Plastic makes the world go round, but for small business owners, accepting credit cards can mean additional charges from processing companies and confusingly tiered pricing structures. Setting up free credit card processing is an appealing option on the surface – after all, who doesn’t like free? But you may be wondering why and how some companies claim to offer small businesses free processing while others charge fees.
Here’s the unvarnished truth about free credit card processing, how those freebie companies operate, and what you can expect if you choose the no-cost route. We also offer a comprehensive guide to the best credit card processors for small businesses, which we review independently on an annual basis for our readers.
Traditional credit card processing methods allow businesses to accept credit card payments in exchange for a processing fee. No matter what credit card processing company you use, there is a processing fee involved in accepting credit. However, with free credit card processing companies, that fee is offloaded onto your customers rather than coming out of your own pocket. So, it’s not free in the sense that it has no cost – you’re just not the one paying it. Additionally, companies that claim to offer free credit card processing still charge their clients a fee for their software and services, so no matter how you look at it, it’s not free.
The interchange fee (sometimes referred to as a swipe fee by retailers) is what credit card companies charge merchants or customers in exchange for offering them purchases on credit. When people use credit cards to buy things, a financial institution has to offer the money upfront before it is paid back. Credit card companies …Read More
A few years back, SCORE conducted a poll asking entrepreneurs what was the worst part of owning a small business. A whopping 40% answered bookkeeping and taxes.
That survey wasn’t an anomaly. In that same year, TD Bank asked over 500 business owners that same question, with 46% listing bookkeeping as their least favorite task. A 2012 survey by Mavenlink had 41% of respondents giving that same answer.
So, it’s no wonder that so many small businesses put it off for as long as possible. If a person despises doing something, it’s not exactly going to jump to the top of their to-do list. Unfortunately, this can have a severely negative effect on a business’s performance.
So, what can be done to fix it? Short of miraculously developing a passion for accounting, what are some simple tricks to reduce the pain around bookkeeping?
One thing that has helped a lot of our clients is understanding why they’re doing their books in the first place. To be able to file their taxes? To provide records to a bank for a loan? To give something to their annoying CPA to get them off their backs?
Sure, all of those things are real reasons. But they are far from the primary purpose that bookkeeping serves.
Accounting is called “the language of business.” A business’s books are the truest reflection of its operations. They show the successes, the failures and the opportunities. They provide data on cash flow, receivables turnover, seasonality, and the profitability of different products and services. They give a snapshot of the business’s performance – all backed up by cold hard data. As a friend of mine bluntly put it, “If you don’t know your books, you don’t know your business.” They can and should be …Read More
In such scenarios, raising loans through banks for small business or relying on individual investors becomes unavoidable. However, raising small business loans poses a challenge for startups, and business owners struggle to find the right capital structure or funding mix for their company. Differentiating between the two funding options, debt and equity, raises issues. In this regard, a clear demarcation between the two and the cost of capital to be incurred will help entrepreneurs make the right financial decisions, ensuring business growth and higher valuation.
Debt financing is a process of arranging funds for your business through borrowings. These borrowings can be in the form of secured or unsecured loans that will eventually have to be paid back to the lender at a certain interest rate. On the other hand, equity financing is a process of raising funds by selling off part of stocks of your business, or shares. Under this type of funding, ownership of the business is traded off in return of funds.
While the key underlying difference between the two types of funding structure is clear, further distinctions are vital for an entrepreneur to make the right decision.
In the case of debt funding, the downside is the payment of interest, which results in a greater sum than the amount repayable to the lender, making it a costly proposition. Moreover, the loan has to be repaid regardless of whether your business generates revenue. On the other hand, equity funding dilutes ownership and reduces the controlling stake in the business. The main obligation under equity financing is the need to generate consistent profits to distribute dividends.
Further, debt financing offers the benefit of tax deduction, as interest paid on debt can be deducted from a …Read More
Franchisees usually benefit from a ready-made, tried-and-tested business model from the franchisor, which often includes a known brand, marketing strategy, and benefits associated with economies of scale when buying supplies and other relevant business inputs.
