SBA Community Advantage Loans: A Complete Guide

Every small business has one thing in common: they all need cash to operate. Money is required to start a new project, expand a business, or purchase the equipment required for daily operations, and sometimes that money has to come through financing. As many business owners know, though, this isn’t as easy as simply walking into a bank and receiving a loan, especially in underserved areas.

Sadly, whether we’re talking about an inner-city business or one that is owned by a woman or minority, funding can be hard to get. But funding for these demographics is critical, not just for the success and survival of the individual business, but to improve the economy throughout underserved markets. This is why the Small Business Administration has launched the SBA Community Advantage Loan Program. Read on to find out more about this innovative pilot program.

What Is The SBA Community Advantage Loan Program?

The Small Business Administration offers loads of resources for small business owners, including training, educational materials, and even funding. Any small business owner that has ever attempted to take out a loan knows just how difficult it can be to obtain traditional funding. This holds especially true for those in underserved communities.

What Is An Underserved Community?

Underserved communities typically include inner cities and rural areas. Federally designated Low-to-Moderate Income communities are considered underserved. Any business that has more than 50% of full-time staff members that are low-income or live in LMI areas is considered an underserved market. Businesses that are owned by minorities, women, and veterans are also included in this definition.

The SBA assists small business owners in becoming empowered and successful, and businesses in underserved markets are no exception. After all, a successful business doesn’t just benefit the owner – it also helps stimulate the economy and create jobs, which is especially critical in these low-income areas.

This is why the SBA has launched the SBA Community Advantage Loan Program. This financing program allows businesses in underserved areas to receive low-interest financing with reasonable terms. Business owners that can’t receive financing through traditional loan programs can take advantage of competitive rates and terms through this SBA pilot program.

Because this is an SBA pilot, there is a limited amount of time during which businesses can apply for and receive a Community Advantage loan. This small-scale project from the SBA will expire on March 31, 2020, after which businesses will have to consider one of the Administration’s other loan programs, such as the 7(a) program.

Community Advantage VS Standard 7(a) Loans

When exploring the options for SBA business loans, the Standard 7(a) program is typically the most popular. Why, then, would a business consider applying for a Community Advantage loan? Looking at the differences between the two programs can help determine which is the best choice for any business.

First, it’s important to understand how SBA loan programs work. The Small Business Administration does not provide funding directly to small businesses. Instead, the SBA has created a framework and standards that enable banks, credit unions, and nonprofits to act as intermediaries and provide low-interest loans with flexible terms for business owners. Because these loans are backed by the SBA, there is less risk for the lender, so it can feel confident in loaning money to startups and established small businesses.

The SBA Community Advantage program was launched in 2011 and will be available through 2020. This program provides loans of up to $250,000 to qualifying small businesses. Because 85% of loan funds up to $150,000 and 75% of funds more than $150,000 are guaranteed by the SBA, lenders are more willing to work with businesses that have failed to obtain traditional financing. Loans can be used for almost anything, including the purchase of equipment or real estate, to refinance existing debt, or for use as working capital.

The maximum interest rate for these loans is set by the SBA as the prime market rate plus 6%. Rates are typically around 7% to 9%, which varies by lender. The background of the borrower, including credit score, could affect the interest rate, but it will never go above the SBA’s set maximum. Terms for these loans are dependent on how the money is used. Equipment purchases and working capital come with a maximum maturity of 10 years, while real estate purchases have a maximum term of 25 years.

The Standard 7(a) program has a few differences when compared to the Community Advantage program. For starters, the maximum loan amount for 7(a) loans is much higher. Borrowers can receive up to $5 million through this program, which makes it the better choice for anyone seeking more than $250,000. If you need a smaller loan and don’t qualify for the SBA Community Advantage program, you may want to consider SBA Microloans.

Interest rates for loans obtained through the 7(a) program vary and depend upon the amount borrowed. Rates are currently set at the prime rate plus a maximum of 4.75%. Average interest rates range from about 7% to 9% and are comparable to the rates of the Community Advantage program.

The repayment terms are also similar between the two programs. Loans used for working capital and equipment have maximum terms of 10 years, while real estate purchases have terms up to 25 years.

One of the biggest advantages of the Community Advantage program is that businesses without adequate collateral can be approved since the SBA backs between 75% to 85% of the loan. Collateral requirements will vary by lender.

Under the terms of 7(a) loans, lenders do not have to take collateral for loans that do not exceed $25,000. Lenders may opt to demand collateral for loans up to $350,000. Once the loan exceeds this amount, the SBA requires that the lender collateralize the loan up to the total loan amount. If business assets are not enough collateral, trading assets and personal real estate will be used. It’s also important to note that a personal guarantee is required to receive both 7(a) and Community Advantage loans.

Aside from the maximum loan amount, one key difference between the two programs is which businesses are eligible. Any for-profit business or startup that meets the general requirements set by the SBA can apply for a 7(a) loan. Only businesses that have met the qualifications of operating in an underserved area can apply for and receive Community Advantage funding.

If an SBA Community Advantage loan is the right choice for you, read on. If the 7(a) program sounds more in tune with your needs, read more about SBA 7(a) terms, rates, and eligibility.

Who Is Eligible For A Community Advantage Loan?

All applicants for an SBA Community Advantage Loan must meet the standard eligibility requirements set forth by the SBA.

Business owners applying for a Community Advantage loan must own a for-profit small business as defined by the SBA. This means that businesses should have fewer than 500 employees and under $15 million in annual revenue. Businesses must be based in the United States and must also be in the area that is served by their chosen lender. Businesses that participate in illegal operations, lending, or investment services are not eligible.

All applicants must have a purpose for obtaining the loan, be able to prove that they can repay the loan, and be able to demonstrate a need for the funding. In addition, applicants must have exhausted other financing options before applying for a loan through the SBA.

A good credit score is required for all SBA loans, including the Community Advantage program. A minimum score of 680 is recommended for the highest chance of approval. Any negative marks on a credit report will need to be explained to the lender. Unsure of your score? There’s no need to be – find out how you can obtain your free credit score before talking to a lender.

Finally, the SBA has requirements specific to the Community Advantage program. In order to qualify for a loan, the applicant must operate the business in an underserved market. By the SBA’s definition, this includes Low-to-Moderate Income communities, businesses where over half of the full-time staff is low-income, Empowerment Zones, Enterprise Communities, Promise Zones, and HUBZones.

In addition to the underserved communities previously listed, startups that have been in business for fewer than two years are also eligible to apply. Servicemembers and military veterans who qualify for the SBA Veterans Advantage program and meet all other requirements can also apply for a Community Advantage loan.

If you’re still unsure if the SBA Community Advantage program is right for your business, take a look at the requirements for other types of SBA loans that may better serve your needs.

How Do I Apply For An SBA Community Advantage Loan?

small business

If you need a loan of $250,000 or less and you operate your business in an underserved area, the SBA Community Advantage program may be the right choice for your financing needs. After you’ve determined that you’re qualified for the program, the next step is to begin the application process.

To begin, you will need to find a lender that offers SBA Community Advantage loans. You can use the SBA website to find a local lender in your area or you can ask your existing financial institution for a list of SBA Community Advantage lenders. Once you’ve found a lender, you’ll need to work with them online, over the phone, or in person to complete the application process.

Your lender will guide you through the process and will provide the details specific to your loan, such as interest rates, terms, and collateral requirements. The lender will also require personal information from you relating to your credit, finances, and business history. You can get started ahead of time by gathering a few critical documents.

To apply for your loan, you will need to provide financial statements, personal and business tax returns, and personal and business credit reports. You should plan to have all documents for at least the last two years.

For startup ventures that have been in operation for fewer than two years, a solid business plan and financial projections will be required to process your application. Please note that other documentation may be required for both established and startup businesses.

Once the application is completed, approval and funding typically take several months because of the lengthy underwriting and closing processes. The entire process from application to funding takes an average of 30 to 90 days (and sometimes longer). If you need approval in a hurry, consider the advantages of an SBA Express Loan.

After the application is approved and the underwriting and closing process is complete, funds will be distributed and you can use them to purchase, update, or expand your small business.

Final Thoughts

It’s no secret that SBA loans can be tedious to apply for and difficult to obtain, but the benefits of these small business loans outweigh the drawbacks. If you operate in an underserved community and need low-interest financing to improve your business, the SBA Community Advantage Program is certainly an option worth considering.

The post SBA Community Advantage Loans: A Complete Guide appeared first on Merchant Maverick.

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Credit Cards Balance Transfers: A Guide for Small Business Owners

Picture this: you get a credit card for business expenses that comes with a high APR. Maybe it’s because you didn’t know any better, needed quick credit for an emergency, or simply didn’t have the credit score to qualify for better offers. No matter what the reason, you’re not alone. Even the savviest consumers and business owners can fall victim to high-interest credit cards.

Once you’ve used the card, you’re stuck with this high interest rate until you pay off the debt, right? Actually, you have an alternative that can lower your interest rates, potentially saving hundreds or even thousands in interest. That alternative? Transfer your balance to a credit card with a lower APR.

If saving money on interest is something that, well, interests you, read on to learn everything you need to know about balance transfer credit cards.

What Is Balance Transfer?

To put it simply, a balance transfer occurs when existing debt is transferred from one credit card to another. The transfer won’t eliminate the debt. While the first credit card will be paid off, the balance will simply be applied to the new card.

Is A Business Credit Card Balance Transfer Like A Normal Balance Transfer?

The primary difference between personal and business credit card transfers is how they are reported. Monthly payments, late payments, and defaults from normal credit cards affect your personal credit score, while business credit card payment history is typically reported to business agencies.

What Is A Balance Transfer Fee?

A balance transfer fee is a one-time fee charged by the issuer of a credit card for completing the transfer. This fee varies by company but typically runs 3% to 5% of the total transferred balance. When compared to long-term savings on interest, these fees are quite minimal for many business owners.

What To Watch Out For

You’ve transferred your balance to another card, and it’s all smooth sailing from there, right?

Not exactly. It’s important to note that balance transfers come with expiration dates. This period of time varies by issuer, but you can typically expect the introductory APR to expire between 6 and 18 months after making the transfer. Once the low interest rate disappears, the balance will be subject to the standard APR which could be 15%, 18%, or even higher.

Making a late payment could also result in losing the introductory APR; all balances would then become subject to the company’s standard APR.

Be aware that new purchases charged to the credit card will most likely not be covered by the introductory APR offer. Instead, new purchases are typically subject to the standard APR. Make sure you fully understand the terms, conditions, and rates surrounding new purchases before making your move.

How Long Do Balance Transfers Take?

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Once you’ve picked a balance transfer card that’s right for you, the process of completing the transfer is quite simple. All you need to initiate the transfer is information such as account numbers and the balance amount. Once all of the information has been submitted, you can expect the transaction to be completed in about two weeks.

Different Types Of Balance Transfer Offers

There are a few different types of balance transfers available. Make sure to shop around to find the card that offers the most savings while also providing a competitive interest rate after the promotional period has expired.

One of the first types of balance transfers is the no-fee offer. These balance transfer cards do not require you to pay the typical 3% to 5% transfer fee, which could add up to big savings on larger balances.

Another popular type of balance transfer is the 0% APR offer. These balance transfers offer a 0% introductory rate, making it easier to pay down or pay off debt. As previously mentioned, these offers do expire, so it’s important to be aware of standard APR rates and try to pay down as much of the debt as possible during the introductory period.

The Benefits Of Business Credit Card Balance Transfers

There are several benefits to taking advantage of a business credit card balance transfer. For starters, the money saved on interest allows business owners to pay down their debts much faster, which not only provides more unused credit but can also boost the credit rating of the business.

A business credit card balance transfer is also an easy way to consolidate debt and lower credit utilization. For example, if a balance of $4,000 on a card with a $5,000 limit is transferred to a new card with a $20,000 limit, credit card utilization on the new card is not as high, and additional purchases up to the higher limit can be made, keeping all expenditures on one card.

In some cases, additional debt balances can be transferred to a business credit card. High-interest loans and installment payments can sometimes be transferred, depending on the card issuer’s terms. This could save in interest and help reduce debt over a shorter period of time.

If business purchases have been made on a personal credit card, transferring the balance to a business card will also help boost your business credit, which is critical for obtaining business loans, equipment financing, and other business-related financial products.

Balance Transfer Drawbacks

Balance transfer cards aren’t without their drawbacks. A big mistake that many business owners and consumers make when signing up for these cards is not looking beyond the introductory APR. Sure, it sounds great in theory, but reading the fine print can reveal caveats such as a higher interest rate than what is currently paid. All terms and conditions should be fully understood before making the transfer.

It’s also easy to believe that once the introductory rate expires, the remaining balance can be transferred to another card. In reality, this can harm your credit score. Bouncing from card to card and keeping a high balance makes you a riskier venture, which could harm your chances at receiving additional financing when needed and can potentially lead to reduced credit limits on existing cards. Remember, a balance transfer card is meant to pay off debt more quickly and should be used responsibly.

I Want To Do A Balance Transfer – Where Do I Begin?

  1. Understand your current financial situation. What is your current balance, credit limit, and APR? Knowing this information will help you make an informed decision on whether making the transfer is the smartest financial move.
  2. Explore your options. If you’ve received a preapproved offer (or several), consider these first. Weigh the new terms and conditions with the terms and conditions of your old card or loan to see which are better. Remember to think over the long term and look beyond the introductory APR. Also, note that you typically cannot transfer balances between two cards from the same bank or provider.
  3. Choose a card. Apply for your chosen card once you’ve determined which best fits your needs.
  4. Wait for approval. Once approved, you can either use the credit card company’s online system or call customer service to provide details on the balance transfer. Remember, you will need balance amounts and account numbers to complete the transfer.
  5. Pay off the debt. Once the transfer is complete after 1 to 2 weeks, work to pay off your debt as quickly as possible. Don’t forget that the introductory APR expires, so your goal is to pay off as much as possible before this period ends.

Frequently Asked Questions

Is it better to pay off one credit card or reduce the balances on two?

The most effective way to tackle credit card debt is to focus on paying down the balance of the card with the highest interest rate. Chipping away at this debt will cut down on the interest you’re paying and help you pay off the card faster. After one card is paid off, continue this method to pay off all of your cards. Remember, even though you’re keeping the focus on one card, you always want to make sure you’re making at least the minimum payment on all credit accounts.

How do balance transfers affect your credit score?

