If you’ve ever paid employees or received a paycheck through electronic deposit, then you’ve used the ACH payment system. Same with using the “pay bills” feature from your bank account. Whether you are aware of it or not, you use ACH to make payments every day.
In fact, even when a payment is not called an ACH transaction, a portion of that process might still pass through the ACH network. This is because ACH payments form the backbone of money transfer between US banks.
This article is meant to give you a quick introduction to ACH transfers. We have longer articles elsewhere if you want to do a deeper dive, but if you’re short on time, we hope this article at least gives you a general framework on what an ACH transfer is and how it works.
What Does ACH Stand For?
ACH stands for Automated Clearing House…which doesn’t mean anything by itself. ACH transfers are run by an organization called Nacha (in the past, it went by the acronym NACHA, which stands for the National Automated Clearing House Association). The association is responsible for making the rules related to how to make an ACH transfer, even down to the file transfer format a bank must use to transmit the information. It also interfaces with the US federal government, even trying to convince the US Federal Reserve to change its daily operations to make ACH transfers easier/faster for the banks.
Note that Nacha is an organization of/for US banks. While ACH transfers are possible outside the US, they are mostly used by banks in the US, and so Nacha rules mostly work only within the US.
Sometimes, people confuse ACH with eChecks, but they’re not the same. We have an article explaining eChecks in more detail, but, briefly, eChecks typically start as actual physical checks. They’re digitized (e.g. you take a photo of the check to deposit it to your bank account) and then the bank of the payor transfers that amount to the bank of the payee.
(This is where eChecks and ACH payments sometimes get confused. When the banks transfer that money, they could do it over the ACH network or they could do it over the Check 21 network. The precise network used depends on the bank’s preference. Just remember that, for pure ACH payments that started out as ACH payments, they will always go over the ACH network.)
How Does An ACH Transaction Work?
ACH transactions basically form the backbone of money transfer between banks in the US. These transactions are sent over a private computer network called the ACH network, which connects US banks to the US Federal Reserve Bank. The Federal Reserve is where money exchange between all the banks occur; right now, this is done twice a day during regular business days. This means that each bank must keep track of which customer sends how much money to which other person at what other bank until it’s time to send that information to the Federal Reserve at the designated settlement times. The Federal Reserve then makes the actual money transfer between the banks. Here’s an article with a more detailed explanation of the mechanics of money transfer between banks.
Note that ACH transfers can occur between a US bank and a foreign bank. In that case, the transfer information is passed through a different computer network — typically the SWIFT network on which most US-foreign transactions are sent through. These transactions use ACH transfer rules set up by Nacha, and that’s why they’re still called ACH transfers.
From a user’s standpoint, there are two types of ACH transfers: ACH credit and ACH debit. We will briefly explain the two below.
What Is An ACH Credit?
ACH credit payments are often thought of as “push” payments, where money is pushed out of the owner’s account. In other words, the sender of the money must authorize each payment before the money is transferred out.
The recipient of an ACH credit payment first gives the sender their bank account number and bank routing number. The sender then sends the recipient’s bank information to their own bank, along with instructions to pay a certain amount (sometimes, on a specific date). The payment information is batched and then sent to the central bank for settling according to a daily schedule. Once the transfer is settled, the money shows up in the recipientâs account. This type of payment is better suited for payroll or occasional bill payments where you want to control when and how much to pay.
What Is An ACH Debit?
With ACH debit payments, money is “pulled” from an account according to a set schedule. This type of payment is better suited for recurring bills such as utility payments, subscription plans, and similar. With ACH debit, the payor sends the information to the entity where payment is due (e.g., the utility company). The information includes account number, routing number, and payment authorization for a certain date of each month. On that date, the recipient of the payment sends a payment request to their own bank. That bank sends the information through the Federal Reserve to the payorâs bank, which checks for previous authorization and ensures there are sufficient funds in the account. If there are sufficient funds, then the payorâs bank releases the money.
ACH Payment Processing Times
ACH transfers are processed in batches, for efficiency. As of this writing, the Federal Reserve batches payments twice each working day, and Nacha hopes to be able to do three batches per day by 2021. Because of the batching times, ACH transfers can technically be completed on the same day, but typically you’ll have to pay an extra fee for the speed/jump ahead in line. If you do not wish to pay the extra fee, then the bank gets to decide when to make the transfer, and that means the transfer will take at least 24 hours.
Now, some money transfer services, such as Zelle, basically allow for instant transfers, once the account is set up. If ACH is the backbone money transfer service between banks, how do these services almost instantaneously transfer money? The answer is that they don’t. To you, the user and the recipient of the money, the money transfer seems instantaneous. But your bank is actually just lending you the money. The actual exchange of money between the two banks occur over the ACH network and is completed a few days later.
Why Use ACH Payments?
ACH payments typically cost less to process than credit card charges. What’s more, it’s also harder for the payor to dispute the payment and pull it back, once the payment is finalized. And, of course, despite the popularity of credit cards, not everyone wants to use them/can qualify for them. For these reasons, it might be worth your while to look into allowing your customers to pay through ACH payments.
ACH payments are not the best form of payment for all purchases. They are, however, especially suited for recurring payments such as payroll, utilities, installment payments of any sort, subscriptions, and the like, where a certain amount is due on a certain date each month. From a merchant’s standpoint, the money is pulled from the payor’s account always on a certain date, and from a payor’s standpoint, the money is paid on a designated date without fear that it might get lost in the mail.
Are ACH Payments The Best Payment Option?
Like everything in life, one size doesn’t fit all, and so it is with ACH payments. Although they’re well suited for some types of payments, they are not always the best option for others. For instance, for retail purchases where the customer buys an item and wants to take the item home right away, an ACH payment is not suitable. Credit or debit cards are the better form of payment under those circumstances.
However, ACH payments are well-suited for routine and recurring payments. From the merchant’s standpoint, ACH payments tend to cost less to process than credit card payments and, once they’re scheduled, they’re paid on a regular basis, often without the payor needing to pay attention to the process. Finally, ACH payments are harder to pull back, once the transfer is completed. This means that the merchant would have to deal with chargebacks a lot less.
If you wish to learn more about ACH and other forms of payment, we have other more detailed articles summarizing these. If you have any questions, please leave us a note below. We will do our best to help.
The post What Is An ACH Payment? Everything You Need To Know About ACH Transactions appeared first on Merchant Maverick.
The COVID-19 pandemic has left the small business world reeling, with businesses forced to shut their doors, lay off staff, or change the way they operate. These sudden and unexpected changes have hit many business owners hard as they struggle to follow social distancing guidelines and comply with government orders. Unfortunately, many small businesses are already struggling financially or may be in the near future.
Small business aid made available through the Coronavirus Aid, Relief, and Support Act has been making headlines, but many small business owners missed out on funding, do not qualify, or did not receive enough money to sustain their business for an extended period of time. The good news, though, is that many companies and organizations are offering millions of dollars in grant money to small business owners.
Instead of spending hours scouring the web for legitimate grant programs available to businesses affected by the coronavirus, keep reading. We’ve done the hard work for you by finding the best grants available to help your business clear the hurdles that this year has thrown at us … and the inevitable challenges that lie ahead.
Sam’s Club Small Business Relief Grants
Eligibility Criteria: Small businesses that have been affected by COVID-19, particularly underserved communities
Open & Close Date: Round 3 of funding will open on May 14, 2020
Sam’s Club has provided a $1 million grant through the Local Initiatives Support Corporation (LISC) that will be distributed to small business owners affected by COVID-19. Through this program, small business owners can receive up to $10,000 to cover immediate expenses. Qualified uses for grant funds include payroll costs, rent and utilities, outstanding debts to vendors, upgraded tech infrastructure, and other operational expenses.
Any business that has been affected by COVID-19 can apply for the grant. Priority will be given to underserved communities including businesses owned by women, minorities, and veterans, as well as businesses that are particularly challenged by the COVID-19 pandemic.
Two rounds of funding have already been closed, and the third round opens on May 14. A close date for submitting applications has not yet been announced. Interested business owners can visit the LISC website to learn more about this grant, sign up for email updates, or submit an application.
Verizon Small Business Recovery Fund
Eligibility Criteria: Small businesses that have been affected by COVID-19, particularly underserved communities
Open & Close Date: Round 3 of funding will open on May 14, 2020
Verizon Wireless has donated $7.5 million in grant funding that will be distributed through LISC. Businesses may qualify to receive up to $10,000 to use for immediate operational expenses, including outstanding debts to vendors, rent and utilities, payroll costs, and other purposes.
Businesses that have been affected by COVID-19 can apply. However, priority will be given to business owners in underserved communities that are unable to secure funds elsewhere. Businesses that have been particularly challenged during the pandemic will also receive priority.
The grant funds will be distributed through three rounds of funding. The first two rounds are closed, and the third opens on May 14. A close date for the submission of applications has not yet been announced. If you’re interested in this grant, you can apply, sign up for email updates, and learn more through LISC.
GoFundMe Small Business Relief Fund
Eligibility Criteria: Available to independently owned and operated businesses affected by COVID-19. All recipients must raise at least $500 through the GoFundMe platform.
Open & Close Date:Â Currently open; submissions will close when funds have been depleted
GoFundMe has launched its own fundraiser to help small business owners. The GoFundMe Small Business Relief Fund has raised over $2 million that will be used to provide matching grants of $500 to qualified business owners.
Any business is eligible to apply provided they meet a few requirements. Businesses must be independently owned and operated. Businesses that are nationally dominant in their fields are not eligible to receive a grant. Furthermore, all recipients must have been affected by COVID-19 and must use funds to pay employees or ongoing operational expenses.
To be eligible for a $500 grant, all recipients must register to confirm their small business status. Recipients must also launch a GoFundMe fundraiser and raise at least $500 in funds. All fundraisers must include the hashtag #SmallBusinessRelief to qualify. Grants will continue to be distributed until all funds are depleted. The GoFundMe Small Business Relief Fund campaign page and the program FAQs provide all of the information you need to secure your grant.
FedEx #SupportSmall Grants
Eligibility Criteria: For-profit businesses in the US that have been in operations for at least 12 months, have fewer than 50 employees, made less than $5 million in sales revenue in 2019, and have shipped or plan to ship
Open & Close Date: Submissions will be accepted from May 25, 2020, through June 12, 2020.
FedEx is showing its support of small businesses by providing a total of $1 million in grant funding to eligible applicants. The 200 recipients of this grant will each receive $5,000 plus a $500 FedEx Office credit that can be used for posters, banners, and other marketing and promotional materials.
To be eligible, all applicants must be at least 18 years old and operate a US-based business. Only for-profit businesses can apply. Qualifying businesses must have been in operations for at least 12 months, have less than $5 million in sales revenue from 2019, and have fewer than 50 employees. All applicants must also have shipped within the last 12 months or are planning to ship within the next 12 months. Franchises, resellers, independent consultants, nonprofits, and previous winners of FedEx Small Business Grants are not eligible.
The application period opens on May 25, 2020. Applications will no longer be accepted after June 12, 2020. Interested business owners can apply directly through FedEx.
Nav’s Small Business Grant
Eligibility Criteria: Any Nav customer with a social media account
Open & Close Date: The current round runs from February 24, 2020, through May 30, 2020. A new submission period opens quarterly.
Nav’s Small Business Grant isn’t specifically for businesses affected by the coronavirus — any Nav customer can qualify. Every quarter, three recipients are selected to receive grants. The winner of first prize receives a check for $10,000. The first runner-up receives a grant for $2,000, while the second runner-up receives $1,000.
To qualify for this grant, you must be a Nav customer. Then, you must create a post and share it on Facebook, Instagram, or LinkedIn. Your post should discuss a challenge that your business has faced and how you plan to use your grant. Nav encourages participants to get creative with their posts by including photos, creating videos, or recording audio. Nav must be tagged in the post for the submission to be considered.
This grant program is ongoing and accepts new submissions each quarter, so if you miss out on this round, don’t worry — you can take part in the next round. Check out past submissions, tips for creating your post, and learn more about this grant by visiting Nav.
COVID-19 Business for All Grants
Eligibility Criteria: Any US-based business affected by the coronavirus
Open & Close Date: This contest is open from March 26, 2020, through July 16, 2020.
Hello Alice has partnered with companies like eBay and Verizon to distribute funds through the COVID-19 Business For All Grant program. Through this program, qualifying small businesses can receive a $10,000 grant.