That package of goodies, however, doesn’t come without a price tag – sometimes a hefty one, depending on the franchise brand you want to associate with. In addition to a franchise fee, which typically ranges from $20,000 to $50,000, franchisees often have to meet contractor and professional fees, as well as costs associated with signage and inventory. As with any other business, they also have to raise sufficient working capital to launch the business and keep it running until it breaks even.
Franchisees must always be on the lookout for funding opportunities to help with some of these costs. Because of the highly competitive nature of business funding, it pays to build a business that will not only get loan approvals from banks and other traditional lenders but also attract independent investors, including private equity firms that might have more favorable lending terms.
Editor’s note: Looking for financing for your business? Fill out the below questionnaire to have our vendor partners contact you with free information.
Here are a few tips to help you build an investor-friendly franchise business.
When you’re looking to bring investors into your franchise business, remember that you’ll be adding another independent party, the investor, into an already complex web of interactions. To ensure things run smoothly, it’s crucial to take up the services of a franchise attorney from the get-go who will help with things like the franchise agreement, the franchise disclosure document, and issues of liability that often carry serious implications for franchise businesses.
Liability issues can weigh heavily on any business, …Read More
While some small businesses try to scrape by with what they have, others look to banks, alternative lenders or the government for a quick infusion of cash.
For those looking for added funding, there is no shortage of places to turn. Traditional banks, nontraditional lenders and the Small Business Administration, via its loan program, all offer small businesses access to additional capital. Then you must decipher which lender will serve you best, and which will give you the greatest chance of success. [Looking for a business loan? Check out our reviews and best picks.]
As the head of small business lending and decision sciences at Capital One, Iskender Eguz has a ton of insight into the various loan options and what it takes to secure one.
Eguz has more than 15 years of experience in advanced analytics, strategy development, valuations, marketing and credit risk management. In his current role, he leads all aspects of Capital One‘s small business and business banking lending, including P&L and credit risk management, valuations and pricing, underwriting and portfolio management, data science, product development, and technology investments.
We recently had the chance to speak with Eguz about the various lending options, the types of loans available, how to apply for one and what mistakes to avoid throughout the process.
Editor’s note: Looking for financing for your business? Fill out the below questionnaire to have our vendor partners contact you with free information.
Q: What should small business owners do to prepare for applying for a loan?
A: As you prepare to apply for a business loan, you should keep the five C’s of credit, a common lending framework, in mind. The five C’s are capacity, capital, collateral, conditions and character.
You would be amazed to know that the subprime leads in America alone, is worth more than $1 trillion. Thus, it is necessary to understand how to convert these subprime leads to profits.
A subprime loan is a kind of personal loan, which is provided to a borrower that reluctantly applies for a subprime loan because of being rejected by the bank or private lender due to poor credit score. When banks and lenders do not facilitate people with a loan due to their highly risked income ratio, they look for the alternative and end up with money lenders and become high-risk borrowers.
The interest rate of a personal loan is between 8 and 34%. Usually, banks and credit unions offer personal loans at 20% interest rate. However, some private lenders can provide subprime loans at minimum 10% interest rate. Variations in the interest rate depend on the lender. With the enhanced competition and high expenditure ratio of the population, these lenders widen up the gate of opportunities to borrow money other than official financial institutions and sustain.
A personal loan is a facilitation of money to the borrower depending on their income level. Sometimes, personal loans can be as simple as signature loans or credit loans, which can go through banks or private lenders. Personal loans include credit cards and signature loans from the bank. Loans from online lenders and peer-to-peer lenders often are personal loans.
Editor’s Note: Looking for a business loan? Fill out the below questionnaire to be connected with vendors that can help.
It is evident that subprime leads are the best option marketers have to connect with customers who …Read More
Of course, odds are that your employees who are playing the lottery are just throwing their money down the drain. Right now, the odds of winning Powerball’s Jackpot are 1 in 292 million. Even the odds of winning Powerball’s lowest prize – a $4 payout – are 1 in 38.2, on a $2 ticket. So, on average, you’d need to spend $76.40 to win that $4 prize.
Taken as a whole, state lotteries offer a negative return of $0.52 for every dollar spent. If one of your employees spends $600 on state lottery tickets, they’re likely to end up $288 in the hole.
Not a great investment strategy, but why should you care what your employees do with their money?
