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In this 5-minute read:\nWhat’s the lowest-cost option for processing credit cards\nFlate-rate processing vs. interchange plus\nSubscription flat-rate processing pros and cons\nExamples of credit card processing fees for different business models\nOne reason that many small business owners are reluctant to get set up to accept credit cards is that the fees for the service eat into their profits. Depending on your business model, your processing agreement, and the number and amount of your transactions, these fees can be significant. \nHowever, today’s customers expect every business—even super-small, local businesses and roadside carts—to accept credit cards, so not having a credit card payment option can prevent your small business from growing and staying profitable.\nLet’s go over what credit card processing really costs so you can determine a good fit for your business. \nThe “interchange plus” credit card processing pricing model is usually the lowest cost overall\nA lot of small businesses use one of the newer payments services providers or “aggregators” (like Square, Stripe, Clover, etc.) because they seem simpler and people can easily understand “flat rate” processing.\nWhat is flat-rate processing?\nIn typical flat-rate processing agreements, you pay a simple percentage for each card transaction (typically between 2.4% and 3.5% of the total purchase price) plus a fee per transaction (usually between $.10 and $.30). That’s it. This may seem like a good deal, especially when most of these payments providers will give you a simple card reader for free and get you set up to accept payments relatively quickly.\nHowever, you may get the lowest rates and pay the least overall if you opt for a traditional processor who offers competitive “interchange plus” pricing.\nWhat is interchange plus processing? \nEvery credit card network (Visa, Mastercard, American Express) charges an interchange fee that your processor pays to facilitate each transaction. Providers that use “interchange plus” pricing model charge the interchange rate plus a markup. So for interchange plus pricing, you pay the current interchange rate, plus your processor’s markup, plus a transaction fee (similar to the transaction fee added to flat-rate purchases discussed above), plus sometimes an additional monthly fee.\nThis may sound complicated, as interchange rates are subject to change so you might not always be paying the exact same fees for processing card transactions. But the fact is the interchange rate doesn’t vary much, and most businesses find that a reliable processor charging interchange plus will save them around 20% on processing costs (or more) compared to the flat-rate aggregators.\nWhat is subscription or “zero markup” flat-rate processing?\nSubscription flat-rate processing is gaining in popularity for a couple of reasons: it’s simple to understand, and it sounds like it would be cheaper than either the interchange plus model or the typical flat rate model. Some providers pump up the “zero markup” angle to imply that you will be paying less per transaction than with other pricing models.\nIn a subscription flat-rate processing agreement, you pay a fixed monthly cost to maintain your processing capability, plus a set fee per transaction. Since the monthly costs and transaction fees for various providers vary widely, it’s not practical to estimate what you might expect to pay for this type of processing from an average provider. Depending on how large your transactions are and how often you transact, a subscription flat-rate processor might be competitively priced with a traditional interchange plus processor, or it might be quite a bit more expensive.\nLet’s look at a couple of examples, as elucidated in \nthis article\n by Ben Dwyer at CardFellow:\nLet’s say that you sell furniture. You’re likely processing higher average ticket transactions, but fewer transactions per day than some other types of businesses. You’ve decided to take credit cards, and you have an offer from Processor A using interchange plus pricing with a markup of 0.10% and 10 cents per transaction and from Processor B using subscription flat rate pricing with a markup of 0% and 25 cents per transaction. Processor A has a $10 monthly fee, and Processor B has a $29 monthly fee.\nYou sell a couch for $2,000.\nWith Processor A, you’d pay $2.10 to the processor for their markup. (2000 x 0.001 + 0.10) With Processor B, you’d pay 25 cents. On the surface, it looks like a no-brainer in favor of the subscription pricing. However, to get the most accurate number, you’d also include your monthly fee divided by your number of transactions for that month. If you only sell that one couch all month, you’d be paying $12.10 to Processor A as a markup or $29.25 as a markup to Processor B.\nIf you sold 10 of those couches in a month, you’d pay Processor A $21 (20,000 x 0.001 + 10 x 0.10) and Processor B $2.50 (10 x 0.25). Again it looks like a big savings with the subscription pricing, but the monthly fee changes that. The monthly fee would add another $1.00 per sale with Processor A for a total of $31 or $2.90 per sale with Processor B for a total of $31.50. Those costs are pretty close, but it’s important to remember that the disparity could be even greater if you have a higher monthly fee for your subscription pricing. Memberships from some processors start as high as $69 for a basic plan.\nBut what if you sell smaller-ticket items but process more transactions daily? Let’s look at another example from Ben’s article:\nNow let’s say that you own a shoe store. Your average sale is $50 and you have 10 sales per day for a total of 300 transactions per month. With Processor A, that’ll cost you 15 cents per transaction (50 x 0.001 + 0.10). Adding in our monthly fee of $10 adds 3 cents per transaction for Processor A, bringing the total to 18 cents per transaction. With Processor B, it’ll cost you 25 cents per transaction, plus the monthly fee of $29 split over 300 transactions, equaling 35 cents per transaction. (29 / 300 + 0.25). For the month, you’d pay a total markup of $55 with the interchange plus pricing (300 x .15 + 10) or $104 with the membership pricing. (300 x .25 + 29). Guess what? That 0% processing just cost close to double as much as the competitive interchange plus processing. It’s easy to disregard the monthly cost because it doesn’t seem like it’s part of your processing costs, but these examples illustrate that it’s important to take it into account. When searching for the lowest cost processing, 0% markup doesn’t automatically equal lowest cost.\nAdditionally, Ben points out that, while the subscription flat-rate model may be a cost-effective option for new and growing businesses, you need to understand that many subscription pricing processors set a limit on the number of transactions you can process at each membership level. If your business processes more transactions, you might need to change to a more expensive monthly membership, which of course means you’re averaging more in overall costs per transaction.\nThe bottom line is that you need to discuss your needs and options with your merchant level sales agent or processor, and determine whether you value simplicity, or the absolute lowest processing cost, or personalized customer service, or useful value-added options that come with many processor agreements.\nSolo makes it easy to pay and get paid\nSolo is not a bank, but is a financial super-app for small businesses, freelancers, sole proprietors, contractors, and more. Solo is the easy way to pay and get paid. Your customers don't have to sign up to pay you, and can use several payment methods, including Apple Pay, Google Pay, and cards. QR codes make it easy to get paid, and you can easily cash out your Solo account balance for free, or spend it using your Solo Cash Card anywhere Visa is accepted. Learn more at \nSolo.co\n.