Applying for a credit card does show up as an inquiry on your credit report, which can lower your score. It’s important to pick just one card with the best terms to avoid multiple dings on your credit. Transfers can be great for your credit score over the long term. In addition to potentially lowering your credit utilization, a lower interest rate allows you to pay off your debt quickly, which can boost your score.

Does a balance transfer automatically close the account I’m transferring from?

A balance transfer does not automatically close your old credit account. If you wish to close your account, contact the creditor once the balance has been transferred.

Can I transfer a personal credit card balance to a business credit card?

In some cases, yes, but it depends upon the terms of the company. It’s important to note that keeping business and personal expenses separate is often recommended, so this should be a consideration before a transfer is initiated. It is also important to remember that business cards typically require a personal guarantee, so you will still be held liable for the transferred debt.

Can I transfer a business credit card balance to a personal credit card?

Again, in some cases, you can do this, provided that both accounts are in your name. However, as previously mentioned, it’s typically recommended to keep business and personal finances separate for bookkeeping purposes.

The post Credit Cards Balance Transfers: A Guide for Small Business Owners appeared first on Merchant Maverick.

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Picked For You: Best Business Credit Cards For Good Credit

If you’re sitting with a credit score above 700, you could be missing out on some worthy credit card offers for your business. This means that you may not be maximizing your potential rewards, benefits, limits, or APR. Luckily, at Merchant Maverick, we have already done the heavy lifting and picked out the best business credit cards for a variety of business owners with good credit. You can take a peek at our selections below.

Best For Travel Rewards: Chase Ink Business Preferred

Chase Ink Business Preferred



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Annual Fee:


$95

 

Purchase APR:


17.74% – 22.74%, Variable

 

Why It’s Our Pick

Chase’s flagship business card, Ink Business Preferred, is the clear winner if you travel a lot. That’s because reward points are worth 25% more if redeemed for travel through Chase Ultimate Rewards. Additionally, points can be transferred to other travel programs on a 1:1 point basis, meaning you could eke out more than 1.25 cents per point. On top of all that, Chase also packs this card with no foreign transaction fees, a plus for those going overseas.

With bonus rewards for redemption on travel and 1:1 point transfers for travel programs, Chase Ink Business Preferred stands above other cards when it comes to travel rewards. Find out more with our in-depth review.

Best For No Annual Fee: Chase Ink Business Unlimited

Chase Ink Business Unlimited


chase ink business unlimited
Apply Now 

Annual Fee:


$0

 

Purchase APR:


14.99% – 20.99%, Variable

 

Why It’s Our Pick

Besides featuring that tantalizing no annual fee, Chase Ink Business Unlimited boasts a range of rewards and benefits that make it one attractive card. To start, this card offers an unlimited 1.5% cash back on all purchases, a generous reward scheme that stays simple. Additionally, its welcome offer hands over $500 cash back if you spend $3,000 on purchases in the first three months.

Beyond those rewards, Chase Ink Business Unlimited provides a 0% intro APR for the first 12 months, and you can add employee cards at no additional cost. Get Merchant Maverick’s full breakdown by reading our detailed review.

Best For High Limit: Capital One Spark Cash for Business

Capital One Spark Cash For Business


capital one spark cash select
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Annual Fee:


$95 ($0 the first year)

 

Purchase APR:


18.74, Variable

 

Why It’s Our Pick

While your credit limit ultimately depends on your credit score and business finances, Capital One Spark Cash for Business provides a range of rewards and benefits that make it appealing to those with excellent credit. Its base rewards program features an unlimited 2% cash back on all purchases. This very generous offer should catch the eye of most businesses looking at getting a new credit card. Of course, there is a $95 annual fee, but high spenders should be able to recoup that loss quickly.

This all comes with the caveat that you’ll be bringing excellent credit to the table; Capital One requires that you have had a loan or credit card for three-plus years with a credit limit in excess of $5,000 before getting a Spark Cash for Business card. For a deeper look at Capital One’s card, venture on over to Merchant Maverick’s full review.

Best For Low APR: American Express SimplyCash Plus

American Express SimplyCash Plus



Compare

Annual Fee:


$0

 

Purchase APR:


13.99% – 20.99%, Variable

 

Why It’s Our Pick

Depending on your credit score, the American Express SimplyCash Plus card can get you a lower APR than industry standard. It posts a variable APR that currently sits at 13.99%, 18.99% or 20.99%. Of course, only those with excellent credit will be able to benefit from the lower ranges.

Beyond that potentially low APR, SimplyCash Plus features no annual fee and 0% intro APR for the first nine months. You can also get up to 5% cash back at office supply stores and on wireless telephone purchases, and 3% back on the purchase category of your choosing. If you want the full picture on SimplyCash Plus, head on over to our fully featured review.

Best For Cash Back: Chase Ink Business Cash

Chase Ink Business Cash



Apply Now

Annual Fee:


$0

 

Purchase APR:


14.99% – 20.99%, Variable

 

Why It’s Our Pick

The Chase Ink Business Cash really holds its own when it comes to cash back rewards. This card offers 5% back on purchases at office supply stores and on internet, cable, and phone purchases up to a combined $25,000 in purchases each account anniversary year. There’s also a 2% back at gas stations and restaurants up to a combined $25,000 in purchases each account anniversary year. On top of those hefty rewards, there’s 1% cash back on all other purchases.

After hitting the cap in both the 5% and 2% tiers, you’ll drop down to 1% cash back in both. Maxing out both tiers will net you $1,750 back. Rewards can be redeemed via cash back, or through credits applied to Amazon purchases, gift cards, or travel. If you think that Chase Ink Business Cash is right for you but you want to learn more, head on over to Merchant Maverick’s detailed review.

Best For Balance Transfer: American Express Blue Business Plus

American Express Blue Business Plus



Compare

Annual Fee:


$0

 

Purchase APR:


12.99% – 20.99%, Variable

 

Why It’s Our Pick

American Express’ Blue Business Plus features a 0% intro APR for 15 months on both purchases and balance transfers. In addition, the balance transfer fee sits at a low 3% or $3—whichever winds up higher—making this card attractive to businesses that need to transfer debt over to a new card.

It boasts a potentially lower-than-industry-standard variable APR once your 15 months of 0% APR are up. For rewards, it provides two points per $1 up to $50,000 spent, and then one point per $1 after you hit that cap. You can also take advantage of expanded buying power with Blue Business Plus, allowing you to purchase above your credit limit. Read up on further details with our in-depth review.

Frequently Asked Questions About Business Credit Cards

Should I Apply For More Than One Card At A Time?

While nothing is preventing you from applying for more than one card at a time, that doesn’t mean you should. Every time you apply for a credit card, you will receive a hard inquiry on your credit report. Multiple hard inquiries in a short space of time could negatively affect your credit score, at least temporarily. This is because credit score bureaus might think that you actually want multiple cards, something they see as a potential indicator to financial woes.

As a general rule of thumb, it’s usually best to not apply for multiple cards at once. Instead, take your time to find the right card for you. If the above cards don’t seem to fit your business, check out our small business credit card comparison for further tips on picking out which card best suits you.

How Long Does It Take To Be Approved With Good Credit?

How long it takes to be approved for a credit card depends on several factors, the biggest being how you apply. If you apply online or over the phone and you’re carrying that good credit score, you could be approved within a matter of seconds. Of course, should other hitches arise—such as your personal information being tagged as fraudulent—it may take longer to receive the credit card company’s decision.

If you mail in your application, a decision could take anywhere from seven to 10 business days no matter how good your credit score is.

Is There A “Best Time” To Apply For A Credit Card?

Generally, you’ll want to wait several months after you received a hard inquiry on your credit score. Hard inquiries can occur when you apply for credit cards, loans, housing, and other services. As I mentioned above, multiple hard inquiries in a short space of time could negatively affect your credit score, at least temporarily. Credit score bureaus might think that you actually want multiple cards, something they see as a potential indicator to financial woes.

You may also want to wait until you’ve been pre-approved for a card, a process that’s offered by many credit card issuers. Getting pre-approved for a card lets you know that you have solid chance to actually get approved without placing a hard inquiry on your account.

You might also decide to wait to apply for a credit card until your business needs to make a big purchase. That way you can get a card with a 0% introductory APR, allowing you to pay the purchase off over multiple months without worrying about racking up interest.

Does A Business Credit Card Affect My Personal Credit Score?

It depends. Almost all issuers check with consumer credit bureaus when applying for a business card. In some instances—if your account is frequently delinquent, for example—issuers may report your activity on a business account to consumer credit bureaus.

All told, as long as your keep your business account in good standing and you keep from slipping up, your personal credit score should be fine.

Final Thoughts

We hope you enjoyed reading through this breakdown of the best business credit cards for those with good credit. If nothing else, hopefully you learned a thing or two!

Check out our detailed list of the best business credit cards for 2018 to get an even deeper look at some awesome cards. If your credit score isn’t quite high enough for the above cards, we recommend you check out our ultimate guide to improving your business credit score. Or, if you decide you need to go the charge card route, we’ve got you covered on your best options.

The post Picked For You: Best Business Credit Cards For Good Credit appeared first on Merchant Maverick.

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How To Accept Credit Cards Online

So you’ve realized you want to start selling online. Good for you! The ecommerce market is certainly booming. But before you can start raking in the money, you probably have a few questions, like “how do I make a website?” and “how do I accept credit cards online?” Here’s the good news: There are plenty of software options and payment processors to choose from! The bad news? There are plenty of software options and payment processors to choose from. So how do you choose?

As always, there’s no one perfect solution for everyone. You need to know your business (and where you want to go with it) and have a rough idea of what you need. If you have no idea where to start, never fear! In this article, we’ll cover some of the basic considerations about accepting credit card payments online, as well as types of payment processors and how to accept credit card payments online with and without a website. We’ll also discuss some of our favorite solutions for ecommerce and provide resources to help you learn more.

5 Questions To Ask Before You Start

It’s really important, before you dive headlong into any kind of financial investment in your business, to sit down and make sure that you know what you want and what you need. I say that a lot, but with selling online it’s especially important to look before you leap because if you get any component of your setup wrong, redoing it will cost time and money.

So before anything, here are some questions to consider:

  1. How technologically savvy are you? Simply put, are you even able to build and maintain your website yourself? If you’re not exactly a technological wizard, your priority should be finding an easy-to-manage solution. You can also outsource tasks you can’t handle yourself, such as design or even data entry for the creation of products. Of course, if you have an ambitious idea and no ready-made solution exists, or you need a lot of customization, you might need a developer who can work with software APIs to create what you need. You can find freelance developers to help out as you go, but the more high-tech you go, obviously, the more you should consider having a full-time developer.
  2. Do you already have a website? If yes, do you like your website? Would you rather abandon it for a better site with more features? If you already have a site and don’t want to go through the effort of creating a new site to sell a handful of products, payment buttons or plug-ins are better options. If you don’t have a site or you don’t mind nixing your current site in favor of something better, shopping cart software might meet the brief nicely. But of course, you don’t need a website to accept payments online. We’ll talk about all of these options more below.
  3. What’s your budget? When it comes to numbers, you need to look at both upfront costs and monthly (or yearly) costs. How much can you spend at the outset, and how much do you expect to be able to afford on a monthly or annual basis? Keep in mind the more technically advanced your website, the more you can expect to pay to build and maintain it. Likewise, the busier your site — the more products you have and the more sales you make — the more you can expect to pay. Don’t forget the tangential costs, such as hiring a designer or a developer, or data entry, and of course, the costs of payment processing itself!
  4. What are you selling? Whether you’re offering digital goods, subscriptions/services, or retail products, look for service providers that cater to your industry so you don’t have to find creative workarounds. Many solutions are generalized for a broad array of merchants, but with add-ons and integrations to make them more tailored. You can also find payment processors and software that offer ready-made specialized solutions and service plans, such as micropayments for merchants who sell low-priced digital goods.
  5. How comfortable are you with handling security features? If you want to sell online, you have to make sure your website is secure. That means ensuring your site is PCI compliant. The more involved you are in the payments process and the more sensitive information your website handles, the more of a burden you are taking upon yourself. Fortunately, many payment processors and other software providers offer solutions to keep your customers’ information secure and reduce your PCI burden — in some cases, you may not need to do anything at all.

Once you’ve got the answers to these questions and a list of the features you need and want, it’s time to actually start looking at your options. One of your primary considerations should be finding a payment processor. However, depending on your business model, you might want to first look at what kind of ecommerce options work for you and then select a payment processor from the available options.

We’ll begin by talking about payment processors and go on to look at what other software or platforms you should explore.

Types Of Payment Processors

No matter how you go about finding a payment processor — choosing a standalone, going with the default processor included with your shopping cart, or choosing a recommended partner from a software provider — you need to consider what kind of business model the processor uses. If you’ve been here before and read any of my other articles, you know that I am talking about the difference between third-party payment processors versus traditional merchant accounts.

Traditional merchant accounts are very stable. It would take a clear violation of either your contract or card network rules in order to trigger an account termination, and you’re unlikely to encounter a hold on funds unless you’ve had a series of issues with chargebacks or fraudulent transactions. However, most merchant account providers expect you to have an established business and a monthly volume of $10,000 in credit card transactions. Plus, setting up a merchant account will typically take a few days. It could take longer depending on how many processors are on your short list and how much negotiation is required.

Third-party processors are not quite as stable as merchant accounts. That’s because instead of issuing separate accounts for each of their merchants, everything is lumped together in one giant, communal merchant account. It takes very little effort to apply for an account with one of these processors, and you can often get approved and set up to accept credit cards online within a day. Factor in no monthly minimum volume requirements and third-party processors provide a great way for new businesses to take payments. However, the trade-off is that you’ll face greater scrutiny and a higher risk for account holds or terminations, often with no warning. Check out our article on how to prevent merchant account hold and freezes to learn how to reduce your risk.

While third-party processors are riskier than merchant accounts, they are a great option for new businesses who don’t know what sort of volume they can expect and don’t have an established history. Even for established businesses, there are some advantages: namely, third-party processors offer predictable, flat-rate pricing, so you know exactly how much you’ll pay. The best merchant account providers typically offer interchange-plus pricing, which, while clear and transparent, doesn’t make it easy to accurately estimate processing because interchange rates vary.

It’s up to you to decide which type of processor is right for your business. I do want to point out that some software companies (ecommerce shopping carts, point of sale solutions, invoice platforms, and more) often build white-label payments into their solutions. These solutions can take the form of third-party processors or merchant accounts, so make sure you investigate before just going with the default processor. In addition to their native payment processing services, most ecommerce software providers support integrations with an assortment of merchant accounts and third-party payment processors.