Qualifying for this grant is easy. The program is open to any US-based business that does not engage in illegal or illegitimate activities. All entrants must sign up for a Hello Alice account and complete the online application. Winners will be selected based on their need for funds and how grant funds will be used. You can learn more about this grant and submit your application through Hello Alice.
Supermaker’s Entrepreneurial Dream Project
Eligibility Criteria: New businesses or businesses that haven’t yet launched, less than $2.5 million in gross annual revenue, and an active business website and social media account
Open & Close Date: Applications are due by June 15, 2020
Supermaker’s Entrepreneurial Dream Project is aimed at new businesses or businesses that haven’t even gotten off the ground yet that have been impacted by the coronavirus. Two winners will be selected to split a grant of $100,000. Ten additional winners will be selected to receive mentoring through the Supermaker Mentor Network.
Businesses that made their products available in 2019 or later are eligible. Businesses that have not yet launched may also apply. Existing businesses must have less than $2.5 million in gross annualized revenue. Products must currently be sold or ready to sell within six months of applying to qualify. Eligible entrants must also have a US-based business, an active website, and social media accounts showing entrepreneurial activity.
Winners will be picked based on criteria including the business’ mission statement, sustainability, and proposed use of funds. Interested applicants can go directly to Supermaker to check out FAQs, read tips for submitting a good application, and apply for this grant.
The Conductor Foundation
Eligibility Criteria: Nonprofit organizations
Open & Close Date: Ongoing
The Conductor Foundation grant program is different than other grants on this list. First, it’s open to nonprofit organizations. This also isn’t a monetary grant but does offer more opportunities for growth and online visibility.
Winners of this grant will receive Conductor Searchlight SEO technology, Keyword Discovery Services, and ongoing support from the team at Conductor.
Applicants do not have to be affected by COVID-19 to qualify, and this contest is ongoing. Interested nonprofits can learn more and submit a one-page application directly through The Conductor Foundation.
Amazon’s Neighborhood Small Business Relief Fund
Eligibility Criteria: Small businesses with less than $7 million in annual revenue or fewer than 50 employees that are located in select neighborhoods in Seattle and Bellevue
Open & Close Date:Â Undetermined
Amazon has created the $5 million Neighborhood Small Business Relief Fund to provide financial assistance to small businesses located in select Washington State neighborhoods. The amount of each award varies and will be determined based on information received during the application process. Funds should be used to cover day-to-day operational expenses and to improve cashflow.
To qualify, businesses must be located within close proximity of Amazon’s offices in Regrade, South Lake Union, and Bellevue. All eligible entrants must have less than $7 million in annual revenue or fewer than 50 employees. The grant program is open to any business that is open to the public and relies heavily on foot traffic.
Amazon has a page that allows you to determine eligibility and register to apply. The company also has a list of FAQs and additional information to help interested business owners find out more about this funding opportunity.
PBA COVID-19 Relief Fund
Eligibility Criteria: Licensed beauty professionals unable to work as a result of COVID-19
Open & Close Date: Ongoing until funds are depleted
Licensed beauty professionals that have been unable to work due to the coronavirus can apply for a grant through the Professional Beauty Association COVID-19 Relief Fund. Eligible entrants will receive a $500 Visa gift card that can be used to purchase supplies or cover immediate expenses.
A lottery process is used to determine winners of this grant. To date, over $1 million has been distributed to help beauty professionals, and the contest will be ongoing until funds are depleted.
Interested applicants must submit an application. The PBA also offers FAQs giving more details on this funding opportunity.
CND x BCL Nail Professional Relief Grant
Eligibility Criteria: Licensed nail professionals employed for at least 12 months that are currently not receiving an income
Open & Close Date: Submissions will be accepted through May 30, 2020
Beauty Changes Lives, through a donation by CND Creative Nail Design, will be awarding grants to nail professionals that have lost their income as a result of COVID-19. Each winner will receive temporary financial relief through a one-time $1,000 grant.
This program is open to licensed beauty professionals that have been employed for at least 12 months as of March 16, 2020. Eligible applicants must also reside in the US and must not be currently be receiving an income.
In addition to submitting an application, entrants must also write an essay of more than 200 words and provide documentation proving identity, number of dependents, licensure, and other information. Submissions will be accepted through the end of May 2020, and winners will be selected through July. Check out Beauty Changes Lives to learn more about this program and to sign up for a chance to win.
The Red Backpack Fund
Eligibility Criteria: Woman-owned businesses and nonprofits affected by COVID-19
Open & Close Date: Application rounds will open on June 1, July 6, and August 3
The Spanx by Sara Blakely Foundation has donated $5 million and partnered with GlobalGiving to help female entrepreneurs through The Red Backpack Fund. This fund will provide a minimum of 1,000 grants of $5,000 each to female entrepreneurs impacted by the coronavirus. Recipients will also receive an All-Access Pass to MasterClass for mentorship opportunities.
This grant program is open to US-based businesses that are at least 51% women-owned. Eligible entrants must have an EIN, at least one employee but no more than 50, and annual revenues not exceeding $5 million.
There will be multiple rounds of funding for these grants. Application periods are June 1 – June 8, July 6 – July 13, and August 3 – August 10. If your business is interested, check out the FAQs or submit your application. If the fund currently isn’t accepting applications, you can sign up for email updates to be notified when the next round of submissions is open.
The Doonie Fund
Eligibility Criteria: Black female entrepreneurs affected by COVID-19
Open & Close Date: Undetermined
The Doonie Fund was launched by digitalundivided CEO Kathryn Finney to support and empower black female entrepreneurs. The fund was launched on April 5, 2020, and has helped over 500 women to date.
To qualify, all entrants must be an entrepreneur that identifies as both black and female. Eligible recipients must also have been impacted by COVID-19. Recipients will receive $100 to help their business. This is an ongoing fund with no announced submission deadlines.
To get started and to learn if you qualify for the program, submit your application. You can also check out The Doonie Fund page to learn more about the program.
Grants Worth Watching
While some grant programs aren’t currently accepting submissions, there are a few that may offer more funding opportunities in the future.
Visa Foundation COVID-19 Emergency Relief
The Visa Foundation has committed $10 million to provide immediate relief to organizations on the frontlines of the COVID-19 pandemic. So far, the foundation has distributed $8.8 million in grant funds to organizations including UNICEF, Feeding America, and Red Cross.
Visa Foundation Small & Micro Business Program
The Visa Foundation has also committed $200 million over the next five years to support small businesses, micro businesses, and the economic advancement of women. Of these funds, $60 million will be allocated to non-government organizations worldwide that support small businesses and micro businesses. The remaining funds will be allocated to investment partners that generate returns for these businesses.
Facebook Small Business Grants Program
Facebook is providing small business grants to up to 30,000 recipients through its Small Business Grants Program. The two-week window to submit an application for a portion of the $100 million fund is closed to US businesses, but businesses in other nations may still be eligible to apply. Additional resources may be made available in the future.
Horst Rechelbacher Relief Fund
The Horst Rechlebacher Relief Fund provides $1,000 grants to unemployed licensed beauty professionals or students enrolled in a licensing program. Although the submission deadline has already passed, interested professionals can keep an eye on the Beauty Changes Lives website for updates.
Other Resources For Coronavirus-Affected Businesses
If you need immediate funding or don’t qualify for any of these grants, you still have options to keep your business afloat during this pandemic. An abundance of resources are available through our COVID-19 hub, including industry-specific survival guides, emergency funding options, credit card payment assistance, and more. We’re continually updating and adding new content to make sure that business owners like you have the financial support and resources needed to weather this storm. Good luck!
The post Take Advantage Of These Small Business Grants For Coronavirus Relief appeared first on Merchant Maverick.
When Kim Wilson closed up her two Commissary Cafe locations in Portland, Oregon on March 21 in response to the national Coronavirus emergency, she believed sheâd never reopen.
The savvy small business owner, a graduate of Le Cordon Blueâs Patisserie program who carved out a niche for herself in the coffee-shop-flooded city, laid off her 12 employees, posted, âThatâs a wrap,â from her Instagram, and allowed herself time to mourn and grieve the loss of her dream.
Wilson opened her NW Portland cafe in 2013. Named after movie studio commissaries where the stars of yesteryear would grab a sandwich on set, the Commissary Cafe quickly became a Slabtown neighborhood staple. With fresh ingredients, homemade soups, and buttery biscuits, Wilson threw herself into making her business a success. Six years later, she was rewarded with the opportunity to open a second location.
It is the knowledge that she will likely close the second location for good that keeps her up at night.
âItâs hard to see what my long-term plans should be, but Iâm in mourning and having to really pivot,â Wilson said.
She also knows that in some ways, sheâs lucky.
After receiving a Payroll Protection Loan via the CARES (Coronavirus Aid Relief and Economic Stability) Act, Wilson re-opened her flagship location for a trial run.
“I’m a single mom, a small business owner used to working 80+ hours a week, and I’ve never been this tired, ” she admitted. Since Wilson had closed her doors late March, the landscape of her business changed overnight. But she understands that keeping herself in-tune with that revolving landscape will be what helps her keep open long-term.
âIt is a daily rollercoaster in the neighborhood. I have friends who own businesses here and they have closed their doors. Iâm approved for the PPP loans, some of them didnât see that money, and they have had to throw in the towel,â she added. The general mood among business owners is dismal.
Even those that received PPP loans don’t know what will happen when the eight-weeks of spending are over.
Photo by Jesse Rowell, Jr.
“You are spending money fast and I’m happy and grateful to do it now, but what happens when the eight weeks are over?” she asked. “This is not sustainable spending long-term.”
Wilson applied for a Payroll Protection Program loan with the bank where she has her business account. She was quickly approved and saw the loan deposit less than two weeks after approval. Per the SBAâs instructions, she understood 75% of the loan needed to go into payroll and employee retention during the next two and a half months in order to be eligible for forgiveness. There is ample trepidation about following the governmentâs directions.
âWe are nervous about misusing the money because there is limited information or protocol, and no one at the bank really [knows about the program]. But thereâs an understanding that we are all in the same boat, so Iâm giving it some time before I check in,â Wilson said.
The quick timeframe attached to the spending is forcing Wilson to get creative.
âThe money needs to go to labor. I am hiring a nightly cleaning crew and hiring people to get work done around the shop,â she specified, but she was not able to use those funds specifically to hire back her former employees.
Wilson discovered when she went to rehire her employees that not everyone was ready to come back. From her staff of 12, eight employees declined an offer to come back to the cafe. Their reasons for not returning fell into three camps: the governmentâs unemployment benefits outweighed potential part-time earnings; there was fear and worry about the pandemic and putting oneself at risk; or the employee held misinformation about re-opening instructions.
âMy line of work relies on younger people or people who are changing careers. I have baristas with bachelor degrees. For some, this particular job can feel dispensable. Thatâs a tough road and learning lesson for people who havenât ridden out or maneuvered through roadblocks,â Wilson said. She understands their reasons for not coming back to work, but there is a cost to the lost training and expertise.
The pandemic requires everyone to dig a little bit deeper.
She is currently training a group of five new hires, some of which are displaced workers from the wedding industry.
Wilson is not unfamiliar with shifting to adapt to a new landscape. “In many ways, the recession in 2008 really revitalized the culinary experience,” Wilson said. She ruminated on how some of the best coffee shops and restaurants were born from people who lost their jobs; it gave rise to the notion of the bootstrap chefs. “This is a competitive marketplace. Places that want to survive will have to adapt.”
And Wilson is adapting daily.
âWeâve changed the way weâre operating. I have platforms outside for guests and no one is allowed inside the store. I am requiring my employees to use a face mask 100% of the time, too. There is no exchange of money and weâre using online ordering only. But that can be tricky when people walk up to the cafe and want to hand you cash, and you have to walk them through a process,â Wilson said. “Sometimes people who are stuck at home want to be helpful and support us, but they don’t always know how to be safe.”
That support from the community, however, has been a bright ray of light.
“I didn’t realize how hard it was not to see my guests every day,” Wilson admitted. “We are having such quality conversations, and I’m realizing how much of this business is a kindness to the people in this community. They want to help. My regulars want to come here in person and make that connection.”
As small businesses break down in communities around the nation, the effect is not entirely economic.
