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6 Key Benefits of Factoring Receivables

Usually, it takes a period of about 30 to 60 days for a company to receive cash on their receivables or invoices. However, if a business wants to get cash from receivables and invoices quickly, it can sell these receivables or invoices to a financial company (third party) known as a factor. The factor will now be left to collect payments from the business’s clients. Here are the benefits of factoring receivables:

1. Credit Screening

When your business factors receivables, it obtains its clients’ credit information from its factors. As a business person, you will, therefore, have the ability to make sound business decisions on who to do business with and which clients to avoid on account of the chances of becoming delinquent. This protects the business from unnecessary losses.

2. Faster Invoice Payments

Factors often report payment details to credit agencies. This is a general report regarding the payment of the invoice. Companies (your debtors) will, therefore, try to settle their debts as fast as possible to avoid the consequences of being reported.

3. Personal Guarantees Are Not Required

As a business, it’s not mandatory that you guarantee the payment of the factor by the customers – at least not personally. You don’t have to guarantee against the client’s inability to pay. All you have to guarantee against are disputes and cases of fraud.

4. Factoring Is Fast and Easy

No projections, business plans, financial statements, or tax returns are required to factor. Unlike other types of financing where you may be required to provide up to several guarantors, there is nothing of the sort when it comes to factoring. Company principals don’t have to guarantee repayment.

5. It’s Not a Debt

Note that factoring is not a loan. Just because it’s a form of financing, many people just assume it’s some kind of a loan and try to avoid it. However, that’s not the case. You factor your accounts receivable, which is typically your money – it’s only that you need it faster than the debtors are willing to pay.

6. Eliminate Bad Debt

Bad debt can cause major liquidity problems for a business. A non-recourse factor assumes bad debt. Factoring eliminates the expense from your business’s income statement.

The banking sector has continually downcasted the practice of factoring. As a result, a lot of people are afraid to try it. For that reason, most people aren’t aware of the positive aspects of this type of financing. Hope this article has cleared things up.

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Reasons Why Your Company Should Accept Credit Cards

These days, customers don’t necessarily want to pay with cash or want to carry cash in their pocket. Instead, they want to be able to pay with their credit card and get the perks that come with using it to pay for gas, groceries or dinner out. What are some of the benefits to your company when it partners with a credit card processing company?

Increase Sales

The most obvious reason why your company should accept credit cards is that it will increase sales. If a customer doesn’t have cash or checks handy, he or she won’t be able to make a purchase no matter how badly he or she wants your product or service. By accepting credit cards, you give your customer more flexibility to buy on that person’s terms and are more likely to drive more sales and make more money.

Do Business From Anywhere

If you run a small business, accepting credit cards means that you can do business from wherever you happen to be. For instance, you can attach a card reader to your phone or tablet and sell products on the sidewalk or at a booth by the beach. You could also take orders online or allow customers to checkout from wherever they are in your retail establishment. Customers love not having to stand in line, so allowing them to find a salesperson and cash out where they happen to be is a winner from a customer service standpoint.

Get More Information About Your Customers

You can get a lot of information about your customers by getting them to pay by credit card. For instance, you get names, email and home addresses and phone numbers just by getting a customer to swipe his or her credit card into your point of sale system. This information may be used in future email, direct mail or phone marketing campaigns to target your most loyal customers or those who spent the most money with your company.

It can also be used to provide targeted coupons or special offers to those who are most likely to use them, which can drive sales while also creating a stronger bond between your brand and its target audience. In the event of a recall, you can contact individuals who have bought products that are involved in that recall. This allows them to return contaminated food or medical supplies before they get sick or get others in their families sick.

If your company is not accepting credit cards, it should do so as soon as possible. While you may be concerned about credit card processing fees, they are more than negated by the extra sales as well as the increased customer satisfaction with your brand. For more info, visit the resources at Collective Point of Sale Solutions.

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What is Credit Card Processing and How Does it Work?