Square is our top-pick for third-party payment processor. In addition to predictable, flat-rate pricing with no monthly fees or contracts, Square offers a whole suite of seamlessly integrated apps to address in-person and online sales at no charge at all. eCommerce transactions process at 2.9% + $0.30 each.

For merchant accounts, we recommend CDGcommerce, which offers flat-rate pricing and an interchange-plus option depending on the merchant’s payment volume. There are no monthly minimums and no contracts, just a $10 monthly fee. Low-volume merchants will pay 1.95% + $0.30 for most transactions, or 2.95% + $0.30 for premium, corporate, or international cards. Merchants who process more than $10,000/month are eligible for interchange-plus pricing with a 0.30% + $0.10 markup.

Does Your Payment Processor Include a Gateway?

If you want to accept credit card payments online, it’s not enough to find a credit card processor. You also need a gateway. As the name suggests, a gateway is an intermediary software program that transfers the payment data from your website to the customer’s bank to be approved or declined (and then routes the money to your merchant account).

Many payment processors offer gateways as part of their services. For example, PayPal, Square, and Stripe all offer gateways bundled with the rest of their services at no additional cost. CDGcommerce offers its Quantum gateway as part of its services for online merchants.

However, some processors will charge you a setup fee and/or a monthly fee for use of the gateway. While it’s fair and legitimate to charge for this service (especially if you’re being offered other discounts or freebies in exchange), there’s no reason for you to overpay, either. Make sure you know how much a gateway service will cost if it’s not offered for free.

While it’s rare to find a processor that doesn’t include some sort of gateway access, they do exist. In the event that you find yourself leaning toward one of these processors, you can find your own gateway. Authorize.net is nearly universally compatible and reasonably priced, which makes it a good option for most merchants. (Worth noting: CDGcommerce’s gateway, Quantum, also includes an Authorize.net emulation mode to maximize compatibility.)

Want to know more about how payment gateways figure into your ecommerce setup? Check out our article, The Complete Guide to Online Credit Card Processing With a Payment Gateway, for more information.

How To Accept Online Payments With A Website

A website is a pretty integral part of selling online (but it’s not 100% necessary — we’ll look at some alternatives in the next section). As mentioned above, the first question to consider is: Do I already have a website? Then ask yourself: Do I like that website, or would I rather start over completely? Fortunately, there are solutions for both of these scenarios. For existing sites, you can implement payment buttons or seek out a plug-in or extension that supports ecommerce.

Adding Payments To An Existing Site

best templates

If you’ve used a site builder such as WordPress, Weebly, Wix, or Squarespace, it’s fairly simple to implement online payments. Simply check out the sitebuilder’s available third-party apps, extensions, and plugins. If you already know which payment processor you want to use, you can search directly for an available add-on. Otherwise, you can browse and see what options are ready-made for you. These add-ons will allow you to securely collect payment information from your customers as well as manage the order fulfillment process. Do your research and go with solutions from your site builder rather than third parties, if possible. Check reviews of any plugins or extensions you add and make sure they are well supported and any glitches are fixed in a timely manner.

If you run a WordPress site, WooCommerce or Ecwid could be good starter options. WooCommerce is actually a free plug-in to add to your site, with a basic theme and your choice of payment processors. It’s a very modular setup, so you can choose from a mix of free and paid extensions that allow you to customize WooCommerce to your needs. That includes payment processors, subscription tools, the ability to create add-ons (such as gift wrap for products), and more. Most WooCommerce add-ons are charged on an annual basis, which could require more of an up-front investment than a monthly subscription, so be aware of this fact.

Ecwid is another plug-in designed for WordPress. However, it also works on an assortment of other website-building platforms, including Wix and Weebly, Ecwid does offer a free plan for businesses with 10 or fewer products, but for higher-tiered plans you’ll pay a monthly subscription fee. Ecwid supports a wide assortment of integrations, including payment gateways. With higher plan tiers, you also get access to expanded sales channels.

Wix and Weebly’s website builders can be used for blogging, personal portfolios, and any other purposes. They both offer online store modules. Online stores from Wix start at $20/month with no transaction fees and your choice of processors. Upgrading to an eCommerce plan is fairly simple from within the Wix dashboard and won’t require any substantial reworking. Simply add the “My Store” module to your dashboard, make the upgrade, and start creating products.

Finally, there’s Weebly. Square actually bought Weebly in the spring of 2018, so it’s possible we could see Weebly start to favor Square pretty heavily in the future. For now, though, Weebly’s online store plans start at $8/month (on a yearly plan), with a 3% transaction fee on top of your processing costs. The transaction fee drops off with higher-tier plans, leaving just the monthly fee.

The other way to add payments to an existing site is to look for a payment processor that supports customizable payment buttons. A good payment button creator will give you power over the appearance of the buttons as well as the settings for transactions. The obvious, go-to solution for many is PayPal, which offers a pretty powerful array of tools. PayPal’s buttons are a good option whether you are selling a single product or multiple ones. You can set up payment buttons to allow products to be added to a cart or to go directly to checkout. PayPal even allows nonprofits to create a “Donate” button for their site, which can be configured for one-time and recurring donations.

An alternative to PayPal is Shopify Lite, an entry-level solution. For $9/month plus transaction costs (2.9% + $0.30), you can accept payments on your website by adding payment buttons. The plan also includes access to Shopify’s mPOS app and the ability to sell on Facebook (we’ll talk about that option in the next section, too.) And it’s worth mentioning that Ecwid also supports the creation of custom buy buttons.

While adding payments to an existing site is incredibly convenient and often requires little work, you won’t get quite as many tools as you would with a hosted ecommerce software solution. Which brings us to the best solution if you would rather build a new site or have no website to start with:

Building A New Site With Shopping Cart Software

eCommerce software apps, sometimes also called shopping carts or shopping cart software, are hosted, all-in-one solutions to online sales. Adding an ecommerce feature to an existing website requires you to choose a platform, buy the domain, and pay for hosting, but with shopping carts, you’ll get everything in a single package: online sales and product management, hosting, and sometimes even the ability to buy a domain name directly. Typically, shopping carts will also help you centralize control of sales across multiple channels, so that if you sell on social media, on eBay, or through another channel, you can handle order fulfillment through a single platform. That even includes buying postage (at a discounted rate) and printing the shipping labels. Some shopping carts will offer marketing tools or integrations with marketing platforms, as well as integrations with point of sale systems.

As far as payment processing goes, some shopping carts have opted to include their own white-label payments as a default part of their services. One such cart is Shopify, which offers its own Shopify Payments service (read our review). However, this is just a white-label version of Stripe. Be aware that choosing a payment processor other than the default can incur additional fees.

Generally speaking, even if a shopping cart doesn’t offer all of the features you want, you can search the app market for available extensions and integrations to get what you need. It’s worth researching the available add-ons as well as the native software features.

There’s a lot to consider and compare with a shopping cart. Obviously, you can use a sitebuilder such as Weebly or Wix, which both offer eCommerce modules. Then there are ecommerce-exclusive platforms, including Shopify and BigCommerce, which make it easy to build your site and customize the design (and even offer blogging so you can centralize control of your website).

If you want a whole lot of freedom and have coding knowledge, an open-source platform such as Magento might be more to your liking. Open-source platforms tend to be chock-full of specialized features (particularly if they have attracted active user communities) and you have almost limitless control of your site. A closed-source, SaaS platform is certainly a lot easier and more convenient for business owners who are just starting out and want to go the DIY route.

If you aren’t sure what you want, we recommend you start by checking out Shopify and BigCommerce, both of which are affordably priced for new businesses and offer extensive customer support resources. They also both offer multi-channel sales manage so you can sell through your own site and through other platforms but manage all of your orders from a single portal.

If you’re still curious about what makes a great ecommerce platform, check out some of our other resources!

  • The Beginner’s Guide to Starting an Online Store (eBook)
  • Shopping Cart Flowchart: Choose the Right eCommerce Software for Your Business (Infographic)
  • Shopping Carts 101: How to Choose a Shopping Cart for Your Business (Article)
  • Questions to Ask Before You Commit to a Shopping Cart (Article)

Managing Services, Subscriptions & Other Recurring Charges

A lot of merchants, from accountants and other professional service provideres to lawn care and cleaning services, could benefit from being able to automate recurring charges. And of course, the ability to automate charges is essential for SaaS providers and subscription-box sellers.

Generally speaking, the ability to accept recurring payments — for monthly services or subscriptions — isn’t a default option for payment processors or shopping carts, which tend to be retail-focused. However, you can find plenty of solutions that will work with your existing eCommerce setup. For example, Stripe and Braintree both offer extensive subscription management tools along with their payment gateway and processing services. Add-on services such as Chargify, Recurly, and ChargeBee work with a variety of processors. Zoho Subscriptions and Freshbooks also offer recurring billing tools. PayPal offers recurring billing tools for its merchants; Square offers “recurring invoices” but not a lot of advanced customization for subscription billing.

Proper research will be very important when selecting a provider that offers all of the features you need, whether you require metered billing for usage-based online services, the ability for customers to upgrade to a higher tiered plan mid-billing cycle, the ability to offer free trial periods and extend them, or a way to calculate taxes. Tools that automatically update expired cards can also help reduce failed charges and therefore improve revenues and reduce customer loss.

Accepting Online Payments Without A Website

Most people equate taking payments online with having a website. That is the most common option, but you don’t actually need your own website. Let’s talk about a few of the alternatives for how to accept credit cards online.

Creating Online Invoices

You could create your own invoices in Microsoft Office and send them out via email, but then you’ve got to keep track of which invoices have been sent and which have been paid — and you’ve still got to deal with waiting for the check in the mail. Online invoicing solutions can eliminate every single one of these hassles.

Generally speaking, invoicing software is cloud-based, so you can access it anywhere. You can customize invoices and send them via email (or generate a shareable link to the invoice). But unlike old-fashioned invoicing, these invoices include a link to pay directly in the invoice. Your customers follow the link, enter their payment details, and bam! You get paid much quicker.

Depending on which invoicing software you choose, you can get some powerful features. For example, PayPal allows you to enable partial payments on an invoice if you are willing to accept installment payments. Square’s invoicing links up with the platform’s customer database, allowing you to send recurring invoices and even store customer cards on file to make getting paid even easier. Zoho Invoice, which starts at $0/month, also allows for a customer database, as well as project management (so you can generate an invoice based on the number of hours worked). Shopify offers invoice creation within its platform at no additional charge as well — and this feature is even available on the Lite plan.

For most merchants, Square Invoices may be the most appealing, as it’s available with a Square account at no additional charge. However, Shopify’s built-in invoicing will work for merchants who want to sell with or without a website. Merchants who need project management as part of their invoicing should look at Zoho Invoice.

Using Online Form Builders

So you don’t have a website, but you still need to collect user information and accept payment. Online form builders offer an easy way to do both. Plus, you can post links to forms on social media or send them out via email.

Off the top of your head, you might think of Google Forms, which is free to use and quite advanced for a freemium software. However, it doesn’t integrate seamlessly with payment processors. Your best option, in this case, would be to use PayPal’s embeddable buy buttons and include the button in the form’s submission confirmation page as a second step. However, you’ll have to manually reconcile the payment records versus form submissions.

Subscription-based form builders will cost you money but offer far more capabilities than Google Forms, including direct integrations with payment processors/gateways such as PayPal, Stripe, Square, and Authorize.net. Subscriptions generally work on annual or monthly plans, but one option, Cognito Forms, offers an entry-level plan that charges 1% of the transaction amount instead. (Note, that’s in addition to any processing fees.) Other form solutions worth looking into are Zoho Forms and Jotform. Zoho Forms starts at $10/month and includes unlimited forms and up to 10,000 submissions. It integrates with both PayPal and Stripe. Jotform’s paid plans start at $19/month and are limited to 1,000 submissions, but include integrations for quite a few payment processors, including PayPal, Stripe, Square, and even Dwolla. Cognito Forms’ paid plans start at $10/month plus 1% of the transactions and include up to 2,000 form submissions. Integrations include PayPal and Stripe.

And we haven’t even talked about event registration sites. There are a lot of them, but the one many people are likely familiar with is EventBrite. EventBrite allows you to put all the details of your event online and sell tickets — including setting multiple tiers of admission and promotion cards, automatically setting price changes for registration deadlines, and so on. You can even collect marketing data about your patrons, from their zip codes to how they heard about the event. Your event is searchable from within the EventBrite platform, allowing people searching for something to do to discover your event as well. EventBrite does charge fees on top of processing costs, but these can actually be passed onto event registrees, saving you some money at least.

Selling On Social Media

It wasn’t all that long ago that the idea of being able to buy products directly through social media channels was novel and experimental, but nowadays you can create your own online shop through Facebook, or sell on Instagram or even Pinterest.

With Facebook, you just need a Facebook business page to get started. You can choose your payment processor (PayPal or Stripe) and start manually uploading products, all of which have to be reviewed by Facebook before they can go live. An easier option is to link your Facebook shop to an online store builder such as BigCommerce, Ecwid, or Shopify.

Shopify is actually an interesting solution because, while its core offering is an online shopping cart, it offers a “Lite” plan for $9/month that includes access to its mPOS app, buy buttons for a website, and a Facebook store with automated tools to make the process easier. You wouldn’t necessarily have to go through the hassle of building a website with Shopify just to sell on Facebook, but you still get more tools than you would by going through Facebook directly. Check out our Shopify Lite review for an in-depth look at the plan and all its features.

Selling on Instagram requires you to have a Facebook shop (because Facebook owns Instagram) to create what it calls “Shoppable posts.” That shop can be managed directly via Facebook itself, or via Shopify or BigCommerce as one of multiple sales channels. I’d like to point out that Instagram isn’t available as a sales channel with the Lite plan; you’ll need to upgrade to Shopify Basic at $29/month to be able to manage sales via Instagram.

Lastly, Pinterest allows merchants with a business account to create “Buyable pins,” so you can sell from your Pinterest page. Unlike Facebook, where you can manage the buyable pins from the platform, to sell through Pinterest you will need to go through either Shopify or BigCommerce and actually apply for approval before you can start selling.

Shopify Lite is an ideal option if you want to start with Facebook and maybe add buy buttons to a website. You can upgrade to Shopify Basic ($29/month) to get your own site, plus access to Instagram and Pinterest if that appeals to you.