“I really hope this helps change the perspective about the service industry. We are out here right now taking care of people. This has always been about the connection to our community,” Wilson said. Her baking kits and how-to videos, new since the pandemic shut her doors, are ways she wants to reach out and remind people that the Commissary is still here.
Wilson is navigating the changing news with a renewed perspective. For someone focused on her business, the extra time with her son was a helpful reset. “This has definitely been a forced slow down and it’s making me rethink how I can permanently slow things down as an owner, as an employer,” Wilson said. “If I could go back in time, I’d remind myself to stop and reflect on the people important to me. I’d tell myself to have a life outside of business and give myself a break.”
For now, the Commissary will operate its NW Portland location as the law allows (Oregon counties will be allowed to petition to open restaurants at 25% capacity as part of a Phase 1 reopening) and Wilson will build her team back up. “At the moment, I’m glad to be able to pay my local vendors,” she said. But if businesses remain closed long-term many owners don’t know how it’s possible to retain newly hired employees after the PPP loan’s 8-week requirement expires.
The post Small Business Spotlight: Portland’s The Commissary Reopens With A PPP Loan appeared first on Merchant Maverick.
Maybe you noticed the term, along with the fee inevitably associated with it, when you signed up to process credit cards. Or maybe you didn’t notice. Now you’re seeing your first chargeback —Â wondering what it is, how to deal with it, and how to get it to go away.
The good news is that chargebacks happen to every merchant, so you’re not unique. In fact, you probably won’t be able to eliminate all chargebacks as long as you keep accepting credit cards. The best you can do is to contain them and reduce them to a small number. What is left is just a part of the cost of doing business.
To find out more about what chargebacks are and how to best deal with them, read on to find out.
Chargeback Definition: What Is It Really?
To start, let’s define chargeback. A chargeback is a payment dispute initiated by the credit card holder by contacting the card-issuing bank, with the goal of getting the credit card charges reversed. It’s a process in which both the card-issuing bank and the merchant’s acquiring bank are involved. Although you, the merchant, do have the ability to speak for yourself to fight the dispute, the final decision on whether or not to reverse the charge is up to the issuing bank. (There are subsequent legal procedures a merchant can follow, but, considering the time and money involved, it’s probably not worth it.)
The issuing bank’s business relationship is with the credit card holder, so it’s natural that they’d want to please the card holder. Expect the bank to rule in favor of the card holder most of the time, even when the card holder is being unreasonable.
Compare chargeback with, for instance, the refund process. There, the customer deals with the merchant, and the merchant decides whether or not to accept a returned merchandise and refund the purchase. Note, though, that the chargeback process can be initiated after an unsuccessful refund request, so the customer gets two bites at the apple.
There can be many acceptable reasons behind the chargeback, and each card association has its own reason code for each of these reasons. In general, some of these reasons include:
No authorization by cardholder
Goods/services returned or refused
Goods/services canceled
Goods/services not received
Goods/services not as described
Goods/services damaged or defective
Canceled recurring billing
Incorrect charge amount
Duplicate charge
ACH Disputes VS Credit Card Disputes
One reason a credit card holder requests a chargeback is that there was no authorization for continuing to charge a card in a subscription service. What they mean, usually, is that they forgot to cancel the service in time, and now they don’t want to pay. One way to solve this issue is to make ACH payments available to your customer for monthly subscriptions.
Both ACH payments and credit card charges can be vulnerable to chargeback claims. However, it’s easier for a consumer to be successful in a credit card chargeback claim than an ACH chargeback claim. Flip this around, and it means that, as a merchant, it’s easier for you to keep your money under ACH transfers than credit card charges.
We have a comprehensive article on accepting ACH payments, if you wish to know all the nitty-gritty details. But before going any further, here’s a brief explanation on what ACH payments are:
Compared with credit card charges, ACH payments work more like cash. An ACH payment is taken directly from the consumer’s bank account, and it costs less per transaction than credit card payments. While ACH can be used for one-time payments, it’s more often used for scheduled, recurring payments.
As listed in the previous section, there are numerous reasons for chargebacks, many of which involve authorization issues or goods/services issues. A credit card user has up to 120 days to initiate a chargeback claim.
The rules for chargebacks on ACH transactions are far stricter. In fact, there are only three reasons under which your customer can successfully reverse an ACH transaction:
The transaction was never authorized or the authorization was revoked
The transaction was processed on a date earlier than authorized
The transaction is for an amount different than what was authorized
The customer will typically have only 90 days to initiate a chargeback (or 60 days after the charges show up in their monthly statement).
While paying by ACH is not always the most convenient thing for your customer, because of the differences above, it might be advantageous for you to steer your customers towards paying with ACH whenever possible.
The Chargeback Process: What Merchants Need To Know
If you’ve been taking credit cards for your business for a little while, you’ve probably had to deal with chargebacks already, but only from the merchant’s standpoint. Below is a quick overview. We hope that a better understanding of the entire process can help you orient yourself when you have to deal with chargebacks again.
The Chargeback Workflow
Briefly, the chargeback process is as follows:
The credit card holder initiates the chargeback process by contacting the issuing bank and giving a reason for wanting a refund/refusing to pay for a specific charge.
If the reason given fits within the allowed reasons for chargebacks, the issuing bank assigns a chargeback code to the incident, provisionally refunds the money to the card holder, and then contacts the acquiring bank to notify the bank of the chargeback claim and to pull back the money already paid to the merchant.
Depending on whether the merchant has a direct or indirect relationship with the acquiring bank, either the acquiring bank or the merchant’s processor performs an investigation to see if they have evidence at hand to refute the chargeback claim. If they do not, then they contact the merchant about the chargeback.
The merchant can elect to accept the chargeback or fight it. Either way, the merchant incurs a chargeback fee. If the merchant decides to fight the chargeback, then the merchant submits evidence to rebut the reason for the chargeback.
The evidence is passed back to the issuing bank, which then makes a decision on whether the chargeback is justified. If it is justified, then the card holder gets to keep the provisionally returned money. If not justified, while the merchant gets to keep the bulk of the money, a chargeback fee is nevertheless assessed against the merchant.
If either the merchant or the credit card customer is not satisfied with the decision, they can escalate. Typically this means some sort of arbitration, but, because a lot of time and money must be invested in the process, probably most people do not pursue this path.
Why Small Businesses Get Hit With A Chargeback Fee Per Incident
A chargeback fee is considered a markup fee. This means that the fee is charged by your processor, so, technically, it’s negotiable. However, smaller businesses have less leverage when negotiating with processors, so they might not always get the best deals.
Chargeback fees typically cost $25. We have seen more, and we have seen less. Often, the fee is assessed against you even when you win a chargeback dispute, on the theory that any chargeback, no matter the outcome, means extra work out of the typical credit card processing flow. Extra work typically means an extra charge.
If you’re worried about chargeback fees eating into your profit, the next time you think of changing processors, be sure to ask about the charge. It can’t hurt to ask if they will reduce the fee. After all, the worst they can say is “no.” You’ve got nothing to lose.
Chargebacks Aren’t The End Of The World, But You Still Need To Be Wary Of Them
If you take credit cards, you will have to deal with chargebacks. There is really no way around it, even if you have happy customers. It’s just a cost of doing business. Don’t sweat it too much if you get one once in a while.
But, if you have too many chargebacks, you do need to be wary. An excessive number of chargebacks could destroy your business. Your processor might force a reserve fund on you so that it takes you longer to get paid when a customer uses a credit card. If things don’t improve, your processor might terminate your contract altogether and put you on the MATCH list. Once you’re on the MATCH list, it would be very difficult for you to find another processor for five years.
So, whenever possible, get a dissatisfied customer to contact you directly for a refund, instead of calling their bank for a chargeback. Be friendly and accommodating. Hopefully, you can resolve the issue directly instead of pushing the customer to try a chargeback.
If you have questions or interesting stories about chargebacks, leave us a comment below. We’d love to hear from you.
The post What Is A Chargeback? Everything You Need To Know About Payment Disputes appeared first on Merchant Maverick.
The COVID-19 pandemic we’ve all been dealing with has had a devastating effect on both public health and the global economy. As our institutions struggle to flatten the curve and contain the economic fallout, the lack of a coherent message from the authorities regarding when and how brick-and-mortar businesses can safely reopen has added to the stress and uncertainty felt by those whose livelihood depends on such businesses.
While we’re all dealing with a huge amount of uncertainty right now regarding when the public health outlook will start to brighten, there are some basic principles you can adhere to in order to keep your employees and customers safe when the time comes to reopen your business.
Start Planning Now
As we enter the month of May, governmental guidance as to when non-essential businesses may reopen varies from state to state and from locality to locality. In Georgia, the governor has already allowed businesses such as gyms, restaurants, and theaters to reopen — albeit against the warnings of public health officials who warn that such measures may accelerate the spread of the virus.
Other states are taking a different approach. In Pennsylvania, the state government has implemented a red-yellow-green system for reopening areas of the state — localities will move from “red” (the highest level of restrictions) to “yellow” and finally to “green” based on what regional public health indicators suggest is safe.
A state-by-state rundown of stay-at-home orders and reopening forecasts is available online. However, regardless of the directives coming from various state officials, the federal government’s criteria for when states should begin easing restrictions call for:
A decline in new COVID-19 cases for 14 straight days
A decline in reports of symptoms that might represent undiagnosed COVID-19 over that same period
Hospitals should have the capacity to handle new cases without operating in crisis mode and have a ârobust testing programâ for health care workers.
Thus far, no state has met these guidelines. If your state has announced a general reopening without meeting these guidelines, you may want to think carefully before reopening.
Regardless, the time will come when you can reopen your business in some capacity. When considering how to do this, it’s helpful to look at the examples set by essential businesses that have remained open. For instance, many grocery chains have implemented capacity limits based in part on the square footage of the store. Likewise, in areas where restaurants are set to be allowed to reopen soon, capacity limits will come into play, along with restrictions such as a mandatory 6-foot distance between diners and restrictions on the use of reusable menus.
It may not be business as you’re used to doing it, but it’s going to be our reality for the foreseeable future. Now, let’s discuss how you can protect the health of your employees when you reopen your brick-and-mortar business.
Protecting Your Employees
Whenever you’re able to reopen your business, protecting your employees will be your foremost responsibility. Let’s discuss how you can achieve this.
What Are Wellness Checks And How To Implement?
In an effort to protect the health of workers, some localities have mandated screening procedures — often referred to as wellness checks — for employees of businesses that have been allowed to remain open. Such checks may include:
Checking for such symptoms as a cough, shortness of breath, a sore throat, diarrhea, or a fever (touchless thermometers are recommended to check for fevers)
Asking employees if they’ve had close contact with someone diagnosed with COVID-19 in the last 14 days
Asking employees if they’ve traveled (internationally or domestically)
The CDC has posted a guide to keeping your employees safe and reducing the spread of COVID-19 in your workplace, including information on how to screen your employees for COVID-19.
Is PPE For My Employees Necessary?
On the subject of providing PPE for your employees, the CDC says the following:
CDC recommends wearing cloth face coverings in public settings where other social distancing measures are difficult to maintain, especially in areas of significant community transmission. Cloth face coverings may prevent people who donât know they have the virus from transmitting it to others. These face coverings are not surgical masks or respirators and are not appropriate substitutes for them in workplaces where masks or respirators are recommended or required.
Employees should continue to follow their routine policies and procedures for PPE (if any) that they would ordinarily use for their job tasks. When cleaning and disinfecting, employees should always wear gloves and gowns appropriate for the chemicals being used. Additional personal protective equipment (PPE) may be needed based on setting and product.
CDC does not recommend the use of PPE in workplaces where it is not routinely recommended. Facilities can use the hierarchy of controls, such as administrative, and engineering controls â these strategies are even more effective at preventing exposures than wearing PPE.
Of course, each particular type of business may have to make its own adjustments to allow for greater safety, which can lead to problems relating to the availability of safety supplies. A recent news story featured the owner of a barbershop in Georgia who reported being unable to open back up due in part to being unable to find the supplies she needed to safely reopen. We expect similar situations to unfold across the country as stay-at-home orders are lifted but safety supplies remain hard to come by.
Unfortunately, like so many questions we face in this new era, there are no easy answers.
How Often Do I Need To Clean?
