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Google Wallet?

I received a great question the other day from one of our clients, and it really got me thinking. Here was the question:

We are interested in accepting payments via Google Wallet. I know it is early in the game and I understand that First Data is involved. Are you guys involved in any way? Can you be?


The quick and easy answer is no. We are not involved, nor is anyone outside of First Data, CitiBank, and MasterCard… yet.

As this technology continues to develop and become more ubiquitous it will find its way to us, and you. For now, players in the game are basically letting the big technology companies work out the kinks and see how this plays out.

There are other hats in the ring including Isis, PayPal, and Apple, but this payment scenario (along with smart card chips, PayPass, and many  other trials over the years) presents a serious “chicken and egg” problem: merchants won’t implement the technology until customers demand it and customers won’t ask if there is no way to use it.

Plus, these numerous players make universal adoption a challenge. Until there is a “standard” across the platforms (universal NFC readers, ALL phones with the technology, ALL banks and ALL accounts on board), it’s too difficult to dominate the market place. Are you going to have a Google wallet reader, magnetic stripe reader, PayPal wallet reader, and Apple Wallet reader, plus a reader for whatever other company is in the game? These readers are connected to software that has to communicate with a host for approval at some point as well. I feel that until these competitors adopt some sort of standard and go from there, they are likely to weaken themselves by trying to dominate the market.

This is why the current system works so well: all banks issue magnetic stripe cards that all readers can read and all processors link up with and support.

This all sounds exciting and it is, but “techiness” alone will not drive widespread adoption. Phone-based NFC has to solve a problem (too many cards to carry, identity theft, convenience, etc.) and right now it’s creating more questions than answers. Ask around and see how many people are comfortable with the idea of all of their money being tied to their phone. You will see there is still a high level of suspicion, justified or not.

Besides, this technology has existed for some time and still does not have widespread adoption. Ever hear of PayPass? It’s the same idea only much simpler. It’s just a fob that ANYBODY can use (if they wanted to) without a special phone or app. And this article was from January 2008 when MasterCard had its own wallet before Google… which never went anywhere. (note the predictions for “somewhere between 8 million and 30 million customers in North America will be using NFC-based contactless payments by 2012”)

Are there changes on the horizon and are we going to phase away from the magnetic stripe? Yes. Is Google Wallet going to be THE payment method? Not entirely likely. Finding the right matrix of card issuers, financial institutions, sales channels, technology companies, willing consumers, and participating merchants is some time off.

I think Google Wallet is a fantastic concept, and if you decide to check it out for your stores, I would love to see it working in action. I know it all has to begin somewhere, but consider the effort in setup and implementation versus the amount of customers actually likely to use it: an Android user (does not work on iPhones) that has a Samsungs Nexus 4G (no other phones work as of now) with a Citi MasterCard account (no other banks or cards work as of now) that has downloaded and setup the Wallet app.

I would say go for it if you are looking to appear “cutting edge” to your customers and don’t mind being an unpaid guinea pig for Google, Samsung, and CitiBank, but it’s not likely you will get a tremendous amount of actual commerce from the system. The available population is just too small for now.

Add comment January 5th, 2012

Is Square Right For Your Business?

I stopped in a local, independent coffee shop last week. As I went to pay I noticed a stand-alone credit card terminal next to the POS system on one side, and an iPhone with a Square ( card reader on the other.

I asked the barista which device they were using for credit card processing. She said, “The owner is switching to Square because he can save two to three hundred dollars per month.” My immediate reaction was that either she misunderstood what the owner said or the owner was misinformed.

“$300 per month?” I asked. “Wow.” I was incredulous because after over a decade of analyzing statements and comparing merchant’s costs of processing credit cards, I knew saving $300 per month was only possible if the merchant was processing a tremendous volume or had highly inflated pricing, or both. So I decided to look further into Square and see what kind of real impact it could have on a traditional, retail merchant.

Square came on the scene in February of 2009 and has been opening accounts at a rapid pace. The company currently processes about $4 million in payments each day, and expects to process $1 billion in volume within a year.