Selling In Marketplaces

Online marketplaces are a good alternative to having your own website if you’re selling retail goods. You don’t have to pay for hosting or invest anything in web design. You simply create your product listings using the tools provided and publish them. Marketplaces allow you to get your products in front of a large audience without you having to build a stream of traffic yourself. However, the trade-offs are that you generally pay more in fees (listing fees, seller’s fees, and payment processing) than you would with your own website, and you have zero control over the design of the site or even how your products are displayed. Generally speaking, you are limited to using whatever payment processing the marketplace offers as well.

A few popular marketplaces include:

  • eBay
  • Etsy
  • Amazon
  • Jet (owned by Walmart)
  • Ruby Lane

Accepting Payments Through Virtual Terminals 

The final alternative is a bit of a stretch, I’ll admit, but it can be a powerful tool for some merchants. A virtual terminal is a web portal where you can manually enter credit card information to process a transaction. (There’s the stretch: VTs require an internet connection, so they’re technically online payments.)  Virtual terminals are a necessity for merchants who want to accept payments over the phone (or even by mail).

Some payment processors offer a virtual terminal as part of their software package, others as an add-on. These providers include PayPal, Payline Mobile, Square, and Fattmerchant. However, if you want the best value for a virtual terminal, we recommend Square. You pay only the payment processing costs (3.5% + $0.15) and it is interoperable with the rest of Square’s platform.

Beyond Credit Cards: Alternative Online Payment Methods

Credit cards are the go-to for accepting payments online, but they aren’t the only options. For starters, there are ACH bank transfers, which are generally less expensive for merchants to process. They’re often preferred in B2B environments, but some consumers favor them too.

Offering ACH processing as an additional option, especially if you’re in the B2B space, could win you more customers. According to a 2017 Payment Benchmarks Survey by the Credit Research Foundation and the National Automated Clearing House Association (NACHA), ACH transfers currently account for 32 percent of B2B transactions, lagging behind checks, which took the no. 1 spot at 50 percent. Credit cards account for just 11 percent of B2B transactions. By 2020, the survey estimates that ACH will take the top spot and account for 45 percent of B2B transactions.

Despite this, most merchant accounts or even third-party processors don’t offer ACH by default. Some offer it as an add-on plan, others may require you to look for a supplemental option for ACH acceptance.

ACH is far from the only option as far as “alternative” payment processing now, too. Mobile wallets are bridging the gap between in-person and online payments, and card networks have implemented their own online checkout options for cardholders. The major advantage to accepting these options is that they offer an extra layer of security for consumers. For example, Apple Pay on the web still requires biometric authentication before approval.

Some of these alternative payment methods include:

  • Apple Pay on the Web
  • Google Pay
  • Microsoft Pay
  • Chase Pay
  • MasterPass
  • Visa Checkout
  • Amex Express checkout

Apple Pay and Google Pay are fairly widely supported, but you may not see the other options on this list everywhere.

Two noteworthy providers that offer ACH, as well as other alternative payment options, are Stripe and Braintree. However, both are developer-focused platforms, so you’ll need someone with the technical know-how to implement them. Merchant accounts that specialize in eCommerce and provide a solid gateway might offer these options too.

We recommend Stripe because of its extensive developer tools, customizable checkout, and resources for recurring billing. The company also offers round-the-clock customer support (an admittedly recent addition to its feature set). Plus, Stripe is great for international merchants who want to be able to accept localized currencies in Europe and Asia.

Begin Accepting Payments Online

Starting an online store and learning how to accept credit cards online can seem like a daunting task! There are so many factors to consider, but I hope I’ve been able to shed some light on the process and point you in the direction of some good options. A merchant account can give you security and stability, but it may not be the most cost-effective option for low-volume merchants. A third-party processor can get you set up quickly with predictable pricing that often favors low-volume merchants, but the trade-off is account stability. And of course there’s the matter of compatibility: You need to make sure that whatever payment processor you choose offers a gateway compatible with the software (and sales channels) you want to use.

But you also need to have a good idea of what you can afford to spend up front and on a monthly basis and understand your limitations when it comes to technology and software. If you want to go the DIY route, you’ll need to be fairly tech-savvy. Otherwise, be prepared to outsource tasks to designers, developers, and even admin assistants. Some software solutions make it incredibly easy to do everything yourself, others will require lots of hands-on effort to make them work.

If you’re still not sure where to go from here, we recommend you check out our article: The Best Online Credit Card Payment Processing Companies. You can also view our merchant account comparison chart for a quick look at our favorite providers.

Have questions? We’re always happy to hear from our readers, so please leave us a comment!

The post How To Accept Credit Cards Online appeared first on Merchant Maverick.

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Guide To Buying ShopKeep Hardware

There are a lot of reason why ShopKeep is among our most recommended point of sale systems for small businesses. This product remains one of the more affordable options on the market while giving you a wide variety of features to help your retail or restaurant establishment function efficiently. Chances are, if you’ve decided to go with ShopKeep or are heavily leaning in that direction, you appreciate convenience. You don’t want to spend any more time than absolutely necessary sweating some of the seemingly mundane aspects of starting a business — such as researching and purchasing all of the necessary hardware you might need.

Fortunately, ShopKeep makes this process easy as well. ShopKeep offers an impressive array of hardware bundles and individual items from some of the top-rated companies around all for purchase through their website, making it possible to get absolutely everything you need in one convenient stop. Here’s a brief overview of the hardware that ShopKeep has to offer.

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Hardware Delivery & Shipping

To get started, ShopKeep will ship all hardware within the continental United States for free with no minimum purchase and all orders generally arrive within 7 business days. They will also ship to Hawaii, Alaska, and Canada for an additional fee.

ShopKeep has a generous replacement policy, offering to replace any new equipment that fails to work properly within one year. The same agreement applies to refurbished hardware for 90 days. You may also return any hardware, no questions asked, within 30 days of purchasing it to receive a full refund. Shipping back to ShopKeep is free.

Get Started With ShopKeep

Hardware Bundles

ShopKeep offers some convenient Starter Kits to get your business up and running quickly.

  • Basic Starter Kit for iPad: $809 or $839 if you choose Bluetooth printer
    • 14×16  Cash Drawer
    • Epson 2″ Ethernet Printer or Epson 2″ Bluetooth Printer (
    • iPad Air Stand
    • Ethernet Credit Card Reader
    • Compatible with Apple iPad Air/Air 2 and Apple iPad Pro 9.7″
  • Basic Quick Service Starter Kit for iPad: $1166 or $1196 if you choose Bluetooth printer
    • 14×16 Cash Drawer
    • Epson 2″ Ethernet Printer or Epson 2″ Bluetooth Printer
    • iPad Air Stand
    • Ethernet Credit Card Reader
    • Epson Kitchen Printer
    • Ethernet Cable
    • Compatible with Apple iPad Air/Air 2 and Apple iPad Pro 9.7″
  • Basic Restaurant and Bar Hardware Kit for iPad: $1166 or $1196 if you choose Bluetooth printer
    • 14×16 Cash Drawer
    • Epson 2″ Ethernet Printer or Espon 2″ Bluetooth Printer
    • iPad Air Stand
    • Ethernet Credit Card Reader
    • Epson Kitchen Printer
    • Ethernet Cable
    • Compatible with Apple iPad Air/Air 2 and Apple iPad Pro 9.7″
  • Basic Retail Hardware Kit for iPad: $1297 or $1327 if you choose Bluetooth printer
    • 14×16 Cash Drawer
    • Epson 2″ Ethernet Printer or Epson 2″ Bluetooth Printer
    • iPad Air Stand
    • Ethernet Credit Card Reader
    • 1D Laser Barcode Scanner
    • Compatible with Apple iPad Air/Air 2 and Apple iPad Pro 9.7″
  • Complete Quick Service Hardware Kit for iPad: $1369 or $1399 if you chose Bluetooth printer
    • 14×16 Cash Drawer
    • Epson 2″ Ethernet Printer or Epson 2″ Bluetooth Printer
    • iPad Air Stand
    • Epson Kitchen Printer
    • Ethernet Cable
    • Cash Drawer Mount
    • Thermal Paper – 50 Roll Case
    • 1-Ply Bond Paper – 50 Roll Case
    • Ethernet Credit Card Reader
    • Compatible with Apple iPad Air/Air 2 and Apple iPad Pro 9.7″
  • Complete Restaurant and Bar Hardware Kit for iPad: $1369 or $1399 if you choose Bluetooth printer
    • 14×16 Cash Drawer
    • Epson 2″ Ethernet Printer or Epson 2″ Bluetooth Printer
    • iPad Air Stand
    • Epson Kitchen Printer
    • Ethernet Cable
    • Standard Duty Cash Drawer Mount
    • Thermal Paper – 50 Roll Case
    • 1-Ply Bond Paper – 50 Roll Case
    • Ethernet Credit Card Reader
    • Compatible with Apple iPad Air/Air 2 and Apple iPad Pro 9.7″
  • Complete Retail Hardware Kit for iPad: $1519 or $1549 if you choose Bluetooth printer
    • 14×16  Cash Drawer
    • Epson 2″ Ethernet Printer or Epson 2″ Bluetooth Printer
    • iPad Air Stand
    • 1D Laser Barcode Scanner
    • 7 Series USB Charging Cradle
    • Cash Drawer Mount
    • Thermal Paper – 50 Roll Case
    • 1″ x 1.5″ Barcode Labels
    • Label Printer
    • Ethernet Credit Card Reader
    • Compatible with Apple iPad Air/Air 2 and Apple iPad Pro 9.7″
  • Mobile Register Kit: $198
    • iPad Mini Handheld Enclosure
    • Lightning Credit Card Swiper
    • Compatible with iPad Mini 2/3
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A La Carte Hardware Options

Of course you can also purchase hardware a la carte if you don’t need everything in one of the packages or already have existing hardware that is compatible with ShopKeep.

Card Readers:

  • Magtek Lightning Credit Card Swiper: $99
  • Ingenico Credit Card Reader (EMV Enabled): $329
  • Ingenico Bluetooth Credit Card Reader
  • Vault Credit Card Reader Stand: $49

Printers:

  • Epson Bluetooth Printer: $269
  • Epson Ethernet Printer: $239
  • Epson Kitchen Printer: $331
  • DYMO Label Printer: $119

Cash Drawers:

  • APG 13×13 drawer: $109
  • APG 14×16 drawer: $112
  • APG 16×16 drawer: $139
  • Cash drawer mount: $35
  • Cash drawer till: $29
  • Cash drawer till cover: $29

Barcode Scanners:

  • Socket Mobile 1D Scanner: $269
  • Socket Mobile 2D Imager Barcode Scanner: $449
  • Socket Mobile 7 Series USB Charging Cradle: $79
  • Socket Mobile 2D Imager Stand: $149

iPad Enclosures;

  • iPad Mini Handheld Enclosure: $99
  • iPad Mini Stand: $109
  • iPad Pro Stand: $139
  • iPad Stand: $129
  • Freeform Made iPad POS Stand: $199

You can also purchase gift cards, labels, printer and receipt paper, and a variety of USB and ethernet codes directly through ShopKeep.

Get Started With ShopKeep

Ready To Buy ShopKeep Hardware?

No matter how equipped or completely green you are as you’re starting your business, ShopKeep has you covered. Not only do they provide you with a wide variety of hardware options, they are stocked with some of the most trusted and best-reviewed brands on the market.

If you’ve decided to go with ShopKeep, you’ve already made an informed decision for your POS needs. They also make it very difficult to go wrong when selecting all of your necessary hardware. Hopefully, we’ve just simplified the process slightly.

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The post Guide To Buying ShopKeep Hardware appeared first on Merchant Maverick.

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The Complete Guide To Credit Bureaus: Equifax VS Experian VS TransUnion

The Complete Guide To Credit Bureaus: Equifax VS Experian VS TransUnion

If you’ve ever applied for a loan — whether it be for a car, a house, or even a small business — then I’m sure you’re well acquainted with the importance of credit scores. But what about credit reports?

Credit reports tell lenders about your credit history and indicate how reliable you are as a borrower. But more than that, credit reports help you understand your credit, improve your credit score, and prevent fraud and identity theft. So how do you get your credit report? That’s where credit bureaus like Equifax, Experian, and TransUnion come in.

In this post, we’ll cover everything you need to know about credit bureaus. Then we’ll break down the “big three” credit bureaus so you can confidently understand your credit report and score.

What Is A Credit Bureau?

Let’s start with the basics.

A credit bureau is a business organization that collects and sells data regarding the credit history of individuals. They typically collect data such as your credit card and loan balances, the number of credit accounts you have, your payment history, any bankruptcies, etc. Today, there are dozens of credit bureaus, but the “big three” are Equifax, Experian, and TransUnion.

Credit bureaus arose to help lenders quickly gauge the reliability of a potential borrower. In the past, you could go to the good ol’ general store and the owner would know you, your character, and whether or not putting your items on “charge” (or on credit) was a good idea. That method may have worked in the past, when communities were small and isolated, but there had to be a better way moving forward. Thus credit bureaus were born.

Credit bureaus collect data on potential borrowers and sell it to banks to help them make informed lending decisions. The oldest of the “big three,” Equifax, started capitalizing on this need all the way back in 1899.

Today, the credit bureaus have streamlined and computerized the whole process by compiling the data they collect into a credit report and credit score. While every credit bureau calculates credit scores differently, and every lender has different credit score requirements, credit reports and credits scores allow for a more universal measuring stick to judge potential borrowers by. Recently, credit bureaus also have branched out to providing dozens of additional products to help individuals and businesses alike, including identity protection, business marketing, and more.

How Do Credit Bureaus Collect My Information?

Okay, we admit it all sounds a bit creepy. Big Brother’s always watching, right? Well, yes, but it might comfort you to know how credit bureaus collect and share your information.

Credit bureaus mainly collect information from credit institutions with which you already have a relationship, such as:

  • Banks
  • Credit card companies
  • Student loan providers
  • Auto loan providers

Credit bureaus do not have access to these accounts; instead, the credit institutions share the information with the credit bureaus. Credit institutions are not obligated to share information and can give data to one, two, three, or none of the major credit bureaus. Typically, credit bureaus store data on your balances, available credit, payment history, and the number of open and closed accounts you have. Collection agencies and debt collectors may also report to the credit bureaus if you have any delinquent activity.

The rest of the information credit bureaus collect comes from public court records. They access these records in search of any possible bankruptcies, tax liens, repossessions, and foreclosures.

How Do Credit Bureaus Use My Information?

Now that you know how credit bureaus collect your information, you’re probably wondering how they use your information?