Is flat-rate credit card processing the cheapest?

In this article:\nWhen to start thinking about a business ownership transition/exit strategy\nWhat’s the best type of exit strategy?\nHow can business structure affect your exit strategy\nHow to make a change in business ownership\nTransferring your business to a new owner, or even closing it outright, can be a lengthy process. This can take even longer if you are passing the business on to an employee or family member who needs to be groomed and trained to run the business before you leave. \nThere’s a lot to think about and it’s good to be prepared \nwell\n \nbefore\n you intend to step down. \nWhen should you start thinking about your business succession or exit strategy?\nFrom the day you start a new business or become the majority shareholder of your company, you should have an idea of how you intend to implement your exit strategy. It doesn’t have to be all planned out from day one, but you should have some idea in mind of what you intend to do when you leave or sell your business. \nWill you sell the business outright? Pass it on to a family member or employee? How will you leave the business for the next owner? Will there \nbe\n a next owner?\nYou don’t need all of the specific details laid out from the beginning, and it’s okay if your plans change as you go along. But it’s important to prepare for your future and to have an idea of when you want to retire or leave the business so you can start planning this important transition. \nYou should start getting things in motion for your plan of exit well before you leave the business— we’re talking at least several years ahead of time. Most exit strategies take a long time from start to finish, especially if you need to train the next owner. \nWhat is the best exit strategy for your business?\nAn exit strategy can, and should, be different for every business. This will depend on the type of business you run and its financial structure (we’ll talk about how your business structure can affect this process below). \nHere are some of the most common business exit strategies:\nAcquisition\nAcquisition, commonly referred to as “merger and acquisition,” is when another business acquires your company. They generally absorb it into their own and continue to offer your products or services as a new addition to their business. \nThis can help the new owner broaden their offerings, stand out against their competitors, or even eliminate you as a competitor. \nIf you know this avenue is something you want to move toward from the beginning, then you can craft your business to be more appealing to potentially interested parties. Just be careful not to cater your business to the needs of one specific company, because they might not be interested in acquisition (or could change their mind) and you’ll have a lot more to lose than gain. \nInitial public offering (IPO)\nIPO is the process of offering the shares of your private corporation to the public. This allows you to raise capital from public investors who believe your company will be worth something to the public. \nThis isn’t always the best strategy for truly small businesses, but for those that grow into franchises or large corporations that the general public will have interest in. And in order to use this process as an exit strategy, you’ll need to sell your individual shares. This is more common among partnerships and large corporations with multiple owners/shareholders.\nKeep in mind that this strategy can heavily impact how you run your business and should be something that you’ve thought about from the beginning. You may need to tailor large business decisions to what the analysts believe will do well if you want the opportunity to take this route. \nManagement buyout\nOffering the business for sale to your employees is a great exit strategy if you want to see your business continue for a long time. Your employees are more familiar with the business and company culture and generally already have the relationships with your customers that they need to be successful in the future. \nThere are a couple of ways you can do this. You can allow an employee (or employees) to buy your company outright, or allow them to finance the company by paying you monthly or annual increments over time. If you go for the latter, be prepared to be involved with the business for a longer period of time during the transition. You’ll obviously want to ensure its success with the new owner so that you get your payment. \nFamily succession\nYou may be interested in selling or legally transitioning the business to the next generation of your family or a younger sibling. Keeping it in the family can preserve the legacy of your business and the family name, but it isn’t without its challenges. \nWhen considering this option, it’s best to look at the people who have been brought up with an intimate understanding of the business and how it operates. You want to sell or leave your business to a family member (or members) who are determined to succeed, particularly if you plan to benefit from any shares of the business during your retirement. \nLiquidation\nIf you don’t have anyone interested in purchasing your business outright, then liquidation may be the best route. This is when you gather all your valuable business assets (like land, equipment, your building) and sell them. \nLiquidation often occurs when businesses are facing bankruptcy or other financial hardships and need the money quickly. If you aren’t facing financial challenges, it may be worth holding out for a potential