The Best Offshore Merchant Account Providers

Offshore Merchant Account Providers

Ordinary payment processing is complicated. But finding good offshore, international, or high-risk payment solutions can be a real nightmare. If you fall into one of these categories, you’ve likely had your merchant account applications denied at least a few times. Even worse, perhaps you’ve had your processing service terminated and your money withheld from you for months. We understand your struggle. We’ve seen hundreds of businesses go through the exact same thing, and we’re here to help you find the perfect offshore merchant account for your high-risk business.

If you’re just looking for a run-of-the-mill high-risk merchant account for your business, you’ll want to check out our article The Best High-Risk Merchant Account Providers. The high-risk category often includes business types that you wouldn’t normally associate with the term “high-risk,” such as airlines or online furniture sales. While these types of businesses are usually treated as high-risk by banks and processors, they can usually be approved for a domestic merchant account by working with a high-risk specialist.

For our purposes, we’ll use the terms offshore merchant account and international merchant account interchangeably, as they mean the same thing. Both terms refer to a merchant account that is underwritten by a bank or processor that is situated in a different country from the one where the business is located. The most common reasons for needing an offshore account include the following:

  • You do a significant amount of business in a foreign country and need to accept payments in the local currency.
  • Your business has offices in multiple countries, and you need separate merchant accounts for each location.
  • Your business is considered to be so risky that you cannot obtain a regular high-risk merchant account in your own country.

Below, we’ll discuss the factors to evaluate when considering an offshore merchant account and several special features that you’ll want to include in your service. We’ll also profile four offshore merchant account providers that we feel offer superior service and overall value in comparison to their competitors.

Factors To Consider When Selecting An Offshore Merchant Account

While many offshore merchant account providers also specialize in high-risk accounts more generally, not all high-risk processors work with international merchants or provide offshore accounts for domestic merchants. Many high-risk specialists only work with US-based businesses, and only provide accounts through US-based banks and processors. Before you apply for an offshore account, you’ll want to confirm that the company you’re considering works with businesses located in your country. This information might be spelled out explicitly on the provider’s website, or you might have to talk to their sales staff to get a confirmation.

Providers that specialize in setting up offshore merchant accounts can usually get you an account in just about any country around the world, though obviously, there are exceptions. As a US-based merchant, don’t expect to set up your offshore account in a place like Afghanistan or North Korea. It’s simply not going to happen. With the exception of countries limited by political considerations or a high level of instability, however, the possibilities are wide open.

In most cases, you should aim to get an account in a country where you expect to do a significant amount of business. On the other hand, if your business is going to operate exclusively in the United States, an offshore account serves mainly as a last resort for getting a merchant account when you simply can’t get approved for a domestic high-risk account. Banking regulations are more relaxed in certain other countries, and the willingness on the part of banks and processors to work with high-risk businesses is also more favorable. At the same time, you should be aware that setting up an offshore account under these circumstances, while it might be your only option for accepting credit cards, can present some serious risks to you as well. Your ability to pursue a legal remedy against a foreign bank or processor might be severely limited – or even nonexistent. At a minimum, you should consider legally registering your business in the country where your account will be located. Even with legal standing in the country, however, be aware that it might be extremely inconvenient and expensive to pursue a legal action outside of your own country.

There’s also an increased risk that you could become the victim of fraud or identity theft. Banks in other countries collect the same personal data about you and your business that US-based banks do, but they don’t always do as good a job of protecting it. You’ll want to keep an especially close eye on your merchant account, your business account, and any personal accounts about which you’ve released information to get approved for an offshore merchant account.

High-risk merchant accounts are notorious for including higher processing rates and account fees, and offshore accounts can be even worse. Providers know you’re particularly desperate and some, but not all, will take advantage of your situation by charging you as much as they think they can get away with. We recommend that you shop around and compare multiple quotes when looking for an offshore account. Don’t accept the first offer from a bank or processor just because they’re the first one that hasn’t rejected your application due to the nature of your business.

Note that merchant account providers who market offshore accounts often downplay or fail to mention these risk factors, so it’s up to you to look out for yourself. Do your own independent research, compare multiple offers, and thoroughly review all contract documents before you sign up for an account.

Special Features Of Offshore Merchant Accounts

For the most part, you’ll want the same services and features for an offshore account that you would want for a traditional merchant account. This includes processing hardware such as credit card terminals and POS systems for retail merchants, and a robust payment gateway for eCommerce merchants. You’ll also want an online account dashboard of some kind that allows you to monitor your sales in real-time. While online account access is now a standard feature in the United States, you might not always find this feature with an offshore account. Mail-order and telephone-order (MOTO) businesses often find a virtual terminal to be the most cost-effective method for inputting transactions. Depending on the needs of your business, a smartphone- or tablet-based mobile processing system might also be important. Almost all providers offer some type of mobile processing system these days, either as a proprietary product or through a partnership with a third-party provider. Be aware that very few mobile processing systems have begun to offer EMV-compatible card readers, and you’ll often be stuck with a magstripe-only reader.

In addition to these basic merchant account features, there are several special features that your offshore merchant account might (or might not) include. How important these features are to your business will be determined by how you intend to use your account. Extra features to look for in an offshore merchant account include the following:

  • Multi-Currency Support: If you’re going to do business in a foreign country, it only makes sense that you’ll want your customers to be able to pay in their local currency. Multi-currency accounts allow you to maintain balances in multiple currencies and can save you a ton of money in currency conversion costs.
  • Currency Conversion Services: Having an offshore account will invariably require you to convert funds into your own local currency at some point. Most offshore account providers include built-in currency conversion services that allow you to convert foreign funds when it comes time to transfer them to your business account. While these services can sometimes offer you much lower conversion fees than what a bank would charge you, it still pays to shop around for the best deal on this service. You might save money by using an international transfer service such as TransferWise or OFX.
  • Expanded Anti-Fraud Features: Offshore merchant accounts invariably involve a higher degree of risk of fraud than their traditional counterparts, so you’ll want as many extra services to avoid it as you can get. Most offshore account providers offer a number of enhanced anti-fraud features as a standard part of their service. These features automatically detect suspicious activity, hopefully stopping any fraudulent activity before it can affect your business. Providers are increasingly turning to artificial intelligence (AI) features to improve their ability to detect potential fraud beyond what would be possible with a traditional algorithm.

With these considerations in mind, let’s take a brief look at four of our overall favorite offshore merchant account providers:

Durango Merchant Services

Durango Merchant Services is a small merchant account provider headquartered in Durango, Colorado. Established in 1999, the company specializes in providing high-risk and offshore merchant accounts to hard-to-place businesses. They work with a wide variety of banks and processors to find a suitable account for almost any business. While they can’t place 100% of the merchants who apply to them, their track record is very good, and their sales process is so transparent and honest that we’ve even seen praise for the company from merchants who’ve been turned down for an account.

If you need an offshore account, Durango has you covered. Their accounts include multicurrency support as well as enhanced anti-fraud features to keep you protected. They can set up accounts in countries as diverse as Germany, Panama, Spain, and many others.

Durango doesn’t try to set you up with expensive leases when it comes to processing equipment. Instead, they offer a variety of terminals for sale right on their website. Options include both wired and wireless models, with some offerings that support NFC payments. They also sell the iPS Mobile Card Terminal, which connects to a smartphone to provide mobile payments capability in conjunction with the iProcess mobile app. If you’re using a virtual terminal, they sell the MagTek DynaMag, a USB-connected magstripe card reader that attaches to your computer. Unfortunately, it’s Windows-only. Durango currently doesn’t offer any POS systems for sale.

The company supports eCommerce through its proprietary Durango Pay payment gateway, which integrates with the numerous processors the company uses and includes support for most of the popular online shopping carts. Durango’s gateway also features an Authorize.Net Emulator, which allows it to interface with any shopping cart that works with Authorize.Net (see our review).

Because Durango works with such a wide variety of third-party processors to set you up with an offshore merchant account, they don’t list rates or fees on their website. These will vary tremendously depending on which processor they set you up with. While we normally like to see more transparency from merchant account providers, in this case, it’s understandable. Depending on your qualifications, you can expect either an interchange-plus pricing plan or a tiered one. Merchant accounts through Durango don’t seem to have standardized fees. Again, these will depend on the terms that your backend processor imposes.

Durango assigns a dedicated account manager to every one of their merchants, which means you’ll be talking to the same person every time you have an issue. While this can sometimes be problematic outside of regular business hours and when your account manager isn’t available, overall it provides a much higher level of service than you’ll get from a random customer service representative.

Pros

  • Direct sales of processing equipment
  • Reasonable rates and fees based on your business and your backend processor
  • Dedicated account manager for customer service and support

Cons

  • No support for POS systems
  • USB card reader not compatible with Mac computers

For more information about Durango Merchant Services, read our complete review.

SMB Global

SMB Global logo

SMB Global is a new high-risk provider that was spun off from one of our favorite providers, Payline Data in 2016. Headquartered in South Jordan, Utah, the company specializes in providing merchant accounts to high-risk and offshore businesses. Using a variety of backend processors, they’re able to approve a merchant account for almost any high-risk business (including those selling CBD oils). They have an excellent reputation for fair prices and top-notch customer service.

As a newly-established business, SMB Global is still a little rough around the edges, lacking a mobile processing system and credit card terminals for retail merchants. At the same time, they offer a full range of services for eCommerce merchants, including a choice between the NMI Gateway and Authorize.Net.

Because they work with so many banks and processors to get you approved for an account, the company doesn’t offer any pricing information. Processing rates, account fees, and contract terms will all vary widely depending on which backend processor is handling your account. While we highly recommend that you request an interchange-plus pricing plan, be prepared to have to accept a tiered plan instead, particularly if you haven’t been in business for very long. Likewise, you can also expect to have a standard three-year contract with an automatic renewal clause and an early termination fee if you close your account early. As a high-risk merchant, you should be prepared to have a rolling reserve included in your account agreement.

SMB Global requires a minimum processing volume of $50,000 per month for an offshore merchant account, although they will occasionally waive this requirement if your business has a very strong financial history. Offshore accounts support multi-currency processing, allowing you to avoid cross-border fees. They also feature dynamic currency conversion, letting your customers pay in either their local currency or the currency in which you bill them.

Pros

  • Offers international merchant accounts to a wide variety of industries
  • Reasonable pricing and contract terms
  • Excellent customer service

Cons

  • No mobile app
  • No information available about credit card terminals or POS systems

For a more detailed look at SMB Global, be sure to check out our full review.

Host Merchant Services

Host Merchant Services is a relative newcomer to the merchant accounts business, first opening in 2009. The company is headquartered in Newark, Delaware and has a second office in Naples, Florida. While they primarily cater to traditional, low-risk businesses, they can accommodate several categories of high-risk businesses and also offer offshore accounts. Their interchange-plus-only pricing and a full range of products and services make them an excellent choice – if you can get approved. A former web hosting company, HMS is ideally suited for eCommerce merchants. They use TSYS as their primary backend processor, but can also work with several international banks and processors to get you an account.

For retail merchants, HMS offers a variety of Verifone and Equinox (formerly Hypercom) terminals. Terminals are offered for sale, and the company does not lease its equipment. While prices are not disclosed on the HMS website, you should be able to negotiate a very reasonable deal on terminals, especially if you need more than one. If you already have a compatible terminal, they’ll reprogram it for free.

HMS also offers a variety of POS systems that utilize either tablets or touchscreen displays. Choices range from an 8” tablet-based system up to a 17” touchscreen monitor. The company’s Starter, Plus, TouchStation Plus, and Custom POS options should meet the requirements of just about any business that needs or wants a POS system.

If you need a mobile processing capability for your business, HMS has you covered, offering the ProcessNow mobile payments system via a partnership with TSYS. ProcessNow works with either iOS or Android phones, but the current card reader is magstripe-only and requires a headphone jack to plug into.

As a tech-focused company, eCommerce is HMS’ specialty. The company has recently introduced their proprietary Transaction Express payment gateway, which includes a free virtual terminal. HMS also supports a large number of third-party gateways, including Authorize.Net.

HMS uses interchange-plus pricing exclusively for its low-risk merchants, but you might have to pay tiered rates if you have an offshore account. While they don’t disclose their rates on their website, they’re based primarily on monthly processing volume and are very competitive. Fees are not disclosed either, but include a $24.00 annual fee, a $14.99 monthly account fee (which includes PCI compliance), a variable payment gateway fee ($5.00 per month for Transaction Express, $7.50 per month plus $0.05 per transaction for Authorize.Net) and the usual incidental fees (i.e., chargebacks, voice authorizations, etc.). High-risk and offshore merchants should expect to pay higher fees than these, and possibly additional fees as well. In particular, be prepared to have a rolling reserve included as part of your account.

HMS provides customer service and support via 24/7 telephone and email. Chat is available via the HMS website during regular business hours. They also feature an extensive collection of articles and blog posts on their site for customer education. Support quality appears to be well-above-average, based on the almost complete absence of complaints about it on the BBB and other consumer protection websites. If your business falls into one of the categories of high-risk activities that the company can accommodate, HMS is an excellent choice for an offshore merchant account.

Pros

  • Full range of products and services for retail and eCommerce businesses
  • Exclusive interchange-plus pricing plans (for low-risk businesses)
  • Excellent customer service and support

Cons

  • Rates and fees not disclosed on website
  • Can only accommodate a small number of high-risk business categories
  • Mobile card reader not EMV-compliant

For more information, see our complete review.

Easy Pay Direct

Easy Pay Direct logo

Easy Pay Direct is headquartered in Austin, Texas and has been in business since 2000. The company’s primary product is their proprietary EPD Gateway, but they also provide full-service merchant accounts for international, high-risk, and traditional non-high-risk merchants. High-risk merchants will have to pay a premium in terms of processing rates and account fees, whether they’re partnered with a domestic or offshore bank or processor. However, the additional expense is entirely reasonable under the circumstances.

Like most offshore merchant account specialists, Easy Pay Direct works with a variety of banks and processors, both domestic and international, to find one that’s a match for the needs of your business. You’ll have to pay a $99 account setup fee to get started, but considering the extra effort required to underwrite a high-risk or offshore account, we feel the expense is justified in this case. Processing rates will be under a tiered pricing plan, but you should still have some room to negotiate your rates, especially if you have a high monthly processing volume. Contracts generally follow the industry standard, or a three-year initial term that automatically renews for one-year periods after that. One very positive feature about Easy Pay Direct’s contracts is that they do not have an early termination fee, even for high-risk businesses. While this isn’t quite the same thing as true month-to-month billing, it does make it much easier to close your account without penalty if you have to.

One helpful feature offered by Easy Pay Direct is called load balancing, where a business can divide its incoming funds among multiple merchant accounts. This is particularly helpful for high-risk businesses that often exceed the monthly processing volume limits imposed by the processor underwriting their account. Just be aware that you’ll usually have to pay separate monthly fees for each account, so it might not be cost-effective for some merchants. Also, be aware that you might not need this feature if you opt for an offshore account. Underwriting guidelines in some (but by no means all) foreign countries are more relaxed, and you might not have a monthly processing limit imposed on your account at all.

Although Easy Pay Direct doesn’t get as much attention as other, better-known processors, it’s a solid choice for merchants in the high-risk category or those who need an offshore account. We particularly recommend the company for high-risk eCommerce businesses due to the robust feature set of their EPD Gateway.

Pros

  • Load balancing feature for high-risk merchants
  • No equipment leases
  • No early termination fee

Cons

  • $99 account setup fee
  • Three-year contract with automatic renewal clause

Check out our full review of Easy Pay Direct for more information.