Square’s original business model was to provide simple payment processing to small vendors, artists, etc who couldn’t afford the expense of a traditional merchant account. The appeal of Square is in its simplicity and ease of enrollment. They charge a flat 2.75% for transactions swiped with the reader and 3.15% plus a 15 cent transaction fee for keyed in sales. Square charges no other start up fees, monthly fees, or gateway fees. All of these expenses are absorbed into the flat rate (blended pricing). Just about anyone can apply for the account and get the free credit card reader (“dongle”) that plugs into the headphone jack of a Smartphone- these devices were even recently handed out at a local hockey game! A merchant then downloads a free app for their smart phone or tablet, enters some basic personal information at, the bank account is verified, and they are up and running.

Square’s leadership, which includes Twitter co-founder Jack Dorsey, figures to come out ahead using a blended price model: interchange, authorization and settlement, customer support, gateway, and any other expenses (let’s not forget profit) are all averaged into one flat price. Depending on the transaction type and interchange cost, they are losing money on some number of transactions while over pricing others. And there seems to be no reduction in Square’s fees to reflect the recent law lowering debit costs. It is important for Square to shake out a positive mix on these transactions to become profitable and stay in business.

Let’s take our local coffee shop. I happened to spend $7 for two beverages on my debit card. Under the new price guidelines, a $7 debit card transaction has a processing cost of 3.43% before Square or any traditional processor makes even a fraction of a penny in profit.


Here’s how:

New debit interchange cost of .05% + 21 cents per transaction.
Plus  .11% for dues and assessments and $.019 for NABU/APF.
This a total cost of .16% and 22.9 cents.
.16% X 7 = $.0112
+ $.229
.24 / 7 = 3.43%


So Square is essentially losing a nickel on that $7 transaction (7 X 2.75% = .19 – .24 = -.05). Of course they are making significant profit on merchants with larger transactions.

Perhaps that’s great for the coffee shop merchant in the short term; what business wouldn’t love to get any raw material at 19% below what it costs to manufacture? But even with Square’s millions of dollars in venture capital to back temporary losses, they will have to make a consistent profit eventually. So I suspect that our coffee shop owner can indeed see some savings in the short term, but they are not likely to last.

I predict that Square will have to do one of two things once they are firmly embedded in the market:

1.    Eventually raise pricing across the merchant base to stop the bleeding (remember, right now they have very deep pockets and can afford to lose revenue while they build), or

2.    Leverage the card brands to drive down their wholesale pricing. The latter is unlikely as competitors such as PayPal, which is much larger, have not been able to affect pricing so far.


Here are a few additional points to consider besides cost:

1.    Consider the customer experience and perception. It seems that currently Square’s target market is the part-time craft person or handy man where credit card payments are not a daily affair. How would you feel if you walked into Best Buy or Target and they handed you an iPhone at check out? Maybe you wouldn’t care, or maybe you would have concerns about whose phone it is and what account it might be tied to.

2.    There are very real security concerns. The system has already been hacked and can easily be turned into a skimming device. While the software is compliant with security standards, the Square reader does not encrypt card data. Other vendors we deal with offer smart phone devices that scramble card numbers in the reader before they ever reach the phone software. Square has the potential for major card data exposure. This is from the Square agreement:

“We have implemented technical and organizational measures designed to secure your personal information from accidental loss and from unauthorized access, use, alteration or disclosure. However, we cannot guarantee that unauthorized third parties will never be able to defeat those measures or use your personal information for improper purposes. You acknowledge that you provide your personal information at your own risk.”

3.    Traditional merchants lose integration with existing POS systems. You would have a device outside of your POS terminals that would act like a standalone credit card terminal- no reporting or accounting tied to your software.

4.    The transaction time is slower than an IP-connected POS system or terminal. How would lines be affected by 5-10 extra seconds per transaction? Connectivity is slower and the card readers are sometimes inconsistent in capturing the magnetic stripe data. What if a customer wants a receipt? Are you going to collect email addresses on the device for every customer and have them sign with their finger at the counter as is the current functionality of the app?

5.    Support seems to be an issue. All support is handled by leaving a voicemail or sending email. The option of speaking with a live person when you want to does not seem to be available to Square users. The latest numbers I can find state that there are a total of about 100 employees at Square (up from around 60 at the beginning of the year) supporting many, many merchants: Square claims to be adding 100,000 merchants per month. Of course “adding” might mean software downloads. It’s no wonder there are many complaints about service in online forums.