Surfaces and equipment that come into contact with employees and/or customers will need to be cleaned on a regular basis. There are no specific guidelines regarding exactly how often this must occur, but the following is what the CDC recommends:
Current evidence, though still preliminary, suggests that SARS-CoV-2, the virus that causes COVID-19, may remain viable for hours to days on surfaces made from a variety of materials. It may be possible that a person can get COVID-19 by touching a surface or object that has the virus on it and then touching their own mouth, nose, or possibly their eyes, but this is not thought to be the main way the virus spreads.
If the machinery or equipment in question are not accessible to employees or have not been in contact with someone infected with COVID-19, they will not present an exposure hazard.
If machinery or equipment are thought to be contaminated and can be cleaned, follow the CDC cleaning and disinfection recommendations. First clean dirty surfaces with soap and water. Second, disinfect surfaces using products that meet EPAâs criteria for use against SARS-Cov-2external iconexternal icon and are appropriate for the surface.
If machinery or equipment are thought to be contaminated and cannot be cleaned, they can be isolated. Isolate papers or any soft (porous) surfaces for a minimum of 24 hours before handling. After 24 hours, remove soft materials from the area and clean the hard (non-porous) surfaces per the cleaning and disinfection recommendations. Isolate hard (non-porous) surfaces that cannot be cleaned and disinfected for a minimum of 7 days before handling.
One step you can take to improve safety is to adjust your hours and your employees’ schedules to allow for the extra time you’ll need to spend on cleaning and sanitizing the surfaces that your employees and customers come into contact with.
Protecting Your Customers
Upon reopening, you’ll be responsible for the health of your customers as well as that of your employees. Here are some tips for keeping your customers as safe as possible when the time comes to reopen.
Implementing Occupancy Limits
When you’re legally able to open for business, you may need to abide by occupancy limits set by your state or locality. For example, in North Carolina, occupancy inside supermarkets and retail stores is currently limited to 20% of the fire capacity of the store.
Obviously, occupancy limits aren’t ideal and will cut into your profits. No business owner wants to turn away willing customers! Unfortunately, during a public health emergency, we all have to make painful adjustments.
How To Encourage Social Distancing Inside Your Store
We’ve published a detailed article about how to implement social distancing in your customer-facing business. I highly recommend reading it before you reopen your business if you’re looking for guidance on implementing social distancing.
Again, look to the examples of businesses that have been permitted to remain open, such as supermarkets. Supermarkets have implemented such measures as keeping foot traffic flowing in one particular direction and placing tape on the floor in the check-out lane to ensure that customers stay 6 feet away from each other (of course, this requires supermarkets to put up signage directing customers to do these things). Now, depending on the size and nature of your establishment, you may not need to do everything that’s being done at grocery stores, but since you’ll need to maintain the principles of social distancing, you’ll likely need to implement similar measures.
Keep Open Lines Of Communication
Considering the fact that your customers haven’t been able to come around in a while, you don’t want them to forget about you entirely. That’s why you need to keep communicating with them. If your business hasn’t been talking to your customers via social media and/or through email marketing, you should start doing so right away. If you have important information regarding your future reopening (or any policy changes or product availability updates) to convey, you should obviously do that, but even if you don’t, it’s a good idea to keep communicating with customers just to stay fresh in people’s minds.
Be Prepared To Shut Down Again If The Outbreak Resurges
As things stand, none of us can forecast the future with any accuracy. We may experience a lull in new infections over these next months as the weather warms — or the partial reopening of society may just lead to a surge in new cases that requires another lockdown. As daunting as this possibility may be, it could happen, so you’ll need to prepare for the possibility of shutting down again in the near future.
We’re all going through a frightening and tragic chapter in our collective history. However, we are a resilient people, and just as the small business community hasn’t given up the fight, Merchant Maverick will keep providing the clear information and unbiased reviews you deserve. Together, we’re going get through this. Better days lie ahead. Until then, keep an eye on our COVID-19 hub for small businesses — we’re adding to it continuously, covering all the latest developments.
The post How To Safely Reopen Your Brick-and-Mortar Business As Pandemic Measures Are Lifted appeared first on Merchant Maverick.
As the COVID-19 pandemic continues its attack across the globe, the financial world has experienced a brutal setback. Small businesses have been particularly affected in this downturn; roughly 70% of owners had applied for Paycheck Protection Program loans by April 9, according to the NFIB Research Center.
With such danger looming overhead, credit card issuers have begun to reign in customers’ spending limits. These decisions can cause headaches for business owners who rely on credit cards: Besides dropping the amount of usable credit available, a lower credit limit can impact all-important credit scores.
Have you been hit by a lower credit limit recently? Or are you concerned about having your card’s credit line decreased in the future? Continue reading to find out how you can help manage your situation and keep your business financially healthy.
Why Issuers Are Lowering Credit Limits & Why It Matters
As mentioned above, several card issuers are known to have tightened credit limits in recent days. The Wall Street Journal specifically attached Citi, Discover, and Synchrony as issuers that have lowered spending limits due to concern over “millions” of credit card customers being unable to pay their bills.
Synchrony Bank is one of the few issuers to publicly comment on lower credit limits, stating that it has been using internal and credit bureau data to “dynamically reevaluate” its customers’ creditworthiness. Discover has also revealed that it is decreasing limits for new customers but added that it isn’t dropping spending limits for current customers directly due to COVID-19. There are also reports that Chase has recently tightened limits for current customers, although the bank hasn’t officially commented on the situation. It’s possible that other issuers have done the same as the above banks or are planning similar tactics for the future.
Such decisions aren’t unprecedented, even if the times we live in are. At the start of the 2008 recession, roughly 20% of banks dropped credit line limits for credit cards of prime borrowers, according to a senior loan officer survey by the Federal Reserve. Sixty percent of subprime borrowers, meanwhile, saw their credit limits tightened during the same time.
Issuers cut down credit limits for a very simple reason: They want to lessen their risk. With the current financial instability swirling around the world, more and more accounts will miss payments and potentially even default. Such situations could wind up being costly for issuers, and lower spending limits can minimize any potential damage.
For you, a lower credit limit on your card can be detrimental to your credit score — a metric that issuers and lenders use to determine how trustworthy of a borrower you might be. You’ll want to have a higher credit score because it can affect your business’ ability to qualify for loans, credit cards, and other sources of credit.
A key component to having a healthy credit score is maintaining alowcredit utilization rate, something that can impact up to 30% of your score. Credit utilization is calculated by taking the amount of credit you’re using and dividing it by the amount of credit you have access to. When an issuer lowers the limit on a credit card you have, your credit utilization will, of course, rise — potentially decreasing your credit score.
Credit limit decreases to your card can also happen stealthily. While most credit card changes require 45-days’ notice, no such restriction is in place for credit line changes. That means you’ll need to stay on your toes and take note of any changes to your card’s credit limit.
With all this said, plenty of issuers are working with customers impacted by the pandemic. In fact, some have stated that credit line increases might be a potential solution if you are struggling financially due to the coronavirus.
What You Can Do To Protect Your Financials & Credit Score
If you do find yourself with a suddenly lower credit line on your credit card, there are a few avenues you can take to minimize the damage to your financial health. We’ll take a peek at several of your options below:
Talk To Your Issuer
The quickest fix could be simply to reach out to your issuer and ask them to reconsider your new credit limit. Not all issuers will be happy to reverse a recent change, though. Still, setting out for a credit line negotiation is worth a shot. In some cases, you may also learn that your credit line decrease was due to other reasons not directly related to the financial downturn, such as a change in spending habits or a previously missed payment.
However, do note that with the current pandemic crisis, many issuers’ customer service lines are experiencing high call volumes. In some situations, this means that you may wind up being on hold for an hour or even longer.
It’s also worth a try talking to issuers of other cards you might have. While you might have seen a drop in available credit on one card, a different issuer might consider you due for a credit line increase. Plus, many issuers, such as American Express and Chase, offer the ability to request increases through their online portals. Asking for an increase online can save you the time spent and headache of calling customer service.
Check Your Credit Score Regularly
Something worth getting into the habit of doing even if your credit line hasn’t decreased is checking your credit score frequently. By monitoring your credit score regularly, you’ll be able to grasp where your overall credit health stands.
Luckily, there are a few websites that offer free credit score services. Here are some of Merchant Maverick’s favorites:
Credit Karma
Discover Credit Scoreboard
WalletHub
For a more in-depth look at free credit score-checking websites, read our guide.
As another note, each of the three major credit bureaus (Equifax, Experian, and TransUnion) are now allowing every American to check their credit report once per week for free. Previously, individuals were only allowed to look up free credit reports once per year from each bureau.
While these reports don’t display credit scores, checking them often can give you an overview of what lenders and issuers are looking at when you ask to borrow money. On top of that, regular peeks at your credit report can help stop problems before they get out of hand.
Apply For Another Credit Card
A possible remedy to a lower credit line is simply to increase your overall amount of credit available. You can do this by applying for a new credit card. If you get approved, your new card’s limit will be added to your overall amount of credit available, potentially offsetting the dip from one of your current cards.
Keep in mind, though, that you’ll want to make sure you get a new card that makes financial sense for your business. Some cards carry costly annual fees that won’t be worth your time, while others offer rewards that won’t suit your spending habits. Of course, there are plenty of worthwhile cards out there, such as those that dole out cash back or those with limited balance transfer fees.
You’ll also want to practice proper credit card habits. That means you’ll only want to spend what you can afford, keep your balance to a minimum (unless you find a great 0% APR credit card), and make your payments on time. Just because you have a new credit card doesn’t mean you have free cash at your disposal. Instead, consider the new card as a way to keep your credit healthy during this period of financial instability.
Pay Off Your Balance Consistently
One of the most obvious ways to keep your credit utilization low is to only make purchases you know you’ll pay off. This way, you’ll be able to keep the amount of debt you owe to a minimum.
Unfortunately, in these turbulent times, you may find your business struggling to pay off your credit card bill. Or perhaps your business lacks a cash flow right now and needs to buy on credit to carry a balance. If these situations match your business’s profile, only make necessary purchases on your credit card. Your credit utilization rate will thank you down the line.
All told, dealing with a lower credit limit on your card is a frustrating endeavor. By taking the above steps, you may be able to protect your credit score — potentially benefiting your business into the future.
The post Was Your Credit Card Limit Lowered Due To COVID-19? How To Minimize The Damage To Your Financials & Credit appeared first on Merchant Maverick.
When it comes to online selling, it can be difficult to keep up with new developments in the market. eCommerce is an ever-expanded industry, with new players entering the game every year. And with new competition and technology come new ways of marketing, selling, and fulfilling orders.
In this article, we’ll break down a few of the major trends we’ve noticed in 2020. We’ll explain each trend, demonstrate its popularity, and then give you some actionable steps to implement it in your own business model. Take advantage of these new ideas to stay up to date with emerging selling strategies and make sure your brand is always keeping up with the competition!
Here are the 10 biggest eCommerce trends for 2020.
1) Increase In Online Sales
Fortunately, one of the most important trends of this year is the steady increase that we will continue to see in online sales! According to data from Statista, in Q4 of 2019, eCommerce’s total share of the US retail market increased by 11.2% compared to the previous quarter. We expect online sales to continue increasing, with total annual sales projected to reach $419.9 billion, up from $365.2 billion in 2019.
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The Covid-19 pandemic has only served to cement the notion that online sales are the future of our economy. Many businesses have been forced to sell and accept payments online, or set up online ordering and delivery services just to stay alive during the shelter-in-place orders and social distancing restrictions. We have an entire hub of small business resources for people struggling to survive the coronavirus intact. There, you’ll find information about keeping your staff on with PPP loans, reaching customers virtually through social media and email marketing, setting up a webstore for the first time, and more.
These are encouraging projections for online sellers! eCommerce sales have been increasing steadily for years, and you want to make sure your business gets a cut of the pie. So, keep looking for ways to increase the impact of your online marketing. Test new promotions, create motivating email marketing campaigns, and optimize your site for web traffic. For more recommendations on increasing online sales on your own store, try our article 7 Strategies To Increase Your eCommerce Sales.
2) Household Goods Are Up In Sales
During the current coronavirus (COVID-19) crisis, we’ve witnessed a change in the way people shop. Many customers now express feelings of anxiety around a typical grocery store trip, comparing preparing for a shopping trip to suiting up for battle.