Final Thoughts

Having a hard-to-place business doesn’t mean you have to run your company through Bitcoin. You can accept credit card payments just like any other business by finding a payment processor that will set you up with the right acquiring banks. At the same time, you need to be fully aware that, for a US-based business, signing up for an offshore merchant account is a risky endeavor. You’ll want to be very cautious and carefully research any provider you consider, even the ones we’ve recommended above. Take extra care to protect your sensitive personal financial data and be sure your account includes additional fraud prevention features. You might also want to consider registering your business in the country where your merchant account is located – just in case. Having a merchant account in Panama might sound very tempting if you’ve been repeatedly turned down by domestic providers, but it will be very expensive to have to travel there in person if you later run into legal troubles with your account provider.

Of the four offshore merchant account providers we’ve reviewed above, Durango Merchant Services is undoubtedly the best all-around provider of the group. They disclose more detailed information about offshore accounts than any of the other providers. SMB Global is also an excellent choice. While the company itself is very new, they have an impressive track record from their days operating as the high-risk division of Payline Data. Finally, both Easy Pay Direct and Host Merchant Services offer a solid line-up of products and services for both eCommerce and retail merchants. If you need an offshore account to break into the world of accepting credit cards, they both have everything you need to get started.

Finally, we can’t caution you strongly enough that selecting and setting up an offshore merchant account involves a higher level of risk on your part, and you’ll need to be extra cautious in choosing a company to go with. Relaxed underwriting guidelines and a general lack of monthly processing limits make offshore accounts very tempting to merchants who’ve had a hard time getting their business approved for a traditional account, but these advantages come at a price. If anything goes wrong in your relationship with your provider, you might face some real challenges in pursuing a legal remedy. You should also be aware that if this happens, the US-based provider that brokered your account will not be able to help you in most cases.

Do your homework! Research your provider thoroughly and review all contract documents very carefully before signing up. While these steps won’t eliminate the chance of things going sideways somewhere down the road, they will shift the odds considerably in your favor.

The post The Best Offshore Merchant Account Providers appeared first on Merchant Maverick.

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Quick Business Loans: The 6 Best Lenders And 10 Tips For Fast Approval

Good things take time. Patience is a virtue. We all know the sayings. But let’s face it, when it comes to making critical business investments—whether it’s new technology/equipment, a new location, or even just a new employee on the payroll—you usually don’t have unlimited time to come up with the needed funds. A quick loan or line of credit is often the best bet to take your business to the next level (or simply keep your company afloat).

If you’re reading this article, you’re probably in a hurry, so let’s dive right in. Here is a list of the quickest small business lenders, followed by a list of general tips for fast loan approval.

6 Best Lenders For Quick Business Loans

The following are some of the fastest and most reputable small business lenders. There are a lot of speedy “payday” loans out there, but most of them are dodgy at best (and outright scams at worst) and will end in you paying back way more money than you anticipated. The following lenders are reputable, and while the fees might be higher than what you’d pay with a bank, the financing offered is much faster and easier to qualify for than a bank loan.

We chose these lenders based on their stellar reputation and user feedback, as well as our own experiences reviewing their services.

One term you need to understand before we get started is “time to funding.” This refers to the amount of time from submitting the initial application to when the funds arrive in your account.

Top Quick Business Loans At A Glance

categories OnDeck/Credibly LoanBuilder/BlueVine Fundbox/Kabbage

Borrowing Amount

$5,000 – $500,000

$5,000 – $500,000

Up to $100,000

Term Length

3 – 36 months

13 – 52 weeks

12 or 24 weeks

Required Time in Business

12 months

9 months

N/A

Required Sales

$10,000 per year

$42,000 per year

N/A

Required Credit Score

550

550

N/A

Review

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Borrowing Amount

$5,000 – $250,000

Up to $5 million

Up to $250,000

Term Length

6 – 24 months

13 weeks (invoice factoring)

6 – 12 months (line of credit)

6 or 12 months

Required Time in Business

6 months

3 months (invoice factoring)

6 months (line of credit)

12 months

Required Sales

$15,000 per month

$100,000 per year (invoice factoring)

$120,000 per year (line of credit)

$4,200 per month

Required Credit Score

500

350 (invoice factoring)

600 (line of credit)

N/A

Review Review Review

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1. OnDeck

ondeck logo

Time To Funding: 2–5 days

The Basics: OnDeck is one of the few reputable online lenders willing to lend to less-than-qualified candidates: to qualify for a short-term loan ranging from $5,000 to $500,000 or a line of credit up to $100,000, you’ll only need a credit score of 500, 12 months in business, and $100,000 annual revenue. OnDeck has somewhat higher factor rates than some its competitors in the short-term lending space, but they have a good reputation for transparency, and it might be worth paying the extra cost if you have poor credit and need fast funds.

The Application: OnDeck’s application is fast and easy, and they don’t ask for a lot in terms of documents.  To make the process even faster, have all of this information ready to submit:

  • Business Tax ID
  • Bank statements for the previous 3 months
  • Social Security number of business owner(s)
  • Driver’s license number and state of issue

When applying, take advantage of the live chat feature so that the rep can guide you through the application and answer any questions you might have. After you submit your application, a rep will typically reply with an offer within 24 hours, and after you accept the offer, the money will be in your account within one or two days.

Another cool thing about OnDeck for customers who want fast funds? If you have an eligible debit card linked to your business bank account, you can take advantage of OnDeck’s Instant Funding, wherein you can transfer your line of credit funds to your account instantly, rather than waiting the standard 1-2 days for an ACH transfer.

Apply For An OnDeck Loan

2. LoanBuilder: A PayPal Service

loanbuilder logo

Time To Funding: 1–3 days

The Basics: LoanBuilder, a business financing service offered by PayPal, can potentially put money in your account in just a day. Like OnDeck, LoanBuilder offers short-term loans of $5,000–$500,000. They will lend to applicants with bad credit and newer businesses as well (minimum credit score of 550 and 9 months in business).

LoanBuilder has moderately high rates, but these are competitive with or lower than those of similar lenders. Additionally, this lender does not charge an origination fee, which means no money will be subtracted from the total loan amount. Also, repayments are automatically deducted from your account on a weekly, rather than daily basis (unlike many other short-term lenders). Keep in mind that you will have a maximum of 12 months to finish repaying your loan, and the combination of weekly repayments plus a short repayment term means your loan repayments will be higher than they would be with other types of business financing products.

One great thing about LoanBuilder is that what you see really is what you get. All fees and terms are spelled out before you see the loan and you even have the option to adjust the loan terms to your liking to “build” the perfect loan. LoanBuilder has a tool that lets you tinker around with your prospective loan before applying. For example, if you want longer repayment terms, you can adjust the term and see how that will affect your weekly repayments.

The Application: To apply for a LoanBuilder loan, simply fill out a 5-10 minute online questionnaire. If your business is eligible, you will be able to fill out a complete application. In some cases, the only required documents might be four months of your recent business bank statements. LoanBuilder says that signed contracts received before 5 PM will lead to funds being deposited the next day so long as all documentation is in order.

In terms of ease, transparency, and the reputation for speed and quality synonymous with the PayPal name, LoanBuilder is a great choice for small businesses who want fast funding, even those with bad credit.

Apply For A LoanBuilder Loan

3. Fundbox

fundbox loans

Time To Funding: 1–2 days

The Basics: Fundbox provides invoice financing and revolving lines of credit up to $100,000. Repayment terms are for 12 or 24 weeks, depending on the product and what works better for your business.

Fundbox has no minimum credit score requirement or time-in-business requirement, making its line of credit product, “Direct Draw,” a good loan for businesses with poor credit or little time in business. Meanwhile, Fundbox’s invoice financing offering, “Fundbox Credit,” is a favorite of companies that have cash flow problems due to outstanding invoices; Fundbox will lend you the full value of the unpaid invoice(s) with a 0.5–0.7% weekly borrowing fee.

The only borrower requirement to qualify for Fundbox financing is that you use compatible accounting or invoicing software for at least 3 months, or a compatible bank account for at least six months.

The Application: To apply, simply make an account, enter some basic information (such as your name, email, and phone number), and hook up your accounting or invoicing software account or your business bank account. Fundbox typically makes a decision within minutes of receiving your application, after which you can start requesting funds immediately should you accept their offer.

Fundbox requires very few fees—you will not have to pay a draw fee or a prepayment penalty. Although Fundbox’s borrowing rates are higher than what you’d get from a bank, they are in line with other online lenders’ fees. Having a revolving line of credit like the kind Fundbox offers is also a good way to ensure you never need to take out another fast business loan, because you’ll always have access to cash on-demand.

All in all, Fundbox is one of the fastest small business loans around. It’s an excellent option for businesses that struggle with cash flow issues, especially less-established businesses that can’t qualify for a bank line of credit.

Apply For A Fundbox Loan

4. Credibly

credibly loan

Time To Funding: 2–5 days

The Basics: Credibly offers short-term loans and merchant cash advances with loan amounts of up to $250,000. This lender has relaxed borrower qualifications—to be approved for their business expansion or working capital loan, you only need a credit score of 500, 6 months in business, and revenue of $15,000 per month. For expansion loans, your average daily balance needs to be at least $1,000. As is the case with most business lenders, more qualified applicants will receive better interest rates.

The Application: To prequalify for a Credibly loan, use the easy online application to enter some basic information about yourself and your business. Credibly will then let you know whether you’re eligible and how much money you qualify for. If you’re eligible, a representative will call you and work with you to get the rest of the documentation you need. The docs you might need to supply include:

  • Business lease agreement or business mortgage statement
  • Picture ID of all business owners
  • Most recent business tax return
  • Bank statements for the last 3 months

After you send all the documents, it typically takes about a day to receive a finalized quote. Should you accept the offer, it takes about 1-3 days to receive the funds in your account. Note that while Credibly advertises 48-hour funding, that means you will receive the funds within 48 hours from the moment your loan application is approved.

We like Credibly for their transparent terms, easy application, low borrowing prerequisites, and responsive customer service.  Credibly is one of the few, well, credible players in the short-term lending space.

Apply For A Credibly Loan

5. BlueVine

Time To Funding: 2–7 days

The Basics: BlueVine offers invoice factoring as well as traditional lines of credit up to $5 million. Borrower qualifications vary by product. The minimum required personal credit score for a 6-month line of credit is 600. The minimum score for invoice financing is just 530; for this type of financing, your customers’ creditworthiness is a bigger consideration than your own.

The Application: The process to pre-apply for either the invoice financing or line of credit service is fast and simple: simply create an online account and answer some basic questions about yourself and your business. You’ll also need to provide either the most recent three months of bank statements or allow read-only access to your bank account. A BlueVine rep will then call you and walk you through the process and answer any questions.

Initial approval for either service takes about a day. Once you are approved, you can begin drawing from your credit line or selling invoices immediately. Money transfers normally take one to three business days. If you’re selling an invoice from a customer unfamiliar to BlueVine, it will take an additional 24 hours to see the funds in your account, because BlueVine has to assess your customer’s creditworthiness.

Apply For BlueVine Financing

6. Kabbage

Time To Funding: 2–3 days

The Basics: Kabbage is one of the quickest channels to get a business line of credit. Kabbage sells lines of credit up to $250,000, with zero required collateral – no blanket lien and no personal guarantee. Kabbage also provides borrowers with a spending card so you can spend funds from your line of credit instantly, without having to wait the typical 2–3 days for an ACH transfer period.

Note that Kabbage is bad-credit friendly and does not have a specific credit score requirement. However, the service not suitable for startups; to qualify, you need 1 year in business and must have made at least $4,200 for the last 3 months. It’s also important to keep in mind that while Kabbage is super convenient, this convenience isn’t free—fees are on the high side, and you’ll have to pay back your loan in just 6 to 12 monthly payments. Nevertheless, Kabbage a fast and easy way to get a line of credit if you don’t qualify elsewhere.

The Application: When applying for Kabbage financing, you will have to allow read-only access to your business bank account and any other data channels you use (such as PayPal or QuickBooks). Kabbage uses this information to determine your monthly fee and maximum credit line. Usually, it only takes a few minutes for the system to decide whether to approve or deny your application. Kabbage might request additional information in order to grant you a credit line larger than $150,000.

When you have been approved, you can begin requesting funds immediately. As mentioned, you can also request a Kabbage Card free of charge to pay for goods and services right from your credit line.

Apply For A Kabbage Line Of Credit

Which Loan Should I Apply For?

So, now you know of some quality lenders that can put money in your account within days of your application. To determine which loan is right for your business, consider the services they offer (and how well these services meet your needs) and whether you meet the lender’s minimum qualifications, which are as follows:

  • OnDeck: Short-term loans up to $500,000 and lines of credit up to $100,000; need 12 months in business, 500 credit score, and $100,000 in annual revenue
  • LoanBuilder: Short-term loans up to $500,000; need 9 months in business, 550 credit score, and $42,000 in annual revenue
  • Fundbox: Revolving LOC and invoice financing up to $100,000; need to have been using compatible invoice or accounting software for 3+ months, or compatible business bank account for 6+ months.
  • Credibly: Short-term loans up to $250,000; need 6 months in business, 500 credit score, and $15,000 in monthly revenue.
  • Bluevine: Lines of credit and invoice financing up to $5 million; for invoice financing need 3 months in business, 530 credit score, and $100,000 in annual revenue; for 6-month line of credit need 6 months in business, 600 credit score, and $120,000 in annual revenue.
  • Kabbage: Lines of credit up to $250,000; need 12 months in business and monthly revenue of $4,200 for the last three months, or $50,000 annually (no specific credit score requirement).

Note that if you only meet the bare minimum requirements, you may not be eligible to borrow the maximum amount advertised by each lender; your qualifications will determine how much money you can borrow.

The above loans are unsecured (meaning they don’t require you to list any specific business collateral), though borrowers may have to sign a blanket lien and/or a personal guarantee.

Fast Loan Approval Tips

How fast your loan is approved and received depends in large part on you. For example, if you procrastinate in turning in the necessary documents needed to get approved for a loan, or you apply for loans you aren’t qualified for, you will be wasting precious time!

What follows are some general recommendations to ensure a speedy time to funding. This includes pre-application preparedness tips to make your application process quicker, advice on what to include in your application in order to get approved fast, and considerations as to which type of quick loan you should apply for.

1. Check Your Credit Score

First, you want to check your personal credit score so you don’t waste time applying for loans you’re not eligible for. Of course, if you want to position your business to get good rates on a “quick” loan, you’ll want to your credit score to be as high as possible. While improving your credit is not something you can do overnight, before applying for loans, be sure to at least check your credit history to see if there are any major issues. Also, pay off whatever outstanding debts you might have (if you can afford to do so).

To check your credit score before you start applying for fast loans, you can use one or more of these Best Free Credit Score Sites. And whatever you find, don’t worry—there are still plenty quick financing options even if your credit score isn’t high enough to qualify for every loan.

2. Have Your Documents Ready

Having all your business documents ready and in one place will make for a speedier application process. Here are some examples of documentation the lender might ask for:

  • Tax returns (personal and business)
  • Seller’s permit
  • EIN certificate
  • Business license
  • Balance sheets
  • Bank statements
  • Proof of ID
  • Proof of address
  • Incorporation paperwork
  • Copy of business lease

Different lenders may require different and more/fewer documents. It’s a good idea to find out what paperwork the lender requires before you get pre-approved.

3. Prepare A Proposal

Many lenders require your loan application to include a detailed proposal and/or a business plan. This is often true even of “quick” loans. A proposal generally includes information such as how much money you need, what you will use the money for, and how you will repay the loan. As with your all your important business documents, the loan application process will be speedier and smoother if you have this information prepared and ready to go before you apply.

