For many restaurants, adding the option of online delivery may be something they’ve either been casually considering or maybe just started to implement as an experience. However, with the recent sudden health crisis that COVID-19 has brought, being able to stay open for deliveries has become almost a necessity for many businesses. The good news is, even if you’re starting from scratch, it can be a relatively simple process. However, you want to make sure that you’re still making enough of a profit to stay viable. In this case, you may want to consider going with your own in-house delivery system. And while that may sound daunting, there are plenty of tools available to you that you may not have even known existed. It’s possible to set up delivery in-house in just a few hours in some cases, and it may end up helping to grow your brand and expand your customer base in the process.
Why Should You Keep Delivery In-House?
The most obvious reason to handle your own delivery is quite simply the cost. While third-party apps are inarguably convenient, they drastically eat into your profits. Some studies estimate it can be close to 50% cheaper to run delivery in-house rather than outsourcing that service. With margins that low, sometimes using third-party delivery can be more trouble than it’s worth quite literally. By keeping things in-house, you’re in control. You don’t have to worry about rude or careless drivers who don’t have a vested interest in protecting your brand. And, speaking of branding, you can create your own unique packaging and marketing to expand your visibility further. Also, if you’re lucky enough to be using a point of sale system that integrates with delivery (or offers that option as an add-on), it will integrate with your software seamlessly and require minimal additional training for your employees.
The Alternative: Third-Party Delivery Apps
Restaurant delivery is a competitive business, and while we’ve already briefly discussed that using one of these popular companies will take a big bite out of your profits, it’s still easy to see their appeal. To begin with, they are exceptionally simple to partner with. If you are a busy restaurateur who doesn’t have the time, energy, or know-how to start delivery in-house, you can simply pair with one or multiple services and potentially reach a whole new market. These apps are widely used and can help you reach a broader customer base. They also require very little money upfront if you’re just starting and are low on cash. In short, there’s a reason why these third-party apps are so popular with customers and businesses alike. But while it’s easy to see their appeal, they still might not be the option that ‘s right for you.
Must-Have Tools For Taking Online Orders & Managing Delivery
Point Of Sale App
While you can still technically operate a successful delivery service by simply jotting down orders and hand-delivering them back to your kitchen, a point of sale that comes with or integrates with in-house delivery options can make your life significantly easier. In fact, if you’re just starting out or are currently in business but plan on making delivery a large part of your operation, having a POS with a good delivery integration is almost essential. A quality POS can help you track and manage your orders as they come in, particularly when paired with a Kitchen Display System. This helps give customers accurate delivery times and can help you stay on top of important things, such as your inventory levels.
Online Ordering Tools
If you’ve decided to keep your delivery business in-house, there are some handy options available to you that your POS may already integrate with or that you can easily set up through your website. These companies provide software that is tailor-made for the restaurant industry and can simplify things even more.
GloriaFood:Â GloriaFood provides free software for restaurants, allowing you to take an unlimited number of orders for no fee. You can easily install a simple widget and be up and ready to sell in a single business day. GloriaFood can even help you set up your website to streamline the delivery process and is available on iOS and Android devices.
Menufy:Â This is a similar service to GloriaFood in that it offers free software and can help you create a sleek website for online ordering. The service fee is charged to customers, and the restaurant is only on the hook for the processing fees. There are no contracts, and you can be notified of orders on a wide variety of devices and through many different POS companies.
ChowNow:Â This is another popular online ordering software that can work with your specific brand and logos to create a personalized experience for your customers. ChowNow offers software with zero fees but also has hardware options that you can purchase that can run your delivery orders separate from your in-restaurant orders for added convenience.
There are plenty of other online ordering options available as well, so do a little research to see if one fits best with your specific business.
Courier Tools
Using an in-house system for delivery also gives you control over who is handling and delivering your food and who is the face of your restaurant for customers who are ordering from home. These will be an integral part of your delivery business’s success, and there are plenty of things you’ll need to consider to ensure their success. First, you’ll need to decide if you’ll be using a company car or cars for delivery or if you’ll allow your couriers to use their vehicles. Either way, you’ll need to make sure that you have the proper insurance. And if your drivers are using their vehicles, you’ll need a way for them to track and log their mileage for reimbursement.
Next, there are some things you’ll want to make sure your online ordering system has, whether you’re using an online ordering service or your POS’s features. Certainly, you’ll want a reliable and accurate navigation system. It’s also valuable to have a delivery tracker, so you can tell where your driver is at any given time. The ability to quickly communicate with drivers is essential as well as having a system that allows for text notifications in case of changes or special requests.
Staffing Concerns With Restaurant Delivery
If your fancy new delivery service is a success, you may also start to experience some growing pains. You don’t want to overwhelm your hard-working staff, so you’ll likely need to hire some additional employees. Along with couriers, you’ll need to make sure that your kitchen is staffed well enough to handle the increase in demand, and you may need to carve out a separate space solely for online orders to help eliminate confusion. It may also be beneficial to have an employee whose entire job is to oversee and handle the online ordering process, ensuring that orders are being received correctly and filled and distributed in a timely fashion.
Other Logistical Considerations
We’ve already touched on a handful of things you’ll need to consider for your delivery business, from essential tools to simple conveniences. But here’s a quick recap of things to look for when you’re implementing this feature for your restaurant.
KDS:Â A Kitchen Display System can alleviate numerous headaches in any restaurant, but it’s especially valuable when your restaurant also handles deliveries. A system that receives and organizes orders directly can dramatically cut down on errors and help your kitchen prepare orders in a timely and efficient fashion.
Dedicated Kitchen Space:Â You may be operating with limited space in your kitchen, but if you can swing it, setting aside an area specifically for online orders can alleviate some headaches and make sure that orders aren’t getting confused.
Packaging:Â This is something that might be easy to skimp on; however, the way you package your delivery options can be vitally important. It’s an opportunity for you to brand and market, and it can be easy and inexpensive to order packaging products with your logo. It’s also essential to make sure that you have durable packaging that can withstand a drive and maybe even a way to keep the items hot or cold, depending on the order. You want to make sure your food is presentable and as good as it would be in your restaurant to avoid poor reviews. You’ll also need to think about what to include in delivery orders, such as napkins, utensils, and portable condiments.
Payment Options:Â You’ll definitely want to lock down how people ordering online will pay you and what types of payments you’ll accept. The ability to prepay online will help you track your money and tips easily while equipping your couriers with a card or chip reader provides an added level of convenience. Also, with restrictions from COVID-19, setting up the option to take payments and drop off deliveries without contact with customers could be an important feature that allows you to continue making sales in difficult times.
Add An In-House Delivery Option To Keep Customers Happy & Business Rolling In
While online ordering and delivery options have been rapidly growing in the restaurant industry over the past few years, we are in a time when having that feature may actually be essential for keeping your business afloat. It may seem a bit daunting if you’re just getting started, but remember, you have options. While third-party apps are undoubtedly easy to utilize, you may not end up receiving the type of return that can significantly boost your business. In that case, going with in-house delivery might be the most economical decision. There are plenty of tools at your disposal to help you.
See what your POS system offers for in-house delivery or what companies it integrates with. If you already have an online presence, getting started can be as simple as installing a widget or downloading an app. And many of these products, whether it’s the POS company itself or an online ordering service, can walk you through the setup process as well.
Looking for more resources to help small businesses navigate the coronavirus pandemic? Check out our Coronavirus Survival Guide For Restaurants, or read a variety of other articles on our Coronavirus resource hub.
The post Restaurant Delivery Guide: Everything You Need To Know About Implementing In-House Delivery appeared first on Merchant Maverick.