Overall, I actually think Square is a fantastic solution for the right merchant. I also feel they will continue to evolve and make inroads into different sectors of the marketplace such as larger retail and perhaps ecommerce. But for now, traditional merchants are best served by traditional merchant accounts. Transparent, cost-plus pricing is always going to be more advantageous for retail merchants. Convenience and simplification are great, but often come at a price.

2 comments December 13th, 2011

Playing The Match Game With The IRS


Now You Have A Little More Time To Fall In Line.


Good news. The deadline for complying with the IRS mandate related to the Housing and Economic Recovery Act of 2008 has been extended a full year, until January 2013.

In an effort to ferret out underreported or unreported business income, the IRS devised a plan within the Housing and Economic Recovery Act of 2008 that requires payment processing networks to report a merchant’s monthly processing volume along their TIN (taxpayer identification number) and legal name. To ensure this reporting system is functional and accurate, the IRS requires that the TIN & legal name on the merchant account matches the data they have. If the IRS records and merchant account information do not match, the merchant has to complete Form 1099K and the processor must submit it to the IRS.

The penalty for not complying with this new Act is the imposition of backup withholding to the tune of 28% of the merchants gross credit card revenue. Backup withholding is similar to the payroll tax withholding all merchants with employees are familiar with. The difference here is that the IRS would order the credit card processor to hold back 28% of the merchant’s credit card processing receipts and turn it over to them.

The mandate for compliance began at the beginning of 2011. While the IRS still requires reporting on Form 1099-K by the end of 2011, they are delaying the enforcement of the backup withholding aspect of the plan until January 2013. The IRS decided to extend the deadline after numerous complaints from the processing industry citing problems with consistency in the form as well as difficulties in collecting these forms from merchants.

So, if you have completed your 1099K and returned it to your merchant services provider, good for you- you are in the clear. If you have not received notice or a form, contact your provider right away. Otherwise you may find 28% of your credit card sales zapped after 2013.


Here is a link to the original IRS publication concerning this requirement:

Add comment October 31st, 2011

Durbin and Debit: What New Legislation Means For Merchants

On October 1, 2011 new legislation regulating the costs associated with processing debit cards (check cards) goes into effect. The Durbin Amendment was a last minute addition to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Dodd-Frank bill sought to reform the financial regulatory system following the financial crisis that began in 2007. The Durbin Amendment was introduced with the idea that the government needed to regulate certain aspects of credit card processing. There are two notable changes:

  1. Allow merchants to offer discounts for certain payment types (debit instead of credit) and impose minimum purchase amounts as long as the minimum does not exceed $10. Both of these options were previously against Visa and MasterCard merchant account agreements.
  2. Regulate the fees merchant service providers pay to process debit cards in hopes the savings is passed on to businesses and subsequently consumers.


This column is going to focus on the fee portion of the Amendment.

Debit cards are issued to consumers by banks and are authorized and settled over the Visa and MasterCard networks. Unlike “credit” cards, debit cards use funds drawn from consumers’ checking accounts and access funds that are readily available rather than funds that will be paid back in the future. So far, Visa and MasterCard have been the sole determiners of the fees associated with processing these cards and they control about 80% of the market. The fees are comprised of the transaction costs to authorize and settle transactions along with a percentage of the sale. These collective costs are called interchange.

Largely due to lower risks of fraud and non-payment for the issuing banks, interchange costs have always been lower for debit cards than credit cards. Senator Durbin, lobbied by large retailers like Home Depot, sought to curb these fees and seek an across the board limit on what Visa and MasterCard could charge. The result of the legislation, signed by President Obama on July 21, 2010, is that the Federal Reserve ruled that debit interchange fees would be capped at 22 cents plus 0.05% of the transaction. The new limits will cut the expense of accepting debit cards roughly in half and should amount to a $7 billion reduction in fees overall.

Keep in mind that these changes affect the “wholesale” cost of processing cards. What merchants ultimately pay depends on the merchant’s price structure with their current merchant services provider. Let’s take a look at the two main pricing structures in the merchant services world and how these new regulations might impact what a merchant pays in fees.

The first price structure is commonly referred to as “Interchange Plus” or “Cost Plus”. Originally this price structure was reserved for high-volume merchants but has become more and more common among smaller merchants. This pricing style simply takes the wholesale costs of processing (interchange) as determined by Visa, MasterCard, Discover, etc. and adds a uniform mark up across all interchange categories. This uniform mark up amounts to the profit made (after additional expenses like customer service, internal operations, additional network costs, marketing, etc.) by the merchant service providers. Merchants under this type of price structure should realize a direct correlation between reductions from the new price caps and the final costs on their merchant account statements.