Credit bureaus use your information to create credit reports and credit scores. They then share your information with potential lenders, landlords, and employers for a number of reasons. Your credit report may be pulled up in the following scenarios:

  • When a lender is checking your credit to see if you qualify for a loan
  • When a landlord is deciding whether or not to accept your rental application
  • When a new employer needs to run a background check
  • When a utility provider is about to start a service contract with you

Credit bureaus also sell information for marketing purposes. Say a lender is looking for potential customers with poor credit who might need a credit card. The lender will reach out to a credit bureau, which will then sell the lender a prescreening list of qualifying individuals and their basic contact information. (If you’ve ever wondered how you end up with so many preapproved credit cards flooding your mailbox, this is it.)

However, there are rules that protect you and your data — particularly the Fair Credit Reporting Act (FCRA).

The FCRA is a law that states you have the right to know your credit report and the right to dispute any errors on your credit report. It also lays out what is a “permissible purpose” for a lender to pull your credit and what is an “impermissible purpose.”

If a potential lender, landlord, utility provider, future employer, insurer — you name it — wants to view your full credit report, they must have a permissible purpose and your permission first. In some cases, a potential lender will simply let you know that they will do a credit pull, and by following through with the application, you grant them permission to do so. In other cases, a landlord might have you use a tenant screening service like ExperianConnect, where you have to download your credit report and share it with them directly.

If you aren’t comfortable with credit bureaus prescreening your information and sending it to third-party lenders, you can use OptOutPrescreen.com to prevent this. Continue onto the “What To To Do In Case of Fraud Or Identity Theft” section to learn more ways to protect your credit report and personal information.

Credit Reports VS Credit Scores

Since credit bureaus use your credit history to compile both a credit report and a credit score, it’s important to know the difference between the two.

Credit Report Credit Score

A report prepared by credit bureaus that shows an individual’s credit history, including payment history, loan balances, credit limits, and personal information (such as your social security number, birth date, and address).

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A number that indicates an individuals creditworthiness and is based on the individual’s credit history, payment history, and other data compiled by credit bureaus.

On a credit report, you’ll see detailed information about your credit history. A typical credit report will give you a full breakdown of all your open or closed credit accounts, bank accounts, loans, and payment history. Below, you’ll se an example of a credit report and what it might include (this is only page 1 of 4, so you can imagine how detailed your full credit report might be):

The Complete Guide To Credit Bureaus: Equifax VS Experian VS TransUnion

A credit score, on the other hand, provides much less detail. You’ll usually be given your credit score in tandem with a graphic indicator of whether your credit score is poor, fair, good, or excellent. You may be able to drill down to see the factors that affect your credit score, and you may not. Here’s an example of a credit score and how it might appear:

The Complete Guide To Credit Bureaus: Equifax VS Experian VS TransUnion

Think of it like this: a credit report is a detailed report of what your credit history is, while a credit score is an interpretation of what your credit history means. Your credit score is one of the biggest factors lenders use when considering loan applications; the higher the score, the more likely you are to pay your loan back — at least, in a lender’s eyes.

It’s worth noting one more key difference between credit reports and credit scores. Credit bureaus are legally obligated to give you a free credit report once a year, whereas there is no law requiring them to provide a credit score. This means you’ll have to pay a fee to access your credit score through one of the “big three.” There are free credit score sites if you want to avoid this fee. Check out our post The Best Free Credit Score Sites to learn more.

Note: In certain situations — like unemployment, identity theft, and fraud — you can access your credit report multiple times a year without charge.

How Credit Scores Are Calculated

Credit scores are all based on similar data but can vary significantly depending on the credit score model. Credit scores are generally affected by the following:

  • Your payment history
  • How much credit you use versus how much credit is available in an account
  • The number of accounts you have open
  • How long your accounts have been open
  • The types of credit you have (such as credit cars, loans, mortgages, etc.)

How this information is transformed into a credit score depends on the credit model being used. There are two main types of credit models: FICO scores and VantageScore.

FICO Scores VS VantageScore

The FICO score model was created by Fair Isaac Corporation in 1989 (hence the name FICO). FICO credit scores range from 350 – 850 and are determined by these five factors, which are ranked in terms of importance by percentage:

  • Payment History: 35%
  • Amounts Allowed: 30%
  • Length Of Credit History: 15%
  • New Credit: 10%
  • Credit Mix: 10%

The VantageScore model was created by Equifax, Experian, and TransUnion in 2006. This model also uses a 350-850 scale. Scores are determined by the following six factors that are ranked by level of importance rather than a percentage:

  • Payment History: Extremely influential
  • Percentage Of Credit Limit Used: Highly influential
  • Age & Type Of Credit: Highly influential
  • Total Balances & Debt: Moderately influential
  • Available Credit: Less influential
  • Recent Credit Behavior & Inquiries: Less influential

VantageScore claims that it is “the scoring model that is more accurate.” However, the FICO scoring model is used more predominantly in the lending industry.

Why Is My Credit Score Different With Each Bureau?

It makes sense that your credit score may vary depending on whether the potential lender is using the FICO or VantageScore model. But when the “big three” all use the VantageScore model, why do you get a different credit score from each credit bureau?

Remember earlier when we said that credit institutions aren’t required to share information with the credit bureaus? They can choose to share data with one, two, three, or none of the “big three.” This means that Equifax, Experian, and TransUnion don’t have access to exactly the same data, which accounts for the difference in credit scores.

This is why it’s important to treat your credit score as a “guesstimation” rather than an end-all number. Credit scores are ever-changing and lenders all have their own way of calculating and evaluating your credit score. Check your credit score so you have a general idea of what it is, and try to keep your score as close to 850 as possible, but don’t stress over-much about the exact three-digit number.

Reasons To Use A Credit Bureau

Now that you know what credit bureaus are and how they work, when should you use one? It’s simple: use a credit bureau anytime you want to know or need to know your credit report or credit score. Here are five of the most common scenarios for when you should use a credit bureau.

 

1. When Applying For A Loan

When applying for a loan, a potential lender is going to consider both your credit report and credit score, so it’s extremely important that you know your credit report and score beforehand. This way, you can correct any errors on your credit report and make sure you meet the lender’s minimum borrower requirements before you apply.

If there are errors, they can take a while to set right. Additionally, if you don’t meet the credit score requirement, raising your credit score can take time. Knowing the state of your credit before applying gives you the time to put your best foot forward and significantly increases your chances of being approved for a loan.

For more tips and tricks about increasing your chances of securing the loan you want, read our post on improving your loan application.

2. Before Renting An Apartment Or House

Potential landlords almost always run a credit report in order to decide if you’re trustworthy enough to make your monthly payments on time. Knowing your credit report beforehand is key. Again, if there are any errors, you can correct them before your future apartment or house is on the line. Or, if there is a missed payment or some other potential red flag on your credit report, you can try to explain the situation to your landlord in advance rather than being flat-out rejected.

3. To Improve Your Credit Score

If you are wanting to monitor and improve your credit score, you need to know your score first. Each of the “big three” allows you to purchase your credit score. They also offer credit monitoring subscriptions that allow you to regularly view your credit score and receive alerts when there are any changes to your credit score.

If you don’t want to pay for a monthly credit monitoring service, check out the best free credit score sites.

4. To Doublecheck For Credit Errors

As we mentioned earlier, you don’t want to be stuck with an error on your credit report right when you’re in the middle of the application approval process for a new loan or mortgage. Check each of the big three credit bureaus for errors as they all collect and maintain different information.

5. To Prevent Fraud & Identity Theft

Another benefit of using a credit bureau is fraud prevention and identity protection. If you stay on top of your credit report, you can pinpoint anything fishy and secure your information. When it comes to fraud and identity theft, the sooner you notice a problem, the better. One of the best parts about using one of the “big three” credit bureaus is that they all offer some form of fraud monitoring and extra security measures (which we will cover in more detail).

Bonus: To Help Run Your Business

As an added bonus, Equifax, Experian, and TransUnion all offer additional business services to help business owners manage, expand, and secure their small businesses. These services include everything from analytics to customer acquisition to risk management to fraud prevention and more.

What To Do If There’s An Error On Your Credit Report

If you find an error on your credit report, you’ll need to report and dispute that error with each individual bureau since each bureau collects and utilizes different information. Each bureau has their own process for disputing. You’ll need to go to their individual sites to find details on how to fix an error on your credit report.

One of the reasons it’s so important to check your credit report regularly is that it can often take months to properly fix an error on your credit report. For more details on common credit report mistakes and how to dispute credit report errors, visit the FICO website.

What To Do In Case Of Fraud Or Identity Theft

The Complete Guide To Credit Bureaus: Equifax VS Experian VS TransUnion

When it comes to fraud and identity theft, you don’t want to take any chances. If you suspect fraud related to any of your credit cards, bank accounts, or identity — or if your identity has been stolen — it’s important to take action right away. You can do so by submitting a fraud alert or security freeze (sometimes known as a credit freeze).

Both a fraud alert and security freeze are steps to secure your credit report and personal information, but they differ slightly.

Fraud Alert Security Freeze

A fraud alert warns credit bureaus that there might be fraudulent activity, so potential lenders will need to take extra measure to verify your identity before extending credit.

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A security freeze blocks lenders from accessing your credit report at all until the freeze is lifted by you (usually using a pin).

Fraud alerts usually last 90 days (unless you’re an identity theft victim, in which case you can extend the alert). To place a fraud alert, contact Equifax, Experian, or TransUnion and follow their instructions. You only need to contact one of the big three credit bureaus to place a fraud alert as they will notify the other two credit bureaus.

A credit freeze has the advantage of being much more secure. However, you will have to lower the freeze each you time you or a lender need to view your credit report, and you may be required to pay for the service. Unlike a fraud alert, you will have to place a security freeze with each of the three bureaus.

How Do The Big Three Credit Bureaus Compare

Now that you know the basics about credit bureaus and the reasons to use one, how do you know which credit bureau to use? How do the big three compare to each other? And what products do each credit bureau offer? Here’s a basic breakdown that compares Equifax, Experian, and TransUnion. Read on to learn more about each credit bureau.

Equifax Experian TransUnion

Free Annual Credit Report

✓

✓

✓

Credit Score

$15.95

$19.99

$19.95

Credit Monitoring

✗

Starts at $0/mo

$19.95/mo

Identity Protection

✓

✓

✓

Business Credit Score

✓

✓

✓

Number of Business Services

11

12

15

Equifax

The Complete Guide To Credit Bureaus: Equifax VS Experian VS TransUnion

Best For…

Individuals looking to check their Equifax credit report and score and in need of a free credit lock service.

The oldest of the three credit bureaus, Equifax has been around since 1899. While the company has grown significantly over the years, the Equifax motto to “always focus on its customers” has stayed the same. Today, Equifax offers basic credit report and credit score services as well as several business products. The most notable aspect of Equifax is its free credit lock service that allows individuals to protect their data at no additional cost.

Products Offered

Equifax offers basic credit report and credit score services, as well as a free credit lock service.

  • Credit Report: As with every credit bureau, you can access your free Equifax credit report at annualcreditreport.com.
  • Equifax Credit Score: You can purchase an Equifax credit score for $15.95. This score will be accessible for 30 days.
  • Lock & Alert: This free service allows individuals control over their credit report by locking and unlocking the report as needed. They even have a mobile app and send alerts every time your account is unlocked or locked.

Business Services

You can purchase a single business credit report from Equifax for $99 or a multi-pack for $399.95. You can use this to view your own business credit or to ascertain the credit health of a potential business partner, supplier, or new customer.

In addition to business credit reports, Equifax offers 11 products to help you run your small business. These products range from customer acquisition to risk mitigation to credit monitoring to fraud prevention and more. Visit the Equifax website to learn more about their business offerings.

Experian

The Complete Guide To Credit Bureaus: Equifax VS Experian VS TransUnion

Best For…

Individuals looking to view their Experian credit report or to actively monitor their credit report and credit score from all three credit bureaus.

Equifax began as part of TRW Information Systems and Services INC. back in 1968, and has since had a long history of acquisitions and advancement. Of all three bureaus, Experian offers the most personal products for monitoring and protecting your credit. What really sets Experian apart is that you can monitor your credit report from each of the three bureaus, so you can have all your credit information in one place. Experian also offers a FICO score simulator, which is invaluable for seeing what your FICO score could be if you make changes to your credit.

Products Offered

Experian offers personal credit monitoring and identity protection products as well as loan matching and credit card matching services.

  • Credit Report: As with every credit bureau, you can access your free Experian credit report at annualcreditreport.com.
  • Experian Credit Report & Score: You can purchase your Experian credit report and FICO credit score for $19.99. This purchase is only good for a one-time view.
  • 3 Bureau Credit Report & FICO Score: For $39.99, you can view your Experian, Equifax, and TransUnion credit report as well as your FICO credit score. This purchase is only good for a one-time view.
  • Experian CreditWorks Basic: View your Experian credit report for free every month.
  • Experian CreditWorks Premium: For $24.99/month, you can view your FICO score and gain access to Experian’s credit monitoring, identity protection, and credit lock services. This service includes the 3 Bureaus Credit Report. This product lets you view your credit reports and credit score daily, and it includes a FICO score simulator as well.
  • Experian IdentityWorks Plus: Experian’s identity protection service starts at $9.99/month and includes dark web surveillance, identity theft insurance up to $500,000, lost wallet assistance, credit lock, and identity theft monitoring and alerts. Includes credit monitoring for Experian and FICO score alerts. You can add child identity protection as well.
  • Experian IdentityWorks Premium: Experian’s most expensive identity protection service is $19.99/month and includes dark web surveillance, identity theft insurance up to $1,00,000, lost wallet assistance, credit lock, and identity theft monitoring and alerts. Includes credit monitoring for all three credit bureaus and FICO score alerts. You can add child identity protection as well.

Note: For Experian CreditWorks and IdentityWorks products, you can receive a discount for purchasing an annual subscription rather than a monthly subscription.

Business Services

Experian does offer business credit scores, although they aren’t forthcoming about the cost. The credit bureau also offers Experian Connect (a tenant screening service) and Experian Mailing List Builder (a customer acquisition service).

In addition, Experian offers 11 other business services ranging from customer management to risk management to debt recovery to consulting services and more. Visit the Experian website to learn more about their business offerings.

TransUnionThe Complete Guide To Credit Bureaus: Equifax VS Experian VS TransUnion

Best For…

Individuals looking to check their TransUnion credit report and score and to manage their business and its credit.