If you’ve been searching for a payment gateway, you’ve probably come across these two names: Stripe and Authorize.Net. Or heck, maybe you were just searching for a way to take credit card payments online, and these appeared near the top of your search results.
Both companies offer a powerful suite of payment services along with robust support for developers who want to integrate their services into their websites. Both companies provide excellent support for foreign eCommerce transactions.
While Stripe and Authorize.Net aren’t exactly the same type of company — Authorize.Net is not a “full-stack” payment service — it is possible to get most of the same services through either company.
Stripe VS Authorize.Net: Quick Comparison
Evaluating Stripe vs. Authorize.Net comes down to the sheer volume of features vs. flexibility.
Both Stripe and Authorize.Net provide payment gateway access, but Stripe does so as merely one part of a gigantic payment services package. Authorize.Net gives you the option of pairing its gateway service with any merchant account, potentially making it a better choice for businesses with established, stable merchant accounts. On the other hand, Stripe — which has no monthly fee — will probably be the more efficient option for newer businesses.
Features
I struggled with this one for a bit despite, at a glance, it being pretty obvious that Stripe is just a far more massive service than Authorize.Net. That begs the question of whether it’s a fair comparison. Stripe is designed to be a one-stop-shop for your payment processing needs. Authorize.Net focuses on a much smaller part of the payment processing environment. If it offered everything that Stripe does, it wouldn’t be Authorize.Net anymore. In fact, Stripe can be overkill for a lot of businesses, and if all you’re looking for is a payment gateway, it just doesn’t make sense to choose Stripe over Authorize.Net.
Authorize.Net has some niches where it excels, particularly where security is concerned, but let’s give credit where credit is due: Stripe can just plain do a lot more than Authorize.Net. From its more comprehensive support for global eCommerce to its more flexible development environment to its plethora of add-on features, it lives up to its “full-stack” claims.
Stripe Payments
Stripe is a powerful brand for international eCommerce. Stripe is available to businesses in 34 countries. The company’s reach, however, is significantly greater; you can accept payments from all over the world thanks to Stripe’s support of over 135 currencies and numerous regional payment methods.
Stripe Supported Payment Methods
Stripe breaks its support for payment methods into two categories: universal, for payment types accepted throughout the world, and local, for payment methods that are only supported in specific regions, with particular attention given to the US, European, and Chinese markets.
Stripe accepts the following universal payment types:
Alipay
Apple Pay
Google Pay
Microsoft Pay
Amex Express Checkout
Masterpass by Mastercard
Visa Checkout
WeChat Pay
Stripe supports these payment methods in their markets:
ACH
Bancontact
EPS
Giropay
iDEAL
Klarna
Multibanco
P24
SEPA Direct Debit
SOFORT
Stripe Core Features
Listing all of Stripe’s features would make this article unreadable. It’s an enormous ecosystem, with numerous optional features. Here’s a quick rundown of the main features:
Payments:Â Stripe Checkout is a prebuilt form that you can just drop into your site. But if you need something more customizable, Stripe Elements will let you design a form that suits your needs. You can build payments into your website or your mobile app.
Connect: Stripe’s Marketplace tools are some of the most robust out there, allowing you to build and manage your platform, including automated payouts to your merchants. Connect also facilitates connecting Stripe to other services (such as building native payments into eCommerce software).
Billing:Â “Billing” now encompasses all of Stripe’s subscription, invoice, and recurring billing tools. Stripe’s subscription tools have always been powerful, but with the addition of invoice capabilities and the option for metered billing, it’s safe to say that you really can’t beat what Stripe has to offer.
Additional Stripe Features
Sigma: Stripe offers an assortment of standard reporting tools in its dashboard. However, if you want advanced reports, then you’ll need Sigma. For an additional monthly fee (based on volume, see the Pricing section below for more details), you can generate custom reports based on SQL queries.
Radar:Â Stripe’s fraud monitoring tools include machine learning to identify and flag suspicious transactions. Merchants can review and override transactions they know to be legitimate or set up custom rules for fraud transactions, all with far less fuss than you’ll see with Braintree. If you’re very comfortable with fraud management, this is definitely an advantage.
Multi-Currency Displays & Conversions:Â Stripe has spent a LOT of time billing itself as the platform of choice for global businesses. It should come as no surprise then that Stripe allows merchants to display pricing in local currencies and automatically handles the currency conversion. You can connect multiple bank accounts to save money on conversion costs, too.
Account Auto-Updater:Â Keep recurring transactions from failing when customers get new cards. Stripe will automatically update card data in your vault to ensure continuity of subscriptions.
Atlas:Â Atlas allows international businesses to incorporate in the US, set up a US bank account, and get tax and legal guidance. Stripe says it has had more than a thousand startups apply in more than 120 countries, and it has added more than 100 partners to the network since the launch.
Payouts: This is an automation toolset designed to help you send mass payouts to sellers, freelancers, or service providers. It’s also designed to help simplify compliance requirements with third parties and global markets.
Relay:Â Relay’s features allow merchants to link their eCommerce catalogs with your app or directly upload product information. Relay creates in-app buy buttons and forwards all the sales information to the merchants to fulfill the order.
Integrations: Stripe has more than 300 integrations with all kinds of other software and services that a business might need. The sheer number of supported integrations could be a significant advantage for some merchants. You can browse the integrations by category on Stripe’s “Works With” page.
Stripe Developer Tools
Stripe’s built a reputation on being extremely developer-friendly, and, to be fair, it’s largely earned it. Stripe’s SDK is easy to work with for novices and extremely customizable for experts. Stripe’s documentation is also second-to-none, with detailed tutorials, clone-able boilerplates, and support for mobile platforms.
Stripe supports the following server-side languages:
Go
Java
.NET
Node.JS
PHP
Python
Ruby
Authorize.Net
Authorize.Net’s business support isn’t quite as widespread as Stripe’s; it’s only available to merchants in the United States, Canada, United Kingdom, Europe, and Australia. Its currency support is also more limited. Authorize.Net supports different currencies, depending on the region in which your business is located.
US & Canada: USD, CAD
The UK & Europe: CHF, DKK, EUR, GBP, NOK, PLN, SEK, USD
Australia: AUD, NZD, USD
Authorize.Net Supported Payment Methods
Authorize.Net supports the following payments methods:
Visa
Mastercard
Discover
American Express
JCB
PayPal
Visa Checkout
Apple Pay
Chase Pay
eCheck payments
Authorize.Net Core Features
Authorize.Net’s feature set is considerably smaller than Stripe’s, but at their core, they do many of the same things.
Payment Gateway:Â If you’re working with Authorize.Net, you’re there for the payment gateway. Or even more likely, the payment services company you signed up for is using Authorize.Net as its gateway. It is, however, possible (though not necessarily advisable) to work from the other end and sign up directly with Authorize.Net, in which case the company can help set you up with a merchant account through one of its partners. Just be aware that, unlike Stripe, the merchant account isn’t in-house.
Virtual Point Of Sale, Mobile Point Of Sale & Simple Checkout: Authorize.Net offers ways to accept cards both on the web and through mobile devices. The virtual terminal also allows you to key in card information manually. Authorize.Net is integrated into a dizzying number of third-party shopping carts through Simple Checkout, which allows you to generate HTML snippets for “Buy Now” and “Donate” buttons to add to your website easily.
Billing:Â Authorize.Net allows you to process recurring subscription payments and permits you to not only customize pricing but also offer free trials and installment packages.