This resource from the SBA includes the information you should include in a loan proposal – although you should note that the SBA requires more information than do most “fast loan” options.

4. Be Thorough On Your Application

The more relevant information you reveal about yourself and your business on your loan application, the better. The whole process will be faster and less painful if you provide everything upfront. That way, there will be less back and forth between you and the lender as they work with you to get the information you didn’t supply initially. You are also more likely to get approved for a loan if you have a more thorough application.

5. Consider All Your Options (Even Unconventional Ones)

Assuming you have all your ducks (and docs) in a row, it’s time to look at your best options in terms of financing. In some cases, you might not even want to get a “loan” in the traditional sense; a line of credit or cash advance might be a faster or better option for you, depending on your situation. If speed is of the essence, you should consider the following loan products, through which you can potentially get funds as soon as a day or two of applying:

  • Short-term installment loan
  • Short-term line of credit
  • Merchant cash advance
  • Equipment financing
  • Invoice financing

You also might want to consider the following unconventional financing options:

  • Peer-to-peer loans
  • Business crowdfunding
  • Personal loan
  • Microloan

All fast financing options have their own pros and cons, of course. Merchant cash advances, for example, tend to be some of the most expensive forms of capital, though they are usually the fastest. Of the unconventional options, P2P loans and personal loans tend to be the fastest, but you’ll generally need to have good personal credit in order to qualify for these options.

6. Apply For Online-Only Loans

So here’s the quick-and-dirty about bank loans vs. online loans: bank loans are not only much more difficult to qualify for, they also take a lot longer to come through than online loans. If you want your loan fast – potentially even as soon as a day or two – online is the way to go. Interest rates are typically higher than with bank loans, but if you shop around, you might be able to get a low-interest small business loan online, especially if you have good credit.

7. Use A Loan Aggregator

A loan aggregator service lets you apply for multiple online business loans at once. Using a service lendio logolike Lendio you can fill out a single application with your business information and be pre-approved for multiple loan options. This is one of the quickest way to apply for online loans, as you save the time it takes to apply for multiple loans individually. Loan matchmaking services are also typically free; if you do accept a loan offer, the lender pays a referral fee to the matchmaker. You never have to pay the matchmaker directly.

Compare loans with Lendio

8. Consider An Online/SBA Loan Hybrid 

If you’re looking to borrow from the SBA, you probably know this isn’t the fastest form of financing around. And if speed is your top priority, you probably shouldn’t bother applying for an SBA loan, bank loan, or any other type of long-term loan. With that said, the SBA offers high quality, low-interest loans, and if you qualify for one, it might be worth waiting a little extra time for. To make the SBA loan application process faster and easier, you can apply for an online/SBA loan hybrid.

SmartBiz is one example of an online service that facilitates SBA-backed loans. Your funds might still take up to a few weeks to come through, but it will be quicker than applying directly through the SBA.

9. Don’t Forget About Your Business Credit Card

Taking out a business loan isn’t your only option if you need fast cash. You can also charge major expenses on your business credit card and pay them off later as you are able. Be sure to check out the Best Business Credit Cards for 2018 to find a good credit card that earns rewards and doesn’t charge an exorbitant amount of interest.

If you need a large sum of liquid cash, you might also consider a credit card cash advance. You need minimal qualifications in order to qualify for such an advance; if you have a business credit card, you will probably be approved for an advance. Once you sign up for your card’s cash advance program, you can typically begin withdrawing cash right away.

The downside to credit card cash advances is that the APR and cash advance fees are usually quite high. Since you’re borrowing against your own credit limit, this can also temporarily lower your credit score by affecting your credit utilization ratio. Nevertheless, credit card advances are a fast and easy business loan alternative available to virtually anyone who has a credit card.

10. Don’t Be Too Hasty

Finally, when getting a fast business loan, it’s important to take your time and read the fine print. In many cases, the super-quick “next-day” loans you find online will have less than ideal terms. You’ll likely have to pay your loan back rapidly at a high rate of interest.

Ideally, of course, you will find a great lender that gives you a fair rate and terms. Check out our Small Business Loan Calculators to calculate your total repayment, financing cost, daily/weekly/monthly payments, APR, and cents on the dollar.

Final Thoughts

Fast business loans can serve as a lifesaver for businesses that need working capital, have cash flow problems, and other financing issues. Although banks can take weeks to issue business loans (if you can even get approved for one), alternative lenders can put money in your bank account within a couple days. However, the reason that online/alternative lenders are willing to give you money so quickly is that you are paying a premium for speed—meaning, you’ll pay more than you would for a bank loan, and you’ll pay the loan back much quicker than you would other types of financing.

To avoid getting ripped off by a predatory lender or agreeing to a bad loan because you are desperate, be sure to compare multiple loan offers. It’s important to do your due diligence to ensure you get the best loan possible, i.e., the one with the lowest fee and repayments you can reasonably afford. Remember that you can pre-apply for multiple loans online without affecting your credit score.

Bear in mind that there are indeed some legitimate, quality lenders (like the ones on this list) that provide quick capital. What’s more, you can take certain actions to speed up your loan application process and time to funding. Be sure to organize and present all your business documentation at the start of the application process. And save time by applying for multiple loans at once with a loan matchmaker service like Lendio.

Lender Borrowing Amount Term Interest/Factor Rate Req. Time in Business Min. Credit Score Next Steps
$2K – $5M Varies As low as 2% 6 months 550 Apply Now
$5K – $500K 3 – 36 months x1.003 – x1.04/mo 12 months 500 Apply Now
$5K – $500K 13 – 52 weeks x1.029 – x1.1872 9 months 550 Apply Now
$20K – $500K 1 – 4 years 7.99% – 29.99% APR 2 years 660 Apply Now

The post Quick Business Loans: The 6 Best Lenders And 10 Tips For Fast Approval appeared first on Merchant Maverick.

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How To Get Small Business Loans For Restaurants

Restaurants have a (somewhat unfair) reputation for being especially risky businesses that are hard to get off the ground. The good news is that restaurant business loans aren’t especially hard to find, even if you’re looking for a loan to open a restaurant.

Want to know how to get restaurant financing or a loan to open a restaurant? Below, we’ll look at how to finance your restaurant with working capital. If you’re specifically looking to finance restaurant equipment, check out our companion post on restaurant equipment leasing.

Comparison Chart

fundation logo
Read Review Read Review Read Review Read Review Read Review
Borrowing Amount  $10K – $5M $10K – $5M $2K – $100K $20K – $500K $1K – $5M
Term Length Varies by product Varies by product 3 – 36 months 1 – 4 years Varies by product
Required Time In Business Varies by product Varies by product 1 years 12 months 6 months
Required Sales $1.50 for every $1 borrowed $100K/yr $10K/mo
Required Credit Score 640 670 620  660 550

 

kiva logo avant logo
Read Review Read Review Read Review Read Review Read Review
Borrowing Amount  $5K – $500K $5K – $500K $6K – $5M $25 – $10K $1K – $35K
Term Length 3 – 36 months 13 – 52 weeks 6 – 12 months 3 – 36 months 2 – 5 years
Required Time In Business 6 months 9 months 6 months N/A N/A
Required Sales $10K/mo $42K/yr $120K/yr N/A N/A
Required Credit Score 550 550 600  N/A 600

Where To Get Restaurant Business Loans

Most traditional and alternative lenders, at least on paper, offer restaurant lending services. Typically, your ideal option for restaurant funding is a bank or credit union with whom you have an established relationship. In most cases, they’ll offer the best rates and terms.

If you or your business are too risky for a traditional lender, however, there are still restaurant financing options in the form of alternative lenders.

The Cost Of Restaurant Financing

Before we look at your restaurant funding options, you want to be able to compare the offers you might come across.

Here are some of the data points to consider when comparing restaurant loans:

  • Term Length: The amount of time you have to pay back your loan. The longer the term, the higher your interest or factor rate will usually be.
  • Interest/Factor Rate: A percentage or decimal multiplier that determines the amount of money you have to pay back. For short-term loans, this may be a flat fee rather than accumulate over time.
  • Origination Fee: This is a closing fee some lenders charge in addition to interest. It’s either a percentage of the amount you’re borrowing (1% – 5% is typical) or a flat fee. In most cases, it will be deducted from the amount of money you receive from the lender.
  • Administration Fee: This is a fee charged to maintain or set up your account. It may be a percentage or a flat fee. Sometimes charged in place of an origination fee.
  • APR: Annual percentage rate represents what your effective interest rate over a year would be. This can help you determine how expensive a product is relative to another.
  • Payment Schedule: If you’re used to monthly billing, you may be surprised to hear that some lenders expect payments weekly or even daily. May sure you’re prepared for whatever terms you accept.
  • Collateral: An asset, property, or cash deposit used to secure a loan. Not all loans require collateral.

Types Of Restaurant Business Loans

Restaurant loans and related products come in a few different forms. When you’re looking for a lender, you’ll also want an idea of the type of financial product you’re seeking. All of these products will get you the money you’re seeking, but with different terms. Some are cheaper; others are more versatile. Some are more available to applicants with bad credit.

  • Term Loans: Term loans are for a specific amount that, once received, is paid off in regularly scheduled installments (they’re also sometimes called installment loans). Medium and long-term loans usually accrue interest over time while short-term loans have flat fees.
  • Lines Of Credit: Lines of credit are a bit like credit cards. You’ll be approved for credit up to a set limit. You can draw on your account as often as you want as long as you stay below your limit, paying interest only on the outstanding balance.
  • SBA Loans: As is the case for other business types, there are Small Business Administration loans for restaurants. These loans are partially guaranteed by the SBA, allowing you to access better rates. Just bear in mind that the application process is usually more complicated and often slower.
  • Merchant Cash Advance: MCAs aren’t technically loans, but can serve as the financial product of last resort for businesses with bad credit but steady credit card revenue.
  • Equipment Leasing: If you’re looking to finance restaurant equipment, you also have the option to lease it, which you can read about in more detail in our restaurant equipment financing article.

Restaurant Loans For Start-Ups

If you’re looking for start-up restaurant financing, you’ll face a narrower band of options, but you aren’t completely out of luck. Conservative lenders may still consider approving a loan to start a restaurant if you have a good business plan and credit and are able to put some of your own money into the mix. Additionally, some alternative lenders offer loans specifically geared toward brand new businesses.

Restaurant Loan Providers

Not sure where to start looking for small business loans for restaurants? Here are some lenders to consider.

For Good Rates

Wells Fargo

Borrower Requirements:
• Credit score of 640 or higher
Read Our Review

 

As big banks go, Wells Fargo is one of the easier institutions for small businesses to work with. Due to their size and resources, they can offer a wide range of products for restaurants of any size. Their credit restrictions are higher than those of most of alternative lenders and they require you to show strong month-to-month revenue, but they’re more accessible than many of their conservative competitors.

Chase

Borrower Requirements:
• Excellent credit
Read Our Review

 

Chase has a reputation for offering some of the best business loan rates out there. The trick will be qualifying for them. Despite its size and prominence, Chase is very conservative about who they lend to. You’ll also need to have a branch near you as you’ll need to go to your local branch to apply.

StreetShares

Borrower Requirements:
• 1 year in business
• 620 credit score
Get Started With StreetShares

Read Our Review

 

If you don’t have a bank in your area with whom you’ve built a good relationship, you can still find good rates with online lenders. StreetShares is a bit more selective than many of their competitors, but they offer loans and lines of credits at reasonable rates with no collateral.

Fundation

fundation logo
Borrower Requirements:
• 1 year in business
• 660 credit score
• $100K/yr
Get Started With Fundation

Read Our Review

 

Fundation is another option for borrowers with good credit who would prefer (or have) to avoid dealing with a traditional bank. Fundation offers both installment loans and lines of credit with no collateral needed. Just be prepared for a slightly lengthier application process than you’ll typically experience with alternative lenders.

For Borrowers With Bad Credit

Lendio 

Borrower Requirements:
• 6 months in business
• 550 credit score
• $10K/month
Get Started With Lendio

Read Our Review

 

Lendio is an online lending platform that matches businesses with lending partners. This is a handy service for restaurant owners who don’t have a lot of time to compare loans on their own, or who have bad credit. Lendio’s pool of potential lenders is big enough that you’re more likely than not to find one willing to work with you, even if you haven’t been in business very long. If you’re looking for a loan to open a restaurant, however, you may have to look elsewhere.

OnDeck

Borrower Requirements:
• 12 months in business
• 500 credit or higher
• $100K/year
Get Started With OnDeck 

Read Our Review

OnDeck is one of the bigger names in alternative online lending and a solid choice for borrowers with poor credit but decent cash flow. Just be aware that their factor rates use a per month formula rather than a flat fee, which can make them a little bit difficult to compare to many of their competitors.

OnDeck offers installment loans and lines of credit.

LoanBuilder

Borrower Requirements:
• 9 months in business
• 550 credit or higher
• $42,000K/year
Get Started With LoanBuilder 

Read Our Review

LoanBuilder doesn’t offer as many products as some of the other lenders on the list, but they do give you the freedom to tweak the terms of a short-term loan to your liking. Combined with relatively low qualifications and integration with PayPal’s infrastructure, working with them should be pretty painless.

BlueVine

Borrower Requirements:
• 3 months in business
• 530 credit or higher
• $100,000K/year
Get Started With BlueVine 

Read Our Review

If your company is profitable, but you haven’t been in business long enough to build up a good credit score, BlueVine might be the lender for you. Rather than offering installment loans, BlueVine gives you the option of getting a line of credit or, if you do a lot of B2B business, invoice factoring. Just be aware that their lines of credit aren’t available in every state.

For Borrowers Starting Their Restaurant

Kiva

kiva logo
Borrower Requirements:
• A strong professional and social network
Read Our Review

 

If you’re coming up blank with ideas about how to get a loan to start a restaurant, Kiva is one possible solution. Kiva is a nonprofit microlender that operates worldwide. Rather than measure your income and credit, Kiva uses a process called “social underwriting” to measure your community standing and character. Best of all, the loans have zero interest.

So what’s the catch? Well, Kiva uses a type of crowdfunding to finance your loan, which means you’ll be waiting longer to get your funds than you would with most other lenders. You’ll also be limited to a maximum of $10,000, which may not cut it for your business plan. If you have some of your own money to put into your new business and just need to make up that last few thousand dollars, though, it’s worth a look.

Avant

avant logo
Borrower Requirements:
• Credit score of 600 or higher
Read Our Review

 

Another way around the time in business restrictions you’ll often encounter when seeking new restaurant business loans is to forget the “business” part and get a personal loan. While you won’t be able to borrow the large amounts that you can with a business loan, they can get you a modest ($1,000 – $35,000) amount of money with which to start a restaurant.

Note that you’ll still have to show a strong income relative to the amount of money you’re seeking. Additionally, Avant cannot currently lend to individuals in Colorado, Iowa, Vermont, or West Virginia.

Final Thoughts

If you didn’t find what you were looking in our examples above, don’t fret! We’ve barely scratched the surface of the resources restaurants can tap to find funding. If you don’t have much in the way of collateral, you can try to get an unsecured business loan.

If you’re looking to finance restaurant equipment, check out our resources on leasing and equipment loans. Good luck hunting for restaurant business loans! Do your research and you’re sure to find something that fits your needs.

The post How To Get Small Business Loans For Restaurants appeared first on Merchant Maverick.

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What is Reseller Hosting?

What is Reseller Hosting

Reseller Hosting is a hosting product that dedicates specific server resources to an administrator who can create shared hosting accounts. Reseller Hosting is typically used as a stable, affordable product for freelancers & agencies to provide to clients. It allows agencies & freelancers to generate recurring revenue via hosting, maintenance & turn-key solutions while providing clients with world-class infrastructure & technical expertise.

