show up here – e.g., an annual fee or semi-quarterly.
Three: Processing Fees – this is where the discount rates will be listed. If you are on tier pricing the best statements will print an itemized list showing the “qualified”, “mid-qualified”, and “non-qualified” (the 3 tiers) rate. If you are on Interchange Plus, you’ll see a list showing all the different cards you took, followed by the actual interchange rate for the card, the “dpi” (discount per item), plus the processors mark-up expressed as basis points and a transaction fee (or per item, depending on the term used to list it).
Four: Authorization Fees – here’s where you’ll find fees that go to VISA and MC. They’ll show up listed as access, authorization, and /or WATTS fees. You could also find here AVS fees (address verification); assessment fees; brand usage fee; risk fee; settlement fees, IAS fee (Issuer Access & Settlement).
Five: Third Party Fees – 3rd parties means networks other than VISA & MC that are included in your statement. This would include American Express, Discover, and the debit networks if you are using pin debit
Part of the problem in reading a merchant statement is different processors use different category names and different terms to identify charges. That’s why I began by saying it can be like playing “Where’s Waldo?” While there are common terms used for certain fees there is also a wide variation used, depending on the acquirer (the company you signed a merchant agreement with).
Again, part of this is due to an attempt to hide what’s being charged and make it difficult for a competitor to analyze a statement. While that’s ‘somewhat’ understandable – in my opinion it’s a disservice to the merchant. Integrity demands transparency. Maybe if processors were more merchant oriented they’d have a lower turnover and would not have to worry about competition so much. At least that’s my opinion.
In the world of e-commerce, the success of your business will depend largely on the credit card processing service that you give your customers. The fast changing worlds of trade is becoming more and more revolutionary that you can now have your dinner delivered through online and paying through your credit card. In a few minutes, your dinner is served, you enjoy hot food and you never left your couch. Absolute bliss.
Now, as an online businessman, you must be able to cater to your customers with much high quality and security as well. When it comes to the online travel agencies, you will soon find out that there are only a few merchant account providers catering to this high risk business.
Online travel agencies today need a way to process payments online among anything else since travel agencies are believed to be a high risk commercial enterprise by many experts.
Being one of the businesses in the travel industry, getting a merchant account is quite difficult. With a possible high charge back, it makes it hard and complicated to accept credit cards because of the long term booking. When you think about internet payment processing that would suit your needs, it is very important to have the information and understand the types of merchant services. Every company has their own specifications of requirements and they usually offer a range of methods in accepting credit cards.
Choosing the right kind of merchant services accounts helps businesses in increasing their sales. Being a part of the online business world, your online travel business successes will largely depend on the payment processing service that will be provided to your customers, whether it’s some kind of high risk merchant or a travel merchant.
Travel merchant account providers offer merchant account holders with a facility for high risk credit card processing together with some tools to be used for online credit processing services that will help the customers to make it easier for merchants to accept credit card payments. This will boost sales and profit. Doing a thorough research is the ultimate key in choosing the most reliable credit card processing. It keeps things smooth and definitely helps in increasing your customers.