Authorize.Net Additional Features
Advanced Fraud Detection Suite (AFDS):Â Included for free with your account, AFDS consists of a set of thirteen filters that you can customize to your own needs to help flag and block potentially fraudulent transactions. This feature helps to prevent inventory loss due to fraud and lowers your liability for chargebacks. While Stripe’s security features are nothing to sneeze at, Authorize.Net’s have a reputation for being some of the best in the business.
eCheck.Net: This is an optional feature. You can add echeck processing to your existing merchant account or sign up for the eCheck Only Pricing Plan. Pricing is 0.75% per echeck, a much lower rate than you’ll pay for credit or debit card transactions.
Customer Information Manager (CIM): The CIM, one of Authorize.Net’s most powerful standard features, allows you to securely store customer information, such as billing address, shipping address, and payment method information. Because this includes your customers’ sensitive credit card information, the data is securely encrypted. As we’ve noted, however, this security comes at the expense of data portability (see Negative Reviews & Complaints).
Sync For QuickBooks: While a QuickBooks integration is fairly standard these days, it’s still nice to have and will keep your accountant happy, especially if that accountant is you.
Authorize.Net Developer Tools
Authorize.Net also has a healthy developer subculture with excellent online resources and the option to create a sandbox account in which to test out your code. It doesn’t support quite as many languages as Stripe, but where the two overlap, you’ll probably see variable preferences from developer to developer.
Authorize.Net supports the following languages:
PHP
Ruby
Java
C#
Python
Pricing
Both Stripe and Authorize.Net offer similarly priced services, although making a direct comparison isn’t easy. For purposes of this comparison, I’m only looking at the costs of features the two companies have in common. If you want a complete look at Stripe’s pricing, check out our guide.
If you take Authorize.Net up on its merchant account partnership offer, you’re looking at identical flat-rate transaction costs for both Stripe and Authorize.Net. Beyond that, you have to dive into the secondary fees. If you process a lot of subscriptions, you may incur a processing fee with Stripe. On the other hand, Stripe’s chargeback fees are $10 less. International transactions are more expensive with Authorize.Net unless you need to do a currency conversion, in which case Stripe is more expensive.
And then there’s the gorilla in the room: You can buy Authorize.Net as a humble gateway service without any of the other bells and whistles. With Stripe, if you want to use the gateway, you’re also getting the payment processing bundled up with it.
What ultimately breaks the tie in Stripe’s favor is its lack of a monthly fee. Stripe’s fees are almost entirely usage-based, making it easier to get a sense of where you’re getting value and where you’re not. By comparison, if you’re interested in Authorize.Net, it’s often cheaper to get it bundled with another service than directly from the company.
Authorize.Net Fees & Transaction Costs
Authorize.Net breaks its services into three plans:
All-In-One (includes a merchant account with one of Authorize.Net’s partners)
Monthly Gateway Fee: $25
Per Transaction: 2.9% + $0.30
Payment Gateway Only
Monthly Gateway Fee: $25
Per Transaction: $0.10, daily batch fee $0.10
Enterprise Solutions (for companies processing over $500K/year)
Contact Authorize.Net for pricing info
International transactions cost an additional 1.5%. Chargebacks cost $25 per occurrence. Note that, should you choose the All-In-One package, you may be subject to additional fees associated with the merchant account provider you are paired with.
Stripe Payments Fees & Transaction Costs
Since Stripe has a lot of add-on features that Authorize.Net does not, we’re going to ignore those for purposes of this comparison and just compare pricing for those features that they both offer.
Card Transactions:Â 2.9% + $0.30
Subscription Fee:Â 0.4% after the first $1 million
Stripe charges $15 per chargeback incident. International transactions cost an additional 1%, with another 1% added on if currency conversion is required.
Ease Of Use
Both companies are reliant on a mix of do-it-yourself developer culture and third-party services that integrate Stripe or Authorize.Net into their product.
Starting with the first case, as we touched on above, both companies offer extensive documentation for developers who want to add payment functionality into their websites and apps through the services’ APIs. Stripe’s documentation, support, and interfaces feel just a little more extensive and modern than Authorize.Net’s, but your mileage may vary.
Some users report that Authorize.Net is a little bit faster on average when it comes to payment processing time (one to seven business days vs. two to seven business days).
On the third-party side, your ease of use will depend entirely on the method of integration you’re using, for example, a shopping cart such as WooCommerce. With most of these services, activating your payment gateway is pretty simple, just tweaking some toggles and entering security keys; the challenge with most of these is mastering the eCommerce environment more than the payment integration.
Customer Service & Support
Both Authorize.Net and Stripe offer numerous ways to resolve problems should they arise.
Authorize.Net offers:
Phone Support: This avenue of support is available 24/7, minus major holidays.
Support Center: The online resources include a knowledgebase, articles, white papers, and video tutorials.
Ticketing System:Â You can open a support case online through the integrated ticketing system.
Social Media: You can reach out to Authorize.Net on Facebook, LinkedIn, and Twitter. You can also check out video tutorials and customer testimonials on YouTube.
Stripe offers:
Phone Support: This avenue of support is available 24/7.
Live Chat: This is also available 24/7 to customers.
Knowledgebase & Documentation: Stripe’s documentation is the gold standard. Developers will have no trouble here, whether they’re searching for a term or clicking through the sidebar. The knowledgebase is a little more sparse but serviceable.
Email: Stripe offers 24/7 email support but doesn’t give an exact time frame on how quickly someone will get back to you.
Freenode IRC Chat: Stripe’s developers seem to spend their time in the #stripe channel if you need technical assistance. Unsurprisingly, most developers seem to like this aspect of support.
While Stripe offers more methods of contact, Authorize.Net seems to have a better reputation for quick, responsive, and useful customer service. Stripe’s made efforts to improve — including offering phone support — but it still has some ground to make up.
User Reviews, Complaints & Criticisms
Both Stripe and Authorize.Net have avoided any scandals grave enough to drop their BBB ratings below an A+, though both do register a fairly typical spread of complaints. They tend to garner similar scores on various review aggregators, with a few outliers here and there rating one substantially higher than the other.
Stripe High Points
Pricing:Â While it’s not the cheapest possible option, it does offer a lot of functionality for the price.
Global Utility:Â Stripe is a truly international platform, giving businesses the ability to conduct eCommerce all over the world and in different currencies.
Freedom & Control:Â Stripe’s API allows for great flexibility for developers and makes it a good fit for various integrations.
Stripe Low Points
Account Holds & Terminations:Â Like all third-party processors, Stripe ends up doing a lot of its due diligence after the fact, which means it’s easy to run afoul of its opaque quality control processes. Most user complaints about Stripe fall into this category.
Lack Of Fraud Protection: While Stripe’s security features are strong, most of the advanced ones cost extra, leaving some users more exposed to chargebacks than they’d like.
Unresponsive Customer Service:Â While Stripe’s customer service is much improved, many customers were frustrated by Stripe’s inability to resolve or contextualize sudden account holds and terminations.
Authorize.Net High Points
Recurring Billing Support: Many users were pleased with how easy this feature was to activate and use.
Flexibility:Â Between Authorize.Net’s robust API and the ability to pair the service with any merchant account, users were generally happy with the amount of freedom it offered them.
Customer Service:Â Many positive user reviews involve good experiences with Authorize.Net’s customer service.
Authorize.Net Low Points
Billing Issues:Â Most of the complaints you’ll see about Authorize.Net revolve around that pesky monthly fee. The timing of the monthly payments seems to cause confusion for a number of customers, resulting in disputes over what interval of time they were paying for.
Non-Refundable Fees: Related to the previous issue, customers found it difficult to recover fees for which they believed they were wrongly charged. Be aware that if you sign up for an account online, you will be charged the gateway fee.
Data Portability:Â Authorize.Net has a reputation for being a difficult platform to migrate from, although some of this appears to be due to issues that have been at least partially addressed.