buyer. \nHow business structure can affect the sale of your business \nThe structure of your company can affect how you are able to pass on the business. So this is important to keep in mind as you build your business and plan your exit strategy. \nLet’s talk about the basics of how your business structure can impact the transfer of ownership for your business:\nSole proprietorship\nIf you are a sole proprietor or the sole owner of an LLC, then you can’t technically sell the business, but only its assets. This can include the branding, customer lists, equipment, etc. \nThis is because the ownership, in this case, cannot be transferred. The current business will be dissolved and the new owner will have to register it as a new business. \nPartnerships\nIn a partnership, at least two owners share interest in the company. In order for one partner to leave, they will need to sell their interest in the company. This can be split among the remaining partners, or a new partner can be brought in if this is agreed upon by all the partners. \nThere may be more documentation required in this process, especially because most states have regulations on partnerships and you’ll have to register any change of ownership according to your state guidelines. \nLimited liability company (LLC)\nLLCs with multiple owners work similarly to partnerships when one of the owners is retiring or wants to sell their percentage of the company. The member buyout is generally laid out in the company’s operating agreement from the beginning. The remaining owners may buy out the leaving owner, in which case a new agreement would be written up and registered with the state. \nSole owners of an LLC, as we mentioned above, will need to value up assets and sell them, rather than transferring ownership. \nC corporation\nC corporations generally have multiple shareholders that own stock in the business. Ownership is based on the number of shares that each owner holds. Because a C corporation is set up this way, the owner may have the opportunity to offer their stocks to the public through an IPO or to sell their shares to the remaining owners. \nS corporation\nS corporations are similar to C corporation except for the fact that they are taxed differently and can only have up to 100 shareholders (where C corps can have an unlimited number). S corps often have bylaws that restrict who the shares can be sold to. Because of this, shares are often sold within the company rather than be opened up to the public or to another company. \nBasics in the process of making a change of business ownership\nThere’s a lot to consider when it comes to making a change of ownership for your business. You have to gather up your assets, documentation, create a sales agreement, and set a date for all of this to be done by. \nIt can quickly become an overwhelming process. We recommend seeking the assistance of an experienced business attorney to guide you along your plan of succession. \nThere are a few main steps that you’ll need to take throughout the process. Be sure not to skip any of these. (This is where an attorney can be particularly helpful.)\nNondisclosure agreement\nBefore discussing any important details of your business, how much specific assets are worth, customer details, etc., you’ll want to have a nondisclosure agreement in place that ensures your information is protected from being used by a potential buyer outside of purchasing your business. \nIndication of interest\nOnce the buyer and you have done due diligence and valued the company (or its assets), the buyer then submits an “Indication of Interest” that gives a range of value for the purchase. If you like what you see, then you can provide the buyer with more detailed information of specific contracts, customer lists, and financial agreements that you have. \nLetter of intent\nWhen the buyer has this additional information and a fuller picture of your business, they may then provide a “Letter of Intent” in which they offer a specific value for the business. This often discusses the details of the purchase, similar to a sales agreement, however, this letter is non-binding. \nPurchase agreement\nAfter the negotiation process has ensued and everyone and their attorneys have done their due diligence and are satisfied with the terms of the sale, then a purchase agreement is written up and agreed upon by all parties to guide how the purchase will play out.\nThe negotiations and steps it takes to value up your assets can take several months before a purchase agreement ever comes into the picture. And if you aren’t the sole owner and have partners to work with, the process can take even longer because of additional documentation that is involved. \nThese steps are general guidelines and it may be different if your intent is to leave your business to your children or liquidate it outright. Be sure to consult a business advisor and/or a reputable attorney to help guide you through the process.\nA key point is, whatever your plans for succession, you need to be thinking about them YEARS before it’s time to sell, liquidate, or pass on your business. Don’t wait.\nFrom the start of your business to the time when you transfer it to a new owner, it’s important to help your business have every opportunity for success so that you can make the most out of it when you leave. \nSources:\n
\nhttps://articles.bplans.com/types-of-exit-strategies/\n
\nhttps://www.valuepenguin.com/small-business/how-to-transfer-business-ownership\n
\nhttps://www.eidebailly.com/insights/exit-strategy-transition-business-new-owner\n