Some customers are now choosing to avoid the grocery store altogether, opting instead to order their household products online. According to a study by Ipsos from March of 2020, 23% of U.S. respondents said they were buying more of their household purchases online instead of in-store. For comparison, 42% of respondents said there had been no change in their online shopping habits, 12% said they had made fewer online purchases, and 23% never made online purchases of these goods at all.
The takeaway here is particularly relevant to those who already sell household products: if you haven’t begun selling online, now is the time to start. For those who do not yet sell household goods, you might consider stocking and advertising in-demand products–cleaning products, self-care products, and other non-perishable items. Make sure your customers know that they can look to you for the products they would typically buy in-store.
3) Mobile Shopping Is Preferred
Since the development of smartphones, mobile devices have had a growing impact on eCommerce. For many years, customers preferred to browse on mobile devices (smartphones and tablets), but they returned to a desktop or laptop computer to make their final purchase. In 2020, however, it is possible that mobile purchases will outnumber computer purchases for the first time!
We’ve known that mobile traffic has played a large role in eCommerce for years. As of Q1 2019, 64% of all online shopping traffic came from mobile devices. What is surprising is that this same quarter, mobile purchases accounted for 46% of total eCommerce orders, for the first time on par with purchases made on a computer!
With this in mind, it is absolutely crucial that your online store is mobile-friendly (meaning that it adapts to screens of all sizes). It should be easy to browse on a small screen, with simple headers, search tools, and filtering features.
What’s more, your mobile checkout needs to work seamlessly–complicated checkout can cost you sales! According to one study by the Baymard Institute, out of a pool of customers who had abandoned an online sale in the last months, 21% had abandoned the purchase because the checkout process was too long or complicated. Make sure your checkout only asks customers for the key information: name, email address, and shipping and billing information. You can create a membership/login process, but it’s vital that you allow people to check out as guests as well. Keep the full checkout process to as few steps as possible, and snag those mobile sales!
4) Subscription Purchases Are Trending
You’ve likely seen plenty of subscription boxes advertised online. The Dollar Shave Club, FabFitFun, and BarkBox are just a few examples of popular subscription services. These subscriptions make customers feel like they’re buying themselves a gift, and it works. AÂ 2019 survey from Clutch shows that 54% of respondents who shop online say they are members of a subscription box service.
It isn’t hard for your business to jump on board with this trend. Many online stores are naturally suited to starting up a subscription service. If you sell wine, a wine of the month club would be a natural application. If you sell cosmetics or beauty products, try compiling your own surprise subscription boxes. These boxes are a great way to introduce customers to new products, move some older inventory, and ensure regular purchases.
But even businesses that don’t sell glamorous products can benefit from creating subscription offers. If you sell consumable products that customers purchase regularly–think toiletries, natural cleaning supplies, or pet food–you have a great market for subscription purchases. Customers will appreciate the automatic re-ordering process, especially if you give them the flexibility to start and stop shipments at any time.
Finally, if you choose to set up subscription boxes as an option on your site, make sure you have a payment method with recurring billing features. Take a look at our full article on recurring billing for more information.
5) Ethical & Sustainable Consumerism Is On The Rise
This year, retailers should expect consumers to become increasingly conscientious in their purchasing habits. Today’s consumers are more careful than ever in their purchasing, favoring products and businesses with ethical and sustainable practices. According to a Nielson survey in 2018, 81% of global respondents feel strongly that companies should help improve the environment.
As you consider implementing better environmental practices in your own business, I suggest you start by rethinking your packaging. How you package your products and shipments can leave your customers with a big impression, either positive or negative. Good environmental practices include using recycled plastics and cardboard, as well as packaging your products in the smallest boxes possible. Shipping your products in smaller boxes not only uses less cardboard, but it also takes up less space in a delivery truck, meaning it takes less gas to deliver.
Whatever environmental and ethical practices you decide on, make sure you advertise that information. Of course, it’s always good to be environmentally responsible; but, it’s only going to increase your sales if you let customers know how you’re reducing your footprint.
6) Free Shipping Is A Must
The words “free shipping” are every customer’s favorite phrase and every online seller’s biggest challenge.
Retail giants like Amazon and Walmart have made free shipping an expectation for many customers. The National Retail Federation’s Consumer View report in January 2019 showed that 75% of consumers surveyed expected free shipping, even on orders under $50. What’s more, 29% of interviewed consumers had abandoned a purchase because two-day shipping wasn’t free.
This is a huge burden for smaller online retailers. As all online sellers know, “free shipping” is never free, and offering free shipping on the wrong orders can completely eliminate your profit margins (sometimes even causing you to lose money on a sale!).
That’s why it’s important for sellers to be strategic about the ways they offer free shipping. You might choose to set order totals that customers must reach in order to earn free shipping (i.e. “Free shipping on orders over $50!”). Or, you could offer free shipping on every purchase, but then raise their product prices to account for the shipping costs. Alternatively, you could offer free shipping as a limited-time promotion when customers sign up for your newsletter. There are many options to consider! For more recommendations, take a look at our articles 8 Hacks For Saving On Shipping Costs and 7 Strategies To Increase Your eCommerce Sales.
7) Social Media Marketing Impacts Shopping
In the past two years, we’ve seen a sharp rise in the popularity of social media marketing. Instagram influencers, social media managers, and professional YouTubers have changed the game when it comes to online marketing.
And that shift to social media has also made an impact on online sales. Now customers aren’t just learning about brands and products on social media–they’re purchasing them on social media too! In 2019, social commerce accounted for $22 billion in sales, and that number is projected to rise to $29.3B in 2020.
If you haven’t started selling yet on social media, it’s time to get started! Look into selling on a Facebook store, via shoppable posts on Instagram, or through buyable pins on Pinterest. You should also consider beefing up your social media marketing methods. Define your brand, discover your audience, and consider hiring a social media manager. For more recommendations on creating a successful social media presence, check out our Guide To Social Media Marketing.
8) Users Want Personalized Customer Experiences
Personalization is not new in eCommerce. For years, online sellers have been using personalization in their email marketing campaigns, and with great success! Research shows that emails that use a customer’s first name in the subject line have a slightly higher open rate, and when you use a customer’s name in the body of the email, you gain a higher click-through rate!
Now online sellers are applying personalization to their online storefronts. The most popular method of personalizing your customers’ shopping experience is through product recommendations. Recommending the right products can make a big impact on your bottom line. According to data from Barilliance, sales from product recommendations account for up to 31% of a seller’s eCommerce revenue. That’s not a small amount! Be sure you list recommended products on your site, whether those recommendations are based on your customers’ browsing history, past purchases, or the items currently in their shopping cart.
Personalization can make a big impression on your customers. Do your best to personalize your shopper experience in any way you can!
9) Chatbot Customer Service Is Popular
A chatbot is an artificial intelligence software that is designed to answer common customer questions within a chat window.
Chatbots are quickly becoming a popular option for large businesses to easily handle large volumes of customer inquiries. According to statistics from eMarketer, in 2019, 40% of survey respondents had previously used chatbots to engage with retailers. And fortunately, it seems that most of those interactions go well. A 2018 study by Sumo Heavy showed that 72% of people who had interacted with a chatbot found the experience to be helpful and informative
For many small businesses, creating a chatbot may seem like a complex and overwhelming task. Fortunately, there are many software add-ons available that can take away the technical hassle of creating a chatbot. For Shopify users, you can find a number of Facebook Messenger chatbot applications in the Shopify App Marketplace.
For those who don’t use Shopify, there are many other chatbot programming software apps to which you can subscribe to in order to create your own solution. For example, a software called ChatBot lets you create question-and-answer flowcharts that you can easily turn into a chatbot’s programmed responses. Chatfuel lets you create a chatbot for your Facebook Messenger, and Kik also allows you to build your own chatbot (although Kik does require you to work with their API to do so).
Fortunately, building your own artificial intelligence doesn’t have to be hard. There are many options that you can take to simplify the process of setting up your own customer support chatbot.
10) Augmented Reality Can Lead To More Purchases
Augmented reality is a type of virtual imaging software that allows you to overlay pictures and videos of reality with a digital image. You may have seen augmented reality used in mobile games like Pokemon Go, when a digital creature seemingly appears right in front of you! Using augmented reality (AR), customers are able to “place” your products in their own homes, walk around them to view them from all sides, and even “try on” accessories and cosmetics.
While AR may seem like just a gimmick, studies show that AR can lead to more purchases! According to data from Tractica, global revenue from mobile augmented reality apps (including social media, games, eCommerce, and more) is expected to increase 89.5% from 2019 to 2020, resulting in $6.2 billion in global revenue in 2020.
AR can have multiple applications in your eCommerce business. You can use AR to let your customers view your furniture in their home, get up close to a new camera, or try on a pair of earrings.
Fortunately, enabling AR on your site doesn’t have to be complicated. Shopify users can take advantage of the new Shopify AR, which uses Apple’s AR Quick Look to enable AR experiences for Safari users. Sellers on other platforms should look into AR tools like Augment, and Marxent 3D Commerce. These apps do the hard part of creating an AR experience. Often, all you have to do is import multiple product images to get started!
Leveraging Trends For Your eCommerce Business
In an ever-evolving industry like eCommerce, it can be difficult to keep up with the new developments and trends in the market. However, this year you can keep up with the competition by using the steps we’ve included in this article.
As you consider your approach for this 2020, think about the steps you’re already taking to stay in line with current trends. Where are you racing ahead, and where are you falling behind? It might be a good approach to pick one or two areas in which your business is beginning to get outdated, and start by improving those areas. It’s best to make sure your site is up to date with all of the current best-practices before you try to get on the cutting edge of online selling.
So what are you waiting for? Get out there, review your current practices, and see which of this year’s eCommerce trends you want to tackle. You’re going to do great!
Here’s a quick reminder of how to get started:
Review your online marketing strategy
Look into selling household goods
Make sure your site works seamlessly on mobile
Create subscription products for your store
Consider sustainability in how you package and ship products
Offer free shipping when you can
Sell on social media
Use product recommendations to create a personalized shopping experience
Program a chatbot with add-on applications
Use an augmented reality tool to help customers envision your products
The post Top 10 eCommerce Trends For Small Businesses In 2020 appeared first on Merchant Maverick.
There are many ways to build a successful business. Some business models involve selling lots of items each marked at a lower price, while others work by selling fewer things at a higher cost. With either path, the financial resources of your customers will come into play. You might soon realize that not everyone can afford the more expensive things you sell; similarly, not everyone has the resources or desire to buy a lot of small items in one purchase. Is there a way to solve this problem and increase your sales without cutting your prices?
Of course there is. In fact, there are many ways. One way is to advertise, so that a larger number of potential customers are brought to your door. Statistically, you should make more sales. Another way is to offer financing to your customers. Financing allows those who are wavering on a purchase because of the price to buy from you right away and then pay for the goods/services in installments in the future. This way, you don’t lose a sale to sticker shock. This is called customer financing or, sometimes, consumer financing.
Broadly speaking, you can provide customer financing yourself, or you can use a third-party financing specialist. As to how to do either, along with their pluses and minuses, read on to find out.
How Does Customer Financing Programs Work?
By customer financing, we mean any sort of buy-now-pay-later arrangement. Typically, the customer will have to pay a portion of the total cost before the goods/services are released. This sort of financing is usually a business-to-customer (B2C) arrangement instead of a business-to-business (B2B) arrangement.
If you want to offer customer financing, you can either provide that service in-house or you can work with a third party. We’ll discuss each option in more detail below.
In-House Customer Financing
By in-house financing, we mean that you, the merchant, take all the financial risk — and possibly reap all the financial rewards — when letting a customer walk away with your merchandise (or receive the benefit of your services) before you’ve collected in full. If you wish to consider this avenue, there are some items you might want to think through first.
Cash Flow
If you wish to tackle in-house customer financing, you’ll need to consider your business’s finances first. Understand your cash flow and maybe do some financial projections.
Know that when you actually start to finance your customer’s purchases, you’ll have a period of reduced income because you’re not receiving the full payment for the goods or services you sell. At the same time, your customers might be making a greater number of purchases, so you would need to pay out to replenish your inventory. You’ll need to make sure that you have enough money to run the day-to-day operations of your business while you wait for the installment payments to come in and become a regular part of your cash flow.
If you are right and your customers start to buy more than before because they can now finance their purchases, then your cash flow should eventually increase after an initial dip.
Legal Risk
When it comes to lending money and charging interest, both state and federal usury and debt collection laws may apply. If you fail to follow them, you might have to pay fines or be subject to other penalties.