A majority of merchant accounts are billed using a”tiered” price structure. Most commonly tiered pricing takes all of the nearly 300 interchange pricing categories and compresses them into three tiers: Qualified, Mid-Qualified, and Non-Qualified. Fluctuations in interchange costs are rounded up into the next tier and priced as “surcharges” to the qualified rate.

Rate adjustments under this structure are a little trickier and not automatic as in the cost plus example. Tiered pricing is predetermined and requires the processor/acquirer to manually change the price for debit or even add a separate category for debit if it didn’t exist previously. This leaves processors with one of several choices that will impact their merchants: 1.) make no price adjustment whatsoever and realize a higher profit from the reduction in cost, 2.) adjust the tiered price for debit accordingly to reflect the new rate change, or 3.) move the merchant to “cost plus” pricing.

Needless to say this new environment casts chum in the water for merchant services sales organizations. Sales people will be contacting merchants with the intent to move them to new accounts with “better pricing”; a barrage of phone calls and knocks on the door are forthcoming.

It is critical for merchants to understand how their merchant accounts are priced, what their current processors intend to do, and what options they have in order to avoid side-stepping into a new merchant account with pricing that seems more attractive, but has the same old deceptive fees and pitfalls.

By now, merchants should either have had their rates automatically adjusted or received some notification from the processor as to how these changes will be addressed in a reasonable time frame. It is best for merchants to reach out to their current processor and learn how they will address this new legislation. Then merchants can assess their options, and make an informed decision that best impacts their business.

Add comment September 21st, 2011

Keep Them Coming Back


I started my first business back in 1995. I was fresh out of college and a good friend and fellow graduate was freelancing as an audio engineer at a company that produced “on-hold messages”; the recorded music and voiceovers that play back through phone systems while a caller is on hold. He would tell me about how easy these recordings were to produce and distribute and how the production house had a nationwide client with dozens of locations. We formed a partnership with the belief that my gumption and his technical expertise all but guarantee our success.  How could we possibly go wrong?

We wrote a business plan and secured some money to buy a digital recording system. It was top-notch, state-of-the-art; the same gear all of the big guys used. We set up a studio/office in my partner’s two bedroom apartment, got a business phone, a fax machine, office supplies, and had everything in place that two novices in their early twenties needed to take over the world. Everything except… a customer. In the process of getting our systems in place to produce a product, it didn’t occur to us that our biggest challenge was not production, but finding customers.

Our education commenced. We tried a few marketing techniques and after some struggle, we had a handful of clients. But the learning process was tough and slower than we imagined, so when we finally got that first customer, the now-familiar business adage became crystal clear: it’s cheaper and more effective to keep a customer than to find a new one.

Does this sound familiar? You have a business up and running, you are surviving the economy, and you have happy customers. Now how do you get them to return to your business, buy more, and spread the word about how great you are?

Many successful businesses are accomplishing this feat through incentive programs. Whether we call them loyalty programs, rewards, or some other clever name, the concept isn’t new. The idea of “baker’s dozen” has been around for centuries. But loyalty and incentive programs do more than just “bribe” your customers into repeat spending. They can actually create stimuli, tangible and intangible, that draw a customer back and keep your business in the forefront of their minds (and hearts!) and ahead of your competitors.

Maybe it’s a simple punch card- “buy 10 get one free”.  Maybe it’s an elaborate, computerized tracking and rewards system like those we see at the grocery store chains and airlines. Either way, chances are you participate in at least a few of these programs as a consumer. If you are not sure, just check your key chain for those little tags or your wallet for a stack of plastic. Not only do these systems track a buyer’s spending frequency and patterns, they provide data for what a customer actually buys, allowing retailers to present offers on the products a customer really cares about.

So if you have a relationship with a business that thanks you for your patronage, knows what you like, gives bonuses for continuing to buy, and presents rewards for referrals, aren’t you more likely to do business with them? Isn’t this approach to business more attractive than a competitor whose owner just has the door open and his hand out?