Small business essentials: How to plan your exit strategy or succession

In this article:\nTips for getting loan assistance quickly\nAssistance from U.S. Small Business Administration (SBA)\nEmergency loans you can get from a local bank\nOther funding sources\nDuring emergencies and times of crisis, it’s hard to predict what kind of effects your business will experience. Will sales drop? Will demand increase? Maybe you’ll have a combination of the two depending on your industry. \nAs we learned during the coronavirus (COVID-19) pandemic, small businesses all over the world may be disrupted and seriously impacted by physical or economic disasters. So, we’ve put together a helpful list of places where you can get emergency funding for your business during your time of need. \nIMPORTANT NOTE:\n As of the time of this publication, \nCOVID EIDL is no longer accepting new applications\n but will continue to accept requests for increases, reconsideration, and appeals. If the EIDL program is reopened again on a national level, we'll be sure to let you know!\nTips for getting loan assistance quickly\nBefore getting to our list, we wanted to share some tips that will make the process of acquiring funding a little bit easier (and sometimes quicker), especially when seeking assistance from alternative lenders:\nHave your statements prepared. Get at least four months of your business’s recent bank and credit card processing statements ready before applying for any loans. \nHave paperwork ready to show your business’s annual revenue, debt obligation, cash flow, and profitability. These are the primary factors for loan approval. \nBe prepared to state how long you’ve been in business. Most lenders require a minimum business age of 6 months (sometimes up to two years).\nwoman reviewing business documents for emergency funding\nAssistance from U.S. Small Business Administration (SBA)\nThe United States Small Business Administration is prepared to help during national emergencies and also offers alternative loan and funding programs for businesses that need it. \nSBA Disaster Assistance\nThe SBA has \ndisaster assistance\n in place for businesses that are heavily affected by the impacts of various types of physical and economic disasters. Depending on current circumstances in your area, you may be able to apply for these loans.\nClick to read our helpful walkthrough for \napplying for SBA disaster loans\n\nHow the SBA Disaster Assistance program works:\nThe SBA’s Disaster Assistance will coordinate with state and territory governors to submit and approve requests for Economic Injury Disaster Loan assistance\nWhen specific areas have been chosen and approved for this program, the SBA will make this information available to affected communities and update their website: \nSBA.gov/disaster\n\n\nEconomic Injury Disaster loans\n can be acquired for up to $2 million (depending on the current program. As of the time of this publication, \nCOVID EIDL\n is no longer accepting new applications but will continue to accept requests for increases, reconsideration, and appeals.\nLoans can be used to pay fixed debts, payroll, accounts payable, and other bills that can’t be paid due to the impact of the coronavirus\nInterests rates will vary, but are curretly 3.75% for small businesses and 2.75% for non-profits\nRepayment plans can be long-term (for up to 30 years) in order to keep payments affordable\nSBA loans and funding programs\nBeyond the SBA’s disaster assistance options, they also have the resources to help connect you with other types of lenders when traditional methods aren’t working. This can be helpful if your state or territory doesn’t yet qualify for the disaster relief efforts. \nWhether you need $500 or $5 million, the SBA can help point you to the perfect lender for your business’s needs. \nThere are eligibility requirements for loans provided through the SBA (this is different from the Disaster Assistance requirements):\nMust be a for-profit business\nMust do business in the U.S.\nMust have personal equity invested in the business (time or money)\nMust have exhausted financial options (can’t get loans from other lenders)\nLearn more about how to get loans through the SBA’s lender match program at \nSBA.gov\n.\nEmergency loans and funding from alternative lenders\nIn emergency situations, you often need capital quicker than traditional lenders (like banks) can get it to you. That’s where alternative lenders come in. These are non-bank companies, like venture capitalists, angel investors, non-profits, and other investment companies that seek to provide funding to small businesses. \nEmergency loan options from alternative lenders:\nShort-term loans are lump-sum loans that are meant to be paid back within 18 months. These are often quicker to acquire and helpful in a pinch for a one-time unexpected emergency\nMedium-term loans (or traditional term loans) are the types of loans that you might acquire from a bank with regular payments at a fixed interest rate. But if you can wait a little longer to get your loan from an alternative lender, this might be the way to go. \nInvoice financing is helpful when your customers aren’t able to pay their invoices. Invoice financing options will pay a percentage of your unpaid invoices to you quickly, generally 85%, with the other percentage getting paid later. \nA merchant credit advance (MCA), while not technically a loan, is a great option for quick cash. With an MCA, a financing company will give you cash in exchange for a percentage of your daily credit and debit card sales, with an additional fee. \nSome national lenders that can help with these types of emergency funding:\n\nCAN Capital\n can help with short-term loans and MCA \n\nFundation\n can assist you with medium-term loans\n\nBlueVine\n can help with invoice financing and term loans\n

Emergency funding options for small businesses (2022 update)