Well, because research shows that financially stable employees are better employees. Studies show that financial stress decreases productivity, is associated with poor health and causes missed work days. On the flipside, employers who care for their employees’ financial health earn loyalty and can give themselves more flexibility in overall benefits packages.
Don’t think your employees are experiencing financial stress? You might want to think again. A study last year found that 40% of Americans don’t have enough savings to cover an unexpected $400 expense.
So, how can you help? By pointing your employees toward tools that make saving easy and that can turn the money they’re wasting on lottery games into a healthy emergency fund.
A new type of savings account – called prize-linked savings accounts – is designed to do just that.
The idea behind a prize-linked savings account is that the more money you deposit into your savings account, the more chances you earn to win cash prizes.
Take the recently launched Big Prize Savings account from American First Credit Union in California. …Read More
Dun & Bradstreet’s Small Business Health Index recently found that small businesses are surviving at higher rates in 2019. Those same businesses are using credit cards almost as frequently as similar-sized companies did before the recession. That could be a good thing, but card delinquency rates are at a seven-year high, indicating some business owners might be in over their heads.
Dun & Bradstreet’s research shows that business loan rates recently hit their highest point in over a decade. According to the Biz2Credit Small Business Lending Index, bank loan approval rates for small businesses dipped 0.2 percent in February 2019. Alternative lenders saw a smaller dip, as did credit unions. As traditional credit becomes more expensive (and as lenders tighten standards), credit cards make sense as an alternative solution.
Credit cards offer plenty of advantages, but when used without respect, these beneficial tools can quickly turn into burdens.
Just because a business makes its payments does not mean it uses credit cards wisely. Interest rates on cards tend to be extremely high when compared to other funding sources, which means companies that fail to pay in full usually pay more than they earn through the card. Businesses that turn to high-interest credit during hard times can dig their own graves by making a bad situation worse.
That said, credit cards provide significant advantages for responsible borrowers. Cashback, interest-free periods, and 60-day floats all help growing companies take advantage of short windows of opportunity. To get the most from the perks without suffering the drawbacks, business owners should take the time to learn the ins and outs of business card financing.
Editor’s note: Looking for the right [category name] for your business? Fill out the below questionnaire to have our vendor partners contact you about your …Read More
Like many small businesses, veteran-owned companies often walk a fine line between success and failure. Occasionally, that line gets thinner due to issues related to financing.
Whether your cash flow is held up due to late payments from clients, or you identify an important equipment upgrade that is just out of your financial reach, access to affordable funding can get you out of a variety of jams. For that reason, knowing where to find the best business loans is crucial for veteran business owners.
Not every loan option will be a perfect fit for your business and its needs. That being said, there are some standouts in the space. Here are the best business loan options for veterans:
The Small Business Administration (SBA) is a federal government agency well known for being an excellent resource for, and champion of, small businesses. One of the agency’s primary functions is to guarantee loans to small business owners, encouraging banks to lend to small and new enterprises at rates typically reserved for more established companies.
Editor’s note: Need financing for your business? Fill out the below questionnaire to have our vendor partners contact you with free information.
The SBA has a variety of small business loan programs, some of which are specifically geared towards (or made easier for) our nation’s veterans. Three SBA programs, in particular, are excellent options for veteran business owners:
The SBA 7(a) loan is the SBA’s most popular loan program, guaranteeing millions of dollars in funding for the working capital needs of all business owners.
Veteran business owners, however, are eligible for the Veteran’s Advantage program. This program waives the guarantee fee for any loans of $125,000 or less, or discounts it by 50% for any loans …Read More
The credit card processing fee is the cost merchants are charged to process credit card payments – which sounds obvious, but there’s a lot more to them than meets the eye. If you’re not careful, your business could wind up spending thousands of dollars on processing fees. Here’s what you need to know about the basics of credit card processing fees.
The customer makes a purchase from the merchant using their credit card. The merchant runs the sale through the payment gateway, which sends the credit card payment to the credit card processor. The credit card processor submits the payment to the credit card association and then finally to the credit card issuing bank. These are the parties involved in the whole process:
Editor’s note: Looking for information on credit card processors? Use …Read More