For anyone looking to become a merchant in any kind of marketplace, it will be critical for you to understanding the basics of what credit card processing is, how it works, and how it will affect your bottom line. In this article, we will discuss the basics of this topic.

The Basics: Banks, Card Sponsors, and Payment Processors

When you decide to accept credit cards as a method of payment at your business, you are actually deciding to engage in an incredibly complex process. As a result, we will need to outline the steps of what happens every time you accept a Credit Card Processing transaction.

There is a bank that issues the card, and there is a card sponsor. Sponsors are companies like Visa and Mastercard, and the bank could be Wells Fargo or Bank of America. In some cases, a bank can be both the issuer and the sponsor (i.e. Discover) The bank takes the risk of lending the money to the buyer, while the card sponsor deals with part of processing the transactions that the buyer makes.

When a buyer chooses to make a purchase with his credit card at your store, the card sponsor is going to charge you a fee for interfacing with the customer on your behalf. This fee is usually a flat fee of about $.30 plus 2.9% on the total purchase. This is the cost that you pay to allow credit cards be used at your business.

Of course, different card sponsors charge different fees (whether higher or lower), so it is up to you to decide which card types (i.e. Visa, Mastercard, American Express, Discover, etc.) you are going to allow to be used at your business, but the more types of credit cards that that you allow, the more likely you are to receive more customer volume.

Finally, the actual terminal that you accept transactions on must be purchased by a sort of clearinghouse company that interfaces on your behalf with the card sponsor to make sure that your transactions are recorded appropriately and that helps you in the case of an error. These gateway companies will charge you a percentage fee in order to provide their services.

Our Goal is to Bring Fees Down

Quite naturally, this entire process can be quite expensive, costing you as much as 3-4% of each transaction. That might not seem like a lot of money, but when you multiply 5% by one thousand transactions, it really starts to eat away at your bottom line. Therefore, it is prudent for anyone who is looking to start a business that accepts credit cards to check the lists put out by Merchant Maverick and Cardfellow to see which companies offer the lowest rates at the beginning and then every couple of years thereafter.

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How Do Credit Card Processing Machines Work?

A credit card processing machine works by detecting the card inserted by a user. Swiping a card over the reader slot allows the machine to automatically read the information in the magnetic strip or chip including the credit card number and the cardholder’s name as well as other personal information. This information is acquired by the credit card machine and prepared for transfer.

Transmitting the Data
Credit card machines are designed to transfer the data they collect to the credit card processor. The software in the machine merges the merchant’s identification number and name with the cardholder’s data. Credit card terminals then transfer this information to the processor’s server through an Internet connection.

Approving the Transaction
Once the card has been swiped and its information processed, the machine either accepts or rejects the transaction. If accepted, the transaction receives an exclusive approval number that ascertains the specific purchase. The machine electronically confirms that the amount used does not exceed the card’s limit, that the user is the right cardholder, and that the card has not expired. Generally, the whole process takes 3 to 5 seconds. Once the transaction has been approved, the credit card machine starts processing receipts on its internal printer with details of the transaction.

Types of Credit Card Swipe Machines
The credit card has a strip with negative and positive charges. The Credit Card Processing machine interprets the charges as a series of zero and one in a binary code. The information in the credit card is transferred to the computer, which changes the binary code into digits.

Once the credit card processing machine reads the data in a card, it transfers the information to the cardholder’s bank through a telephone line. The bank then confirms whether there is enough cash for the transaction or not. This is when you will know if your credit card is accepted or not

A credit card processing machine is part of a central processing unit and can be hacked into or be affected by malicious applications and spyware. This may result in fraud and identity theft. Unscrupulous sales clerks can also use cardholder’s data to commit crimes.

The standard price of a credit card processing machine is approximately $350 including a printer. However, Installation fees are not included in this quotation. A printer is an essential component of the credit card processing machine because it enables users to get receipts with details of their transactions.

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