In this article:\nBootstrapping\nPersonal loans\nSmall business loans\nMake a trade\nCrowdfunding\nFind investors\nSmall business grants\nStartup incubator or accelerator\nWhen starting a new business, finding the capital to back you can often be the hardest part. But funding your new startup doesn’t have to be difficult. You just need to know what options are available to you and where to start first.\nDepending on how large you expect your business to be from the start, you may be able to begin small and scale up later as needed. \nThis may even allow you to start the business from your own savings and then reach out to other sources like investors or your personal network down the road. \nMany avenues exist for funding your new business, so if you aren’t able to do it on your own, don’t fret. We’ll guide you through some of the best options out there. \nBootstrapping a startup business\nBootstrapping is starting with the bare minimum that you can get by on. You don’t even need to save up a huge amount of capital to get going. You simply start with the resources you already have at your disposal. \nUntil you grow your business sufficiently, everything you earn goes back into the business to help you increase your resources and capability to provide results/products for customers. \nA great example of this is starting a web design company. Let’s say you have built your own website before and you already have the software, tools, and know-how to do this. \nYou can choose to start small by offering your services at a low cost to people in your personal network and grow your business from there. \nThe same can go for any type of business that you already have the minimum effective resources for. \n\nUse your own savings to fund your business\nMaybe you have a grander plan for your business that requires a little more capital to start up than bootstrapping would allow but you don’t want to go in debt to start your business. \nYou can make a plan to put aside any extra earnings from your current day job into a savings account, and save enough for your startup costs before you launch.\nAnother option here could be to pick up a second or third job to help save the money you need to go after your dream of entrepreneurship. \nHere are some tips you can use to help you save the money you need to start your business:\nMake a list of your needs and wants. Determine which wants you are willing to part with and put your money that would have gone to those into savings. \nAvoid personal debt (i.e. car loans, credit cards, personal loans). \nCreate a realistic budget and follow it. \nLearn to sacrifice unnecessary luxuries or “wants” and derive satisfaction from living debt-free and saving for your dream business.\nAutomatically deduct a certain amount into a dedicated savings account each paycheck so you don’t have it available to spend from your checking account. \nPersonal loans from family, friends, or network\nReview your personal network and determine if there’s anyone you would be willing to borrow money from to help fund your new business. \nYes, we said “anyone \nyou would be willing to borrow money from\n.” This is actually as important as the consideration of which friends or family members actually have the money and would be willing to invest in your business.\nIt’s important to think long and hard about borrowing from friends and family. Be wary of those who may want to have a say in business decisions due to their “share” and make sure you have a solid plan of action for paying them back as quickly as possible. \n\nFinances can cause a strain on \nany\n relationship, so don’t enter into any agreement that is going to hurt your relationships. \nSmall business loans\nSmall business loans are a common resource for starting up new businesses, but not every bank or lender is going to be willing to assist you. \nWhen you apply for a small business loan, you will need to have a detailed business plan that outlines how you will make good on your debt. \nYou may also need to offer personal assets as collateral for the loan you are taking out. Keep these things in mind if you pursue this option. \nCheck out our \nguide to small business loans\n to learn how to apply, what types of loans are best, and tips for making it happen. \nMake a trade\nYou can trade equity or services to help mitigate some of the costs of your new business. You might not be able to completely get by on trades, but it can be helpful to lower initial startup costs. \nFor example, let’s say you are starting a new gym, but you’re going to need marketing services to get the word out. Marketing is expensive, so you find an advertising agency that is willing to trade their services for gym memberships. \nBe creative. Don’t give up if your first choice turns you down. If you’re interested in this option, ask around at several places before trying another method. \nCrowdfunding your startup business\nCrowdfunding is a way to raise money, generally online, from people or companies that are interested in your project. \nMost of us are familiar with the GoFundMe campaigns that get shared on social media to help raise money for charity. That’s just one crowdfunding platform. \nCrowdfunding for businesses is a little different in that you can’t always go the route of asking for donations. \nDifferent types of crowdfunding\nInvestment-based crowdfunding: Someone invests in your business and receives a stake in your shares. \nLoan-based crowdfunding: This is also referred to as peer-to-peer or peer-to-business (P2P or P2B) lending. Individuals will lend you money in return for a set interest rate. \nReward-based crowdfunding: Individuals will give to your business in exchange for some kind of reward like free samples, passes, or discounts for your services. \nDonation-based crowdfunding: You receive no-obligation donations from those interested in helping you out. This form of crowdfunding is generally used for charity but can be used for startups as well (depending on the platform you use). \nCheck out these crowdfunding sites to get started:\nKickstarter\nCrowd Supply\nCrowdfunder\nFundable\nWeFunder\npiggy bank with people inserting coins for startup crowdfunding\nFind investors for your startup\nCrowdfunding and small business loans aren’t the only ways to get investors for your business. You can also seek out venture capitalists or angel investors to help you get started. \nVenture capitalists\nVenture capitalists (VCs) are generally looking for businesses with large growth potential. VC firms generally raise money from a variety of sources and find the perfect investment opportunities to put that money into. In return, they make money on the interest of the loan they provide and/or have stakeholder claims in your business. \nAngel investors\nAngel investors are likely a more suitable option for small business startups. They typically have spare funds available to invest and look for opportunities to gain a higher rate of return than they would get from a traditional investment. \nThe main downside to either of these investor options is that they are usually looking for a large stake in the companies they help. \nMake sure you read the agreements carefully and don’t get into a deal that will kill your business before it gets legs of its own.\nSmall business grants\nDepending on the type of business you are starting, you may be eligible for a small business grant. \nGrants are basically “free money” that you can use to invest in equipment, improvement of commercial premises, startup inventory, office supplies, or whatever other business needs you have.\nThe \nU.S. Small Business Administration\n (SBA) helps businesses find opportunities to receive grants. See if they have something you can qualify for.\nStartup incubator or accelerator\nThis last option is to find a startup incubator near you. Startup incubators are programs designed to help small businesses get started and find success. \nThey are typically run by non-profit organizations, sometimes associated with business schools or other universities. \nThe nature of an incubator program is that they will provide entrepreneurs with some of the resources that would otherwise be difficult to acquire, like a workspace, startup funds, networking opportunities, legal counsel, management training, business training, and more. \nYou may also like: \nBest practices for launching a small business\n