TransUnion started back in 1968 as a holding company for a railroad leasing organization known as Union Tank Car Company. Today, TransUnion is the smallest of the three credit bureaus but packs the biggest punch where business services are concerned. TransUnion also offers a credit score simulator — it is a great tool for improving your credit score as you can see how your credit could be affected if you made certain changes to your credit.

Products

TransUnion offers basic credit report and credit score products, as well as a free credit monitoring and identity theft service.

  • Credit Report: As with every credit bureau, you can access your free TransUnion credit report at annualcreditreport.com.
  • TrueIdentity: This is TransUnion’s free credit monitoring and identity theft protection service. It includes unlimitedTransUnion credit reports, a credit lock service, and alerts.
  • Credit Monitoring: For $19.99/month, you can have access to unlimited TransUnion credit report and score views, as well as credit lock, credit change alerts, and a score trending and score simulator tool.

Business Services

TransUnion offers business credit scores, although they aren’t forthcoming about the cost. The credit bureau also offers SmartMove, a tenant screening service.

In addition, TransUnion offers business products covering 14 fields, including marketing, fraud detection, healthcare revenue protection, customer acquisition, and more. Visit the TransUnion website to learn more about their business offerings.

Which Credit Bureau Should I Use?

Now that you know a little more about each of the three credit bureaus, the question becomes: Which credit bureau should I use?

The answer is all three of them.

We promise this isn’t a trick answer. Since each credit bureau collects different data regarding your credit history, it’s incredibly important to check your credit report with Equifax, Experian, and TransUnion. Luckily, you are legally guaranteed a free annual credit report from each bureau.

One recommendation is to stagger your annual free credit report. Check your Equifax report, then your Experian report four months later, and then your TransUnion report after another four months. This way you can always have a rough idea of what your credit report looks like without losing a penny. Another option is to use ExperianCreditWorks, which monitors all three credit bureaus and your FICO score for $24.99 a month.

If you simply want more control over your credit report and credit score, Experian offers the most bang for your buck in terms of personal credit monitoring and identity protection. However, TransUnion offers the most business-related products.

Ultimately, choosing which of the three credit bureaus’ monitoring services is right for you will depend on your budget and the level of control you want. The most important thing is to actually monitor your credit regularly. Take advantage of your free annual credit reports and know your credit score at the very least. Being proactive about your credit report can help ensure your credit report is accurate and can help catch any early signs of fraud, and knowing your credit score is the first step to improving your credit score.

Read our post 5 Ways To Improve Your Personal Credit Score and The Ultimate Guide To Improving Your Business Credit Score to learn more.

The post The Complete Guide To Credit Bureaus: Equifax VS Experian VS TransUnion appeared first on Merchant Maverick.

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SBA Loans For Startups: Types, Terms, and How To Apply

Your startup is off the ground and you’re ready to make your next move, but you need funding — or maybe you have a fantastic idea that will completely shake up your industry, and you’re anxious to get your project rolling. Whether you’re in the early stages of setting up a new business or you need a boost to get started, financing is a necessity. However, when lenders look at you, they don’t see the “next big thing.” Instead, they see just one other big thing: risk.

Startups are viewed by lenders as bigger risks than established small businesses, but don’t give up just because you think funding isn’t available. Although it may be more difficult to obtain startup unsecured business loans, it isn’t impossible. With SBA loans for startups, you’ll have access to the financing you need without high interest rates and unfavorable terms.

Ready to grow your business or find government loans to start a business? Read on to learn more about the loan options that can take your startup to the next level.

How Can The SBA Help My Startup?

The Small Business Administration was established to provide small business owners with the resources they need to successfully operate their own businesses. In addition to training and advocacy, the SBA offers loan programs that give business owners the money they need for anything from acquiring a business or franchise to hiring new employees to funding equipment purchases.

The SBA helps all small businesses, including startups. It’s no secret that startups are viewed as riskier endeavors. Whereas established businesses have proof of their success in the form of financial statements, tax returns, and other documents, startup owners are reliant on their business plans and industry experience. After all, the idea behind a startup may be a game-changer, but it isn’t yet proven—at least not in the eyes of a lender.

The SBA offers different loan programs than you’ll see elsewhere. In fact, funding isn’t distributed directly through the SBA. Instead, they have established several loan programs targeted at small businesses and startups through intermediaries — think banks, private lenders, and even non-profit organizations. The SBA has outlined a set of standards for each program; because the administration backs these loans, there’s less risk for lenders – and more funding opportunities for you.

These standards keep interest rates low and terms flexible. SBA loans are designed to help businesses grow and/or stay above water (as opposed to drowning in debt).

Types Of SBA Funding For Startups

The SBA doesn’t offer funding that is specific to just startups. Instead, new businesses can qualify for many of the programs that are used by established businesses. Most of the SBA loan programs don’t have a requirement for time in business. However, it is important to note that you will have to find an intermediary that works with startups once you’ve evaluated your options and selected the type of loan that works for your business.

Microloans

The first resource for startups that need smaller loans should be the SBA Microloan program. Under this program, small businesses can receive up to $50,000 from a non-profit intermediary. On average, the typical amount funded through the Microloan program is $13,500.

Microloans are available to startups provided that they are for-profit businesses and have a solid business plan. Interest rates vary by lender, ranging from 6.5% to 13%. The average typically falls on the lower side at approximately 7.5%. The maximum maturity for a microloan through the SBA is 6 years.

Fees may be required by the intermediary to receive a microloan. Intermediaries can charge between 2% to 3% of the loan amount for packaging fees. Additional fees to close the loan, including recording fees, collateral appraisals, and credit reports, may also be passed on to the borrower.

The SBA limits how the funds from microloans are used by the borrower. Loan disbursements can be used to purchase materials, furniture, supplies, inventory, and other necessary items for the startup. The money can also be used as working capital. Funds can not be used to purchase real estate or to pay off or refinance existing debt.

The SBA Microloan program is a great choice for any startup that needs working capital or to purchase equipment that will help expand the business or get a project off the ground. However, startups that need more capital or don’t want as many limitations on how they spend their funding will be better served by another SBA loan product. If microloans seem to fit your needs, learn more before connecting with a lender.

Standard 7(a) Loans

The SBA 7(a) program is the most popular choice for most startups and small businesses because of the flexibility it offers.

Startups can receive up to $5 million in funding through the 7(a) loan program. In addition to having access to higher loan amounts, borrowers will also have more flexibility in how they can use the funds. Standard 7(a) loans can be used for equipment or inventory, the purchase of property, refinancing debt, renovations, or other purposes.

Under this program, payment terms vary depending on how the loan proceeds are used and the borrower’s ability to repay the loan. For real estate purchases, the maximum repayment term is 25 years. If the proceeds are used for equipment financing, inventory, or working capital, repayment terms are set for a maximum of 10 years. Interest rates vary but remain very competitive at 7.25% to 9.75%. Borrowers can also expect to pay up to 3.5% for guaranty fees, and a down payment may be required with the purchase of real estate or equipment. Find out more about the terms, rates, and eligibility of SBA 7(a) loans.

The long repayment terms, low interest rates, and overall flexibility make this a top choice for many startups and small businesses. That said, 7(a) loans can take a while to be processed and funded — a potentially major drawback for business owners who need cash fast. Potential borrowers can expect to wait a minimum of 30 to 90 days to get through the entire process from application to funding. Startups that require money sooner should consider other options, such as peer-to-peer lending or another source of funding.

SBA Community Advantage Loans

A startup that doesn’t meet the eligibility criteria for the standard SBA 7(a) loan should consider applying for the SBA Community Advantage program. This program offers very similar rates and terms to the traditional 7(a) program with just a few minor differences.

One of the most significant differences is the maximum amount that can be borrowed through this program. Borrowers can receive up to $250,000 with an SBA Community Advantage loan. The identical guidelines from the 7(a) program apply for how the money is spent. It can be used to purchase another business, finance equipment, or for just about any business purpose. Interest rates for these loans are comparable to those set forth by the lender based on SBA guidelines.

While the lowered maximum loan amount is a drawback, this program can be extremely beneficial for startups. This is because Community Advantage loans are designed for underserved communities, such as low-income areas. However, startups are also qualified to receive these loans. Businesses that have been operating for two years or less that have been disqualified from other loans may receive a Community Advantage loan if all requirements set by the SBA have been met.

SBA Express Loans

Another SBA product similar to the standard 7(a) loan is the SBA Express Loan program. This loan program offers benefits including low interest rates and long repayment terms. However, there are two main differences between the 7(a) and the Express programs: the maximum loan amount and the approval turnaround.

Applicants for the SBA Express loan can receive up to $350,000 through the program. This could be a drawback for anyone seeking more capital. However, this program’s biggest advantage is that it comes with expedited turnaround times. After the application is submitted, an approval decision is guaranteed within 36 hours. Although the time it takes to complete the process and receive funding could add weeks to the timeline, getting an approval quickly means that small business and startup owners no longer have to shop around and can rest assured that the money they need will soon be on the way.

Because only a maximum of 50% of the loan is backed by the SBA, interest rates may be slightly higher than the standard 7(a) loans. However, all interest rates must fall within the SBA’s guidelines, so borrowers won’t get slapped with ridiculously high interest rates.

If this sounds like it’s the right type of loan for your startup, learn more about SBA Express loans.

SBA CDC/504 Loans

The SBA CDC/504 loan program is designed for small business owners who want to make a fixed asset purchase to expand or update their business. This loan provides funding for the purchase or upgrade of commercial space or land, the purchase of long-term equipment, or refinancing debt related to the upgrading or expansion of the business.

This loan program is different because it requires the borrower to work with two partners to finance 90% of the costs of the project. A bank or other lender will loan a maximum of 50% toward the project cost. A Certified Development Company, or CDC, will provide up to 40% of the cost of the project. 504/CDC loans are backed by the SBA. The borrower is responsible for paying the remaining 10% of the project cost.

The interest rates for these loans are determined by the 5-year and 10-year U.S. Treasury issues market rates. Currently, maximum interest rates are just above 5%. Terms of 10 and 20 years are available under the 504 loan program.

This program is a good choice for startups looking to expand or improve their commercial space. With fixed interest rates, longer terms, and up to 90% financing, this is a very competitive product. However, business owners seeking capital or funds to use for other purposes will be better off applying for other SBA loans. Potential borrowers will also have to take the time to find a lender and a CDC to work with under this program, which could be time-consuming.

SBA Startup Loan Borrower Requirements

Who can qualify for a startup SBA loan? Restaurant startups, tech companies, or any other businesses that have been in business for two years or less (and meet the requirements of the SBA) are eligible.

It’s important to note that because these loans have such favorable rates and terms, they can be difficult to obtain. In order to get an SBA startup business loan, you’ll have to find an intermediary that works with startups. You’ll also need to come prepared with the right credit score and documentation to qualify.

For all of the SBA sources of funding for startups mentioned here, there are a few basic requirements across the board. Qualified businesses must be for-profit operations. They must do business in the United States, and they must have an adequate amount of owner equity. SBA loans should also be pursued after all other means of funding have been exhausted. The business must also demonstrate a reasonable need for requesting the loan.

Businesses that invest in real estate, engage in illegal operations, operate as non-profits, or specialize in loaning money are disqualified from applying for these programs.

To qualify for an SBA loan, one of the most important things to remember is that a good credit score is required. Generally, scores should not fall below 680, but this can vary by lender. Credit reports should reflect a good payment history, and any negative items must be explained to the lender. There should be no recent bankruptcies, foreclosures, or tax liens on the report. Personal credit history and business history (if applicable) will be considered by the lender.

If loan proceeds are to be used to acquire a business or to purchase property or equipment, equity or a down payment of 10% or more may be required based on the lender. Ready to learn more? Read on for more information about the requirements of SBA loans.

Do SBA Startup Loans Require Collateral?

Another potential requirement of receiving an SBA startup loan is collateral. In short, collateral is something of value that is pledged in the event that a borrower defaults on the loan. Collateral can be real estate, equipment, vehicles, or other items of value.

Because startups are seen as riskier investments by lenders, it’s very common to have to put up collateral in order to receive funding. The one exception to this rule is when the loan does not exceed $25,000. Through the 7(a) standard, Express, and Community Advantage programs, no collateral is required under SBA guidelines for any loan up to $25,000. Loans exceeding this amount will require collateral potentially valued up to the total amount of the loan. For CDC/504 loans, the project being financed often serves as the collateral.

For microloans, the SBA does not require collateral but does advise lenders to follow lending best practices and collect collateral or equity if deemed necessary.

Personal guarantees are also required to obtain SBA loans. This means that a borrower agrees to put up personal assets if they default on the loan. In the event that a startup does not have enough business property, personal assets will be used to back the loan.

One important thing to note is that while startups will not necessarily be disqualified from SBA loans by a lack of collateral (if all other conditions are met), your chances of being funded will improve if you have at least some collateral.

How To Get An SBA Loan For A Startup

Now that you’re familiar with the options the SBA has to offer and you’ve found a product that fits your needs, it’s time to get the application process rolling. The first step is to find an SBA-approved lender that operates in your area. If you have a working relationship with a financial institution, you can ask for recommendations. You can also be connected with a lender through the SBA’s Lender Match service.

In addition to finding a lender that offers SBA loans, it’s also important to inquire as to whether they work with startups. Some lenders see startup companies as too much of a risk, so it’s important to ask before devoting too much time to the process. You’ll also want to ensure that they work with startups on the specific loan that’s grabbed your interest.

Once you’ve connected with a lender, you’ll have to speak with them on the phone or, in many cases, meet with them face-to-face. While each lender has its own requirements, there are a few things you’ll always need to have on hand when applying for an SBA loan.

Because startups don’t have the history of a more established business, documentation — like three years of business income tax returns or several years of business financial statements — won’t be available. Instead, you can provide a few other standard documents, as well as a couple of additional items required from new businesses.

As previously mentioned, credit scores and reports are extremely important. Even if you haven’t yet established business credit, your personal score and report will be evaluated by a lender. If you aren’t sure of where you stand, check out these resources for getting your free credit report online. Dispute any inaccuracies with the credit bureaus and be prepared to explain any black marks on your report.

Additional SBA startup loan requirements include your personal financial statement, personal income tax returns for the last three years, resumes for each principal of the business, and your business certificate and licenses.

Because you are seen as a risky borrower, you will need a solid business plan that includes details about the current status of your business, as well as future plans. You will also need business projections. A projection of at least one year is the minimum, but more may be required by your lender. You must also be prepared to prove that you have several years of experience in the industry. A minimum of 2 years is generally preferred.