Integrations
If you’re running your credit card through any eCommerce site, there’s a very good chance it’s passing through a Stripe or Authorize.Net gateway. The number of integrations for both services is staggering, and both can be easily plugged into most eCommerce environments with just a few lines of code. In general, you should have very little trouble getting either to play nice with the program of your choice.
Since we are splitting hairs, however, it’s worth mentioning that Stripe is just a bigger fish in the pond, possessing a higher market share and more widespread adoption. That translates to more integrations, should you need to work with something more niche and obscure. But again, both are extremely well-supported.
Which Is Best For My Payment Gateway Needs?
We’ve arrived at the moment of truth. If you’ve been following along until now, you probably already have a sense of the recommendations I’m about to make. If you’re impatient and skipped to the end, and who can blame you, here are my recommendations.
Choose Stripe Payments If…
You Need Payment Services In Addition To A Gateway:Â Stripe works best as a comprehensive, all-in-one platform offering both a payment gateway and third-party payment processing. It delivers the gateway functionality at the same per-transaction cost as Authorize.Net and without the monthly fee.
You’re Doing Business Globally:Â Authorize.Net’s support for foreign transactions is good, but it’s not anywhere near as extensive as Stripe’s. Stripe supports local payment methods in addition to the popular international brands and can handle over 135 currencies.
Choose Authorize.Net If…
You Already Have A Merchant Account You Like:Â If you’ve been taking card payments for a while and are pleased with your merchant account provider, you won’t be able to take it with you if you migrate to Stripe. On the other hand, you can simply add Authorize.Net onto your existing services.
You’re In A “High-Risk” Industry:Â Because it’s a third-party processor, Stripe isn’t keen on taking chances with industries that are flagged as high-risk. As a payment gateway, Authorize.Net has far fewer restrictions regarding the types of businesses it’s willing to partner with (just make sure your merchant account provider is also cool with your industry).
Neither Option A Good Fit For You? Try These Alternatives To Stripe & Authorize.Net
Stripe and Authorize.Net are both excellent gateway options, but they’re not the only ones. If Stripe has too much bloat and Authorize.Net feels too much like a clumsy add-on, consider one of the following options.
PayPal
If you’re looking for a Stripe alternative with brand name recognition, PayPal’s a no-brainer. PayPal covers most of the same bases as Stripe. It’s a third-party processor/gateway combo that plays nice (even better, arguably) with international markets. Like Stripe, it’s a sprawling platform with tons of optional buy-ins. Just be aware that it doesn’t support recurring billing.
Square
Square is another popular “full-stack” payment services provider. Compared to Stripe and PayPal, Square is a bit more focused on brick-and-mortar transactions, offering a wide variety of productivity-related functionality as well as POS hardware. Square supports eCommerce, but don’t expect the international support that Stripe offers.
Payline Data
It may not be a household name, but Payline Data is one of our favorite merchant account providers here at Merchant Maverick. It offers stable merchant accounts with interchange-plus pricing, not to mention its own proprietary payment gateway free of additional charge.
Comparing Authorize.Net & Stripe Payments: The Final Verdict
The battle between Stripe and Authorize.Net comes down to a big hearty buffet vs. a tasty side dish that can be served with almost any meal. Newer businesses that don’t want to add unnecessary complexity will probably prefer Stripe’s comprehensive payment services. Veteran businesses with stable merchant accounts that want to add gateway functionality may appreciate the flexibility Authorize.Net offers them.
If you’re scratching your head over a lot of the terms used throughout this post, don’t feel bad; payment processing is a very confusing industry. If you want to learn more about it, start with our complete guide to getting a merchant account. You may also want to read more about what a gateway is and how it fits into accepting payments online.
The post Stripe VS Authorize.Net: Which Is Better? appeared first on Merchant Maverick.
As a new business owner, you will need to make some decisions about your company’s structure and type. Whether you are an LLC or a Corporation, understanding business structures will help you make important decisions about tax structures and inform you about potential tax liabilities. If you see the terms C-Corp and S-Corp and don’t know how they apply to your business, keep on reading. Understanding these differences at the most basic levels is a job for your company’s legal and accounting teams, but as a small business owner, you should have a working knowledge of corporation types and how the differences could affect business.
Corporation Basics
When you started your small business, you likely spent a good deal of time dreaming about marketing strategies, product design, and customer retention. Thinking about a company’s corporate structure and how that affects taxes, business decisions, and future financing is not as exciting of a topic, granted, but it’s important to understand these differences from the onset. Ultimately, the type of corporation you run also decides how your company is taxed, who is held liable for faults and mistakes, or even the type and number of shareholders you may have.
Corporate structures may be varied, but a corporation is essentially a company (or a group of individuals running a company) that operates as one entity for legal purposes. Incorporating requires specific regulations that do vary by state. Check with a legal representative in your area for your state requirements regarding corporations.
There are private corporations (whose company shares are not available for public purchase) and public corporations (whose company shares are available for public purchase). All corporations need a board of directors (even if that board of directors is one person: you), and at least one employee (could also be you), and an owner/shareholder (at least one, and could also be you; I think you sense a pattern).
A corporation has all the rights a legal individual would have regarding the business. The corporation can own property, be sued, engage in contracts, etc. When you incorporate your business, you are agreeing to certain terms and regulations (again, varies by state) in exchange for protection from business liabilities. Bottom line: If you’re starting a business and you want to protect your and your investor’s money in the event of business failure, you’ll want to first decide what type of business structure works best. You do not need to make your business an LLC or a corporation; however, there are benefits to protecting your personal assets from business liabilities, which in turn can make you appear more stable to outside investors.
After you decide how best to structure your business, you will need to decide what type of corporation your business will become. Your choices are a C Corporation, an S Corporation, or a Non-Profit Corporation (like a religious organization or educational entity). A C Corporation is the default corporation category; you must register and file additional paperwork to become an S-Corporation.
What Is A C Corporation?
A C Corporation is structured in such a way that the owner pays an income tax on personal earnings, but the business itself is taxed for all corporate income tax. This is the most traditional corporate structure and may sometimes be called the “ordinary” corporation. Business owners do not need to be US citizens and there is no limit to shareholders, but there is a risk for double taxation since profits can be taxed at the corporate and the personal income level.
What Is An S Corporation?
An S Corporation is a business that chooses to tax its earnings to the owners/shareholders on their personal income taxes. (There are certain Federal tax requirements for an S Corporation. For example, all owners/shareholders must be US Citizens and your company cannot have over 100 shareholders.) Sometimes known as a “pass-through entity”, an S Corporation simply passes the tax requirements through to the owners/shareholders per their shareholder agreement and state legal requirements. The business itself is not directly taxed on earnings.
Why does an S Corporation exist? The hope was that the subchapter S rules in the tax code could help level the playing field for small businesses. Both LLCs and S Corporations pass along taxes to owners directly, and by taxing the owners directly, the company can avoid double-taxation. Once a company grows too big (with more than 100 shareholders), it will automatically upgrade to C Corp status and lose its S Corporation eligibility.
C Corps VS S Corps: Key Differences
If you are a small business owner with the option to register as an S Corporation, what are the major differences? Here’s the breakdown:
1) Differences In Taxation
A C Corp taxes the personal dividends of its owners and the business independently. An S Corp passes the taxes directly to the owner’s personal income tax, bypassing business income tax and preventing double-taxation. The only way to avoid double-taxation if you are a C-Corp is to operate at a loss or reinvest profits back into the company. Under new tax regulations, C Corps pay a flat 21% federal tax. Owers of S Corporations, however, can claim a 20% business deduction from their personal returns.
Talk to a tax specialist about how these differences in taxation could affect your business. (And then compare to other business structures like a sole-proprietorship or LLC, which also operate as pass-through entities.)