Top 9 funding options to back your startup business

In this article:\n5 advantages for your hair and nail salon of paying vendors and suppliers with a credit card\nBelieve it or not, business-to-business credit card payments are still in the stone age, for the most part. In fact most businesses still pay at least half of their bills using paper checks. Smaller businesses like local hair and nail salons including one-person shops and freelancers typically pay even more of their bills with paper, or the cumbersome “online bill pay” method where you have to have a different login for each vendor or business you have to pay.\n \n\n\nCredit card processors\n and \nthird-party payments facilitators\n usually charge between 2% and 5% to businesses that accept these payments, and for some vendors, these fees can eat up a significant portion of their profit—or all of it. \nSo small suppliers or local vendors may not be set up to accept your credit card payments for their services.\nWhy should you care? Because there are quite a few advantages for you to paying all of your vendors, suppliers, rent, utilities, etc. with a credit card.\nLet’s go over a few perks you can benefit from when you pay your salon’s bills with a credit card, and then we’ll talk about ways you can pay everyone using a credit card—even if they don’t accept credit card payments (nope, we’re not kidding!).\nYou may also like: \nWhat’s the cheapest way to accept credit cards?\n \nAdvantages to your salon of paying vendors and suppliers via credit card rather than by check or online bill pay\nNow let’s talk about some of the benefits to salons who pay vendors, utilities, suppliers, and everyone else, using a credit card, rather than sending paper checks.\n1. Credit card payments save time and improve cash flow for businesses\nSending a check can take quite a few days or even weeks to complete the process and clear a bank. When you pay vendors using a credit card, you speed up the process and free up cash for other business expenses.\n2. Increased purchasing power and business credit\nSince you don’t have to pay off your card balance for at least 21 days (and often longer, if your account is in good standing), you can effectively borrow business funding at 0% (plus you get perks and rewards) to pay vendors and suppliers. \nIf you need to spend a little more than you currently have in your bank account to order salon supplies or make improvements, a business credit card with an appropriate limit can make that easy. (Just be sure to pay it off quickly once you have what you need.)\nIn addition, as you regularly pay your credit card statement on time and use much of your available credit, you can increase the credit limit available to your business and improve your business credit rating, which can lower your interest rate for business loans and other expenses.\n3. Perks, miles, rewards, cashback, discounts\nNearly all credit cards offer perks and advantages to members, and for local, small like hair and nail salons this can be a huge asset. You might get a price break or increased cashback for using your business card to pay vendors and suppliers.\nSalon owners who rack up lots of airline miles using one of these cards can pay for a significant portion or even all of their business travel expenses, get discounts for small business expos, enjoy free concierge service, get free car rental insurance and discounts, and much, much more.\nSome salons use their cashback bonuses to improve their facilities, buy equipment or supplies, pay for employee team-building events, pay for salon maintenance, or even pay rent and utilities. The uses for rewards points/cashback bonuses are almost limitless. This is assuming the card you choose allows you to spend your cashback bonus how you choose.\n(Image)\n\n4. Paying all your salon’s vendors, suppliers, and bills with one card vastly streamlines your accounting process\nWhen you have to keep track of expenses and bills for your hair or nail salon, the simpler the better. If you can move all of your monthly business expenses and vendor payments to a single card, it’s much easier to keep track of, plus you get the benefit of your credit card statement to help you keep things accurate.\n5. It’s more secure than writing a check\nWhen you pay with a credit card, your issuer and processor help absorb the risk of fraud. (This is one reason they charge fees for the service.) When you mail someone a check, you are giving them your bank account (via the routing number and account number) and your signature. 