When you provide financing to your customers, you might want to charge interest on the loan. If that is the case, be sure to check your state’s usury laws that govern, among other things, the highest interest rate you can charge. To complicate matters, if you sell online and a customer is in another state, you might be subject to that other state’s usury laws as well.
If your customer defaults on a loan, you might wish to collect that debt. Unfortunately, what you can and cannot do are also governed by federal and state laws. The laws typically restrict you on the amount you can collect per type of asset and how you are allowed to collect it. Again, the laws differ by state, so this can get fairly complicated fairly quickly. (Here’s an article from the consumer’s standpoint.)
If you wish to start an in-house consumer financing operation, be sure to talk to a lawyer specializing in this area first. They can help you design a set of best practices that are best suited for your type of business — and that stay within legal limits.
Operational Considerations
If you decide to start your own financing department, you’d probably have to hire new people. For instance, for every application, you might want to pull a credit report before deciding whether or not to lend. There would be additional paperwork and internal records to keep as the customer pays off the debt. If the customer fails to pay the debt, you would have to have someone to work on the failure to pay in some way, even if it’s just sending the account to a debt collection company.
Additional internal processes will have to be set up to smoothly move a customer through each step, from application to approval to installment invoicing. All this requires additional employee hours. So, whether you hire one person or ten people to handle the financing, you would have to consider these operational changes and expenses before making a final decision.
Bad Debt
Lastly, not every customer will pay off their loan. We covered the legal aspects of debt collection above, but the more important aspect of bad debt is the financial impact on your business’s cash flow. Know how much bad debt your business can absorb without running into cash flow issues before you decide if you wish to move forward.
Third-Party Customer Financing
It’s always nice to be able to keep your hard-earned money, but now that we’ve gone through some of the major considerations for providing customer financing in-house, you might start to see the headaches that are involved as well.
Fortunately, there is an alternative. There are companies specifically set up to do customer financing or just debt collection (if you continue to wish to keep a portion of the work yourself). Some of these companies charge you nothing for sending a customer to them for financing, but others want a fee so that they charge you for sending a customer to them. They will also keep all the fees/interest the customer will pay to obtain financing. In return, they take care of all the legal and operational complications of customer financing for you.
If you continue to be interested in working with a third-party financing company, be sure to understand the details of how the financing company works before signing a contract. Understand your expected sales increase and your expected profit. If you sell low margin items, make sure that these financing charges do not exceed your profit margin. Otherwise, you would have gone through all this trouble for nothing.
Is Consumer Financing A Good Fit For Small Businesses?
Many large businesses provide consumer financing. For instance, you can finance a car purchase through any one of the major car manufacturers. Consumer financing is also available from some chain store home furniture sellers or large electronics stores. These are all large businesses that can afford a separate department–and sometimes even a separate corporate subsidiary–to take care of consumer financing.
But you’re a small business owner. Maybe you have only a handful of employees, and each of them is already busy taking care of other things. You already work twelve-hour days and things are still not done. How do you provide consumer financing when you’re already stretched so thin?
You might want to consider using third-party customer financing companies. This doesn’t preclude you from trying in-house financing in the future, if you pick one with a contract with no early termination penalties. It’s a quick way to get started, and it introduces you to an industry that you can become more familiar with, so you can make a more informed decision in the future.
Below are some pros and cons for your consideration.
Pros To Offering Third-Party Customer Financing
No Need To Increase Staff: The most obvious advantage is that you won’t need to hire more people to run the financing. As a small business owner, you know how difficult it is to find the right person–one who has the knowledge needed as well as the proper “fit” for your business. It might take several tries to ultimately find the right person, but with third-party financing, you won’t need to do that.
No Need To Worry About How The Details Work (e.g. credit checks): There are a lot of things you would have to set up from scratch to start an in-house customer financing operation. You’ll have to have the application forms, know where to run credit checks, figure out how much risk you can take, and give the customer the credit needed to make the purchase. With third-party financing, you won’t have to worry about any of this. You just send the customer to the financing company, and they take care of the rest with their existing workflow.
Legal Compliance:Â As already touched on above, when it comes to lending money, there are a lot of legal issues that could arise. If you’re in the US, then not only would you have to understand federal laws that could affect your operations, you’ll have to understand multiple state laws as well, if you operate an online store. These laws change from time to time, so you can’t set up a process and forget it. It would be easier to let a third-party financing company worry about following the laws. They might still (hopefully only accidentally) violate these laws, but at least if they do, they would be responsible for it. (Be sure the contract clearly states they’re responsible for any legal compliance issues.)
Less Need To Worry About Cash Flow:Â While you might still have to invest more money into your business to have enough inventory for increased sales, you are less likely to have to worry about a healthy cash flow by using a third-party financing company. A lot of these companies will fund you within two to three days of purchase, so you shouldn’t have to worry about cash flow at all.
Cons To Offering Third-Party Customer Financing
The Reputation Of The Financing Company Will Affect Your Own Reputation: A company’s reputation, especially where money is concerned, matters. When you recommend a financing company to your customer, like it or not, you’re guaranteeing that the company is reputable. If this turns out to be incorrect, then the bad reputation rubs off on you too. A business’s reputation is everything, and a bad one will run customers away from you.
Customers With Bad Experiences Might Not Come Back: Even if customers clearly understand that the financing company has nothing to do with your business, a bad experience with the financing company could still prevent them from coming back to you. Their shopping experience is ruined, and it’s highly likely they will subconsciously connect that bad experience with you. It’s not difficult to imagine that they might go elsewhere to shop in the future.
Customers With Bad Experiences Might Blame You: Related to the above, we know that people don’t always notice things that they should. This is why there will always be a portion of the customer base that thinks you and the third-party financing company are one and the same. If anything goes wrong, it’s very likely that they will blame you for the financing company’s mistakes. They might go online to complain, giving you a bad reputation that you don’t deserve.
You Must Share Revenue:Â Naturally, these third-party financing companies can’t provide their services for free. In fact, in addition to keeping the interest and fees paid by the consumer for the loan, many will want you to pay them for their services as well. Maybe your margins are high and you don’t mind, but if you do mind, then you’ll need to pick the financing company carefully.
Possible Long-Term Contract: Some third-party financing companies will require you to sign a long-term contract. As with all contracts, you’ll need to look at the possible penalties if you need to get out of the contract early. One contract we reviewed when researching for this article allows you to cancel but requires a 12-month notice period, which is basically the same as not being able to cancel at will. Make sure you’re not stuck with a company that you won’t want to work with for one reason or another (e.g. bad reputation) for longer than necessary.
How To Offer Financing To Customers: Options For Online & Brick-and-Mortar Businesses
If you have decided to offer financing to your customers, the way you tell your customers that financing is available and invite them to apply will depend on whether you operate a physical store or an online store — or both. It also depends on whether you’ve decided to do this in-house or through a third-party specialist.
If you’ve decided to offer financing in-house, then you can advertise any way you want to, as long as you have the application readily available for an interested customer to sign up. However, if you’ve decided to go with a third-party provider, then there are several ways to deliver information about the financing offer and payment options.
Online Customer Financing
For webstores, customer financing is often offered at checkout. The customer sees a financing button, along with other payment choices such as credit or debit cards. If the customer clicks the financing button, they must respond to a few questions. A “soft” credit check is performed. With some companies (e.g. Affirm, Afterpay), a decision to lend is made based on the soft check. With other companies (e.g. Square), a hard credit check is eventually required. (If you’re curious, this article explains the difference between soft and hard credit checks.)
After this, the customer is presented with a choice of how they want to finance the purchase–i.e. how many installments, how much per installment, and interest or other fees. Once the customer makes a pick, the online merchant is paid by the financing company, typically within a day or two after shipping.
As to the rest of online financing, a merchant is often supplied with banners and buttons that they can place on their website to announce that financing is available.
In-Store Customer Financing
If you run a physical store, then customer financing is done a little differently, though you’ll still need a connection to the internet just like online financing.
There are several ways a customer at a physical store can apply for financing. One financing company offers free-standing kiosks that customers can use to apply. Tablets can also be loaded with financing application software for the store clerk to hand to the customer. Yet others simply have the store clerk ask a few questions of the customer at checkout and enter that information online. Lastly, a customer can apply for some specific amount beforehand, the financing company can issue the customer a single-use virtual card, and the card number can be keyed in by the merchant just like any keyed-in credit card charge.
How Much Does It Cost To Offer Customer Financing?
The cost to offer customer financing runs the gamut, from free to something similar to the swipe of a credit card. It’s not always easy to find this cost on the provider’s website, however. (It’s much easier to find out how much the customer will be charged for taking the financing offer.) Very often, the company simply does not disclose the charges to the merchant but instead tries to sell their services as a way to increase sales. You can only find out the cost after you contact them.
Ten Customer Financing Programs For Small Businesses
For this article, we did a quick survey of the companies currently providing customer financing services for small to mid-sized businesses. We briefly discuss the companies we found below, but we haven’t reviewed most of them, so please be aware that we pass no definitive judgment about the quality of service each provides. We hope to have some reviews for you in the future.
In looking through these companies, we find that they can generally be categorized into three groups. The first group contains more traditional financing companies. Financing applications may take a day or two to process and be approved. A second group includes the so-called fintech companies–they have their origins in the tech startup world, and they’re here to “move fast and break things.” These companies tend to do a soft credit pull and then give you a loan within seconds. These loans tend to be of a smaller amount and they typically must be paid back within a year. Some of them are fee-based and do not charge interest. The third group seems to be a hybrid, featuring some characteristics of both the traditional and the fintech companies. They also do a soft credit pull and sometimes can offer you a loan for a very small amount very quickly. Typically, larger loans are also available with these companies.
Grouping the vendors we found below into the three categories above, we have:
With some of these companies, it was hard to find merchant-related information–i.e. sign up cost, processing fee, contract terms, etc. These companies tend to try to sell their services by touting how much more a merchant can sell if the customer had the ability to buy more. Signing up with them might mean that you never get to see any income from the financing side. Still, they seem to be worth investigating, so we encourage you to find a few that you might be interested in and contact them for details.
Lastly, if you look at the way these companies work–especially the fintech companies–you’ll see that there’s a strong potential that they might replace the entire merchant processing side of the credit card industry. If you look carefully about the nature of the credit approvals, loan amounts, and repayment terms, you’ll see that they work like charge cards, where each charge is judged separately based on the person’s current debt load and creditworthiness. It’s very similar to the American Express model. From a merchant’s standpoint, it might be a good idea to understand how these financing companies work, in case they do replace some credit card company functions in the future.
With the above in mind, here are some of the customer service companies we found that you might wish to look into further.
Flexxbuy
Flexxbuy seems to fall into the more traditional side of the consumer lending business. It has a relationship with over 20 lenders in its backend and can quickly set a customer up with the right lender, depending on the customer’s credit score.
With Flexxbuy, the customer can get a loan of up to $50,000. The website isn’t quite clear, but the wording in various places suggests that smaller loans might be approved instantly, but the larger ones can take up to 48 hours. There is a formal application to be submitted by the merchant. The customer doesn’t have to pay a penalty for pre-payment, and loan payback can be from 12 months to a few years.
Flexxbuy says the cost to the merchant is “customized,” and, since they work with several lenders, this probably just means that the cost varies depending on the lender. To sign up with Flexxbuy, there is an enrollment/setup fee for the merchant.
LendPro
LendPro, like Flexxbuy, seems to fall towards the traditional lender side of the industry. They claim that they have lending relationships with more than two dozen lenders on the backend to provide financing for a wide range of amounts and for all types of credit scores.
When a customer finances through LendPro, the lending relationship is directly between the customer and LendPro. LendPro can integrate their financing application software with your website, so customers can see their financing options at checkout and file an application if they are inclined. They also have physical kiosks for physical stores, where a customer can apply for credit in person. A merchant can also buy a tablet and install LendPro’s software on it and then hand the tablet to the customer to apply for financing.
There are no other disclosures about how a contract with LendPro would work or how much they would charge the merchant per transaction.
Snap Financing
Snap Financing calls itself a “lease to own” company. This means that, as a merchant, you might be sending your merchandise out to consumers, but you still own the item until the lease term is up. Then, the consumer can either buy the item outright or return it to you.