2) Differences With Venture Capital
It is harder to raise venture capital with an S Corp. Stock options are limited. However, with a C Corp, there is no limit to the number or types of stock options that may be offered to shareholders. This is an advantage if your company is looking to grow and expand.
3) Differences With Owners & ShareholdersÂ
Again, this comes down to growth. An S Corp can only have up to 100 shareholders and all shareholders/owners must be US Citizens. With those restrictions, it is difficult for an S Corp to look appealing to investors and venture capitalists; and it’s especially limiting to any business interested in growing outside of the United States.
Which Is Right For Your Business?
Maybe you’re not ready to incorporate your business quite yet. That’s okay! However, if you’re thinking it’s time to make that leap, you might want to consider a few other things to help you sort out which one is a good fit.
Becoming an S Corp takes a bit more work and willingness to adhere to the strict guidelines required to maintain that status, and IRS penalties are severe. If you are a small business owner looking to incorporate and you fit the S Corp requirements, the tax benefits are the biggest advantage. An S Corp avoids double-taxation and business owners can claim 20% of their business income on their personal tax returns. Those two tax benefits are significant. If you’re small and staying small, an S Corp is a solid choice. But if you want room to grow and have aspirations of expanding stocks, shareholders, and overseas markets, then you may not enjoy the limitations of an S Corp.
Here are some good guidelines if you’re still stuck.
An S Corp would be good for your company if…
You are fine with limited ownership options. (US Citizens only, fewer than 100 shareholders)
You have no need for expanded stock options.
You have an excellent accountant (an audit is likely: there are specific requirements needed to maintain status and S Corps face higher scrutiny).
You are just starting out and might still be losing money.
A C Corp would be good for your company if…
You don’t want the time/hassle of updating S Corp paperwork requirements.
You want room to grow/expand ownership and stock options.
Your company makes a significant number of charitable donations.
You are making a profit and might want to shelter those profits.
Next Steps
Size and tax structure are the two key take-aways about the differences between C Corp and S Corp. Each state has different tax requirements and corporate business tax rates, so it’s important to check with a local tax expert to run numbers on your own tax situation. In general, once you’ve decided there is a benefit to incorporating, there will be some paperwork and hoops to jump through before you can pay corporate tax rates and earn stock options.
How To Register A C Corporation
Once you’re ready to incorporate, you will need to register your company as a C Corporation. Hire an attorney familiar with filing papers for incorporation or research solid online options. Fees are state-specific and run between $100-$800. Attorney fees are varied. After you draft and file your articles for incorporation and pay all your business licensing fees, corporation fees, and acquire your tax identification number, you’ll be ready to operate with the benefits of a C Corporation.
How To Register An S Corporation
Once you’re ready to incorporate, you may choose to take the next steps to become an S Corporation. Hire an attorney familiar with filing papers for incorporation or research solid online options. Fees are state-specific and run between $100-$800. Attorney fees are varied. After you have filed articles of incorporation with your state and paid any necessary fees, you may then register Form 2553 with the IRS.
Learn About Other Business Structures
There are tax benefits to corporations and the business structure helps provide additional liability protection. However, incorporating isn’t easy or cheap. Between the red-tape, the increased chance for an audit, and all the additional recordkeeping requirements needed to keep your status, you’ll want to have a team ready to implement changes to your company structure with ease. Are you still debating the right business structure for your small business? For more information on types of business structures, you can check out Merchant Maverick’s Types of Business Structures: The Complete Guide.
The post C-Corp VS S-Corp: What They Are, How They Differ, & How To Decide Which Is Right For Your Business appeared first on Merchant Maverick.
If you’ve looked into setting up a nonprofit organization, you’ve probably noticed a few terms floating around. The industry is usually described as “nonprofit,” but at other times the term “not for profit” is used instead. So which is it, nonprofit or not for profit? Is there an appreciable difference between these two terms, and if so, which best describes your organization?
In this article, we’ll compare the terms “nonprofit” and “not for profit.” Then, we’ll go into more detail on the advantages and disadvantages of officially registering as a nonprofit organization. Finally, I’ll point you to a few resources that can help you during the process of registering as a nonprofit.
However, before we go on, it’s important to note that we have written this article for organizations based in the United States. If you aren’t based in the US, you should look into your home country’s laws, terms, and policies regarding nonprofits.
Keep reading to learn about the difference between nonprofit and not for profit, and to find out how those terms apply to your organization!
Nonprofit VS Not For Profit
In the past few years, there has been some discussion online about the exact definitions of “nonprofit” and “not for profit.” Some writers argue that these two terms represent two entirely different types of organizations, while others say that the terms are completely interchangeable. As I researched for this article, I spent some time exploring the different sides of the argument, as well as diving into IRS resources for more detailed information. Here’s what I’ve found:
The terms “not for profit” and “nonprofit” both refer to organizations that are designed to serve the public and not intended to make a profit. These organizations are typically eligible for tax-exempt status, provided they keep up with the IRS’s requirements.
“Not for profit” is a newer term that has gained popularity because it more clearly describes what a nonprofit does. Most “not for profit” or “nonprofit” organizations do in fact make a profit at some point in their existence. However, they do not exist for the sake of making a profit. Any profits made are put to use furthering the cause of the organization, not making anyone richer. Many people feel that the term “not for profit” better expresses the intention of these types of organizations without mistakenly implying that the organization will never make a profit.
In addition, the term “not for profit” is often used as a descriptor for all organizations that serve nonprofitable purposes. These organizations include charities, sports clubs, business leagues, and more. Some of these organizations serve the public while others provide services for their own members. “Not for profit” is a good umbrella term that many people use to talk about all of these organizations.
Key Takeaway: Not for profit is NOT an official business structure, and the IRS does not use this term to describe any business. As you look into registering your organization with the IRS, you will only find them using the term nonprofit.
The word “nonprofit,” is an older and more familiar term for organizations that work for the good of society without the intent to earn a profit. While there are many types of organizations that are “nonprofit,” people tend to use this term to refer to charitable organizations such as The American Red Cross, The Human Society of the United States, and Feeding America. Nonprofit is the more common term, and it is the one that the IRS favors.
To sum things up, despite the slight differences in the ways these words are used colloquially, nonprofit and not for profit are technically interchangeable terms. They both refer to organizations that don’t profit from earnings and which are typically eligible for tax-exempt status and other IRS benefits. So, despite some nuance, there is no real difference between “nonprofit” and “not for profit”.
Types Of Nonprofit Structures
Even though “not for profit” and “nonprofit” mean essentially the same thing, there are still some distinctions that you can make between different types of nonprofits. As I mentioned above, there are many types of nonprofits, and this list goes beyond the charitable organizations that typically come to mind. Fraternities, recreation clubs, and employee associations can also apply for tax-exempt status as nonprofit organizations.
So, what category does your organization fall under? Let’s take a look.
501(c)(3) Nonprofits
The most common types of nonprofits are those that fall under section 501(c)(3) of the IRS’s “Publication 557: Tax-Exempt Status for Your Organization.” 501(c)(3) organizations are the types of organizations that immediately come to mind when you hear the word “nonprofit.” They are charitable organizations, churches, medical research groups, and so on. These organizations are eligible to be exempt from federal income tax (and state income tax depending on state law). Here’s a quote from the IRS that describes 501(c)(3) organizations:
An organization may qualify for exemption from federal income tax if it is organized and operated exclusively for one or more of the following purposes:
Religious.
Charitable.
Scientific.
Testing for public safety.
Literary.
Educational.
Fostering national or international amateur sports competitions (but only if none of its activities involve providing athletic facilities or equipment; however, see Amateur Athletic Organizations, later in this chapter).