So how does the small business owner enter this space and offer something more powerful, secure, and attractive than the old-fashioned “punch card”? There a variety of options including payment terminal based systems, software programs that reside on your PC, and cloud-based systems.

First, there are software programs available on traditional credit card terminals that use the device to connect to a data base that tracks points, rewards, and stored value transactions. These systems are usually based on cards with magnetic stripes or occasionally on a phone number or some other unique identifier. This option is attractive for the merchant who does not have a POS system, but still wishes to have a professional program that does most of the work for them.

Second, are point-of-sale (POS) systems. Many POS systems now have customer relationship and loyalty programs built right in. The great thing about these systems is that if you have one, you already made the investment and there is no additional cost to track and reward customers. Customer activity is usually based on a customer phone number or some other unique identifier, so there is no need for investment in card printing, unless you would like to use them as stored-value or gift cards as well. However, there are serious concerns about data security with a POS solution. What if your hard drive crashes? How will you recover the current status of your customer’s rewards? What if your network gets hacked or your store gets robbed? Whose hands will your customer’s data be in and what financial exposure or even public embarrassment does this present?

Third, are cloud-based systems. These are web portals that essentially replace software installed on your computer and data stored on a PC in your store. They generally work with any internet connection and offer flexibility with other add-on software components that may help manage your business.

Regardless of the system you choose for your business, having a consistent program will help you attract and retain valuable customers. The options and approaches to rewards levels, points systems, redemption levels, co-opted promotions, referral incentives, giveaways, etc. are endless. Find the one that works for your budget, your approach to doing business, and the kind of customer you would like to attract, and you can add immense power to you marketing efforts.


* A baker’s dozen, devil’s dozen, long dozen, or long measure is 13, one more than a standard dozen. The oldest known source, but questionable explanation for the expression “baker’s dozen” dates to the 13th century in one of the earliest English statutes, instituted during the reign of Henry III (1216–1272), called the Assize of Bread and Ale. Bakers who were found to have shortchanged customers (some variations say that they would sell hollow bread) could be subject to severe punishment.  –

Add comment August 30th, 2011

How Much Is The Sandwich Already?



We get calls every day from both new business owners needing to establish credit card processing and seasoned veterans who are disenchanted with their current processors. What they both have in common is they are usually looking for the “BEST DEAL”. And to most shoppers, the “best deal” invariably means “lowest rate.”

The approach of these merchants is very understandable. First, this is how most merchant service providers attract customers and promote their services: “Guaranteed lowest rates”, “Rates as low as…,” etc. Second, merchants want to feel comfortable that their money is going in the bank in a secure and timely manner and at a fair price. But settling on what looks like the lowest rate without considering the overall structure of your pricing is only seeing part of the picture or uh… sandwich. I will explain.

Focusing only on the lowest rate is a little like going from deli to deli at lunchtime and asking how much they charge for turkey (or pastrami, or tuna, or whatever you like. It’s a turkey kind of day for me). Once you’ve found the guaranteed lowest price for turkey, you order a sandwich from the winning deli. The sandwich maker behind the counter goes to work building your lunch and every item has a price. She adds the lettuce charge, tomato tax, pickles price, onions fee, green pepper surcharge (don’t like green peppers? Too bad. You’re going to pay for them anyway), cheese charge, bread fee, a service charge for cutting the sandwich in half, the wrapping fee, the bag and napkin fees, and the smile surcharge. Now your lunch with the well-priced turkey doesn’t look like such a good deal anymore. By the way, they charge for mayonnaise too, but it’s called the condiment deployment fee and there will also be $149 annual charge for the privilege of continuing to buy sandwiches for the coming year. And if you decide to buy a sandwich from another deli there will be a $500 sandwich cancellation fee.

Of course every deli and every processor has a cost of doing business and we are in business to make a profit just like you are. Unfortunately, there is no such thing as free credit card processing. Just like there is no such thing as a free credit card terminal (but we will talk about that another time). The point is to understand ALL facets of your pricing before signing your money away. Ask what the REAL cost of processing is once ALL necessary fees are considered. We call this your “effective rate”- the real, bottom line cost of processing.

If you are already processing credit cards, divide your TOTAL fees by your total sales volume. This is your real cost of processing, not what your statement lists as your “qualified” or “Tier 1” rate. If you have a new business and haven’t processed transactions yet, it will take a little conjecture to arrive at your effective rate, but you will be able to get a pretty close idea so as to include that cost in your business planning and budget.