Why you should pay your hair or nail salon’s bills with a credit card

In this article:\nWhen should I get a loan for my small business?\nQuestions to ask before getting a business loan\nSmall business loan requirements\nTypes of small business loans available\nHow to get a small business loan\nGetting a business loan is a common process for many small businesses as they are starting up or looking to grow. Sometimes you just don’t have the capital to take your business to the next level, so you need a little help along the way. \nBefore getting a loan for your small business, make sure that your plan for return is solid and that you will be able to pay back the loan and keep your business going strong. \nWhen should I get a loan for my small business?\nTo determine when you should get a loan for your business, you need to understand the different types of loans that are available and have a purpose for your loan. \nGenerally, you want to acquire a business loan \nbefore\n you are in dire need of one, but close to the time that you are actually ready to spend the money. \nYou shouldn’t ever get a business loan as a last-ditch effort to save your company or on an impulse. It needs to be well-thought-out and serve a purpose to help grow your business. \nWe’ll guide you through some questions to ask before getting a loan, the basic loan requirements you’ll need, the types of loans available to you, and, when you’re ready, how to get your small business loan. \nQuestions to ask before applying for a business loan\nBefore you get a small business loan, there are several questions you should ask yourself to determine what your goals are for the loan and whether or not a loan is the best decision for your business right now. \nWhat do I need the money for?\nHow much money do I need?\nWhat does my credit history look like?\nHow soon do I need the funds?\nYou should also come up with a list of questions to ask the lender so that you know exactly what is required of you when it comes to acquiring the loan and paying it back. Some questions to get you started:\nWill you lend to businesses in my industry?\nWhat are the interest rates of the loan?\nAre there any other fees associated with the loan?\nHow long does the loan application process take?\nWhat will my payment schedule be?\nWhen is my first payment due?\nHow do I make payments for my loan?\nAre you rated well with the BBB? What is your rating?\nCan I speak to some of your past and current customers?\nDo you report payment history to the appropriate credit bureaus?\nAre there any penalties for early loan payoff?\nThese questions will get you started in determining whether or not you need a loan and will be able to qualify for one, as well as help you find the best possible lender for your situation.\n\nSmall business loan requirements\nIt will help you out immensely to know what the requirements of a business loan are before you apply for one. Set yourself up for success by making sure that you can qualify for a small business loan. \nHere are some of the basic requirements for business loans. Keep in mind that certain lenders may have different requirements and these are just a general guide. \nThe amount you want to borrow\nThe purpose of the loan\nPersonal credit score\nBusiness credit score\nHow long your business has been in operation\nA solid business plan\nYour industry\nType of business\nLicenses and permits that authenticate your business\nEmployer identification number\nCopy of your commercial license\nProof of collateral you wish to use\nAnnual revenue and profits for your business\nBank statements\nBalance sheet\nPersonal tax returns\nBusiness tax returns\nDisclosure of all debts\nAccounts payable and accounts receivable aging reports\nOwnership and affiliations of the business\nLegal contracts and agreements of the business\nNot all lenders will require every piece of information that we’ve listed here and some may have a few more items, but this will give you a good start to be prepared for the information that your lenders may ask for. \nBest types of small business loans: how to choose\nThere are several different types of small business loans. Carefully considering the questions we listed above and understanding the purpose of your loan will help you to determine the best type of loan for your business. \nHere are some of the most common types of loans that small businesses use. \nLines of credit\nBusiness lines of credits are very similar to credit cards in that they are open-ended and have specific limits. With a line of credit, you can withdraw funds, repay them, and then pull out more funds later as needed. \nCommon reasons for business lines of credit include managing cash flow gaps, increasing working capital, and purchasing inventory. \nThe best part about lines of credit is that you only pay interest on the money that you spend. Even if you are approved for a large amount, you only pay interest on the portion that you actually use. \nTerm loans\nTerm loans are the type of loan that most borrowers think of when they hear the term “business loan.” You are given a sum of money which you need to pay back, with interest, at regular intervals over a given period of time. \nThe thing to be aware of with term loans is that they need to be repaid promptly, so they aren’t a good choice if you need working capital. Term loans are best when you have a large purchase coming up (real estate or equipment) and you’re going to use all of the loaned funds towards that business expense right away. \nEquipment financing\nAs you can imagine, equipment financing is used to purchase business equipment like machinery or vehicles. The equipment you purchase with the loan is used to help secure the loan. \nsmall business owner with coffee roasting equipment\nEquipment loans generally have low interest rates and most allow you to finance between 80% and 100% of the cost. \nInvoice factoring\nInvoice factoring is the process by which businesses sell their unpaid invoices to “factoring” companies. These companies will give a cash advance that is generally between 70% and 100% of the invoice, and then will collect their payment when the customer pays the invoice. \nIf you have a lot of unpaid invoices that are hurting cash flow, this type of financing can be helpful. \nMerchant cash advance\nA merchant cash