How Reseller Hosting Works

Reseller Hosting is a variation of a shared, VPS or Dedicated Hosting plan where the customer has an administrator account to create new individual hosting accounts. It is literally reselling hosting to a 3rd party. A reseller account has specific server management software so that the administrator can dedicate specific resources to each account and bill them individually.

Imagine real-world housing for a second. Ok – imagine a house or condominium building that is leased to someone who sub-leases the rooms to individuals. Reseller hosting is like that. The individuals could buy their own condo or rent their own house. But if they simply don’t want to deal with leasing agreements or property management – and would rather deal with their friend, then it makes more sense to sub-lease.

That analogy makes Reseller Hosting sound informal and unprofessional. It’s not. It’s actually a very common service for freelancers & agencies who have clients who simply don’t want to even *hear* the words FTP or DNS. Clients get hands-off hosting. Resellers get recurring revenue and a long-term relationship. Hosting companies lease servers to someone who can pay, knows what they need, and will usually be around for a while.

Reseller Hosting can be part of a shared, VPS, dedicated or cloud server. It all depends on what the customer is using it for.

What Reseller Hosting Is Used For

Reseller Hosting is typically used for running known client websites at a predictable price. With a Reseller Hosting account, the customer will know what types of websites will be on the account, so they’ll be able to allocate exactly what each site needs. Ideally, the reseller will have strong influence over the websites on the account. They’ll be able to set the billing and manage the traffic & resource use.

If you know how many visits you receive, and how efficient your website is – then you can pay a locked-in price for those resources. And you can rebill clients for very high-value add.

For example, if an agency has 10 local business clients with only 500 visits per month each – then the agency could easily put them *all* on a $20/mo reseller account with a solid hosting company. The agency could charge $50/mo for hosting, light tech support & WordPress updates. That’s $480/mo profit for the agency. And also quite a deal for each client. You can see how this could scale – especially if you charge more, provide more value, or balance more websites on the account.

Reseller Hosting Differences

Reseller Hosting sort of exists separately from other hosting products. Here’s how it differs.

Reseller Hosting vs. Shared Hosting / VPS Hosting / Dedicated Hosting

Unlike other hosting products, Reseller Hosting accounts are built to resell part of your server’s resources in a dedicated account. You can have a Reseller Shared plan where you are reselling accounts on a shared server. You can have a Reseller VPS plan where you are reselling accounts on a dedicated allocation of a single server. And so on – the key is to know what kind of resources your business and your clients’ businesses need.

What To Look for in Reseller Hosting

Since you are paying for type of hosting product resources, shopping for Reseller Hosting is simpler than other products in many ways.

You are really looking for –

  • Server Resources (memory, bandwidth, processors, etc)
  • Server Management Support (how much they’ll help with setup)
  • Server, Website & Billing Software (WHMCS, domain resells, WHM, cPanel, etc)
  • Data Center Location & Security Setup
  • Plan Bonuses (ie, automated backups, white labeling, etc)

Reseller Hosting Providers

I’ve used quite a few hosting providers both for my own projects and for clients. Here’s the main 4 companies that I’ve used & really liked. I receive customer referral fees, but all the data & opinion is based on my professional experience.

Name Best if you want… Features!
InMotion …great overall value, bundled reseller features, solid support. See Features.
SiteGround …unique program setup w/ diverse international data centers. See Features.
HostGator …great pricing, solid bundled features and known brand. See Features.
NameCheap …cheap plans with low-commitment & UK data centers. See Features.

I also created a more in-depth best reseller hosting guide with a quiz here.

Additionally, using a reseller host will not automatically solve your clients’ website speed issues. I wrote a Beginner’s Guide to Website Speed & Performance here.

The post What is Reseller Hosting? appeared first on ShivarWeb.

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How To Accept Credit Card Payments For Your Small Business

Whether you’ve been in business for a while or are just starting out, you know how important it is to be able to accept credit and debit cards as payment from your customers. Credit card usage has soared over the past twenty years or so, while the use of traditional payment methods such as cash and paper checks has dwindled. Put simply, accepting credit cards will lead to increased sales and happier customers.

Unfortunately, adding credit card acceptance to your suite of business tools is neither easy nor inexpensive. The credit card associations (i.e., MasterCard, Visa, etc.) charge a fee known as interchange every time their cards are used, and you’ll need to sign up with a credit card processor to process your transactions and pay those fees for you. Your processor will, in turn, add a markup to your processing charges to cover their costs, and – in most cases – also charge you a bewildering variety of fees for maintaining your account.

In this article, we’ll provide a brief overview of the requirements you’ll need to meet to set up credit and debit card processing for your small business. There are a huge number of providers out there on the market, all offering different variations on the same basic services that most companies need. We’ll give you a quick and dirty explanation of how credit card processing works, what a merchant account is, and whether you need one to accept credit or debit cards. We’ll explain the various options for taking card payments, including the required hardware and software you’ll need to get started. Finally, we’ll give you some tips to help you avoid having your account suddenly frozen or terminated – a situation you can and should avoid.

If you’re looking for the best credit card processing companies for your business, you should take a look at our favorite payment processor shortlist to get you headed in the right direction.

How Credit Card Processing Works

You don’t need to be familiar with all the intimate details of processing a credit card transaction, but it’s a good idea to have a basic understanding of the steps involved and how they go together. A little knowledge of how processing works can help you avoid some of the common problems that can result when a transaction doesn’t go smoothly.

First, you’re going to need a way to accept your customer’s card data. This can be accomplished using either a traditional credit card terminal or a payment gateway in the case of online transactions. Another option is a software service known as a virtual terminal, which turns your computer into a credit card terminal and allows you to either input the card data manually or read it using a compatible card reader.

Once you’ve input your customer’s card data, it’s sent to your provider’s processing system for approval. Your provider’s network will check with the cardholder’s issuing bank to confirm that funds are available to cover the transaction. For debit cards, this is a simple check of the remaining balance on the banking account linked to the card. Credit cards require that the cardholder won’t exceed their available credit if the transaction is approved. The processing networks will also run a few anti-fraud checks to (hopefully) detect a suspicious transaction. If sufficient funds are available and there aren’t any clear indications of fraud, the transaction is approved, and you can complete the sale.

At the end of the day, you’ll upload all completed credit/debit transactions to your processor’s network for processing. This usually occurs automatically if you’re using a payment gateway or a modern credit card terminal. For each transaction, your processor will deduct both the applicable interchange (which is then forwarded to the cardholder’s issuing bank) and their markup. You’ll receive whatever is left over after these fees have been deducted. It usually takes another two to three days for these funds to be transferred back to your bank account.

From our payment processing infographic:

Do You Need A Merchant Account To Accept Credit Cards?

For many years, the only way to accept credit cards was to open a merchant account. At its most basic, a merchant account is simply an account to deposit funds into from processed credit/debit card transactions. Of course, maintaining a merchant account also requires transaction processing services, equipment and software to process the transactions, security features, and numerous other services, depending on the needs of your business. Traditional merchant accounts tend to end up being rather expensive, and merchant services providers often require that you agree to a long-term contract with a hefty early termination fee in case you close your account before the contract expires. As a result, traditional merchant accounts tend to be expensive, especially for a small business that’s trying to minimize their expenses.

In recent years, an alternative has become available that lowers costs for small businesses while still providing most of the essential features available with a full-service merchant account. Payment service providers (PSPs) allow you to accept credit and debit card transactions without a traditional merchant account. PSPs such as Square (see our review) and PayPal (see our review) have revolutionized the processing industry by offering simple, flat-rate pricing, no fees for basic services, and month-to-month billing that eliminates long-term contracts. They’re able to do this by aggregating accounts together, so you won’t have a unique merchant identification number for your business. PSP accounts are easier to set up, but they’re also vulnerable to sudden account freezes or terminations which can make them a risky proposition for businesses that depend on being able to accept cards without interruption.

Cheapest & Easiest Ways To Accept Credit Cards Without A Merchant Account

There are now quite a few well-known PSPs on the market, each one specializing in providing credit card processing services to particular segments of the business community. Here’s a brief overview of each of the most popular options:

Square:

This is the best all-in-one solution for low-volume users, especially those in the retail sector. Square also supports eCommerce businesses, but doesn’t have quite as many features for online enterprises as its competitors. Square features a mobile processing system that uses a new, EMV-compliant card reader, no monthly fees, month-to-month billing, and a simple flat-rate pricing system that’s more affordable for a small business than a traditional merchant account. See our review for complete details.

Shopify:

This is the best option for eCommerce merchants looking to easily set up a fully-featured webstore. While Shopify has better eCommerce tools than Square, it’s also more expensive. Pricing starts at $29.00 per month for the Basic Shopify Plan, with a flat-rate processing fee of 2.9% + $0.30 per online transaction. Billing is month-to-month, but you can receive a discount if you pay for a year (or two) in advance. See our review for more specifics.

 

PayPal:

Easily the oldest and best-known option for online credit card acceptance, PayPal is now available for retail merchants also. While a standard PayPal account comes with no monthly fee, you’ll have to pay $30.00 per month for the PayPal Payments Pro Plan. This upgraded plan includes a virtual terminal and a hosted payments page. PayPal uses a flat-rate pricing plan for processing fees that’s nearly identical to what Square charges. See our review for details about PayPal’s services.

Stripe Payments:

Stripe logo

Very tech-oriented, Stripe only supports eCommerce businesses. They don’t charge any monthly fees and have no long-term contracts. All transactions are processed at a fixed rate of 2.9% + $0.30 per transaction. Stripe offers a huge library of APIs that allow you to customize your eCommerce website just about any way you like. However, utilizing these features will require either extensive coding experience or the services of a developer. Check out our full review for more details about what Stripe has to offer.

Braintree Payment Solutions:

Braintree Payment Solutions logo

Another eCommerce-only provider, Braintree is very similar to Stripe in terms of features and pricing. The primary distinction is that, unlike Stripe, Braintree is a direct processor. This translates to increased account stability, which is very important for an online business where credit and debit cards are just about the only forms of payment you can accept. Braintree charges 2.9% + $0.30 per transaction, but doesn’t require a monthly fee or a long-term contract. They also offer a variety of developer tools to help you customize your website any way you like. For more details, check out our complete review.

When & How To Set Up A Merchant Account

With so many low-cost alternatives available, you may be wondering why you would ever consider the added expense and complication of a full-service merchant account. The primary reason that merchant accounts are still alive and well today is that for many businesses the overall cost of a merchant account is actually lower – sometimes much lower – than using a payment services provider. How is this possible? It primarily comes down to processing rates and how your monthly volume and average ticket size affect them. With a full-service merchant account, you can obtain interchange-plus processing rates that are significantly lower than the flat rates charged by PSPs. Providers such as Square (see our review) have to charge an inflated processing rate to pay for all the ancillary services they aren’t charging you for with a monthly fee. A traditional merchant account provider bills for those services separately, so they can afford to offer a lower per-transaction markup.

Unfortunately, there’s no easy way to determine the point at which it’s more cost-effective to upgrade to a full-service merchant account. The primary factor you’ll want to look at is your monthly processing volume. Your average ticket size is also important, but to a lesser extent. We’ve seen providers recommend merchant accounts for businesses processing anywhere from $1500 to $10,000 per month at a minimum, and sometimes even more. Where to draw the line will ultimately depend on the unique needs of your business, and what options for upgrading are available to you. You’ll want to compare your current processing costs with an estimate based on a quote from a merchant account provider to see which option is cheaper. Be sure to factor in all the hidden costs that come with merchant accounts. You can usually uncover these in the fine print of your proposed contract.

For more, see our complete guide to credit card processing rates and fees.

Account stability is also an important factor. With a PSP, a single unusually high transaction can be enough to have your account suspended or even terminated. For some businesses, particularly eCommerce merchants, this can be catastrophic. While this situation can still happen with a traditional merchant account also, it’s far less likely and you’ll have better access to customer service to get your account working again if it does occur.

Setting up an account with a PSP is usually very easy. Most PSPs have online application forms that you can fill out and submit without ever having to talk to a sales agent. If you need a card reader, your PSP will mail it to you. Account activation is usually also accomplished online.

Traditional merchant accounts are more complicated to set up. You’ll need to contact the sales team at the provider you’re interested in and negotiate the terms of your agreement. There’s also a lot more paperwork, although some providers now offer you the opportunity to complete your merchant application online. Beware that automation can sometimes work against you when setting up a merchant account, as some sales agents are now using tablet devices to get your electronic signature. This practice often locks you into a long-term contract before you’ve had any chance to review your contract terms and conditions. Insist on a paper copy of all contract documents and study them very carefully before you sign anything. For some suggestions on making this process go more smoothly, please see our article How to Negotiate the Perfect Credit Card Processing Deal.

How To Accept In-Store Credit Card Payments

For retail merchants, you’re going to need at least one credit card machine per location. These days, you have a choice between a traditional countertop credit card terminal and a point of sale (POS) system. Countertop terminals can process transactions, but most models offer little or no other functionality. A POS system, on the other hand, can handle things like inventory management, employee scheduling, and a host of other features to help you run your business. Naturally, POS systems cost more than most countertop terminals, although tablet-based systems such as ShopKeep (see our review) are more affordable (and mobile) than a standalone POS terminal.

Whatever type of equipment you decide to purchase, make sure it’s EMV-compatible. EMV (Europay, MasterCard, and Visa) is now the standard method for accepting credit and debit cards in the United States, and since the EMV liability shift in October 2015, you can be held responsible for a fraudulent transaction if you accept an EMV-enabled card using the magstripe instead of the chip. EMV-compatible terminals are widely available and less expensive than ever. With most customers now carrying EMV cards, there’s really no good reason to continue using a magstripe-only card reader.

If you want the latest and greatest in card acceptance technology, it’s pretty easy to find a terminal or POS system that accepts NFC-based payment methods. NFC stands for near-field communications, and it’s found on payment systems such as Apple Pay, Google Pay, and Samsung Pay. NFC technology is built into most modern smartphones, tablets, and even smartwatches. While it hasn’t seen widespread adoption by the general public yet, it’s gaining in use as more people become aware of its availability and convenience.

Regardless of what type of terminal or POS system you decide to get for your business, we highly encourage you to buy your equipment outright rather than signing up for a lease. Equipment leasing is still being pushed by sales agents, who cite misleading arguments about the low up-front cost and the possibility of writing off the lease payments on your taxes. While these arguments are technically true, they mask the reality that leasing a terminal or POS system will cost you far more in the long run than buying. Equipment leases typically come with four-year contracts that are completely noncancelable. The monthly lease payments will, over the term of the lease, far exceed the cost to simply buy the equipment. Adding insult to injury, you won’t even own your equipment when the lease finally expires. Instead, you’ll either have to continue making monthly lease payments or buy the equipment (often at an inflated price). For more details on why leasing is such a bad idea, see our article Why You Shouldn’t Lease A Credit Card Machine.

How To Accept Credit Card Payments Online

If your business is eCommerce-only, you’ll have it a little easier because you won’t need a credit card terminal or POS system. However, you will need either a payment gateway or at least a virtual terminal to accept payments from your customers. A virtual terminal is simply a software application that turns your computer into a credit card terminal. Mail order and telephone order businesses use them to enter their customers’ credit card data manually. They can also be combined with a card reader (usually USB-connected) to accept card-present transactions. For retail merchants, a virtual terminal can replace a dedicated countertop terminal if you add a card reader. Unfortunately, we haven’t seen many EMV-capable card readers that are compatible with virtual terminals yet.