The lender will evaluate your personal credit, your business plan, and your ability to repay the loan. Once the SBA startup loan application process is completed and all paperwork has been submitted, you’ll simply need to wait for final approval. This could take weeks or even months if a challenge arises. With an SBA Express loan, you’ll receive your decision within 36 hours. Once approved, you’ll work with the lender to close your loan and receive your funds.

Final Thoughts

The process for obtaining an SBA loan is daunting for any business. As a startup, the process can be even more complicated. However, with a solid business plan in place and a good credit score, it’s possible to obtain the funding you need with competitive rates and terms and put your new business on the path to success. Good luck!

The post SBA Loans For Startups: Types, Terms, and How To Apply appeared first on Merchant Maverick.

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How To Choose The Best Products to Sell Online

Best Products to Sell Online

You’ve probably landed here on this beautiful wall of text because you’re wanting to start an online store and are wondering, “What are the best products to sell online?”

The short version – it depends 🙂

The long version – keep reading for specific ideas to find the best product for you to sell online.

There are hundreds of articles out there talking about trending products for [insert year here], the best all-time products, rising products, etc., but these resources are typically 100% based on what’s happening now.

So, how do you know what the best products are in general?

Again, spoiler alert: there is no such thing as a best product to sell online!

Sure, there are basic principles to stick to, such as

  • products with a high average order value
  • things that can be drop shipped / don’t require a high-touch in store experience
  • products that can be shipped cheaply and easily, etc.

But with that said, if you look at the brands that are killing it online right now, like Native, Dollar Shave Club, and Tuft & Needle… they break all of those “rules”. Native sells deodorant, Dollar Shave Club built an entire business on super-cheap razors, and Tuft & Needle sells mattresses (a product that typically requires a high-touch in-store experience with high shipping costs).

I’m a firm believer that there’s no such thing as the “best” anything — instead, I operate from “best for your skills, knowledge, resources, and goals”.

So when it comes to starting your online store, the key is to move out of the “best product to sell online” mindset and into the “best product for ME to sell online” mindset. And that’s a product that fits your skill set, knowledge, resources, timeline, and market demand.

There are several approaches to finding the best product to sell online for you… and that’s what I’ll be breaking down in this post.

How to Find the Best Products to Sell Online (For You)

The Product Research Route (Amazon scraping, Adplexity, etc)

Thanks to platforms like Amazon, anyone can sell something online — and luckily for you, there is a giant trove of product data just waiting for you on the Internet.

One way to figure out what to sell is by looking at other products that are performing well and weighing those against your own wants and needs.

The goal here is to collect data on what’s working already, then reverse engineer an ecommerce strategy to sell it.

For example, let’s say you’re looking on Amazon for bestselling dog toys. You could look at niches within dog toys to niche-down into subcategories, look at best-selling products within those subcategories, see top sellers to identify competitors — the opportunities are endless.

Amazon Bestselling Dog Toys

The bonus here is you don’t have to do this manually — and you’re not limited to Amazon’s data. Spy tools like Adplexity and Jungle Scout can aggregate product data across several ecommerce platforms and even show you competitor’s ads so you can reverse engineer a marketing strategy that works.

With that said, keep in mind that everyone has access to this data, which means you won’t be the only one reverse engineering a successful product. What’s really going to set you apart is choosing a successful product that fits your own criteria and knocking your marketing strategy out of the park.

The Persona Research Route

People are constantly searching for things online. Think about your own behavior — where do you go when you’re looking for the “best swimsuits for speed” or “most durable dog toys for puppies”?

As a business owner, you can use this data to figure out what people actually want and give it to them. In marketing, this approach is known as creating a persona (marketing jargon for a description of your ideal customer).

An effective persona defines what your ideal customer actually wants. Who are they? What problems do they have? How can you solve these problems.

Use tools like Facebook Audience Insights, Pinterest, Google Display Planner, Trend Hunter, and basic keyword research (see here) to create 2-4 personas that outline your ideal customers. Be as descriptive as possible by including things like job title, favorite device, pay scale, main frustrations & problems, end goals, what they do in their spare time, etc. Use this detailed guide by Moz to guide you through the process.

Remember that your personas don’t have to be the end all be all. The focus here is to define your initial target market that’s small enough you can effectively reach them but large enough to get some insight on what products will fit their needs (and to get some initial sales and feedback on those products so you can polish what you’re offering).

Nearly every business started this way (think about how Facebook started by targeting college students). Here’s a podcast episode explaining this concept [skip to the ~ 11-minute mark].

The Sell What You Know Route

Perhaps the most self-explanatory method for finding the best product to sell online is selling what you know. What are you good at? Passionate about? Experienced with? Use that experience, channel it into a need, and sell it.

Take Quad Lock, a bike mount designed by a biker who was unsatisfied with the mounts on the market, so he designed one he wanted and sold it. The founder used used his own experience (biking) and pain point (ineffective mounts for his iPhone) to create a product that others love too.

Keep in mind though, it isn’t just about the product. Quad Lock leveraged reviews and Facebook and Google ads to get the right people to the product. You’ll need to have a proper and realistic marketing funnel behind whatever it is you’re selling.

The Build an Audience Route

Traditionally, ecommerce business owners take a “build it and they will come” approach to product development and selling online. This method takes the opposite approach. Instead of creating a product and finding an audience to sell it to, you’ll first build an audience and bring them a product they actually want.

Both approaches have advantages — again, there is no blanket “best” way or “best” product to sell online. Once again, it depends on your goals.

Building your product first and selling it to an audience could bring in revenue faster (as long as you build a product that actually sells). However, you do run a higher risk of creating a product that doesn’t fit the market as well as it might if you were to build an audience first, learn about them, and give them what you want.

The tradeoff here is time vs. money. If you have the time to build out an audience, nurture them, and build a minimally viable product to get feedback on, this route can save you the headache of launching a product that no one wants (see The $100 Startup). However, if you need to generate revenue quickly, this path might not be the best option.

The Rapid Product Testing Route

If you’ve ever donated to a kickstarter campaign, or if you know anything about Tim Ferris and the 4-Hour Work Week, then you know how successful rapid testing a bunch of product ideas can be.

Ferriss did it with different ads, headlines, and even book titles until he found what worked, and you can take the same approach with your own product development. The goal here is to get a ton of data quickly. What are people clicking on? What are they signing up to learn more about? What’s sticking? Once you have that info, keep what works and get rid of what doesn’t.

Again, the tradeoff here is time and/or money. You have to give yourself enough of a runway to actually test and get the data, whether you’re starting a campaign on Kickstarter, offering email and social demos to find that one customer with a new idea, or running multiple Google Adwords campaigns to test which promotions get the most traction.

The Niche / Tailwind Route

Sometimes it’s worth sticking to what’s already working. Similar to reverse engineering products that are performing well and fit your criteria, you can also find a growing niche and/or company and build out products that complement them.

A classic example of this is the cell phone case industry. Before the iPhone blew up, cell phone cases were practically non-existent. But once the iPhone took off, an entire niche industry was born.

This is happening all the time. Think about Peloton — the at home spin bike that’s building an entire submarket that needs attention. There are constantly new opportunities to hop on board with what’s working and complement it with submarket products of your own.

The Supplier / Numbers Route

Keep in mind that you don’t always have to supply a product. Sometimes the best product to sell online could be one that someone else has created. In this scenario, you’d focus on building a killer marketing strategy for the product.

For example, let’s say you have a dentist friend who has a patented a new mouthguard that’s amazing, but he has no idea how to sell it. You could start an ecommerce business with exclusive access to the product at a price that makes sense. He’d be your supplier while you’d focus on getting sales.

Even if you don’t know someone directly who has an amazing product, you could always research suppliers on AliExpress or Alibaba, or connect to people who have great industry contacts in a niche you know well enough to navigate profit margins and create a marketing strategy that gets the products to move.

Alibaba

Either way, you’re removing yourself from the product definition. Instead, you’re looking at suppliers who have already created a killer product and need someone (AKA you) to sell it.

Next Steps / Takeaways

Finding the best products to sell online really has less to do with there being a “best” product and more to do with having a system and approach to finding a product that fits your own needs, skills, and means.

Instead of randomly brainstorming and endlessly searching online for that one big idea, take time to do an inventory of your own needs. Think about your skill set, knowledge, resources, and timeline to launch your product. Then, choose one of the methods above to find the product that best aligns with your defined criteria.

You also want to find the best way to sell – here’s how to choose the best ecommerce platform.

The post How To Choose The Best Products to Sell Online appeared first on ShivarWeb.

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Should I Buy A Franchise & How Do I Start?

buying a franchise

Becoming a franchise owner is a career path some people look into when their life circumstances change. For example, recent retirees or veterans returning to civilian life often turn to franchising. But really, you don’t have to have any special circumstances or qualifications to become a franchisee. You do, however, need to know what you’re getting into before you make such a major decision.

While there are plenty of benefits to owning a franchise, there are some downsides too, and you’ll need to determine which things you can live with and which will be dealbreakers for you.

There are specific perks to purchasing an existing franchise, also sometimes called a “franchise resale,” as opposed to opening a new franchise location: you will start out with a cheaper initial investment and an established customer base, with minimal setup or hiring requirements, provided that equipment and employees are included in the sale.

However, when buying an existing franchise, you’ll also need to do careful pre-purchase research to make sure the franchise is a good investment—the owner could be selling because the franchise is underperforming due to a poor location, for example.

In this post, I’ll go over the pros and cons of buying a franchise to help you figure out whether you should make the leap of becoming a franchise owner. I’ll also give you some useful tips on how to start down the path of owning your own franchise business.

Pros Of Buying A Franchise

Buying a franchise is not for everyone. But there are some unique benefits to this career move, making it perfectly suited to the right type of entrepreneur.

1. Turnkey Business

A franchise can be considered a “turnkey business,” which means that it has pretty much everything you need to start operations immediately. All you need to do is “turn the key,” so to speak, to open up for business and start selling.

With a franchise purchase, the sale typically includes the facilities, equipment, and software systems (including the point of sale and accounting software), and even the (already trained) employees in most cases. Your raw materials suppliers, operating procedures, and advertising strategies are already in place as well, requiring only your capital investment and personal labor to get started.

Besides having all the ingredients to start operations, as a franchisee, you open for business on Day 1 with a proven and successful business model. This helps undercut the risks of owning your own business, especially if you are new to business ownership.

2. Minimal Startup Costs

Aside from the cost to purchase the franchise, and sometimes the franchise transfer fee (you should try to get the selling franchisee to pay this if you can), there are negligible startup costs to get your franchise resale up and running, since, well, it’s already up and running!

You will, of course, have to start purchasing your own raw materials to keep operations going, though you will need to invest less startup capital overall than you would if you opened a franchise from scratch.

While business acquisitions have lower startup costs in general compared to new businesses, this is especially the case with franchise acquisitions, as the uniform nature of any franchise brand allows for few, if any, significant changes in operations from one owner to the next.

Note that when you buy an existing franchise, most franchisors will not have you pay a franchise fee—the costly fee required to open a new franchise—but they may require you to pay for initial training.

3. Built-In Support

Technical support, customer support, and other assistance is an inevitable and potentially costly part of just about any business endeavor. A big benefit of being a franchise owner is that you don’t have to figure these things out for yourself. The parent company typically provides training, marketing campaigns, assistance with management, and customer support. And when purchasing an existing franchise, support channels such as technical support, employee support, etc., will already be open and readily accessible, so all you’ll have to do is learn them.

Aside from an initial training fee when you join the franchise, the cost of training and other support channels is included in the royalty fees you pay the franchisor from your gross sales.

As a franchisee, can also easily access a network of support and advice from other franchisees online. Even if you just want to vent or relate to other franchise owners, there are plenty of websites and message boards where you can do this.

4. Brand Recognition

Everyone already knows your franchise brand and you already have tons of fans on day one. A well-known product advertises itself, meaning you will need to devote very little time and energy to marketing.

Though you will be required by the franchisor to spend some of your profits on advertising, you can rest easy knowing that your personal efforts will not be the only way people will find out about your business. In many cases, you simply pay the franchisor an advertising fee and do not undertake any marketing efforts yourself.

There’s also always a chance your franchisor will come up with a new product or viral national marketing campaign that could make your product even more popular, with no blood, sweat, or even tears required on your part.

5. Easier To Get A Loan

It is typically much easier to get a loan to buy a franchise than it is to get a loan to buy an independent business. A franchise is seen by lenders as less risky, as there is an established business model; with a franchise acquisition, there is an established revenue stream as well.

Many franchisors provide their own financing programs for franchise owners, and there are also alternative lenders who specialize in franchise financing. You might even be eligible to get a low-interest loan through the Small Business Administration if your franchise is listed in the SBA Franchise Directory.

For quick capital at somewhat higher interest rates, you will find plenty of alternative online lenders willing to help finance your franchise purchase or provide you with working capital or line of credit, should you need a loan later down the road.

Cons Of Buying A Franchise

Okay, so now that you know the upsides of buying a franchise, it’s important that you understand the pitfalls as well. Whether or not you can live with these downsides will determine whether becoming a franchise owner is right for you.

1. Fees & Expenses

Although there aren’t too many startup fees involved in a franchise resale, there are still significant fees and operating costs involved in franchise ownership overall.

It is a general rule in the franchise world that after various fees are taken out, about one-third of pre-tax profits go to the franchise. Some one-time and ongoing costs of franchise ownership include:

  • One-time franchise transfer fee (if the seller does not agree to pay it)
  • Initial training fee when you first start working for the franchise
  • Royalty fees, which allow you to use of the franchise’s logo and proprietary assets; often calculated as a percentage of gross sales, e.g., 5% of all sales, but may also be a fixed amount that is charged periodically, irrespective of sales
  • Advertising fees to support franchise-wide marketing campaigns (even if you don’t have any say over how your advertising dollars are spent)
  • Proprietary product costs—usually, you’ll have to purchase your products and/or raw materials from the franchisor or from their dedicated distributor, even though you might be able to find the materials cheaper elsewhere
  • Audit fees for periodic financial audits of your franchise
  • Renewal fee charged to renew your franchise contract once the current contract expires

All of these ongoing expenses cut into your margins, and if you’re not meeting your sales goals, it’s possible that your franchise will lose money and not be profitable, at least not right away.

Because of the various costs and fees associated with running a successful franchise, it’s important that you have some money saved or another source of income that you can live off of and use to help pay these costs until your franchise starts making decent money.

2. Competitive Threat

As a franchise owner, whenever a new location of your franchise opens in your area, you will wince and worry about how much of your business will be lost to the competing location.