advance provides business owners with funds in exchange for a percentage of their income over a certain period of time. Payments are made daily as a percentage of the customer transactions that day. \nThese types of loans typically have high interest rates since they take a percentage of your sales, so we only recommend using these as a last resort. \nHow to get a small business loan\nNow that you’ve determined how much you need to borrow and learned what types of loan may be the most beneficial to your business, it’s time to put your plan into action. \nFollow these steps to acquire your small business loan. \nDetermine which type of loan you need\nBefore you can apply for a loan, you need to determine what type of loan your business needs. Do your research to figure out which types of loans suit the needs of your business best and then find a lender that can deliver. \nFind the best lender for your business\nThere are several different types of lenders out there who want to help your business succeed (and make some money in the process). Determine the type of loan you want will help you narrow down your list of lenders that you can choose from. \nCommon types of lenders that small businesses go to:\nCommercial banks\nLocal community banks\nDirect online lenders\nPeer-to-peer lending sites\nBank lenders with SBA guarantees\nafrican american couple meeting with banker for small business loan\nDetermine if you are eligible for a small business loan\nCarefully examine your personal and business credit history, revenue history, assets, and total debts. Lenders make judgments based on all of these things and how high of a risk it will be to give you a loan. \nAnswering some of these questions can help you to decide if a lender will make the judgment call that you want to hear:\nDo you make payments on loans on time?\nDo you have any outstanding debts that haven’t been paid?\nDo you have valuable assets that can stand as collateral?\nHow long have you been in business?\nDo you have any venture capital investors, strategic investors, or angel investors? (Having investors looks good to lenders)\nAre your financial statements in order?\nGet your financial statements together\nLeading on that last question, you should definitely get your financial statements in order before applying for a small business loan. Your lender will ask for these, so it’s vital to prepare yourself ahead of time and be well aware of how your finances look. \nLenders will carefully review your statements to analyze your cash flow, margins, accounts payable and receivable, and more. Be prepared for questions about your records, and keep your accountant involved in the process. \nGather detailed information and documentation for your loan application\nWe mentioned a list earlier of basic requirements that you should have prepared before applying for a business loan. Make sure you have all of those details together in order to make the application process go as smoothly as possible. \nResearch your lender and loan type beforehand as well to see if there are any additional, non-typical requirements by the lender. \nIt takes time to get statements and records together, so give yourself the time you need and don’t postpone the application process by delaying this key step. \nKnow how much you want to borrow\nYou can’t ask for a loan without knowing how much you need to borrow. The lender will want to know the amount you wish to borrow and how you plan to use the funds. \nIt can be good to ask for a little more than you initially planned for just in case you hit any hurdles while spending the funds.  \nDetermine the security options for the loan\nLenders just want to make sure they are going to get their money back (with interest), so they will have different security options to improve the odds of that happening. \nThis is often coined as “collateral” but may simply be a security interest to the lender on company assets. \nAnother thing that lenders will do to ensure this security on their funds is to get a personal guarantee from the business owner. It’s usually a good idea to avoid this when possible because this puts the owner’s \npersonal\n assets at risk as well as the business’s assets. \nmale hands signing personal guarantee for small business loan\nAnalyze the terms of the loan\nDon’t just blindly accept any loan because you need the money. You need to make sure the terms of the loan make sense for your business and that you can actually deliver on them.\nKey terms you should review with your lender and accountant:\nWhat is the interest rate on the loan and can it vary over time?\nHow often can you pay the interest?\nWhen is the principal interest due or is it spread over the lifetime of the loan?\nWhat’s the loan origination fee?\nAre there any other costs or fees associated with the loan?\nAre there limits on how the funds can be spent?\nAre there any security requirements?\nCan the loan be paid off early? Is there a penalty for that?\nReview your online presence\nLenders are going to perform their due diligence to ensure that your business is going to be a valuable investment for them. To ensure that your business is reputable and professional, they will likely check to see what your online presence is like. \nThis will include your website, social profiles, any online reviews your business has, and even the business owner’s personal accounts and social posts. \nIf there’s anything that you think might prevent you from getting a loan, make improvements and updates before you apply.\nApply for the loan\nOnce you are familiar with the process and know what type of loan you want, it’s time to put in your application. Depending on the type of loan you are getting, the waiting period for a business loan can be anywhere from 24 hours to 6 months (this time frame should be disclosed to you when you talk to the lender). 

24 articles found in “Business finances”

Is flat-rate credit card processing the cheapest?

Small business essentials: How to plan your exit strategy or succession

Emergency funding options for small businesses (2022 update)

Top 9 funding options to back your startup business

Why you should pay your hair or nail salon’s bills with a credit card

Guide to small business loans: How to apply, best types, and tips

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