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The cost of finding money to run your business
By now nearly everyone who owns a small business has been contacted by a sales rep to get almost instant money to you. This always sounds wonderful at first glance. After all, outside of winning, inheriting, or stealing, you can only get money in addition to your organic revenues by borrowing in some form. So what are the forms of borrowing? Friends and relatives. We leave this one to you. It usually ends up being a very effective way to have wealthy, incredulous friends take you off their holiday card list. Your "friendly" banker. Ha. If you've ever approached a banker for a business loan, you've been told that you must have "abundant capital" - that's banker-speak for "enough liquid assets that we can dissolve if we feel your loan is in danger of defaulting". Banks have the money - after all, we just bailed them out from their most recent folly. But they make their income from DEPOSITS. Most of them don't even want to make loans. Equipment, receivables or credit-card ("merchant cash advance") factoring. If you have valuable equipment or great receivables, or if you process typically more than $10,000 per month from credit-card payments, you can contact a "factor" who will advance (not lend) you money by securing your equipment or your receivables. The advantage here is that you can usually get your advance within a few days. There are two disadvantages: The amount you'll be paying back in excess of the amount you received is NOT tax-deductible like interest on a loan,The "factoring ratio" is usually 1.3 to 1.5 - or more. That means that if the factor advances you $10,000, you will pay back $13,000 to $15,000 over a typical 6-month term. You are actually paying back the equivalent of a loan with 30% to 50% interest within 6 months. That's equivalent to an annualized percentage rate (APR) of 60% to 100%. And that over-pay is not deductible. If you really need money fast, and IF YOU KNOW YOU CAN PAY IT BACK FULLY WITHOUT GOING OUT OF BUSINESS, this can be a good solution.Locate private lenders. There are several companies that we represent who can loan a business money for far less than any factor can charge. Yes, the interest rate is higher than the one quoted by your local bank - the one you do not have access to. The advantages are obvious: Your interest rate is far lower than a factor,This interest is deductible,The lender typically reports to the credit bureaus (this is good news, not bad). This will help you establish good business credit, which helps you remove your business liability from your personal liability.We represent groups of factors, several merchant banks, and several groups of private lenders, so we can give you a truly objective idea of how much money you can get, when you can get it, and how much you are going to pay for it.tomm@amp-up.com ...read more
By Alliance to Maximize Profits, LLC February 03, 2012
Credit Card Processors don't want you to know this...
If you have a business that receives credit-card payments at your place of business - rather than on-line, you probably have never heard of the "Durbin Amendment". Recently this amendment was tacked onto the only existing statute attempting to protect merchants from secret fees usually charged by the many credit-card processors. The intent was to force processors to reduce several important charges, and would benefit those merchants whose majority of prices were under approximately $40.00. But it was written in such a way that only the few largest processors (there are now over 40 here in the US) have to comply. That means that if your merchant services are with one of the many (in addition to the processors, there are probably over a thousand sales organizations selling merchant services) processors who do not have to, or choose not to, comply with this "enforced" cost reduction, then you are still paying quite a bit more than you should to receive payments by Visa or Mastercard. A recent study found that of several hundred sales/service people who work for card processors or sales organizations, very few of them had heard of the Durbin Amendment. Google "Durbin Amendment" if you want all the details (you don't really). If your monthly credit card statement includes the words: "tier", "qualified", "mid-qualified", or "non qualified" you are probably one of the unfortunates who are being over-charged. There are NO laws that are set up to protect you in this wild world of credit-card processing. So If you believe that you are being taken advantage of - you probably are. Contact us by email. We can find out for you at no cost. If we find you are, then you decide whether to continue to pay too much, or to take things into your own hands. No cost to you to find out if you are processing more than $20,000 per month. tomm@amp-up.com ...read more
By Alliance to Maximize Profits, LLC February 02, 2012