A payment gateway is a web-based software service that connects your eCommerce website with your processor’s payment networks. Payment gateways allow customers to enter credit card data from wherever they are, as long as they have access to the internet. Most merchant services providers charge a monthly fee (usually around $25.00) for the use of a payment gateway. You might also have to pay an additional $0.05 – $0.10 per transaction for the use of the gateway in some cases. Authorize.Net (see our review) is one of the most popular payment gateway providers, but there are many others today as well. Many of the larger processors now offer their own proprietary gateways that include the same security and ease-of-use features that you’d find in a more well-known gateway. For more information on payment gateways, see our article The Complete Guide to Online Credit Card Processing With a Payment Gateway.

Depending on how many products you sell on your website and the options you want to give your customers, you may or may not need to use an online shopping cart in conjunction with your payment gateway. Shopping carts allow you to feature products, conduct secure transactions online, and perform a variety of other functions related to running your business. You’ll want to ensure that your chosen shopping cart is compatible with your payment gateway before you set up your site. Most of the popular shopping carts today are compatible with almost all of the more well-known payment gateways. For more information on online shopping carts, see our article Shopping Carts 101: How to Choose a Shopping Cart for Your Business.

How To Accept Credit Card Payments With Your Mobile Phone

When Square (see our review) first introduced their original card reader in 2009, it was revolutionary. For the first time, merchants could accept credit or debit cards using their smartphones or tablets. Square was (and still is) a great choice for very small businesses, startups, and merchants who operate seasonally. Naturally, they’ve spawned a lot of competitors, and today almost all merchant services providers offer some type of mobile payment system.

Visit Square

These systems inevitably include both an app for your smart device and a card reader. Unfortunately, many of the apps are very basic and don’t offer the depth of features that Square does. Card readers have lagged behind current technology, with many providers still offering magstripe-only readers. The current trend among smartphone manufacturers to remove the headphone jack has also caused problems, as most mobile card readers use a plug that fits into the jack to connect to the device. Today, Square and a few other providers now offer upgraded card readers that feature both EMV compatibility and Bluetooth connectivity. These card readers are significantly more expensive than the older models, but they’re still cheaper than a traditional countertop terminal. For businesses that need to accept transactions out in the field, they’re lighter and far less costly than wireless terminals, which usually run at least twice as much as their wired brethren and require a separate wireless data plan. For more information on mobile payment systems, please see our article on why accepting credit cards with your phone is the easiest option.

Can You Accept Credit Card Payments For Free?

Whether you ultimately use a PSP or a traditional merchant account, you’re still going to pay several percent from every sale to cover your processing costs. While there are many ways to get this percentage down to a reasonable level and avoid overpaying, at some point you’re going to ask yourself why you have to pay for processing instead of your customers. After all, they’re the ones who consciously choose to pay with credit and debit cards rather than cash or a paper check. Wouldn’t it be nice if there was a way to transfer this expense to your customers rather than having it come out of your profits?

In fact, there is a way to do this. Transferring the cost of processing onto your customers, also known as surcharging, is allowed in 41 states. However, the practice is currently going through a series of legal challenges that will ultimately either lead to it being banned or expanded into all jurisdictions. With surcharging, your processor will calculate the processing charge when a transaction is submitted for approval and add it to your customer’s bill.

Needless to say, your customers aren’t going to like unexpectedly having a few percentage points added to their bill just for using a credit card. For this reason, surcharging isn’t popular with most merchants, and you’ll usually only encounter it in certain industries where it’s become an accepted practice, such as taxi cabs and busses. For most merchants, it’s much easier to “adjust” your prices to cover your anticipated processing costs rather than passing those costs directly onto your customers. For a more in-depth look at surcharging, check out our article The Truth Behind Free Credit Card Processing.

How To Avoid Account Terminations & Funding Holds

Once you’ve got your merchant account up and running, you’ll naturally want it to be available and fully functional every day. While this isn’t normally a problem, account holds, freezes, and terminations sometimes occur. You’ll want to understand how this happens, and what you can do to prevent it from happening to you.

An account hold usually occurs when a single transaction is held up, and you don’t receive the funds you were expecting. In most cases, your processor’s risk department has flagged the transaction as suspicious, and you won’t get your funds until they can investigate and confirm that the transaction is legitimate. A single transaction that’s for much more money than your average ticket size is most likely to trigger a hold. Fortunately, you should still be able to process other transactions while the matter is being resolved.

This isn’t the case with an account freeze, unfortunately. Your processor can and will freeze your account – preventing you from getting paid for previous transactions or processing new ones – if fraud is suspected that would affect your entire account. While the wait can be excruciating, account freezes are usually temporary unless your processor decides to terminate your account.

As the name implies, an account termination is final. Your account is shut down, and you won’t be able to reopen it. The risk of an account termination is higher with a PSP than a traditional merchant account. Account terminations usually occur when your processor determines that you’ve misrepresented your business and the type of goods you’re selling. It doesn’t matter if this was intentional or just an honest mistake on your part. If your business type is one that usually falls into the high-risk category, save yourself the aggravation and get a high-risk merchant account from a provider who specializes in these kinds of accounts. It will cost you more, but you’ll have a much more stable account. For more information on the various hiccups that can affect your merchant account, please see our article How to Avoid Merchant Account Holds, Freezes, and Terminations.

Final Thoughts

If you’ve read this far, you’re probably thinking that merchant accounts and credit card processing are pretty complicated. You’re right! There’s a lot to know, and unfortunately, there’s also a lot of misinformation out there. The credit card processing industry has a lousy reputation for misleading sales practices, high costs, hidden charges, and long-term contracts that are very difficult to get out of. The main reason that PSPs like Square (see our review) have become so popular is that they offer a simpler, more transparent alternative to traditional merchant account providers, both in terms of costs and contract requirements.

For many businesses, however, Square can actually be more expensive than signing up for a traditional merchant account, even when factoring in the various account fees and the cost of buying processing equipment. While we heartily recommend Square for very small businesses and startups, realize that if your business grows large enough, you’ll eventually want to switch to a full-service merchant account. You’ll enjoy lower costs, improved account stability and (hopefully) better customer support. PayPal is also a great choice for eCommerce businesses that are just starting out. Again, if your business grows large enough, a full-service merchant account with a fully-featured payment gateway will be a better choice.

Note that this article only provides a relatively brief overview of the significant factors that affect credit card processing for small businesses. For more information, please take a look at the other articles we’ve linked to above for a deeper dive into subjects you aren’t already familiar with. For an overview of several highly recommended providers, please see our article The 5 Best Small Business Credit Card Processing Companies. You can also compare several excellent providers side-by-side using our Merchant Account Comparison Chart.

The post How To Accept Credit Card Payments For Your Small Business appeared first on Merchant Maverick.

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Debt Service Coverage Ratio: How To Calculate And Improve Your Business’s DSCR

Debt Service Coverage Ratio (DSCR)

Applying for small business loans can be stressful. But it wouldn’t be so bad if you knew exactly what lenders are looking for, right? One of the biggest factors in lending decisions is your debt service coverage ratio (DSCR).

But what is the DSCR and how can you figure out what yours is?

In this post, we’ll cover everything you need to know about the debt service coverage ratio. We’ll teach you what a DSCR is, how to calculate your debt service coverage ratio, what a good DSCR looks like, how to increase your debt service coverage ratio, and more.

What Is The Debt Service Coverage Ratio?

The debt service coverage ratio (DSCR) measures the relationship between your business’s income and its debt. Your business’s DSCR is calculated by dividing your net operating income by your current year’s debt obligations.

The debt service coverage ratio is used by lenders to determine if your business generates enough income to afford a business loan. Lenders also use this number to determine how risky your business is and how likely you are to successfully make your monthly payments for the length of the loan.

Why Is The Debt Service Coverage Ratio Important?

The debt service coverage ratio is important for two reasons:

  1. It shows how healthy your business’s cash flow is.
  2. It plays a factor in how likely your business is to qualify for a loan.

The debt service coverage ratio is a good way to monitor your business’s health and financial success. By calculating your DSCR before you start applying for loans, you can know whether or not your business can actually afford to make payments on a loan.

A high DSCR indicates that your business generates enough income to manage payments on a new loan and still make a profit. A low DSCR indicates that you may have trouble making payments on a loan, or may even have a negative cash flow. If this is the case, you may need to increase your DSCR before taking on more debt.

In this way, knowing your DSCR can help you analyze your business’s current financial state and help you make an informed business decision before applying for a loan.

For lenders, the debt service coverage ratio is important as well. Your DSCR is one of the main indicators lenders look at when evaluating your loan application.

Lenders use the DSCR to see how likely you are to make your monthly loan payments. They also look at how much of an income cushion you have to cover any fluctuations in cash flow while still keeping up with payments. This ratio can also help lenders determine the borrowing amount they can offer you.

Here are some of the benefits of a high DSCR ratio:

  • More likely to qualify for a loan
  • More likely to receive an offer with better terms
  • Increases your chances of lower interest rates and a higher borrowing amount
  • Indicates your business can manage debt while still bringing in income
  • Shows your business has a positive cash flow

Unlike your debt-to-income (DTI) ratio, which is healthiest when it is low, the higher your debt service coverage ratio, the better. It is not uncommon for lenders to ask for your debt service coverage ratio from previous years or for up to three years of projected debt service coverage ratios.

How To Calculate Your Debt Service Coverage Ratio

The debt service coverage ratio differs from the debt-to-income ratio in another significant way — lenders don’t all agree on how the DSCR should be calculated.

Different lenders have different ways of calculating your debt service coverage ratio. Some lump the business owner’s personal income in with the business’s income; others don’t. We’ll teach you the most common way to calculate DSCR, but be sure to check with your potential lender for the most accurate DSCR calculation.

Most often, the debt service coverage ratio is calculated by dividing your business’s net operating income by your current year’s debt obligations:

Net Operating Income / Current Year’s Debt Obligations = Debt Service Coverage Ratio

But what is net operating income and how do you determine your current year’s total debt?

Net Operating Income

Your net operating income is your total revenue or income generated from selling products or services, minus your operating expenses. According to the Houston Chronicle:

Operating expenses are those directly related to acquiring and selling your products and services. Such expenses might include costs to make or buy inventory, wages, utilities, rent, supplies and advertising. Operating expenses exclude interest payments to creditors, income taxes and losses from activities outside your main business.

Net operating income is also sometimes referred to as a business’s EBIT (earnings before interest and taxes). To calculate your net operating income, use accounting reports to find your annual income and average operating expenses.

Note: Some lenders calculate your debt service coverage using your EBITDA (earnings before interest, taxes, depreciation, and amortization) instead of your EBIT.

Current Year’s Debt Obligations 

Your current year’s debt obligations refer to the total amount of debt payments you must repay in the upcoming year.

This includes all of your loan payments, interest payments, loan fees, business credit card payments, and any business lease payments. Tally up your monthly charges and multiply them by 12 to get your total year’s debt.

Examples

Now that you know how to figure your net operating income and total debt, let’s do an example using the DSCR formula from earlier:

Net Operating Income / Current Year’s Debt Obligations = Debt Service Coverage Ratio

Let’s say you’re calculating your debt service coverage ratio to see if you can take on a new small business loan to expand your business.

Say your business earns $65,000 in revenue annually but pays $15,000 in operating expenses. That leaves you with a net operating income of $50,000.

Now, let’s say each month you spend $2,000 on your mortgage, $400 on a previous loan, and $100 on your business credit card. That means you pay $2,500/mo on debt. Since the DSCR calculation requires the current year’s debt, we need to multiply our monthly debt by 12. That gives us a total of $30,000 in debt obligations for the year. Now, let’s plug these numbers in.

50,000 / 30,000 = Debt Service Coverage Ratio

50,000 / 30,000 = 1.666667

When you divide 50,000 by 30,000 you get 1.666667. Round this number to the nearest hundredth to get a current debt service coverage ratio of 1.67.

Now you’ve successfully calculated a debt service coverage ratio! Try plugging your own business’s numbers into the formula. And be sure to remember that this is only one way of calculating your DSCR. While this way is fairly common, be sure to ask your lender how they calculate DSCR for the most accurate ratio.

What Is A Good Debt Service Coverage Ratio?

So now you know how to calculate your DSCR, but you may not know what makes a DSCR good or bad. How can you tell whether your debt service coverage ratio will qualify you to take out a new loan or if it means you’re in trouble?

When it comes to DSCR, the higher the ratio the better. Let’s say your DSCR is 1.67, like in our earlier example; that means you have 67% more income than you need to cover your current debts. If you have a DSCR ratio of 1, that means you have exactly enough income to pay your debts but aren’t making any extra profit. If your DSCR is below one, then you have a negative cash flow and can only partially cover your debts.

Obviously, you don’t want a negative cash flow, and breaking even doesn’t quite cut the mustard if you want to take out a loan. So what’s the ideal debt service coverage ratio that lenders look for?

In general, a good debt service coverage ratio is 1.25. Anything higher is an optimal DSCR. Lenders want to see that you can easily pay your debts while still generating enough income to cover any cash flow fluctuations. However, each lender has their own required debt service coverage ratio. Additionally, accepted debt service coverage ratios can vary depending on the economy. According to Fundera contributor, Rieva Lesonsky:

In general, lenders are looking for debt-service coverage ratios of 1.25 or more. In some cases — when the economy is doing great — they might accept a ratio as low as 1.15, but in others — when the economy is tight — they may require a ratio of 1.35 or even 1.5.

FitSmallBusiness writer, Priyanka Prakash, notes that multiple aspects of your loan application can affect whether you are approved as well, not just your DSCR. Prakash says:

Your lender may be willing to overlook a slightly lower DSCR if other aspects of your application, such as business revenue and credit score, are very strong.

Be sure to carefully research each lender’s application process and qualification requirements before applying for a loan. Again, make sure you know how that specific lender calculates DSCR. This is important both for before you apply and after you are accepted as many lenders require you to maintain a certain DSCR throughout the length of your loan.

Most lenders will reevaluate your DSCR each year, but you may want to check your debt service coverage ratio even more often to make sure you’re on track to meet your lender’s requirements. If you don’t meet their DSCR requirements, they may say you’re in violation of your loan agreement and expect you to pay the loan in full within a short time period.

To be safe, it’s always best to know exactly what your lender’s policies are and try to keep your DSCR as high as possible.

Using DSCR To Determine Whether You Can Afford A Loan

Not only can you use your DSCR to check your business’s financial health and ability to pay its debt, you can also use it to determine if you can afford a loan and how big of a loan you should take out.

Let’s return to our example from earlier. Your business is trying to decide if it can afford to take out a business expansion loan. We calculated your current DSCR at 1.67, which means you have an extra 67% of income after you’ve paid your debts. This is well above the 1.25 DSCR mark, but it doesn’t necessarily indicate the size of the loan you can reasonably afford to borrow.

Take your annual income and divide it by 1.25 to figure out how much you can afford to pay back each year:

Net Operating Income / 1.25 = Borrowing Amount

50,000 / 1.25 = 40,000

In our example, your current year’s debt obligations were $30,000/year. From the calculation above, we can see that you can afford to pay up to $40,000 a year on your debt obligations. So, you can take on an extra $10,000/year in debt (because $40,000 – $30,000 = $10,000). That amounts to roughly $830/mo.

If you approach a potential lender knowing exactly how much you can afford to pay each month, you can avoid being pressured into borrowing more than you can afford.

If you aren’t comfortable with a 1.25 DSCR and would rather have a little more wiggle room, that’s totally fine. Don’t ever borrow more than you are comfortable with. The good thing is, you can use the debt service coverage ratio to see exactly how much you can safely borrow while maintaining your desired DSCR. Simply replace “1.25” in the formula above with your desired ratio to figure the payments you can afford.