Lease-to-own arrangements are typically used for large furniture, appliances, electronics, and computers. If the goods are damaged during the lease, they still belong to you. (Presumably, you can deduct the damage from the price.) With Snap Financing, you’re working with a somewhat traditional business model. While it’s not clear on the website, it seems from the nature of the business model that the merchant still owns the sales contract. If the customer defaults on the (unsecured and high-interest) loan, then the matter is between Snap and the customer.
Snap funds your business within 2-3 days once the leased goods are delivered, so you are fully paid.
Affirm
Affirm falls squarely within the fintech label, and it has the pedigree to prove it. The company was founded by Max Levchin, who was one of the founders of PayPal. Even now, it’s still taking money from venture capital firms, with the latest round of funding raising $300 million USD.
Affirm’s website is geared more towards the consumer than the merchant, so there are not a lot of details on how (or if) they charge the merchant to process a customer’s loan. On its backend, Affirm’s loans are financed by two banks: Cross River Bank and Celtic Bank.
The Affirm financing application can be integrated into various eCommerce shopping platforms and be shown to a customer at checkout as a push-button option. When a consumer applies, Affirm performs only a soft credit pull and then makes a decision to lend based on that pull. There’s no stated loan limit. If the purchase is made from an online store, then the payment can be applied at checkout. If the payment is at a store that’s not affiliated with Affirm, then Affirm issues the customer a single-use virtual card that can be used like a credit card.
Afterpay
Afterpay is yet another fintech company. It has a business model that looks very similar to that of Affirm, and it is also funded by venture capital investors. While Affirm seems to focus on providing financing for goods and services that cost a bit more, Afterpay seems to be focused on things that cost a little less.
Afterpay discloses a little more on their website on how they work with merchants. When the merchant makes a sale, the purchase is made between the merchant and the buyer. But the merchant immediately assigns the purchase contract to Afterpay so that Afterpay has the right to recoup nonpayment. After that, the merchant is still responsible for taking care of complaints and returns, but any questions on payments belong to Afterpay.
Afterpay’s services integrate with many existing online shopping carts. Consumers are presented with Afterpay as a payment choice at checkout, and they can apply for credit that way.
Afterpay checks the consumer’s credit with a soft credit pull and, once approved, the consumer is presented with several installment payment options and can see fees and the payment amount for each. The consumer picks whichever option that appeals to them. They can be charged a late fee, but there’s no interest or service fee on the amount borrowed, and of course, the customer can prepay or fully pay before the payment is due.
To borrow from Afterpay, the consumer will have to have an Afterpay account. A credit or debit card must be linked to the account, so Afterpay can automatically withdraw the installment payment from the account. (Which begs the question: why not just use the credit card instead?)
ViaBill
ViaBill is a European fintech startup. Merchants in Denmark, Norway, and the US can sign up with ViaBill.
Like Affirm, ViaBill focuses on bigger ticket items. They offer easy integration with online shopping platforms, easy and fast approvals, and installment payments linked to the debit or credit card used to set up the consumer’s account. The payment is broken into four installments, with the first installment due immediately at checkout. Afterward, ViaBill assumes the risk of fraud and credit risk. If the customer fails to pay, they are charged a late fee (but no “penalty fee”), and ViaBill handles everything related to non-payment/collections.
For merchants, ViaBill charges 2.90% + $0.30 per transaction, which is comparable to some credit card processing charges. After the goods are shipped, the merchant assigns the right to receive payments to ViaBill, but ViaBill may assign the right back to the merchant to deal with chargebacks, disputes, item returns, and some other conditions.
When a merchant signs with ViaBill, the contract can be terminated by ViaBill at any time for any reason or no reason, while the merchant can only cancel for any reason or no reason in the first three months. Thereafter, the merchant must give ViaBill 12-months notice before the contract can be canceled.
There is a setup fee to connect up to ViaBill. They fund the purchase five days after shipping. Be aware that if you sign with ViaBill, they don’t want you to work with any other consumer financing provider unless you both agree in writing that you can.
Vyze
Vyze is a fintech startup that began in 2008. It was acquired by Mastercard in 2019, so if you sign up with them, you at least know that they are backed by a reputable business. Vyze doesn’t seem to be doing anything too different from the other fintech startups, however, so there might not be any other specific benefits to working with Vyze.
Like other fintech companies, it seems Vyze only does a soft credit pull; consumers can apply with just a few quick personal details. A customer can apply online, or if at the checkout of a physical store, apply from the store’s tablet loaded with Vyze’s app.
Once Vyze has the customer’s credit information, the software queries a first lender for approval. If the first lender rejects the application, then the software automatically pings a second lender in the queue, and then a third, and so on until one lender approves the financing.
Vyze’s website does not have much information for the merchant, so it’s difficult to tell if/how much they charge you for each customer you bring them, how they would handle returns or chargebacks, or any other details of a merchant’s contract with them.
VIP Financing Solutions
VIP Financing Solutions has an interesting business model. It seems to be a credit card processor that also does consumer financing (or vice versa). You can get Clover POS stations from them (it’s unclear if they sell or lease them, so be careful). They also have multiple lenders in the backend to support their financing activities.
No matter what you do with VIP, whether it’s credit card processing or customer financing, you’re charged the same rate: a 3.0% “Merchant Fee.” The website also claims that you’re not charged a credit card processing fee, but that 3% seems to cover more than enough of the usual fees associated with credit card processing. Once the charge is cleared, you are funded within 48 hours.
As to financing, VIP offers three types of financing:
A Store-Branded Credit Card:Â The shopper can be instantly approved and walk out with a card, which basically is a revolving line of credit specific to your business.
A No-Credit-Check Loan: The amount can be between $500-$35,000. The repayment is divided into four installments, to be paid within a short period of time.
A Traditional Personal Loan: Approval can take a few days, with repayment plans of up to 60 months.
We couldn’t find a merchant contract on VIP’s site, so we don’t know other details about how VIP works with its merchants.
PayPal Credit
If you are already a PayPal merchant, then you can offer consumer financing through PayPal Credit. Just activate the service as a form of permissible payment. Then you can advertise that the service is available by adding promotional banners already prepared by PayPal to your website.
When a customer uses PayPal Credit, the merchant is paid upfront (i.e. no need to wait for the customer to completely pay back the loan to PayPal). PayPal does not disclose how much it charges per transaction, but it also doesn’t say that the cost would be different from other PayPal transaction charges. So, each transaction likely costs the same as other PayPal payment transactions.
From the consumer’s standpoint, PayPal Credit is a loan between PayPal and the consumer. Once PayPal’s underwriter approves the loan, the consumer has to make minimum monthly payments. For purchases over $99, as long as the consumer pays the loan back within six months, there’s no interest on the loan. However, if the loan is not paid back completely within six months, interest is charged from the date of purchase.
PayPal will pull a soft credit check before approving a loan. The minimum starting credit is $250, and this might be increased from time to time. You can use the money in PayPal Credit to send to family and friends, just like sending cash. And, just like sending cash, you pay 2.9% + $0.30 per this person-to-person transaction.
The service is available to US consumers only.
Square Installments
As with PayPal Credit, if you’re already a Square merchant, you can use Square Installments. Square Installments can be used from the point-of-sale or from your virtual terminal, and they cost 3.5% per transaction. You can also integrate Square Installments into your electronic invoice, and that service costs 2.9% + $0.30 per transaction.
For a merchant to sign up, navigate to your dashboard and look to see if you’re already approved for Installments (approval sometimes depends on industry or location, business type, and/or volume and price of goods sold). If you are, then you’ll have to watch a video and answer a few questions to make sure you understand the terms of service. That’s all you need to do. You can cancel the program at any time. There’s no added integration needed, and Square can provide all the buttons and banners you need to advertise online to your customers that the service is available.
For your customers to apply for financing, they follow a link customized for your business and then enter their information. They will quickly get an offer after a soft credit pull, and the offer will include various monthly plans and total fees. Square pulls a full credit check if the customer elects to go forward with financing. Square Installments are used for purchases of $150 and up and the repayment terms are for up to 12 months.
For physical stores, Square Installments can be used with a digital card, which can be keyed in like any other purchase. The merchant is paid right away, and if the customer misses a payment, it doesn’t affect the merchant.
Here’s a more detailed article about Square Installments, if you’re interested in learning more.
Should I Offer Third-Party Financing For My Customers?
There are a lot of data-based arguments out there that suggest that making financing available to your customers translates to more sales. As a small business owner, the easiest way to do this is to go through a third-party financing company so that you won’t have to deal with the paperwork, the possible cash flow issues, the legal aspects of lending, and the defaults when a customer refuses to pay.
Third-party lenders aren’t willing to do all this for free, of course. Some will charge you a fee, and it’s important to understand how this fee works. It’s also important to think through other issues, such as how chargebacks and returns will be handled. Of the companies we surveyed above, many do not disclose much about how they work with the merchant at all. If you decide that you’re interested in working with one of these companies and contact them, be sure to ask questions such as:
Do they charge you for sending a customer to apply for financing?
Do you get a finder’s fee for sending customers?
How do they deal with merchandise returns? Are you required to accept a return, or can you simply refuse? Do you have to return the money to the customer? Or is that handled between the financing company and the customer? And if so, will the merchant have to return the money to the financing company?
How do they deal with disputes/chargebacks? What about fraud, such as a customer claiming that you didn’t ship a product when you actually did?
How do they deal with defaults? Some companies assign defaults back to you and you’d have to deal with that, so that seems to create more headaches for you.
Who handles customer service? If this is divided between the merchant and the financing company, how do you share the responsibility?
How quickly are you funded, and at which point in the process does a sale count as a sale?
You might have more questions, so be sure to write them down before you contact a financing company. That way, you won’t accidentally leave out a question.
If you decide that providing customer financing is just not for you, but you still want to explore ideas on how to increase the cash you have at hand to grow your business, be sure to check out some of our lending articles. We have picks for the best small business loans, advice on how to get a line of credit, and even information on startup grants. You might also want to consider invoice factoring or invoice financing.
Lastly, if you have had any experience with any of the providers above or want us to do a detailed review of a specific provider, do let us know by leaving a note below.
The post The Complete Guide To Customer Financing For Small Businesses appeared first on Merchant Maverick.
Travel-focused cards are some of the best credit card options for small businesses. These plastic bits come with invaluable perks, such as travel credits, Global Entry/TSA PreCheck application fee waivers, and airport lounge access. Plus, many feature tantalizing welcome offers and unique rewards that help businesses save cash regularly.
Unfortunately, these premium cards often come with premium price tags — their annual fees can reach into the hundreds of dollars. And with travel becoming less of a routine for many businesses due to the COVID-19 pandemic, these cards’ perks and unique rewards just aren’t usable right now. As such, you may be wondering if it’s time to cancel your company’s premium travel card.
However, you should know some issuers are lending a helping hand by offering cardholders incentives for sticking around. Called “retention offers,” these special incentives are meant to stop cardholders from canceling their credit card. While retention offers are nothing new in the world of credit cards, they have become more popularly requested because of the current crisis.
Should you seek out a retention offer from your credit card issuer? Want to learn more about what retention offers are? Then keep reading for a primer on what retention offers are and how they can help your business.
Types Of Retention Offers For Small Businesses
Traditional retention offers have been around for a while, with protocols varying from issuer to issuer. We’re also seeing some types of offers become more popular in the face of the current coronavirus pandemic. Let’s take a look at how issuers might incentivize you to keep your card.
Bonus Points Or Statement Credits
The most common type of retention offer you’ll see is an issuer granting extra points or statement credits. In many cases, these types of offers are intended to help offset your annual fee. For example, you may receive a $100 statement credit to counteract your card’s $99 annual fee.
In some situations, these bonus points/credits are given without you needing to spend anything extra. However, it’s also possible that your issuer will require you to spend a certain amount within a set number of months before you pick up the extra rewards — similar to a welcome offer. So this means you might see an offer such as 3,000 bonus points after you spend $1,000 in three months.
Annual Fee Reduction
You may also be able to get your annual fee reduced (or even completely waived) if you call in and ask. This might wind up being a little better for you because you won’t have to worry about paying all or part of the annual fee before you get credits added to your account.
Occasionally, these reductions are made in the form of targeted statement credits. For example, Chase recently handed out a $100 annual fee credit to select users with the Sapphire Reserve card, which has a $550 annual fee. This credit helped soften the blow during the coronavirus pandemic and especially so because Chase had upped the Sapphire Reserve’s annual fee from $450 to $550 in January.