The prevention of cruelty to children or animals.
To qualify, the organization must be organized as a corporation (including a limited liability company), unincorporated association, or trust. Sole proprietorships, partnerships, individuals, or loosely associated groups of individuals won’t qualify. (Publication 557: Tax Exempt Status for Your Organization)
Organizations that fall under section 501(c)(3) are also eligible for many benefits beyond just tax exemption. For more information, jump down to the Pros & Cons of Registering as a Nonprofit section of this article.
Other 501(c) Nonprofits
While section 501(c)(3) encompasses many nonprofit organizations, it is by no means the only classification of nonprofits. The IRS’s list of tax-exempt organizations includes many organizations that do not fall into any of the categories above. These include social and recreational clubs, business leagues, voluntary employee’s beneficiary associations, and more. Although these organizations do not fall under section 501(c)(3), they do fall under other 501(c) sections. The IRS lists a total of twenty-nine 501(c) sections, including the following:
501(c)(4): Civic Leagues and Social Welfare Organizations
501(c)(5): Labor, Agricultural, and Horticultural Organizations
501(c)(6): Business Leagues, etc.
501(c)(7): Social and Recreation Clubs
501(c)(8) and 501(c)(10): Fraternal Beneficiary Societies and Domestic Fraternal Societies
501(c)(13): Cemetery Companies
These 501(c) organizations tend to differ from 501(c)(3) organizations because the funds raised often go towards furthering the existence of the club or league, rather than accomplishing a charitable purpose. This means that members of these organizations benefit in a non-financial way from participating in the nonprofit.
Pros & Cons Of Registering As A Nonprofit
When you set up a nonprofit organization, you will be faced with a choice. Do you go through all the hassle of applying for tax-exempt status with the IRS, or do you forego that step and continue as usual? As you make this decision, you should keep in mind the pros and cons of each option. So, here are the pros and cons of registering as a nonprofit with the IRS.
Pros
1. Tax Exemptions
This is a pretty obvious advantage to registering for tax-exempt status with the IRS. If your organization qualifies, you are exempt from federal income tax. In addition, you can pass along tax benefits to your donors. If you are a registered nonprofit, donors can count their donations as tax-deductible.
Your organization may also qualify to be exempt from state income tax, sales taxes, and employment taxes, depending on your state.
2. Eligibility For Many Discounts
On top of the tax benefits, nonprofits–and more specifically 501(c)(3) organizations–are eligible for discounts from many services. Registered nonprofit organizations get access to reduced postal rates, and you can use your 501(c)(3) status to get discounts on many business software options. For example, many project management software apps (for example Basecamp, Asana, and Trello) offer discounts for 501(c)(3) nonprofits.
3. Lower Credit Card Processing Rates
One of the biggest discounts from which 501(c)(3) organizations can benefit is reduced credit card processing rates. These reduced fees allow nonprofits to keep more of their donor’s contributions. Take a look at our article on the best credit card processors for nonprofits for more information.
Cons
1. Applying For Tax-Exempt Status Can Be Difficult
Setting yourself up as a tax-exempt nonprofit can be a long and difficult process. You’ll need to read through the IRS’s documentation to understand the requirements your specific type of organization has to meet, and then you have to gather all of the necessary documentation. The IRS estimates that the application form alone should take you 100 hours to complete, and the whole application process typically lasts between three and six months. Fortunately, we have a few resources to help you down this path. Take a look at our Step-by-Step Guide to Registering your 501(c)(3) Nonprofit Organization as well as the IRS’s interactive course on Applying for Section 501(c)(3) Status for some guidance.
2. You Have To Work To Stay Exempt
Gaining tax exemption status is not a one-time event. In fact, The IRS refers to tax exemption as a “lifecycle.” In order to stay tax-exempt, you have to meet certain responsibilities. These responsibilities include maintaining good records, filing an annual return, and allowing the public to inspect certain IRS filings. And, of course, you have to always remain a nonprofit, meaning that the money that you earn should go only to furthering the purpose of your organization.
How To Register Your Organization As A Nonprofit
Have you decided to register your organization as a nonprofit? If so, you’re in for a long haul, but it should pay off in the end!
Registering your organization is an eight-step process, beginning with selecting a name.
NonprofitRegistration Process
Choose and reserve a name for your nonprofit.
Form a board of directors
File articles of incorporation
Write your organization’s bylaw
Hold your first board meeting (taking minutes, of course)
Apply for an Employer Identification Number (EIN).
File your 501(c)(3) application.
Obtain business licenses and permits
Is your head spinning yet? Registering as a nonprofit is not a small task. Fortunately, we have some resources to get you started. If you’d like to see the eight steps to registering a nonprofit laid out in much more detail, check out our Step-by-Step Guide to Registering your 501(c)(3) Nonprofit Organization. This guide names the specific forms you have to file to register as a 501(c)(3) nonprofit, and it provides much more information about each step along the way.
Or, have you decided that your organization doesn’t quite fit within the category of a nonprofit? Take a look at our complete guide to the different types of business structures to find something that better fits your organization.
Whatever route you decide to take, we wish you the best of luck! And as always, feel free to share your questions and advice in the comments below.
The post Whatâs The Difference Between Nonprofit & Not For Profit Organizations? appeared first on Merchant Maverick.
Nonprofit organizations are responsible for doing so many amazing things, from combatting hunger and homelessness, to helping sick children and animals. But no one said saving the world was easy. While there are multiple steps to registering a business, you have to jump through even more hoops if you want to register a nonprofit business. Still, officially registering as a nonprofit is important because it legitimizes your organization and provides it with some distinct advantages. In particular, nonprofits registered as 501(c)(3) organizations have a tax-exempt status, which means they do not have to pay federal or state income tax.
Whether you want to start a nonprofit or have already begun your nonprofit, it’s important to make sure your organization is properly registered, compliant, and set up for success. Read on for an actionable, step-by-step guide to help you make your nonprofit official.
Why Register As A Nonprofit?
It is possible to informally operate as a nonprofit organization without officially registering as a nonprofit. However, until you make it official, you are basically turning away free money, as well as other benefits.
Here are the main reasons to register your nonprofit:
Legal Protections: Nonprofit corporations have limited liability protection, which protects directors and members from being held personally responsible for the organization’s debts or liabilities. The nonprofit is considered a separate entity that can enter into contracts, sue or be sued, take out business loans, etc., without anyone who works for the nonprofit being held personally liable.
Tax Benefits: Once you have your federal and state tax-exempt status, your organization will be exempt from paying income tax. There are also tax benefits for donors, who can deduct donations made to 501(c)(3) organizations on their taxes.
Access To Grants: Many business grants are only available to organizations registered as nonprofits.
Access To Discounts: With proof of your nonprofit status, your organization is eligible for various discounts, such as USPS nonprofit discounts and credit card processing discounts for nonprofits.
Crowdfunding Eligibility: 501(c)(3) status lets you raise money through certain nonprofit crowdfunding platforms, such as CrowdRise. Some crowdfunding platforms will also eliminate platform fees for registered nonprofit entities.
Credibility: An official nonprofit status lets people know your organization is legit and not just a bunch of yahoos or even scammers. Obtaining your nonprofit status is likely to attract more donors and larger donations.
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The 8 Steps You Need To Take To Get Started
The process to execute some of these steps varies somewhat from state to state. For example, in some states, you will need to apply for both federal and state tax-exempt status. But wherever you live, you will need to follow all of the below 8 steps.
1. Select A Name
Though you may have a working name for your organization, to make your nonprofit official, you will have to make sure that name is available and hasn’t already been trademarked. After you choose your name, check with your Secretary of State office as well as the U.S. Department of Commerce website to ensure that it is available. You can normally pay a nominal fee to reserve your name until you file your articles of incorporation.