How To Improve Your Debt Service Coverage Ratio

To increase your chances of getting a loan — or to maintain payments on your existing loan — you may need to improve your DSCR. Here are a few ways to increase your debt service coverage ratio:

  • Increase your net operating income
  • Decrease your operating expenses
  • Pay off some of your existing debt
  • Decrease your borrowing amount

To increase your net operating income, consider various ways to increase your revenue. Maybe offer additional services or goods or raise your prices. Try a new marketing strategy that brings in additional buyers or offer an extra incentive to existing buyers to make them purchase more goods.

Increasing sales isn’t the only way to increase your net operating income. A huge portion of your net operating income comes down to operating expenses. Cut back unnecessary expenses. Find ways to streamline your work processes and make employees more productive during work hours. Ask your existing vendors about discounts for buying in bulk. Maybe even consider eliminating products that don’t sell well or are too time-consuming and expensive to make.

Besides increasing your net operating income, a good way to lower your debt service coverage ratio is to lower your existing debt. Carefully evaluate your budget. Cut unnecessary expenses and allocate that money to paying down your debt instead. You can pay off your debt quickly using various methods like the debt snowball method or the debt avalanche method. Depending on your financial situation, consolidating your business debt might also be a good option.

Final Thoughts

For small business searching for funding, the debt service coverage ratio plays a huge factor in lending decisions. Lenders use your DSCR to determine whether you can afford to make regular loan payments and how much you can borrow.

But more than that, your debt service ratio is also a great tool for understanding your business’s financial health and cash flow. Your DSCR can show you both how much income your company has after debt payments and whether it’s financially wise to take out a loan. The higher your DSCR, the better.

As always, we recommend carefully evaluating your financial situation before seeking a loan. Calculate your DSCR, see if you can afford to take on a loan, and know exactly how you are going to use that loan before you borrow. With debt service coverage ratios, it’s more important than ever to carefully research your lender’s requirements as each has their own way of calculating the DSCR. And don’t forget to confirm whether your lender requires you to maintain a specific DSCR for the length of the loan.

Looking for good lending options? Our small business loan reviews cover both online lenders and major banks. To evaluate multiple low-interest lenders at once, it’s a good idea to use a free loan matchmaking service, often called a “loan aggregator.”

Merchant Maverick has partnered with Mirador Finance, a financial technology company, to bring you the Merchant Maverick Community of Lenders. By filling out one application, you can be matched to multiple potential lenders. Check your eligibility below.

Borrower requirements:
• Free loan aggregation service; requirements vary by area and lender.
Check your eligibility
Learn more about the Community of Lenders

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The Best Credit Card Reader For Your Small Business

So you want to use your cell phone or tablet to start accepting payments for your business. Whether this is your first time around or you’re just wondering if it’s time to update that old credit card reader you’ve had for four years, there’s certainly a lot to consider. What kind of technology is out there? How much does a cell phone credit card reader cost? Should I get a credit card machine and POS instead? Which are the best credit card readers?

I’ve seen a lot of mobile card readers in my time. And the first thing to understand is that the card reader is tied to the mobile processing app (mobile point of sale, or mPOS for short). Sadly, we can’t just mix and match one card reader with another app. So before anything, you need to look at the software and make sure it’s a good fit for your needs. You should also check the processing rates and the cost of the hardware.

Apart from aesthetics, the reality is there aren’t a lot of differences between one card reader and the next. They all have the same core features, and they all use the same sort of security. Reliability is as much a product of the app design as it is the hardware design, sometimes moreso. So while you do want a good, affordably priced credit card reader, you should first narrow down the list of potentials using the software as your main criteria. Once that’s done, you can take a closer look at all the hardware.

If you are curious about what your hardware options are, read on! I’ve compiled a list of the most popular credit card readers and their specs. Make sure you read our reviews for each mobile app so that you understand the drawbacks and shortcomings of each as well as all the advantages.

But first, let’s set the record straight.

Credit Card Reader vs. Credit Card Machine: Know Your Terms

So what’s the difference between a credit card reader and a credit card machine? While it’s certainly possible that you might encounter some people who use the terms interchangeably, “credit card reader” is generally the term for small mobile devices that connect to smartphones and tablets and process transactions through a mobile app. This connection can be physical or wireless. However, the smartphone or tablet typically has to also have either cellular signal or a Wi-Fi connection.

A credit card machine (also called a credit card terminal) is larger, not mobile, and generally connects to a full-fledged POS. They may or may not have an integrated receipt printer or a PIN pad device for customers. Credit card machines require a connection to either a phone line or the Internet to function. Some machines are capable of wireless Internet connections, but they do add to the cost.

The biggest difference between a credit card reader and a credit card machine is price, though. A mobile card reader can cost anything from $10 to about $80, whereas the typical entry-level price for a machine is about $120. However, depending on what features are included, a credit card terminal can cost $600 or more.

Types of Credit Card Readers for Phone & Tablet

When categorizing credit card readers, you need to consider two criteria: how the device connects to your phone or tablet, and which payment methods the device accepts (we’re not talking about manual entry options just yet).

Phone Connection Options:

  • 3.5mm/Headphone Jack: Most of your entry-level credit card readers will connect to a phone or tablet via the 3.5mm headphone jack. However, it’s worth noting that this design is slowly fading out. Part of the driving force is Apple’s removal of the headphone jack from its iPhones, but I think it’s also a result of our overall shift toward wireless. It’s worth pointing out that both Square and PayPal have Lighting to 3.5mm headphone jack adapters that will allow you to continue to use their magstripe readers.
  • Bluetooth: Bluetooth readers are becoming increasingly common. They’re compatible with both iOS systems, they’re secure, and they allow for some sophisticated card reader designs. The one downside to Bluetooth readers is that they can run low on power quickly if they’re always connected without a “sleep” mode.

Generally speaking, credit card readers for smartphones and tablets support one of these connection methods, but not both. There’s always an exception to the rule, however. With Apple moving toward Lightning ports for everything, it’s worth getting a Bluetooth device, which will ensure that no matter what smartphone or tablet you get in the future, the card reader will be able to connect.

Supported Payment Methods

  • Magstripe: Until 2015, magstripe transactions were the only form of credit card payment commonly accepted in the US. Magstripe transactions (also referred to as swipe transactions because they are made by swiping the card through a terminal or card reader) are still supported, but becoming superfluous as other, more secure payment methods become available.
  • EMV: In October 2015, a major liability shift occurred, shifting responsibility for fraudulent swipe transactions onto merchants, if that card had an EMV chip and the merchant did not have an EMV-enabled credit card reader. As a result, you probably saw a surge of chip cards appear, and payment processors rushed to introduced new hardware capable of processing chip card transactions. Chip cards are more secure and can help reduce in-person fraudulent transactions.
  • NFC/Contactless: Apple Pay, Android Pay, Samsung Pay, and all of the other “Pay” apps you’ve seen rely on NFC (near-field communication) technology. Transactions are often called contactless or “tap” transactions.

All mobile card readers on the market accept some combination of these three payment methods. As a merchant, it’s important that you are able to process EMV transactions to protect yourself against liability for fraudulent transactions.

Card Readers for iOS vs. Card Readers for Android: Is There a Difference?

Generally speaking, mPOS apps tend to offer more features to tablet users, especially iPads. But apart from enhanced features for tablets, there usually isn’t much difference between apps for iOS vs. apps for Android.

The same goes for mobile card readers. Unless the app itself is built to function only on one operating system, a card reader for iPhone or iPad works with an Android phone or tablet. So if your business has a mix of Android and iOS devices, you can use your hardware on both. You’ll just have to worry about pairing and re-pairing any Bluetooth devices as needed.

Now that we’ve identified the defining traits of credit card readers, let’s look at the mobile card readers from the most popular mPOS systems: Square and PayPal.

Square Credit Card Readers

Square (read our review) is definitely a leader in the mPOS industry, both for its software and hardware. It was one of the first mobile systems to embrace chip cards and it seems to put a high priority on keeping its hardware affordable.

The one piece of Square hardware that we haven’t included here is the Square Register, which is more of a full-fledged POS than a mobile system. Check out our full review of Square Register for a closer look at the system.

Square Magstripe Reader

If I wanted to be extremely hyperbolic, I would say that Square’s magstripe reader is synonymous with mobile processing. Instead, I’ll just say that the white and boxy device certainly is iconic. The overall design hasn’t changed in years. Available for free if you order directly from Square or $9.99 at retail stores such as Staples (Square will reimburse you later), this entry-level device connects via the headphone jack, and as the name says, handles magstripe transactions only.

  • Cost: Free ($9.99 reimbursed if bought at a retail location)
  • Connection: 3.5mm
  • Payment Types Supported: Magstripe

Square Chip Card Reader

If you just glance at the Square Chip Card Reader (read our unboxing review), you might not notice any immediate differences between the magstripe reader and the chip card reader. That’s because Square didn’t exactly reinvent the wheel. The Chip Card Reader is slightly thicker than the original, with an extra slot for inserting the chip end of a credit or debit card. Unlike the magstripe reader, you need to periodically charge this model. Square sells the Chip Card reader for $29, which is, all considered, a pretty good price for a device that can handle magstripe and EMV transactions.

  • Cost: $29
  • Connection: 3.5mm
  • Payment Types Supported: Magstripe, EMV

Square Contactless & Chip Card Reader

The Contactless and Chip Card Reader from Square doesn’t exactly break the mold as far as design: White, boxy, with Square’s logo set into it. What’s that expression? If it isn’t broke, don’t fix it?

Unlike the previous two card readers, the contactless and chip card reader relies on a Bluetooth connection to process transactions. And it doesn’t support magstripe cards at all. To get around this, Square includes a magstripe reader in the package as well.

The contactless and chip reader sells for a very reasonable $49, but if the upfront investment makes you cringe a bit, Square also offers an installment plan that will allow you to pay off a portion of the cost each week. Expect to pay a little bit more in the long term as a trade-off for the convenience of the installment plan, but it’s nowhere near as bad a hardware lease program from a traditional merchant account.

The contactless and chip reader is a slim, slick little device and you can certainly use it in a handheld mobile situation. But Square also sells a clever little dock to charge the device and still allow you to use it. The dock goes for $29 on its own, but it is optional.

  • Cost: $49 (dock available for additional $29)
  • Connection: Bluetooth
  • Payment Types Supported: EMV, NFC/Contactless (separate magstripe reader included)

Square Stand

The Square Stand isn’t really a card reader — it’s an iPad stand with an integrated magstripe reader. But it was one of the devices that helped make Square so popular with merchants. These days Square sells the stand with a contactless and chip card reader plus the dock. But it merits a mention here because it shows that mobile card readers can also be used in countertop/retail setups. Square even sells bundles and kits with everything you need to get set up.

The Square Stand plus the card readers will run you $169, which is less than you’d pay for all the individual components — the stand ($99 originally). The contactless and chip card reader ($49), and the dock ($29). Bundles that include a cash drawer and receipt printer start upwards of $500, not including the iPad.

  • Cost: $169
  • Connection: Bluetooth
  • Payment Types Supported: EMV, NFC, Magstripe (integrated into tablet stand)

PayPal Credit Card Readers

The other major name in the mPOS space (and commerce in general) is PayPal. The company’s mobile processing app, PayPal Here (read our review), isn’t quite as full-featured as Square, but you’ll find a lot of similarities between the two, especially as far as business model.

PayPal Mobile Card Reader

PayPal’s mobile card reader is a standard magstripe reader with a headphone jack connector. While the color has changed from PayPal blues to black, the overall shape hasn’t: it’s still a simple and quite stable triangle that connects via a headphone jack. There’s no frills or fuss here.

PayPal used to offer the mobile card reader for free through its website, but that’s no longer the case. It’ll cost you $14.99 to get started, though it’s worth the extra money to upgrade to at least an EMV reader.

  • Cost: $14.99
  • Connection: 3.5mm
  • Payment Types Supported: Magstripe

PayPal Chip & Swipe Reader

PayPal’s Chip and Swipe reader is a step up from its Mobile Card Reader, with a sleek rectangular design. It’s about the size of a credit card and slim at just half an inch thick. Plus, $24.99 for a Bluetooth device that accepts both EMV and magstripe, makes it one of the more affordable options for card readers, especially if all you need is mobile support.

  • Cost: $24.99
  • Connection: Bluetooth
  • Payment Types Supported: Magstripe, EMV

PayPal Chip & Tap Reader

If you want more than just magstripe and EMV support, PayPal also sells a Chip and Tap reader that allows you to accept Apple Pay, Android Pay, and other contactless methods. The Chip and Tap reader looks quite a bit different from the Chip and Swipe reader. Though it’s still black, it’s boxy and measures 0.75 inches in depth.

I actually hate to say this, but the PayPal reader reminds me a bit of Clover Go’s all-in-one reader, just more refined. And unlike the Chip and Swipe reader, this design is meant for both mobile and countertop use — and PayPal offers a charging dock for those who are interested in a countertop setup.

Alone, the reader sells for $59.99, but a bundled kit with the reader and dock sells for $80 (PayPal indicates that’s a markdown from $89.99 on its website). I don’t see the dock listed for sale separately, but I would assume it would sell for $30 on its own.

  • Cost: $59.99 (bundle available for $79.99)
  • Connection: Bluetooth
  • Payment Types Supported: Magstripe, EMV, NFC/Contactless

PayPal Chip Card Reader

PayPal’s Chip Card Reader was actually the first EMV-enabled reader the company offered, and it wasn’t PayPal’s own design. The reader is actually a branded Miura M010, which has also previously been offered by Square, and is still available from Shopify as well.

The Chip Card Reader is a handy little mobile reader, but you can get a dock for it and mount it in a countertop setup (at least, until PayPal possibly phases this device out of its lineup). Despite its rather bland name, this reader accepts magstripe, EMV, and NFC/contactless payments. However, it comes at a steep price $79, which is still less than the original $150 it sold for. It’s worth noting that despite the PIN pad, it doesn’t support PIN entry because PayPal Here doesn’t support debit transactions.

  • Cost: $79
  • Connection: Bluetooth
  • Payment Types Supported: Magstripe, EMV, NFC/Contactless

Alternatives to Square & PayPal Readers

While Square and PayPal are certainly two of the biggest names, they’re not the only options if you need a mobile credit card reader. Let’s take a look at some of the other processors and what hardware they offer.

Shopify

Shopify is mostly associated with eCommerce, but it’s moved toward an all-in-one approach that includes a POS (read our review). The full-fledged POS package is designed for a countertop setup and syncs with your Shopify store. However, for a very reasonable $9/month, you can get the Shopify Lite plan, which supports sales through social media and a buy button on your own website, as well as access to the mobile POS. Keep in mind that this is designed almost exclusively for retail environments. For mobile users, though, Shopify offers two readers.

Shopify Tap, Chip & Swipe Reader 

I mentioned before that PayPal’s Chip Card Reader is actually made by another company and is called the Miura M010. Shopify licenses the same device and calls it the Tap, Chip and Swipe reader.

Again, you have a Bluetooth connection with support for magstripe, EMV, and contactless transactions. Shopify sells the reader for $89, which is on the higher end of things. The dock sells for $39. However, the reader is well designed and very functional, and if you want to accept Apple Pay and other “Pay” apps with Shopify, it’s the only option.

  • Cost: $89 (dock available for $39)
  • Connection: Bluetooth
  • Payment Types Supported: Magstripe, EMV, NFC/Contactless

Shopify Chip and Swipe Reader 

Shopify’s Chip and Swipe Reader is a sleek white device. As the name implies, the reader can handle both magstripe and EMV transactions, but not contactless/NFC. I like that it comes with a dock charging dock by default, instead of as a pricey add-on.

