A business that currently processes Visa/MasterCard sales has a unique opportunity to leverage that revenue asset. Consistent monthly credit card sales can qualify a company for a merchant line of credit, which can be an invaluable credit tool during times of growth and expansion.
A merchant line of credit is a funding option designed for small and mid-sized businesses to obtain working capital in exchange for the purchase of future credit card receivables. The credit line amounts may go up to $250k for a business over a year old, depending on how much Visa/MasterCard sales receipts it processes on a monthly basis.
This is not a merchant cash advance, where a lump sum payment is provided in exchange for a share of future credit card sales. Instead, a merchant line of credit acts as a revolving line of credit that can be used at any time. It is a useful financial tool for businesses that require cash immediately, without all the headaches of dealing with the traditional loan process. An approval can take as little as 24 hours, with access to cash in as little as 10-14 days.
Once approved, a company can access the revolving credit line at any time, and best of all — the repayment terms are simple, because repayment is automatically taken from future credit card receivables. There are no restrictions on how funds are to be used, which gives a lot of freedom and flexibility. If funds are needed to cover unforeseen business expenses, to purchase computer equipment, etc., then a company can simply use the revolving line of credit like a business credit card, or access the funds online.
The merchant line of credit is also an essential tool for building a company’s creditworthiness, since all payback history is reported to major business credit bureaus such as Dun and Bradstreet. This will ultimately help a company to establish business credit history, and to show creditors that it can handle a revolving credit line responsibly.
It’s important to note that having a merchant line of credit will not affect personal credit, nor will it impact a company’s ability to obtain a traditional loan or business credit card.
It is a funding source that provides access to capital when a business needs it most. There is no personal guarantee or collateral required, and it’s the best tool of leverage for obtaining working capital without putting personal credit at risk.