Extended Welcome Offer Windows
In the face of the current pandemic, issuers have been extending welcome offer windows for select users. A lot of premium travel cards come with meaty welcome offers. However, with the recent downturn, many aren’t using their cards as frequently — potentially harming a cardholder’s chance of hitting their welcome offer’s minimum spend requirement. By lengthening the time to meet this requirement, a card issuer gains goodwill with customers while also encouraging continued spending with eligible credit cards.
American Express was the first major issuer to announce such a change. Early in April, Amex allowed those who were approved for card accounts between the beginning of December 2019 and the end of May 2020 to receive an extra three months to trigger their minimum spend requirement.
Issuers We Know That Grant Retention Offers
A few card issuers have been pretty aggressive with providing retention offers on their premium credit cards. Below is a quick rundown of some examples you may get from popular issuers.
Note: The offers below are examples of temporary offers in response to the coronavirus pandemic and of more general retention offers. For a consistently updated and fresh list on how credit card issuers are providing aid during the coronavirus pandemic — both with temporary offers and otherwise — check out our article on credit card assistance. For more exhaustive lists on retention offers specifically, visit the FlyerTalk forum or MilesToMemories.
American Express
American Express has some of the best premium credit cards on the market. Its cards come with great rewards, but Amex also packs in some hefty annual fees — making the cards ripe for retention offers.
Amex has also been one of the most responsive issuers to the coronavirus. As noted earlier, the issuer has lengthened welcome offer windows for card accounts approved between the beginning of December and the end of May. If you qualify as one such user, you get an extra three months to spend the minimum amount for your welcome offer.
Additionally, cardholders enrolled in Amex’s Membership Rewards program are eligible to earn one extra point for purchases made via the Grubhub and Seamless delivery services. This bonus rate began in April and will run through the rest of 2020. You can add this offer to your eligible card through the Amex Offers portal.
Beyond its coronavirus response, American Express has been known to provide retention offers when cardholders call and ask. Example potential offers if you ring up Amex include:
The Business Platinum Card From American Express: $595 annual fee — 5,000 points immediately, plus 25,000 more after $10,000 spent in 90 days
American Express Business Gold Card: $295 annual fee — 5,000 points immediately, plus 5,000 more after $3,000 spent in three months
Capital One
While we haven’t seen instances of Capital One offering bonus points or statement credits, the Virginia-based bank has still been doling out new perks to encourage users to keep and continue using their cards during the pandemic.
All of Capital One’s first-party travel cardholders (so those with Venture, VentureOne, and the business-focused Spark Miles and Spark Miles Select) can now redeem their miles for delivery service and restaurant takeout purchases up through June 30. Capital One includes DoorDash, Postmates, and Uber Eats among the eligible delivery services. Both consumer travel cards can also have miles redeemed for streaming services (including Netflix, Hulu, Spotify, Disney+, and Kindle Unlimited), while the business bits of plastic can have miles cashed in for purchases from wireless phone service providers (including Verizon, AT&T, and T-Mobile).
Additionally, some cardholders have chimed in that Capital One is willing to extend welcome offer windows for business cards, according to MilesToMemories. Per one user who called Capital One, the bank is reportedly allowing until December 31 for them to hit the minimum spend requirement on their Spark business credit card. Note that this extension is not automatic — you’ll need to reach out to Capital One to see if you can get a similar deal.
Citi
Citi hasn’t made any widespread tweaks in response to the coronavirus pandemic. However, the bank is still known for dishing out retention offers on its premium credit cards. Here are a couple of example retention offers from Citi:
Citibusiness / AAdvantage Platinum Select Mastercard: $99 annual fee — $99 statement credit after $3,000 spent in three months
Citi Premier Card: $95 annual fee — $95 statement credit, plus 1,000 points after $1,000 spent monthly for three consecutive months
Chase
Between its first-party credit cards and those offered in conjunction with travel brands, Chase has a number of premium credit cards. With such a deep stable of cards, Chase has been fairly receptive to handing out retention offers in the past. The bank has also distributed several perks for those impacted by the coronavirus.
Most notably, Chase has extended welcome offer windows for those who signed up for a card between January 1 and March 31. If you qualify, you get an extra three months to reach your offer’s minimum spend requirement.
As mentioned earlier in this article, Chase also dished out a $100 annual fee credit to Sapphire Reserve cardholders who have a renewal date between April 1 and July 1. This credit effectively knocked the card’s $550 annual fee down to $450 (although the card previously had a $450 annual fee last year, so it basically winds up a wash for those who qualify).
For those stuck at home, Chase has additionally enabled 5x rewards (up to $500 spent) on delivery and takeout through DoorDash and Tock for Sapphire Reserve, Sapphire Preferred, Freedom, and Freedom Unlimited cardholders. This bonus rate runs through May 31.
Those above perks are automatic — no need to dial Chase if you qualify. You might still be able to find some savings if you call in, however. Other example retention offers you might see by contacting Chase include:
Southwest Rapid Rewards Premier Business Credit Card: $99 annual fee — $100 statement credit for keeping the card, no spending required
Marriott Bonvoy Boundless Credit Card: $95 annual fee — $50 or $100 statement credit for keeping the card, no spending required
How To Get A Retention Offer
As seen above, issuers have been announcing offers without cardholders needing to reach out. These temporary offers are intended to placate cardholders during the financial downturn that has occurred amid the health crisis. In most situations, if your issuer has announced some sort of perk due to the coronavirus pandemic (such as an extended welcome offer window or bonus points for certain categories), you won’t have to do anything proactively — the perks will be available automatically.
However, for most traditional retention offers, you’ll need to give your card issuer a call on the phone. While this may be more problematic than in the past — issuers are experiencing high call volumes in the pandemic’s wake — the best way to receive a retention offer is by reaching out.
When looking for a retention offer targeted around your annual fee, give your issuer a call via the number on the back of your credit card. Note that you’ll want to do this after your card’s annual fee is posted to your account but before your monthly payment’s due date.
Here’s a couple of tips to help you with your request:
Come Up With A Game Plan Before You Call: As is the case with most customer service calls, knowing what type of offer you want as well as crafting a script in your head can help immensely. You’ll also want to know what you’re willing to concede and how weak of an offer you’re prepared to take.
Make Your Request Short & Sweet: There’s no reason to beat around the bush. Simply stating what you’re looking for and how you’d like the card issuer to handle your situation should be enough. Retention offer requests are commonplace for most customer service agents, and any offers available to you will likely be auto-generated by the issuer’s computer system — coming with a detailed sob story probably won’t help much.
Know That You May Have To Cancel: Some issuers, such as Chase, have instituted new policies where the customer service agent won’t see a retention offer until after they’ve begun the cancellation process.
It’s also worth noting that the offer may depend on how much money you’ve spent on your credit card in the past months and years. Those who have used their card more frequently will have a better shot at actually receiving a retention offer as well as potentially earning a better offer than someone who might’ve spent less.
Good Luck!
Should you wind up without a retention offer — or an inadequate one — don’t hesitate to cancel your credit card if you can’t afford its annual fee. Especially with the financial woes facing numerous businesses right now, it’s just not worth throwing away money on a card you won’t be taking full advantage of for the next several months at least. However, hopefully, your issuer will provide some sort of solution. With the right offer, you may be able to keep hold of your card until it becomes valuable again in the future.
If your business is still struggling with its credit card due to the coronavirus pandemic, check out how else issuers are providing assistance. We’ve also written up a guide on how to best use your credit card throughout the financial downturn. For more general guides and resources to help your business during the current crisis, visit Merchant Maverick’s coronavirus hub.
The post Get Waived Fees Or Bonus Points With A Retention Offer For Your Small Business Credit Card appeared first on Merchant Maverick.
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As of April 23, it appears the Paycheck Protection Program will be receiving a second round of funding, pending approval from the government. Many PPP lenders, including our recommendations below, are accepting applications in advance. We recommend that you apply as early as possible to have the best chance of securing PPP funding.
With Round 2 of the Paycheck Protection Program (PPP) looking to be about ready to begin, businesses that missed the first round will have a second chance to take advantage of the popular relief package. This includes businesses whose owners may have assumed they did not qualify due to being sole proprietorships with no employees (this status technically applies to freelancers as well).
Wonder no longer! The SBA has released guidance in the form of an “interim final rule” clarifying who does and doesn’t qualify for the PPP, specifically addressing the question of sole proprietorships and businesses without employees.
Am I Qualified For A PPP Loan?
If you’re an individual with self-employment income, you can qualify for a PPP Loan if you meet the following criteria:
You filed or will file a Form 1040 Schedule C for 2019
Your principal place of residence is in the United States
You must have had a net profit for the time in question
Note that if you’re in a partnership, you are still eligible for PPP, but you should not submit a separate application for yourself as a self-employed individual. Instead, you’ll file a single application for the company with the income of each partner reported as a payroll expense. This is meant to cut down on the volume of applications and eliminate confusion regarding which companies and partners have applied.
The SBA plans to release further, specific guidance for self-employed individuals who were not in operation in 2019 but were in operation by February 15, 2020, and will also file a Form 1040 Schedule C for 2020.
Be aware that applying for a PPP to cover self-employment income may complicate your application for state-level unemployment insurance, so make sure you take a look at those guidelines to ensure you’re maximizing your eligibility.
How Much Money Can I Apply For?
Here’s how the interim final rule says to calculate the maximum amount you can apply for:
On line 31 of your 2019 IRS Form 1040 Schedule C, you’ll find your net profit. If it’s over $100,000, reduce it to $100,000. If the number is zero or less, you’re not eligible.
Divide the number you arrived at from Step 1 by 12 to get your average monthly net profit.
Multiply your average monthly net profit by 2.5.
Add the outstanding amount of Economic Injury Disaster Loan (EIDL)Â made between January 31, 2020, and April 3, 2020, that you’re trying to refinance, minus the amount of any advance you received under an EIDL COVID-19 loan, which does not have to be repaid.
If you’re applying as a partnership, you’ll treat each partner’s income as a payroll cost. The maximum amount is up to $100,000 annualized. Otherwise, consult our guide on applying for a PPP Loan.
What Will I Need To Apply?
The first thing you’ll need is a lender, which I will touch on in the next section. As government programs go, the PPP application is surprisingly short. No, really, it’s only two pages long.
Your specific lender may have particular document requirements, but you should be prepared to provide tax documents, organizational documents, and government-issued identification. Since you don’t have any employees, you won’t have to worry about W-2s and payroll documentation.
Where Can I Apply?
Unlike the Economic Injury Disaster Loan program, PPP Loans aren’t made directly through the SBA. Instead, you’ll have to work with a third-party lender. If you prefer to work with a bank or credit union, once the program restarts, you can use the SBA’s Lender Match tool to locate an SBA lender near you.
If you don’t have an existing relationship with a bank or credit union, you can also apply through online lenders that have partnered with the SBA. Here are a few popular and reliable online lenders that have been approved to process PPP Loans.
1) Fundera
Fundera
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Fundera is a popular matchmaking service that pairs applicants and lenders from its pool of partners. If you apply for the PPP through Fundera, the same principle applies: Fundera will shop your application amongst its network of SBA-approved lenders. Considering some of the bottlenecks applicants have run into with traditional lenders, this may not be a bad option for businesses that want to maximize their chances of getting their application through the rush.
Get Started with Fundera
Read our in-depth review
2) Lendio
Lendio
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Lendio is another business financing platform that matches applicants with one or more of its partnered lenders. Lendio has been very vocal about the PPP, to the degree that it turned into something of an advocate for the program after Round 1 of funding was quickly exhausted. Lendio is ready and waiting to leverage its platform to get cash-starved businesses the help they need once Round 2 is ready to go.
Get Started with Lendio
Read our in-depth review
3) Credibly
Credibly
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Credibly isn’t an aggregate platform like the previous two options, but it is using its online application infrastructure to allow businesses to apply for PPP Loans online. It’s a pretty user-friendly setup, so if you’re having anxiety about crossing all your t’s and dotting your i’s, you may appreciate the way Credibly walks you through the process.
Get Started with Credibly
Read our in-depth review
Other Resources For Coronavirus-Affected Small Businesses
To help businesses navigate the unprecedented difficulties of the COVID-19 crisis, we’ve created a centralized hub of guides and resources. We’re updating them frequently, so check it out.
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