The retail price for the reader is listed as $29, but as I am writing this, Shopify is offering it for free. The Chip and Swipe Reader is easily one of the more beautiful card readers I’ve seen, as well as innovative and well priced.

  • Cost: $29
  • Connection: Bluetooth
  • Payment Types Supported: Magstripe, EMV

Payline Mobile

Payline Data is a traditional merchant account processor, but its Payline Mobile app (read our review) is actually a viable standalone processing option even for low-volume and seasonal merchants. The company offers a standard magstripe reader (the Ingenico G5X) that isn’t particularly interesting. Its other mobile reader, though, is the Ingenico RP457c, and it is definitely one of the more innovative card reader designs I’ve ever seen.

For starters, the RP457c can connect to cell phones and tablets through the headphone jack or Bluetooth, which is very uncommon. It also supports magstripe, EMV, and NFC transactions all in one. The device is designed to clamp onto phones or rest in a dock for use as a wireless reader.

Payline doesn’t disclose its current pricing for the RP457c, in part because some merchants may be eligible for a free device. However, I was able to confirm that the reader retails for $150, which is quite expensive.

  • Cost: $150
  • Connection: 3.5mm, Bluetooth
  • Payment Types Supported: Magstripe, EMV, NFC/Contactless

SumUp

SumUp (read our review) is a European company that opened up processing for US merchants in 2017. While it’s not as comprehensive as other mPOS options, it does everything most merchants will need to do. It’s also worth pointing out that the SumUp mobile card reader, called the SumUp Air, actually won an award for its innovative design.

The SumUp Air shows its European sophistication with its sleek white minimalist design. It relies on a Bluetooth connection to process magstripe, EMV, and contactless transactions. If you want more information, check out our unboxing review of the SumUp card reader.

  • Cost: $69
  • Connection: Bluetooth
  • Payment Types Supported: Magstripe, EMV, NFC/Contactless

Clover Go

Clover Go (read our review) is the mobile extension to the Clover family of POS products developed by First Data. It functions best as an extension of Clover, but it can be a standalone POS option. However, pricing for the hardware as well as payment processing can vary significantly depending on which reseller you go through, and you should be wary of sales gimmicks and possible contracts with early termination fees.  However, don’t forget that anyone selling Clover products is just reselling First Data’s processing services.

Clover Go Reader 

Clover’s basic “entry level” reader is a headphone jack reader that supports magstripe and EMV transactions. The design is overall larger than most comparable devices, but Clover does include a clamp to help stabilize the card reader while attached to a phone or tablet.

Pricing for the Clover Go reader will depend on resellers. Some may even offer it for free. Unlike its all-in-one sibling, you can’t get this reader through the Apple Store and if you sign up with First Data directly you’ll probably be offered the All-In-One Reader first and foremost.

  • Cost: Varies according to reseller
  • Connection: 3.5mm
  • Payment Types Supported: Magstripe, EMV

Clover All-In-One Reader

I said earlier that the PayPal Chip and Tap Reader reminded me of Clover Go. That’s because Clover Go is also a square, boxy device with very similar dimensions. However, whereas PayPal’s is black, Clover Go’s is white.

You’ll also find the All-In-One Reader comes with a dock. It’s not the most elegant design, but it will allow you to charge the device or keep it on a countertop while still processing card transactions.

Unfortunately, pricing for this card reader varies depending on which company a merchant chooses to sign up with. You can get it direct from First Data (or the Apple Store) for $39.95, not counting the dock, which sells for $34.  

  • Cost: $39.95 (through First Data or Apple Store; other prices vary according to reseller)
  • Connection: Bluetooth
  • Payment Types Supported: Magstripe, EMV, NFC/Contactless

Intuit/QuickBooks GoPayment

Intuit’s mobile payment solution, QuickBooks GoPayment (read our review) appeals mostly to a small but viable niche — QuickBooks Online customers who need an easy way to take payments in person. While the app isn’t loaded with advanced features, it will work pretty well for merchants with simple needs. Intuit offers two readers to address merchant needs.

Chip and Magstripe Reader

Intuit’s Chip and Magstripe reader is a small, gray, unassuming device. It doesn’t have quite the sophistication of some other readers (I might even call it bland), but the design is overall good. The curves have a sort of friendliness about them rather and prevent it from looking boxy like other devices. As the name implies, this card reader supports magstripe and EMV transactions. It connects to a phone or tablet via Bluetooth.

The Chip and Magstripe Reader goes for $19 normally, but Intuit is offering the reader free for new merchants. That puts it at the lower price end, especially for a Bluetooth enabled device with EMV. You can also connect the device to computers running QuickBooks Desktop Pro 2018 and future versions of the software.

  • Cost: $19 (free with signup for new merchants)
  • Connection: Bluetooth
  • Payment Types Supported: Magstripe, EMV

All-In-One Card Reader

Intuit’s newer card reader is an all-in-one device that connects via Bluetooth. But unlike its sibling, this device supports magstripe, chip card, and contactless transactions. By default, it’s meant to nest in a charging dock.

Intuit sells the all-in-one reader for $49, which is not a bad price at all considering that the dock/cradle is included at no extra charge. It has the same sort of nondescript gray finish, but Intuit has embraced a curvy aesthetic that is easy on the eyes.

  • Cost: $49 (including dock)
  • Connection: Bluetooth
  • Payment Types Supported: Magstripe, EMV, NFC/Contactless

PayAnywhere

Last on the list is PayAnywhere (read our review). While the name isn’t as recognizable as some of the alternatives, PayAnywhere’s mPOS does have some good features and interesting hardware. Its biggest shortcoming is simply the quality of customer service and some practices involving its Storefront plan.

PayAnywhere offers merchants a choice of two readers for merchants, though they still leave me a bit perplexed in terms of design.

PayAnywhere 2-In-1 Reader

PayAnywhere’s entry-level reader is a 2-in-1 device with magstripe and EMV support and Bluetooth connectivity. It looks pretty simple, and it actually reminds me of PayPal’s Chip and Tap reader with its shape and coloring.

There’s not much more to say about this little device except that PayAnywhere offers it free for new merchants. Additional 2-in-1 readers run for $30.

  • Cost: $29.95 (free for new merchants)
  • Connection: Bluetooth
  • Payment Types Supported: Magstripe, EMV

PayAnywhere 3-In-1 Reader

I think the most interesting thing about PayAnywhere’s 3-In-1 Reader is that it’s the only mobile card reader I’ve seen that supports NFC and connects via a headphone jack. (The Ingenico RP457c can connect via headphone jack OR Bluetooth, so I don’t count it in the same category.) It looks shiny and futuristic with its black finish and lights, which is ironic for a device that uses a dying connection method.

PayAnywhere offers its 3-in-1 device for $40, but on the website you’ll also see an offer for free processing on your first $5,000 in Apple Pay transactions (valued at $135). However, an offer like that should not be the deciding factor in choosing a processor.

  • Cost: $39.95
  • Connection: 3.5mm
  • Payment Types Supported: Magstripe, EMV, NFC/Contactless

Is a Mobile Credit Card Reader Absolutely Necessary?

You don’t actually have to have a mobile credit card reader to process payments with a mobile POS system.

Flint Mobile, a mobile processor that works through Stripe, has no credit card readers at all. Instead, the app relies on a device’s camera to scan cards. The camera doesn’t actually snap a photo of the card, which would be a huge security issue. But the app is able to open the camera and scan a card the same way QR code readers are able to access the camera to open QR code links. Flint has a couple of filters it applies to the camera for added security.

That said, Flint isn’t the only mobile option with this ability. PayPal Here and Intuit GoPayment also include the camera scanning feature.

Not only that, but most mPOS apps also include a feature that allows you to manually key in transactions. These process at a higher rate that swiped/dipped/tapped transactions because they’re processed as card-not-present, like ecommerce transactions. But it’s a useful alternative when the card reader is being glitchy or the card is very worn. The notable exception to all this is SumUp, a company that started in Europe and doesn’t support manual entry for cards except through its virtual terminal.

Of course, if you don’t want to pay extra for manually entering transactions, it might be best to spend a little extra money and buy a backup card reader or two in case one starts to misbehave.

Are Free Credit Card Readers Worth It?

Several mobile POS options (including Square) provide an incentive for potential customers in the form of a free credit card reader. This can certainly make it more tempting to try out a payment processing service, but it shouldn’t be the deciding factor.

For one, free card readers tend to be pretty basic. Some have EMV support, but none of the free card readers on this list support contactless payments. Contactless support may not be mandatory for everyone, but EMV support should be a mandatory feature for every merchant. A reader with a Bluetooth connection will also ensure it’s future-proof no matter what phone or tablet you upgrade to later on.

Two, a free mobile card reader will absolutely not offset a processor’s shortcomings, such as poor customer service or missing features. It’s smarter for merchants to make a decision based on the quality of the mobile app, its features, and the processor’s customer support.

So while the ability to try some mPOS options without any upfront investment is nice, please don’t let a free credit card reader be the reason you pick one processor over another. Make sure you explore all of your options.

Don’t let a free reader be the determining factor in choosing an mPOS.

Final Thoughts

I’m not going to try and convince you that mobile credit card readers are the world’s most fascinating subject (even if I could probably talk your ear off for a couple of hours about all the different designs and features and how they embody the philosophies of the companies that sell them).

But if nothing else, you should take away a few key ideas that will prepare you to choose a mobile point of sale app and a credit card reader:

  • Software is more important than the hardware. Make sure the app has what features you need before you set your heart on a device.
  • Make sure the card reader you choose has EMV support. In 2018, there’s no reason why you shouldn’t be taking such a basic step to protect yourself and your business.
  • Prices for credit card readers range from totally free to upwards of $75. How much you want to spend is entirely up to you, but you will generally pay more for Bluetooth connectivity and for NFC support. Don’t be suckered in by the offer of a free reader, because there are lots of other criteria you should consider first.
  • You don’t technically need a mobile reader to take payments on a phone or tablet. However, you will pay more to process manually entered transactions in your mPOS app, so it’s a good idea to get one anyway.

Thanks for reading! If you’re ready to choose an mPOS app, a great place to start is our mobile processing comparison chart! Otherwise, if you have questions, feel free to leave us a comment!

The post The Best Credit Card Reader For Your Small Business appeared first on Merchant Maverick.

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What Is A Merchant Services Provider?

What is a merchant services provider?

If you’ve just started your own business or you’re looking to add credit and debit cards as payment methods, you’re going to be bombarded by a bewildering variety of new terms and concepts that you’ve never encountered before. One very basic term you’ll want to familiarize yourself with is the type of business entity known as a merchant services provider.

To understand what a merchant services provider is and what it can do for your business, you’ll first need to understand the concept of merchant services. This term describes the range of services and hardware and software products that allow merchants to accept and process credit or debit card transactions. Before the internet came along, things were pretty simple. Merchant services consisted of countertop terminals to input card payments, processing services to approve the transaction, and merchant accounts to deposit the money in after the sale. Today, it’s a much more complicated landscape, with eCommerce opening up far more opportunities for selling products remotely than just mail and telephone ordering. Software products such as payment gateways allow customers to pay for purchases directly over the internet, while inventory management and online reporting services give you the power to track virtually every aspect of your business on your computer.

Merchant services providers are sometimes also referred to as acquirers, processors, or merchant account providers. Here at Merchant Maverick, we use the term merchant services providers as a catch-all to cover entities such as merchant account providers, payment services providers (PSPs), payment gateway providers, and any other type of business that allows you to accept payment methods other than cash or paper checks.

Types of Merchant Services Providers

Not all merchant services providers offer the same features, but most fall into one of several categories that help to differentiate them a little from their competitors. The most common types of merchant services providers include the following:

Merchant Account Providers

These entities are the most commonly encountered merchant services providers. A merchant account provider can, at a minimum, provide you with a merchant account and processing services to ensure that you receive your money when a customer pays by credit or debit card. While all merchant account providers can set you up with a merchant account, only a few of the largest companies can also offer processing services to process your transactions. These companies are called direct processors, and include industry leaders such as First Data (see our review), Elavon (see our review), and TSYS Merchant Solutions (see our review). Most other merchant account providers rely on one of these direct processors to process their merchants’ transactions.

Payment Services Providers (PSPs)

While having a merchant account is a good idea for all but the smallest of businesses, you don’t absolutely need one to accept credit or debit card payments. A payment services provider (PSP), such as Square (see our review) or PayPal (see our review) can give your business the ability to accept these kinds of payment methods without a dedicated merchant account. Instead, your account will be aggregated with those of other merchants, and you won’t have a unique merchant ID number. This arrangement has the advantage of virtually eliminating the account fees and lengthy contract terms that often come with a traditional merchant account. However, these accounts are more prone to being frozen or terminated without notice, and customer service options aren’t as robust as they are with a full-service merchant account. PSPs are an excellent choice for businesses that only process a few thousand dollars a month in credit/debit card transactions or only operate on a seasonal basis.

Payment Gateway Providers

With the advent of eCommerce, a new kind of provider has come on the scene: the payment gateway provider. These companies can offer you a payment gateway, which you’ll need to accept online payments. However, they may or may not also offer you a merchant account to go with it. Authorize.Net (see our review), one of the largest and oldest gateway providers, gives you a choice between one of their merchant accounts or using their gateway with your existing merchant account. Other providers, such as PayTrace (see our review), offer a gateway-only service. You’ll have to get your own merchant account from a third-party provider.

Types of Merchant Services

Most merchant services providers offer a wide variety of products and services to allow merchants to accept credit and debit card payments, as well as manage their inventory and track other aspects of their business. Your needs as a merchant will depend on the nature and type of your business. While all businesses will need either a merchant account or a payment service account (if you’re signed up with a PSP), other features will only be useful for certain types of businesses. For example, if your business doesn’t sell anything online, you won’t need a payment gateway. Here’s a brief overview of the most common types of merchant services:

Merchant Accounts

Every business that wants to accept credit or debit cards as a form of payment will need a merchant account. While most merchant account providers offer full-service merchant accounts, those from PSPs like Square (see our review) lack a unique merchant ID number. Merchant ID numbers make your business easier to properly identify to payment processing systems, giving you some protection from fraud and adding stability to your account. A merchant account is simply an account where funds from processed transactions are deposited. Those funds are then transferred by your provider into a business account that you specify, such as a business checking account.

Credit Card Terminals

Retail merchants will also need a hardware product that can read your customers’ credit and debit cards and then transmit that information to your provider’s processing network. Traditional countertop terminals such as the Verifone Vx520 can connect to processing networks via either an Ethernet connection or a landline. Wireless models are also available, but they tend to be bulkier and more expensive than wired models, and require a wireless data plan (usually around $20.00 per month) to operate.

Terminals may be purchased outright or leased from your merchant services provider. Because most providers support the same terminals, we recommend either buying your terminal directly from your provider or purchasing it from a third-party supplier. Terminals require a software load which must be installed before they can accept transactions. If you buy your terminal from a third-party source, you’ll need to have it re-programmed to install this software. We strongly discourage terminal leasing due to the noncancelable nature of the leases and the fact that you’ll pay several times more than the value of the terminal over the lifetime of the lease.

In shopping for a terminal, you should select an EMV-compliant model as a minimum. Support for NFC-based payment methods (such as Apple Pay and Google Pay) is also a good choice as these methods are becoming more popular among customers.

Point of Sale (POS) Systems

POS systems combine the functions of a credit card terminal with a large computer display, enabling you to manage inventory and monitor your sales through a single piece of equipment. These systems include fully-featured, dedicated terminals and tablet-based software options that can run on an iPad or Android tablet. Many providers offer optional accessories such as tablet mounts, cash drawers, and check scanners, allowing you to accept any form of payment through a single device.