So the next time you are shopping for the “best price”, get a clear understanding of what you are really paying first and ask for an analysis of what the proposed EFFECTIVE RATE will be. That way you are comparing real cost to real cost. But alas, there is more to this story than just price and we will talk about that another time, too.


Rob Maccabee

SVP of Business Development, Payex


Add comment August 11th, 2011

Stop Playing The “Shell Game” When Shopping For Merchant Services!

***The shell game (also known as Thimblerig, Three shells and a pea, the old army game) is portrayed as a gambling game, but in reality, when a wager for money is made, it is a confidence trick used to perpetrate fraud. In confidence trick slang, this swindle is referred to as a short-con because it is quick and easy to pull off. – Wikipedia***

I remember my first time in New Orleans. I was coming back from a casino with a few extra dollars in my pocket and a few drinks in my belly when I walked past a compelling young man with a make-shift, cardboard box table top set up just around the corner from a Lucky Dog cart. I had to stop. I watched as his hands and words went into rhythm. He covered a blueberry-sized foam ball with a Dixie cup, moving the cup in and out, around and back, among two other cups, mixing them up thoroughly. As I watched he invited me to pick the cup that concealed the ball. Guess what? I nailed it- on the first try!

Flush with my success and lured by Big Easy banter, I was happy to lay out $20 that the operator promised to match when I made another correct pick. But I didn’t make another correct pick. And it wasn’t that my ability to watch his hands had gotten worse. I was experiencing a sleight-of-hand trick. The ball wasn’t under any of the cups. I had no chance to get it right. It was in his palm of course. I laughed at his cleverness, considered the $20 a well-spent tip for entertainment, and wobbled back to the hotel.

But what about those of us in the business world who are playing this type of game with a genuine expectation to come out on top? Unfortunately, there are thousands of small business owners making frivolous moves with the life-blood of their businesses every day when they jump from credit card processor to credit card processor just trying to save a buck.

First, let me say that I understand the temptation. Who doesn’t want to get the best business services at the best price? But many of the price comparison techniques we see these days often result in a lateral move at best and bait-and-switch scenario at worst.

Second, the simple fact is all direct processors and resellers basically work off the SAME wholesale costs – interchange. So it comes down to how much the provider is willing to give away for the business. Today with competition more stringent than ever and merchants savvier than ever, merchant service fees should be very comparable among the vast majority of providers. The problem is that salespeople approaching merchants are often performing sleight-of-hand tricks to show significant savings where they do not exist.

Here’s how it works: Providers reduce one fee or set of fees (such as the base discount rate) only to recover that loss in other ancillary fees such as surcharges, monthly fees, per item fees, statement fees, PCI compliance fees, annual fees, and on and on and on. What’s worse, many of these “lower processing rates” are “locked in” with contracts so tricky and expensive to get out of, that for some merchants, it is cheaper to continue to over pay than move to a less expensive provider.

What is a business owner to do?

Once you have gone through the process to find a provider you like, that keeps promises, and addresses your questions and service issues properly, stick with them. Of course keep an eye on your statement for anything out of the ordinary, but if they are a serious about maintaining a business relationship with you, you are likely to get periodic (semi-annual, annual) communications from them. Just like everything else, processing costs increase from time to time, so don’t immediately take a small price increase as a gouge. Again, communicate. Know that you are comfortable with your provider and save yourself the time and agony of playing the “shell game”.

So the next time you get an enticing phone call, email, or a personal visit from a sales rep claiming to “save you money”, you can have the peace of mind knowing you are already in a relationship that is as good as it gets. Instead of trying to chase the pennies related to your Merchant Service fees, spend your time and energy acquiring new business. You will be happier and your business will be healthier.

Stay tuned for information on how to choose the right processor for good so you don’t have to play the game anymore.

Thanks for reading. See you next time.

Add comment June 22nd, 2011

Need Cash For Your Business? A Merchant Cash Advance May Be The Answer!

You own a small business and it’s been going well for several years. Compliments of the economy and other factors beyond your control, business has become a little—stagnant. Now that summer is here and the economy is turning around, people are beginning to spend a little more money and you want to hit the ground running. You know exactly what you need to do and how you want to do it. Now all you need is a little extra cash to make it happen.