2. Form Your Board Of Directors
Generally, you should form your board of directors before incorporating. Some, but not all states require that you list your board members’ names in the incorporation documents. You’ll also need to list at least three directors when you file for your 501(c)(3) tax-exempt status. These members should ideally be unrelated (by blood or marriage). Â
3. File Articles Of Incorporation
This is the documentation that forms an official corporation for your nonprofit and will be filed with your secretary of state. It includes information such as your organization’s name, location, board of directors, and purpose (what your nonprofit is being created to do/provide). Although incorporating your nonprofit does not make it tax-exempt, you will need to include certain language in the articles of incorporation for when you apply for tax-exempt status later—your state’s nonprofit formation packet should include the required information.
Some states also require you to publish a notice of incorporation with your local newspaper.
4. Write Bylaws
After your articles of incorporation have been approved, you can write your bylaws. These are your nonprofit’s internal rules and guidelines for procedures such as holding issues, voting, and electing officers. You will need to include a copy of your bylaws in your 501(c)(3) application.
5. Hold First Board Meeting
At your first board meeting, you will make your articles of incorporation part of the official record, adopt your bylaws, and elect officers. Someone will need to take minutes, which you will keep on file. It’s recommended that you hold this initial board meetingbefore you file for federal tax-exempt status. In a later meeting, you can record the receipt of federal and state tax exemptions.
6. File For EIN
The final thing you need to do before filing for your 501(c)(3) status is to apply for an Employer Identification Number (EIN). You need to do this even if you don’t have employees yet, as it is required by the IRS to obtain your tax-exempt status. The IRS uses your EIN to track your organization’s financial activities. You’ll also need an EIN later on when you open a business bank account and hire employees.
To obtain an EIN, file Form SS-4 with the IRS.
7. File For Tax-Exempt Status
After you have your directors, incorporated status, bylaws, and EIN, it’s finally time to file for your federal tax-exempt status with the IRS. For nonprofits in most states, you only need to do this at the federal level, but some states require you to file for tax-exempt status at the state level too. For example, nonprofits in California must also apply for tax exemption with the California Franchise Tax Board after obtaining tax-exempt status from the IRS.
To apply for your federal tax-exempt status under section 501(c)(3) of the Internal Revenue Code, you will need to file Form 1023 with the IRS. If your organization has gross receipts of less than $50K and less than $250K in assets, you can file the 3-page 1023-EZ application (vs. the 26-page standard 1023).
Some information you’ll need to include in your 1023 application:
Your budget, including any balance sheets or other financial information
The names of your directors
Copy of your articles of incorporation
Copy of your bylaws
Dissolution clause (usually included in articles of incorporation or bylaws)
Conflict of interest clause (usually included in articles of incorporation or bylaws)
Statement of exempt purpose (usually included in articles of incorporation or bylaws)
In order to ensure that your application meets all state and federal requirements, it’s a good idea to consult with a lawyer or someone familiar with tax-exempt law. Including attachments, a 501(c)(3) application package can easily exceed 50 pages.
Note that even after your organization receives its letter of determination from the IRS with its tax-exempt status, each year you will have to submit Form 990 in order to maintain your 501(c)(3) status. This document provides financial information about your organization to both the IRS and to the public.
8. Obtain Business Licenses & Permits
Once you have your tax-exempt status, you’re almost ready to start raising funds. But first, you’ll need to make sure you’re in compliance with all business licenses and permits applicable to your state and your organization’s activities. For example, you may need a sales permit or a zoning permit. Check with your local department of consumer affairs to find out what kind of licenses and permits you need to operate as a charitable organization in your particular state. Some cities may require a city business permit as well.
Registering As A Nonprofit: FAQs
How long does it take to register a nonprofit?
The IRS estimates it will take 100 hours to fill out Form 1023. The application process typically takes between 3-6 months, though it could take as long as a year, depending on whether the IRS has follow-up questions and how quickly you provide the answers.
How much does registering a nonprofit cost?
To file for 501(c)(3) status, you will pay either $600 to file Form 1023, or $275 to file Form 1023-EZ.
The costs of incorporating and obtaining the necessary permits to operate as a nonprofit vary from state to state; however, they usually do not exceed $100-$200.
Is the registration process different in each state?
Yes, somewhat. Check with your state to see if you need to complete any extra steps, such as publishing your nonprofit’s articles of incorporation or filing for state-level tax exemption.
Can any organization register as a nonprofit?
No. Your organization must meet the IRS’s definition of a public charity (the most common type of 501(c)(3) organization), private foundation, or private operating foundation. Be sure to read up on the IRS’ exemption requirements for 501(c)(3) organizations before you apply.
Can I register my business as a nonprofit to dodge taxes or get rich?
No. The IRS has strict regulations in place to make sure that businesses cannot use misuse their 501(c)(3) status for personal gain or to avoid paying taxes. All of your organization’s financial information, including salaries and use of income, will be closely and regularly scrutinized to look out for possible fraud and conflicts of interest. For example, if your nonprofit brings in $500K a year, you will not be able to get away with paying yourself a $200K salary.
Should I hire a lawyer to help with the registration process?
Yes, it is a good idea for first-timers to consult with a legal professional at some point to ensure compliance with all state and federal requirements, particularly when filling out the incorporation paperwork and when preparing the 501(c)(3) forms.
Final Thoughts
Whether they benefit schools, the environment, public safety, or another cause, nonprofit organizations do a lot of good in this world. But if a nonprofit is not officially registered, then it can only make a limited impact. When a charitable organization is incorporated as a nonprofit corporation and obtains a 501(c)(3) status from the IRS, the organization does not have to pay income taxes on the money it brings in, and the organization becomes eligible for other funding opportunities, including government grants and charitable crowdfunding platforms. Additionally, donors are more motivated to donate to IRS-registered nonprofits because any contributions they make to these organizations are tax-deductible.
There is some work involved in registering a nonprofit and maintaining nonprofit status, but your charity and your cause will ultimately benefit from your diligence. If you’re not sure your nonprofit qualifies for 501(c)(3) status, the IRS has information you can review on the various types of tax-exempt/nonprofit organizations, including 501(c)(3) and others. If you think maybe a nonprofit structure is not right for your organization after all, I recommend reading our article on the different types of business structures.
The post The Step-By-Step Guide To Registering Your 501(c)(3) Nonprofit Organization appeared first on Merchant Maverick.
A business cooperative, also called a “worker cooperative” or just a “co-op,” is a type of business that offers some special advantages—namely, the advantages of group ownership. Though it has some commonalities with other business types, including business partnerships and traditional corporations, a business co-op is its own animal with its own unique legal structure. A cooperative is not the most conventional business type and can only work for certain types of businesses. Read on to learn more about whether this unique business model could work for your new or existing business.
What Is A Business Cooperative & How Does It Work?
Essentially, a business cooperative is an employee-owned business. Every member of the cooperative has an equal voice, regardless of how many shares they own. Profits and earnings are divided equally among the members (also called “member-owners”). However, it’s important to know that there are different types of co-ops with different goals, and that there are other business types that resemble co-ops.
How Business Co-ops Differ From Consumer Co-ops
A business cooperative is not to be confused with a consumer cooperative, though the legal structure may be the same. With a consumer co-op, members of the co-op are also consumers of the co-ops good or services, paying into the co-op or sometimes volunteering their labor (usually part-time) in exchange for membership.
Why join a consumer co-op? Membership typically gets you a free service or lower prices for a service. For example, a food co-op typically offers high-quality food at much lower prices than you’d pay at, say, Whole Foods. A parent joins a preschool co-op so that their children can attend the school for free or at a discounted rate. Consumer co-ops typically not-for-profit, community-based services. They may or may not be incorporated as businesses.