Mobile Payment (mPOS) Systems

These systems allow you to use your smartphone or tablet as a credit card terminal. mPOS systems consist of a mobile card reader that connects to your mobile device and an app to communicate with your provider’s processing network. While Square (see our review) was the first provider to offer a simple mPOS system, most providers now offer similar products. Although they’re difficult to find and cost more than simple magstripe-only readers, we recommend selecting a card reader with EMV compatibility and a Bluetooth connection (rather than the traditional headphone jack plug) to future-proof your system.

Payment Gateway

A payment gateway is simply software that communicates between your website and your provider’s processing networks, allowing you to accept payments over the internet. Because not all merchants need a gateway, providers usually charge a monthly gateway fee (around $25.00) to access this feature. Most gateways include support for recurring billing, a customer information management database, and security features such as encryption or tokenization to protect your customers’ data.

Virtual Terminal

A virtual terminal is another software product that turns your computer into a credit card terminal. Transactions can be entered manually or swiped using an optional USB-connected card reader. Virtual terminals are most commonly used by mail order/telephone order businesses that don’t have an eCommerce website.

Online Shopping Carts

Shopping cart software is designed for eCommerce merchants who need a more specialized shopping experience or want to customize the features of their website. Shopify (see our review) is one of the most popular online shopping carts. Check compatibility with your merchant services provider before selecting an online cart.

eCheck (ACH) Processing

eCheck processing is an optional feature offered by most merchant service providers. It allows you to scan paper checks and instantly confirm that funds are available to cover the purchase. This service protects you from fraud and saves you a trip to the bank.

Merchant Cash Advances and Small Business Loans

Merchant cash advances and small business loans provide another way for your business to receive funds when you need them, and most merchant services providers offer them. Check out our Merchant’s Guide to Short-Term Loans for more information.

Final Thoughts

Which specific merchant services you need will depend on the nature of your business. Retail-only businesses won’t need a payment gateway, but they will need reliable credit card terminals. eCommerce businesses can’t function without a payment gateway, but do not require terminals. Of course, if your business operates in both the retail and eCommerce sector (which is becoming more common), you’ll need just about every service your provider has to offer.

Every merchant service provider has their own unique combination of products and services, so you’ll want to ensure that a provider offers the features that you need before you sign up. Many of these services are proprietary, meaning they’ll only work with the provider that offers them. While this helps to ensure compatibility between different products, it also means you won’t be able to take your favorite product with you if you switch providers. This is more of a factor in the eCommerce sector, where payment gateways are often proprietary products. For an overview of our highest-rated merchant services providers, check out our Merchant Account Comparison Chart.

The post What Is A Merchant Services Provider? appeared first on Merchant Maverick.

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Gym Equipment Financing: Is It Better To Rent Or Buy Fitness Equipment?

Gym Equipment Financing: Should You Rent Or Buy Fitness Equipment

Without weight machines, treadmills, exercise bikes, and barbells, your gym or fitness center is just a big, open room with a bunch of rubber mats. While there’s nothing wrong with calisthenics, you’ll probably want to lure in your fitness fanatics with some exercise equipment.

That leaves you with the question of whether to rent gym equipment, rent to own workout equipment, or buy gym equipment.

Below, we’ll look at some of the ways you can approach gym equipment financing.

Advantages Of Buying Gym Equipment

The cheapest way to own equipment — without considering external factors — is to buy it. Once you’ve purchased equipment, it’s yours for as long as you want it or as long as it lasts, whichever comes first. Ideally, pieces of equipment that you buy outright will last a long time with minimal maintenance.

Generally speaking, the less complex the item and the fewer the moving parts, the more sense it makes to buy it. For example, there’re only a few things that can go wrong with a dumbbell, and it’s unlikely to be obsolete years down the road.

Ways To Buy Equipment

If you want to completely avoid interest payments, you’ll have to buy gym equipment out of pocket. Of course, that requires that you have healthy working capital and a large amount of cash on hand.

Everyone else is looking at financing their equipment through a loan or a type of lease called an equipment finance agreement (or more broadly, a capital lease).

An equipment loan typically covers about 80% of the cost of your equipment. Like other term loans, it will accrue interest over time, so expect to pay more in aggregate the longer your loan lasts. Typically, the equipment you’re buying serves as collateral for the loan, although you may also be asked to give a personal guarantee or put up additional collateral.

If you don’t have the credit or capital to secure an equipment loan, you may want to look at an equipment finance agreement. While leases are generally thought of as a type of rental, this type of lease will transfer ownership to the lessee (you) either immediately or over the course of the lease. Most capital leases have small residuals (the remaining amount that you have to pay to formally own the item at the end of the lease), sometimes as little as $1, which means you can expect to pay the vast majority of the equipment’s cost (plus interest) over the course of the lease.

Generally speaking, loans are less costly than leases, but harder to qualify for. Leases, which can be offered by either a third party or a captive lessor, will usually cover the full cost of the item. Some lessors will even cover shipping expenses.

Advantages Of Renting Gym Equipment

It’s nice to own your equipment, but sometimes it’s not your best option.

Exercise fads come and go. The cutting-edge machines of several years ago may be obsolete hunks of metal now. Further, they may require more maintenance than they’re worth.

Do you want the option to easily return and upgrade? Would you like to be able to write your monthly payments off as operating expenses? If so, you may want to consider renting or equipment leasing.

Ways To Rent Equipment

Renting commercial gym equipment usually means getting an operating lease. Typically, this type of lease allows the lessor to retain formal ownership of the equipment while you are granted permission to use it for the life of the lease. Depending on the agreement, either you or the lessor may be responsible for upkeep and repairs.

Compared to capital leases, operating leases typically have lower monthly payments but a significantly higher residual. While you do often still have the option to buy the equipment at the end of the lease (usually for fair market value), you’ll generally return the equipment at the end of your term.

Note that not all operating leases are eligible to be written off as operating expenses. If your financial strategy depends on this, make sure to discuss the any prospective lease with your lessor and your financial advisor.

The Cost Of Financing Gym Equipment

In addition to the ticket price of your gym equipment, expect to incur some additional charges depending on the type of financing you go with.

Here are some of the more common costs to expect:

  • Interest: This is (usually) the APR of the loan or lease, although some lenders may use a flat rate instead. In either case, the longer your term length, the more money you’ll be spending on the item.
  • Origination Fee: This is a closing fee some lenders charge in addition to interest. It’s either a percentage of the amount you’re borrowing (1% – 5% is typical) or a flat fee. This fee is more common with loans than leases.
  • Administration Fee: This is a fee charged in addition to interest to maintain your account. It may be a percentage or a flat fee. It’s more common with leases than loans.
  • Downpayment: A payment you’re expected to make at the time of closing. This is either the portion of the cost that an equipment loan didn’t cover or, in the case of leases, the first (and sometimes last) month’s payment.
  • Residual: This is the amount of money you’d owe if you were to purchase the equipment at the end of the lease. In the case of capital leases, the residual may be a trivial formality ($1, for example). In the case of operating leases, it may be substantially higher, typically the fair market value of the asset.
  • Shipping: Depending on the type of financing you select, this may or may not be covered by your lease. Loans rarely account for shipping expenses.

Third Party Financers

If your equipment vendor has a captive lessor, they may offer deals especially suited to gyms. That said, don’t assume they offer you the best rates. Your local bank or credit union may offer competitive financing, especially if you have an established relationship with them — and don’t have bad credit.

You can also seek financing through online lessors. Here are some that finance gym equipment.

eLease

Types of Leases:
• $1 buyout; FMV; equipment finance agreement (EFA)
Visit the eLease website

Read our review

eLease finances gym equipment through one of three types of leases. In addition to normal interest rates, expect to pay an administrative fee, as well as your first and last month’s payment as a downpayment.

National Funding 

 

Types of Leases:
• Capital leases
Visit the National Funding website

Read our review

National Funding primarily deals in term loans and merchant cash advances, but they also offer capital leases to gyms looking to own their exercise agreement.

Final Thoughts

Whether you choose to rent or buy gym equipment for your fitness center, you’ll have numerous financing options. Remember to consider the life cycle of the pieces you’re buying (and the impact sweaty bodies pumping out reps will have on them) to decide whether it’s worth building equity in items.

Looking for more equipment financing options? Check out our equipment financing comparisons and reviews.

The post Gym Equipment Financing: Is It Better To Rent Or Buy Fitness Equipment? appeared first on Merchant Maverick.

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The 5 Best Fora Financial Alternatives For Business Funding

fora financial logo

Fora Financial (read our review) is one of the more reliable online lenders in the business. While they don’t necessarily excel in any one area, they do provide short-term loans and merchant cash advances at fairly reasonable (for the industry) rates and are willing to work with new businesses. If Fora doesn’t sound like your cup of tea, what other options are available?

Here are some business funding alternatives to Fora Financial.

Square Capital

Best for…

Square customers looking for small loans with low rates

Requirements

Time in business: N/A
Credit score: N/A
Revenue: $10K/yr

Square (read our review) isn’t primarily known for loans, but they do offer some of their point of sale hardware customers loans ranging in size from $500 to $100,000.

These loans come at lower rates (1.1 – 1.16) than you’ll probably get from Fora, and Square’s payment processing infrastructure makes it easy to set up the automated repayment process. If you’re looking for convenience and don’t mind your payment services company also being your lender, it’s a pretty good deal.

How To Apply For A Square Capital Loan

Unfortunately, the process for determining who is eligible for a Square Capital loan is a bit opaque. Rather than apply at your leisure, Square will, at their leisure, send email notifications to qualifying customers. That means that you may not qualify for funding through Square Capital when you need it.

If you do receive an offer, the process is extremely easy. You decide how much you want from the options offered, then Square will use the information they already have on file to process your application. In some cases they may ask for additional documents.

Takeaway

It’s best to consider Square Capital as a perk that comes with being a Square customer.

Credibly

 

Best for…

New businesses looking for a transparent lender

Requirements

Time in business: 6 months
Credit score: 500
Revenue: $15K/yr + avg. daily balance over $1K for expansion loans

It can be hard for new businesses to get funding right out of the gate. One of the nice things about Fora is that they’re willing to work with businesses that have been around for only three months.

Credibly (read our review) isn’t quite so lenient, but they are willing to work with businesses that have only been in business for six months. Like Fora, Credibly offers some variety in their financial products, although they’re more focused on installment loans than merchant cash advances. Expect slightly more stringent lending guidelines than you will find with Fora.

One nice aspect of Credibly is that they’re more transparent than most of their competitors, making it a little easier to know what you’re getting into. Credibly’s rates are comparable to Fora’s, falling between 1.09 and 1.36.

How To Apply For A Credibly Loan

You can begin your Credibly application online on their website. This is essentially a screening process. If you make the cut, you’ll be contacted by a representative who will prompt you to provide the following information:

  • Business lease or mortgage agreement
  • Picture ID of all owners
  • Business tax returns
  • Bank statements for the last three months
  • Basic personal information including Social Security number

Takeaway

Credibly’s easy qualifications and above-average transparency make it a decent choice for new businesses without a lot of options.

Breakout Capital

 

breakout capital

Best for…

Businesses looking for a flexible funder

Requirements

Time in business: 1 yr / NA(invoice factoring)
Credit score: 600/ NA (invoice factoring)
Revenue: $10K/month / NA (invoice factoring)

Breakout Capital (read our review) offers a number of short-term funding solutions for new businesses. In fact, flexibility is one of their biggest draws.

Breakout’s loans operate on a principle similar to a line of credit, making it easy to tap additional funding in the future without racking up punishing fees or double-dipping. While Breakout’s rates are still on the high side — as are those of most online lenders — the company takes pains not to pull too many unexpected fees or terms of service changes.

They also offer a niche form of financing that can be useful to businesses that want to borrow against their unpaid invoices. Invoice factoring allows businesses to sell unpaid invoices to a lender at a discount. Rather than owing interest, you’ll sign over your invoices to Breakout, who will then advance you a percentage of the invoice’s worth. The advantage here is that you can bypass credit checks and similar prerequisites. You just need to have invoices to sell. Note that Breakout doesn’t provide invoice factoring in-house, but rather partners with invoice factoring companies to offer the service.

How To Apply For A Breakout Capital Loan

You can fill out a truncated application at Breakout Capital’s website, or bypass that part and contact them by phone. Expect to have to provide documents that establish your identity, your business’s details, and your revenue. Breakout will then determine which of their products you qualify for.

Takeaway

Breakout is a great option for businesses that need flexible lending. Both their lines of credit and invoice factoring give you control over when and if you want to tap your credit resources. This freedom comes at a premium, however.

Street Shares

 

Best for…

Profitable businesses with decent credit, businesses looking for a line of credit

Requirements

Time in business: 1 year, some exemptions for 6 months
Credit score: 620
Revenue: $100K (for 6 month consideration)

Street Shares (read our review) may sound like an arcade game, but they’re actually among the more conservative online lenders, offering installment loans and lines of credit.

The credit requirements here are a bit higher than many of their competitors, but businesses with good credit can take advantage of Street Shares’ lower rates and weekly (rather than daily) repayment process.

Profitable companies should take special notice as Street Shares will work with companies that are less than a year old, provided they’ve earned $100,000 in revenue at the time of application.

Street Shares charges interest just like a bank loan. You’re looking at APRs between 7 – 39.99%.

How To Apply For A Street Shares Loan

Like most online lenders, Street Shares lets you begin your application on their website. There you can submit some basic information about yourself, your business, and the financial products you’re interested in.

If you’re approved, you’ll be contacted by a representative and asked to provide additional information. The documents will vary depending on the product (if you’re provided with multiple loan offers, you can decide between them).

Takeaway

Street Shares is a little harder to qualify for than some of the other options here, but their competitive rates and the flexibility of their products make them a good choice for businesses that can make the cut.

BlueVine

 

bluevine logo

Best for…

New companies needing a flexible lending plan

Requirements

Time in business: 3 – 6 months
Credit score: 530 – 600
Revenue: N/A

BlueVine (read our review) operates in a similar niche to Breakout capitals, offering both lines of credit and invoice factoring. Note above that the lower “time in business” and “credit score” requirement ranges are for invoice factoring, while the higher ones are for lines of credit. The line of credit product isn’t available to businesses based in Kentucky, Tennessee, Nevada, Vermont, New Hampshire, or either of the Dakotas.

BlueVine only assesses a fee (1.5%) on their lines of credit when you draw upon them, but you’ll want to make sure you pay them off quickly. Interest accumulates weekly at a rate of 0.3% to 1.5% (this is not an APR).

BlueVine does their invoice factoring in-house. If you choose to use this service, they’ll set up an account that will receive your invoice payments from B2B transactions. When you receive an invoice, you can then decide whether or not you want an advance on it. If you choose to, Bluevine will advance you between 85% – 90% of its value. When the invoice is paid, you’ll get a rebate on the remaining amount, minus any accumulated fees.

How To Apply For A BlueVine Loan

You can begin the application on BlueVine’s website by creating an account and answering some questions about your business. You’ll then have to provide read-only access to your bank account or three months worth of bank statements. You can create invoices in BlueVine’s interface or connect your QuickBooks, Xero, or FreshBooks account.

In addition to the usual information like income and creditworthiness, BlueVine also considers your transaction volume and advertising strategy.

Takeaway

New businesses that haven’t had much time to establish themselves, but have good fundamentals, can find a lot of flexibility with BlueVine.

Final Thoughts

Alternative lending is a highly competitive market with a huge number of options for businesses looking for non-traditional sources of funding. Finding a lender that will meet your needs at a reasonable rate can take some work, but it’s worth the effort.

Need more information? Check out our small business loan comparison.

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