Franchisors do maintain strict control over franchise territories to prevent market oversaturation, but they will err on the side of opening more locations in a territory to squeeze every last dollar out of that region, even if an individual franchise’s profit margins suffer.

Thus, every time a new franchise location opens in your territory, your market shrinks, and you have no recourse against your competitor; it’s not like you can just decide to move your franchise in a place of your choosing, or change up your product offerings, as you could with an independent business.

3. Less Control Over Business

Running a business where all procedures and policies are mapped out for you can be easier, in some ways. You don’t have to figure out how to run your business effectively because business-critical decisions have been decided for you, and are typically based on significant market research.

However, if you are a creative thinker or are used to managing a business on your own terms, franchise ownership might make you feel trapped and frustrated. Individuals who love coming up with innovative business solutions or who excel at finding more efficient ways of doing things will likely have more success as independent business owners.

4. Possibility Of Contract Terminations & Changes

One of the areas you don’t have any control over as a franchise owner is your business’s future as dictated by your franchise contract.

At the end of your contract term, the franchisor might cancel your contract if they’re not impressed with your franchise’s performance, or they could amend the contract to terms you don’t agree with. In such cases, you could be forced out of business or see reduced profits due to contract changes such as higher royalty rates, territory shrinkage, or others.

Although it is possible to negotiate the terms of any franchise agreement with the help of a franchise attorney, it is inevitably a David vs. Goliath type situation when going up against a big corporation with a lot of money and resources at their disposal.

5. Negative Press Can Hurt Sales

Yet another aspect you have little control over as a franchise owner is the company’s overall reputation. Consider how the following events could affect your business:

  • The company makes a tone-deaf advertising campaign that offends a lot of people
  • Employees at another franchise do something shocking/illegal
  • A company executive says/does something controversial or offensive

All of these are potentially newsworthy and hashtag-worthy events — you can probably think of several recent examples just off the top of your head.

Through no fault of your own, any bad press that attaches to your parent company in the public eye could hurt your franchise’s sales and even cause people to boycott your business.

Tips On Starting Your Franchise Journey

If you think you might want to buy a franchise, you can start with some simple tasks today or whenever you have some free time to do some research.

1. Be Strategic When Choosing Your Franchise Sector

Food —  particularly fast food — is typically the first thing that comes to mind when thinking about franchises, but there are plenty of franchising opportunities even if you don’t want anything to do with food service.

In addition to quick-service and full-service restaurants, other major players in the franchise industry include:

  • Gas stations & convenience stores
  • Clothing/shoe stores
  • Gyms
  • Beauty salons
  • Janitorial services
  • Hotels/motels
  • Real estate agencies
  • Car dealerships
  • Vision centers/optical goods
  • Private postal centers
  • Children’s services (e.g., daycare, preschool, kids’ sports)
  • Pet stores and services
  • Medical services

When determining which type of franchise you’d like to purchase, it’s important to consider market trends in addition to your own personal preference.

  • Which franchise sectors are growing, and why?
  • Which sectors are shrinking?
  • Which franchise brands have been doing well in recent years? Which ones are suffering?

These are just a few quick market research queries you can answer with some targeted Google searches.

2. Talk To Other Franchisees

Of course, you will want to talk to the owner of any franchise you’re considering buying and ask them why they’re selling and other pertinent questions. But it’s also important to get feedback from other franchise locations so you can get a well-rounded view of the particular perks and pitfalls of owning that type of franchise.

You can find the contact information for other franchisees in the Franchise Disclosure Document (I’ll talk more about that document in a moment) and also check message boards and blogs to find whatever “dirt” you can about the franchise. This way, you can know more about what you can expect and decide for yourself whether you’re willing to risk having a similar experience as other franchisees.

3. Determine Your Budget & Financing Options

Before you get too ahead of yourself, you need to know all the costs involved in purchasing a franchise and what you can afford.

Besides the cost of purchasing the franchise, startup fees, and working capital, you also need to factor in your personal expenses. According to the FTC’s Consumer’s Guide to Buying a Franchise (a must-read for any potential franchisee), it could take a year for your franchise to become profitable. Potentially, it could take even longer to turn a profit if the franchise was not profitable at the time of purchase. As a buffer, it’s important to have access to enough capital to ensure you will be able to survive even if your franchise doesn’t!

Once you have a rough idea of how much money you need, you can look into franchise financing options, if necessary. My posts on the best loans for franchises and how to get business acquisition loans are required reading if you’re researching loans to acquire an existing franchise.

4. What Is The USP?

When it comes to any business, the USP, or Unique Selling Proposition, is crucial in determining the business’s success. This is especially true with franchises, as the brand’s uniform nature makes it difficult to differentiate one franchise from the next. With that said, there are still important differences between different franchises within the same brand, and you need to figure out if the franchise you’re considering purchasing has something that makes it unique. Some examples include:

  • Prime Location: Is the franchise right off a popular freeway exit? How close is the nearest location of this franchise?
  • Added Features: For example, some McDonald’s restaurants have play structures and others do not.
  • Unique Building Or Business Space: A building’s age, design, and layout can all affect how attractive it is to patrons.

It may also be possible to add your own USP to a franchise. When working within the confines of a franchise contract, it can be difficult or impossible to offer something unique in terms of your products or services. However, there are still ways you can make your franchise location outshine the rest.

For example, you can keep your gym franchise much cleaner than the other gym locations in your city. Or, if you read online reviews saying that the tax preparation franchises in your town have incompetent staff, you can take efforts to make customer service shine at your tax prep franchise. You may also be able to invest in structural improvements before your grand reopening, such as improved equipment or a new franchise point of sale system.

5. The FDD & Other Pre-Sale Due Diligence

Once you determine which franchise interests you, you’ll need to do various pre-purchase due-diligence, such as reviewing financial documents, performing a business valuation, and making sure the franchisor approves of the transfer (they may not approve in some cases). Assuming you don’t have a legal background, hiring a franchise attorney can help you with most of these pre-purchase tasks.

Another important part of the pre-sale process reviewing the Franchise Disclosure Document (FDD). This document contains important information about the entire franchise brand as well as individual franchise locations and franchisees. If you find out in the FDD that the franchise you want to buy has had a lot of owners in the past few years, this may indicate that the franchise location is not profitable or that the franchisor has not provided adequate support to this location.

Final Thoughts

Buying a franchise is not right for everyone. However, it might be right for you if …

  • You want to own a business but don’t necessarily have a specific skill or vision
  • Lack of control over how to run your business doesn’t bother you
  • You have savings or additional income to live on until your franchise opens and becomes profitable (for example, retirement income)
  • You are a hard worker by nature and good at following the rules
  • The franchise you’re considering purchasing is a successful one and/or you have something unique you can add to make it successful

If you follow all of the tips I’ve laid out in this post, you will be well on your way to becoming a successful franchisee.

Quickly compare franchise loan options:
Lender Borrowing Amount APR Req. Time in Business Min. Credit Score Next Steps

$2K – $5M

Varies

6 months

550

Apply Now

smartbiz logo

$30K – $350K

6.36% – 9.57%

2 years

650

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applepie capital logo

$100,000+

Approx. 9% – 16%

N/A

N/A

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$25K – $500K

7.4% – 36%

2 years

620

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For more information on lenders that will help finance your franchise purchase, contact us and we’ll be happy to suggest a suitable lending service to help you get that franchise loan.

The post Should I Buy A Franchise & How Do I Start? appeared first on Merchant Maverick.

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SBA 504 Loans: Your Guide To SBA/CDC Real Estate & Equipment Loans

The SBA 504 loan is a financing program offered by the Small Business Administration and Certified Development Companies. The loans, while selective, are open to eligible, for-profit small businesses operated by United States citizens and resident aliens. 504 loans are fit for small businesses in search of fixed interest rates with long-term financing and smaller down payments.

What Is The SBA CDC/504 Loan Program?

The SBA CDC/504 Loan Program is a financing program backed by the Small Business Administration. The goal of the program is to promote business growth and job creation through the support of small businesses.

The SBA connects recipients with a Certified Development Company (CDC). CDCs are non-profit organizations, certified and regulated by the SBA. These CDCs provide fixed-rate, long-term financing in partnership with lenders and the SBA. There are around 260 CDCs in the nation, which serve their local economies.

How Can SBA 504 Loans Be Used?

Often, 504 loans are referred to as SBA Real Estate Loans or SBA Commercial Real Estate Loans because of their strict usage policies, which make them a great option for purchasing fixed assets, like real estate.

In fact, proceeds from a small business real estate loan can only be used for fixed assets and few soft costs. The money cannot be used for working capital, inventory, or consolidating or paying debt.

Recipients of 504 Loans can use the proceeds to:

  • Purchase an existing building
  • Purchase land and land improvements
  • Construct new facilities
  • Renovate existing facilities
  • Purchase machinery and equipment for long-term use
  • Refinance debt in connection with renovating facilities or equipment

If your needs for financing don’t fit the bill, consider looking into the SBA 7(a) Loan Program, which offers broader options for small businesses.

CDC 504 Loan Pros & Cons

If you’re wondering whether this loan program is right for your small business, look into the pros and cons. Some small business owners prefer the 504 over the 7(a) loan and vice-versa. Consider the following if you’re looking into receiving a 504 loan:

Pros

  • Offers 90% financing, resulting in savings and improved cash flow for small businesses.
  • 504 Loan recipients often enjoy lower rates than those with traditional loans.
  • Recipients can include any 504 refinancing costs within the given loan.
  • Borrowers have the option to use given equity in the fixed asset as collateral.
  • The 504 Loan offers lower down payments of around 10%, compared to 25–30% on traditional loans.
  • Recipients of 504 loans can receive long-term capital: 20-year, fully amortized financing.

Cons

  • The CDC 504 Loan is selective about borrowers and usage of funds. If you meet all qualifications, this may be a positive for your business. For many businesses, however, this can be a burden. If you need funds for versatile needs and need a flexible loan, the 504 is not for you.
  • While borrowers can use funds to refinance eligible business operating expenses, there is a maximum 85% loan-to-value, meaning such operating expenses may not exceed 25% of the total value of eligible fixed assets.   
  • Prepayment penalties exist during the first half of the loan term. These rates are usually 100% of interest lost in the first year, 90% of interest lost in the second year, and so on, until the tenth year, in which it is equal to 0%.

SBA 504 Loans VS 7(a) Loans

If you’ve been doing your research on SBA loans, you know that 7(a) loans, like 504 loans, can be used to purchase real estate and equipment, construct, and renovate. So, what is the difference between a 504 loan and a 7(a) loan?

CDC / 504 Loans SBA 7(a) Loans

Loan Size

The CDC portion of the loan has a size limit, but the overall loan can be used to finance larger projects.

Offers flexibility for size projects, but are generally used for smaller sized projects.

Interest Rates

504 loans offer fixed-rate financing, which locks in low rates for the full length of the loan.

Usually has lower fees, but are variable, not fixed, and are adjusted quarterly. Rates typically rise over time.

Prepayment Penalty

High prepayment penalties

Prepayment penalties vary depending on loan

Loan Structure

  • 50% Bank Loan
  • 40% CDC Loan
  • 10% Borrower Down Payment

Varies depending on risk. Minimum 10% down payment for the borrower.

Loan Fees

Fees are negotiated per the 50% bank loan. Can be financed within the 504 loan.

Fees are based on the size of the loan. Can be financed within the 7(a) loan. An extra .25% of fees can be charged on portions of a 7(a) loan exceeding $1 million.

Do You Qualify? Borrower Requirements For SBA 504 Loans

To be eligible for an SBA 504 Loan, there are strict requirements a business must meet:

  • Borrowers must first meet the SBA size requirements
  • Businesses must have a tangible net worth less than $15 million.
  • You must also have an average net income less than $5 million (after federal income tax) the two previous years before applying.
  • Businesses must be for-profit
  • Businesses must be owned by U.S. citizens or resident aliens with permanent resident status.

For businesses wishing to gain financing for projects involving real estate, the business must occupy a minimum of 51% of rentable property for existing structures. Businesses intending to build a space must intend to occupy at least 60% of rentable property, with the intention of occupying 80% with growth.

As the 504 Loan is intended to directly create jobs, borrowers must also meet the job creation and retention requirement. This requires the business to create one job per $65,000 received in SBA financing. If the borrower is a small manufacturer, they must create one job per $100,000 borrowed.

If your business engages in other credible community goals, the job creation requirement can be waived. Such initiatives include community development goals, public policy goals, or modernizing facilities for health, safety, or environmental reasons.

There is no minimum credit score required, although it is best that you know ahead of time whether you can afford a small business loan.

SBA 504 Loan Terms, Fees, and Amounts

SBA 504 Loan Interest Rates & Fees

504 loans offer fixed rates and fees, set by the current market rate for 5-year and 10-year Treasury issues. If you’re receiving financing through a 504 loan, you can expect long-term fixed rates. SBA loan rates and fees will vary depending on the loan amount, lender, etc. 504 fees often include:

  • Interest Rates
  • CDC Servicing Fees
  • Central Servicing Agent Fees
  • SBA Guarantee Fees
  • Bank Fees
  • Third Party Fees (if applicable)
  • Prepayment Fees

SBA 504 Loan Borrowing Amounts

There is no maximum project size for businesses applying for a 504 loan. There is, however, a maximum SBA loan amount of $5 million. This debenture varies if the borrower is a small manufacturer or is planning an eligible energy project. Such borrowers can qualify for up to $5.5 million.

The CDC/504 Loan Application Process

Businesses applying for a 504 Loan should be prepared to provide evidence of eligibility, indebtedness, and creditworthiness. The 504 Loan application is roughly thirteen pages long and requires information on project cost, energy efficiency goals, debenture pricing, etc. Once the application is completed, it should be submitted to the CDC, which will then forward the information to the SBA Loan Processing Center.

Final Thoughts

The SBA 504 Loan Program is a great option for small businesses in need of cash for fixed assets, expansion, or modernization. If you need fixed interest rates, long terms, and a smaller down payment, this might be for you. Check out our SBA Loan Calculator to estimate everything you need to know about your individual loan.

If 504 loans aren’t quite what you’re looking for, try checking out the 7(a) Loan Program, which offers wider flexibility for many small business owners. Applying for financing can be an arduous task, so always consider your individual business and make your decision based on what’s right for you!

The post SBA 504 Loans: Your Guide To SBA/CDC Real Estate & Equipment Loans appeared first on Merchant Maverick.

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