Unfortunately, even though the banks have plenty of money to lend, their lending practices still make it quite difficult to get the money you need. Not only are banks looking for stellar credit, they’re typically looking for collateral to place a lien against. Plus, it could take months for you to finally get your money—if you are approved.

Luckily, there is a great alternative to bank loans. It’s called a Merchant Cash Advance. The approval process is FAST—typically with a response in less than 48 hours and money in your bank in less than 7 days! The best part about a Merchant Cash Advance program is that poor credit is usually not an issue.

Here’s how it works… The company providing your advance will review your last 6 credit card processing statements. They are generally looking for an average monthly volume greater than $3000. Depending on your business type, time in business, consistency in monthly volume and personal credit, they offer an advance of anywhere from one to two times your average monthly volume. Most advance companies are looking for a payback period of 6 – 8 months. You pay back the advance by way of an agreement with your credit card processor that entitles the advance company to receive 10% – 20% of your daily credit card processing revenues. Half a year later… you’re in the clear.

Only paying a percentage of money you receive each day instead of a set monthly payment makes the process of paying the advance back painless and simple. Plus, unlike traditional bank loans, there are no limits on what you can use the money for.

So whether you are looking to increase sales with a solid marketing blitz or simply need some cash to get you through a tough time, a Merchant Cash Advance is a simple, fast, and effective way to get the money you need.

Add comment April 27th, 2011

Next Day Funding

Working in the payment processing industry, one of the questions I hear most often is “How quick will I receive my money?” While it would be great if you could get your money instantly, receiving your funds in 48 hours is standard.  To understand the time deposits take, let’s examine the process involved.

As you probably know, all of your transactions for the day are held in your terminal or software and are subsequently released at the end of a day in one “batch”. This is when the card issuer makes the debit to the card holder’s account permanent. The card issuer then sends the money to the settlement bank (24 hours).  The settlement bank then forwards the funds to your bank, which takes an additional 24 hours. These banking transfers all take place at night when we are sleeping and one business day is the fastest they can travel through the ACH system, thus making the fastest available deposit to a merchant 48 hours.

All hope is not lost, however. Some merchant service providers, such as Payex, can offer next day funding. That’s right; you could potentially get your hard earned money in as little as 24 hours.

The time it takes a transaction to process through the system technically does not change. Rather, if your business type is of low risk, you have decent credit, and you hold an account at the settlement bank, you could have your funds in just one day.  Understand that the settlement bank is in the middle of you and your processor, so the processor has not received their money yet. This means your processor is giving you your money before they receive theirs, so there may be a slight increase in your rate or a small amount of interest charged.

Nevertheless, if quick turnaround of funds is what’s important to you, it may be a small price to pay to have your money in just one day.

Add comment February 25th, 2011

Gift Cards- Is your Business Missing Out?

As the owner of a small business, there is one important question you should always ask yourself; am I doing everything I can to maximize my sales? By asking this simple question, you ensure that your business never gets stagnant, and you might just find some hidden income you were overlooking.

Maybe at first you only accepted cash, only to realize that accepting credit cards increased the amount your customers would spend. Perhaps you were stuck on a wired terminal, and discovered that going wireless was what your business needed. (See our post on wireless terminals)

Cash, checks, and credit are no longer the only forms of payment available. If you are looking for a quick and cost-effective way to expand your business, I may have your answer.

Gift cards.

Though often overlooked as just a holiday gimmick or something that only large chain stores can afford, gift cards may just hold that extra sales punch your business needs. The logic behind adding a gift card program is simple; take in more sales revenue today, for future redemption that may not even occur. Typically, anywhere from 17-25% of gift cards are never redeemed. According to a Consumer Reports study, those that do use their gift cards perceive the card as a significant discount and often spend considerably more than the value of the card.

As if increasing your sales weren’t reason enough, there are tax benefits as well. Did you know that the “income” from gift card sales is reported on your taxes as a liability? That’s right—you could sell thousands and thousands of dollars in gift cards and your accountant will not record them as income until (and *IF*) they are redeemed (check your state’s escheatment laws for further details).

On top of the sales benefits of gift cards, they also can help to increase customer loyalty, serve as further branding and advertising for your company, and can even be used as store credit for merchandise returns.

With all that said, can your small business afford to miss out on gift cards?

Add comment January 21st, 2011

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