Business cooperatives, on the other hand, serve workers. The member-owners of a business cooperative are typically full-time corporate employees.
While business co-ops are democratic by nature and often have a socially conscious business ethos, the main goal of a business co-op is not to provide a community service, but to make a profit. Typically a percentage of profits are distributed equally among owners, while the rest is reinvested in the company. There are co-op businesses in retail, agriculture, healthcare, manufacturing, and other industries. Business cooperatives are incorporated and do business as cooperative corporations.
Business Cooperatives VS Other Business Structures
A cooperative corporation is also not to be confused with a regular corporation (C corp). Though many corporations are partly owned by shareholders who also work for the company, a cooperative, by contrast, is 100% owned by its employees, with no owner having any more control or ownership of the company than any other owner. Unlike a traditional corporation, a cooperative corporation has no executives who hold the majority of shares (among other differences).
Co-ops are also different from business partnerships, which have different liability structures and tax structures, and can involve unequal ownership arrangements. Learn more about the different types of business structures if you’re not sure which one is right for your company. Depending on your goals, a more appropriate business structure might be a partnership or even a limited liability company (LLC), which has a lot of the same benefits of a co-op but with fewer restrictions.
Other business types may borrow some features of co-ops without being true co-ops. For example, Costco and Sam’s Club resemble co-ops in that members pay a fee in order to shop there; however, these businesses are not true co-ops because they are not member-owned.
Business Cooperatives On A Large Scale
Very large business co-ops can operate much like franchises—in that members pay to use the company name and resources, but each individual business location is more or less independently managed. ACE Hardware, whose shares are all owned by individual ACE Hardware store owners, is an example of a retail cooperative. In exchange for purchasing shares of company stock, approved ACE outlets become part owners of the company and can use the ACE name, products, and distribution channels.
A business cooperative can also function sort of like a union, in that its democratically-elected leaders can exert collective bargaining power in their industry if the co-op is large enough. Land O’Lakes Inc., owned by dairy farmers, is an example of a large-scale agricultural business cooperative. Due to its large size and purchasing power, Land O’Lakes has a lot of negotiating power from its suppliers (of trucks, farming equipment, etc.), which it uses to lower its cost of production.
But not all business cooperatives are nationwide brands; most are actually small businesses. A new co-op might only have a handful of employees. There are still benefits to forming business cooperative, even on a very small scale.
The Advantages Of Owning A Business Cooperative
Incorporating your business as a co-op can provide great benefits and establish your organization as a really special entity where workers love their job — with low operating costs to boot. Read on to learn about the benefits of owning a business cooperative.
Invested Employees
Because employees are directly impacted by the company’s performance and share in the company’s successes and losses, they are more invested in the company they work for. Employees are more likely to pour their hearts and souls into a company when they are also owners. Having an equal voice in the company, as co-op owners do, can also inspire more motivated workers. In addition to their labor, employees invest their money into the company, which helps fund the business.
Funding Opportunities
Cooperatives may be eligible to receive certain business grants from the federal government and other entities.
Reduced Liability
Equal distribution of ownership in a cooperative also means equal distribution of liability. In contrast to partnerships where all partners are fully liable for both their own and their partners’ actions, each owner of a cooperative has only limited liability for company debts, obligations, etc. The liability of the co-op’s members is limited only to the extent of their investment in the co-op, provided that they were not engaged in illegal or negligent activities. (LLCs, which can also have multiple owners, also have limited-liability benefits.)
Lower Overhead
Owner-employees are more motivated to keep costs down, because lower costs ultimately increase the company’s profitability. By leveraging their large size, co-ops may also be able to obtain lower-cost goods and services from suppliers, resulting in an overall lower cost of production.
Tax Advantages
Earnings are taxed twice in a traditional corporation—the corporation pays tax on their net earnings and then the shareholders pay taxes on their individual dividends. The federal tax structure of a cooperative—subchapter T of the U.S. tax code—is such that these entities are not taxed on the surplus earnings/dividends they redistribute to members. Co-op owners are only taxed once on their personal co-op income, and not at the co-op level. Thus, a cooperative has a reduced tax burden compared to regular corporations.
The Disadvantages Of Owning A Business Cooperative
A cooperative business model is also not without its downsides. Before you decide to incorporate as a cooperative, make sure you are okay with the following caveats of forming a co-op:
Legal Restrictions
Depending on where you live and work, you may not be allowed to incorporate your business as a co-op. Every state has a co-op law, but they are all different. Some states have very restrictive co-op laws, only allowing co-ops in certain industries, such as agriculture, to incorporate. Other states allow co-op businesses in almost any industry. If your state allows you to form a co-op business, you will still have to adhere to your state’s co-op laws. Before you get yourself in some legal challenges, make sure you are following your state’s business cooperative laws.
Not As Profitable For Founders
Because a cooperative’s earnings and profits are distributed equally among all employees, this type of business is not nearly as profitable for the company’s founders. This doesn’t mean that all cooperative employees are paid equal wages, but in a conventional business structure where the owners/founders have the majority of control and ownership in a company, those owners stand to take a much bigger chunk of the profits. Then again, if you’re considering forming a co-op, there is a good chance that personal profit is not your primary goal.
Funding Challenges
Finding startup loans and other types of funding through traditional lenders may be difficult due to a cooperative’s financial and liability structure. Co-ops also struggle to attract large investors, since a large investor will not have any more control in the company than a small investor. During the startup phase and sometimes beyond, co-ops may have to get creative with other funding sources, such as launching a crowdfunding campaign or applying for small business grants.
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Slow Decision-Making
Have you ever tried to make a decision as a large group? It can be pretty challenging! By the time the entire group decides where to eat, you are out of your mind with hunger. The process to make big decisions as a cooperative, where everyone gets an equal vote in all company decisions, can be equally time-consuming and frustrating.
How To Form Your Co-op
The following are the main steps you need to take to form a business co-op. However, the steps to register your business as a co-op vary somewhat from state to state; check with your state’s Secretary of State or State Corporation Commissioner for more information regarding your stateâs specific co-op laws.
1. File Articles of Incorporation
The articles of incorporation is a document that makes your co-op an official business. This document includes your company’s name, location, purpose, financial structure, and the names of your charter members (incorporators/founders). Your incorporators must file the articles of incorporation with your state business entity registration office.
2. Obtain Business Permits & Licenses
You will need to obtain all local, state, and federal permits and licenses before you can operate as a legal business. These requirements will vary based on your industry and location.
3. Create Bylaws
Once your articles of incorporation have been approved by the state, you can write your bylaws. These are all of the rules and procedures for your cooperative and include membership requirements and duties, as well as general operational procedures for your co-op. Your bylaws must comply with state law, so you may need to consult with an attorney at this time if you haven’t already.
4. Hold Charter Meeting
During this meeting, charter members will adopt the bylaws and elect a board of directors (if the board wasn’t already established in the articles of incorporation).
5. Recruit More Members
To make your co-op a success, it needs to grow its membership. These are the employees and co-owners of your company who will supply the capital and labor. The application members use to join the company needs to include names and signatures from the board of directors, as well as a description of the member rights and benefits.
6. File With The IRS
Even though you are exempt from certain taxes as a cooperative, you will still need to file with the IRS (before the end of your fiscal tax year) to validate your organization’s tax-exempt status. In particular, most cooperatives will need to file Form 1120-C to report income, gains, losses, deductions, credits, and to determine your income tax liability. Any cooperative with employees needs need an Employer Identification Number (EIN) to file taxes, so be sure to sign up for one before tax-time if you haven’t already.
7. Obtain Additional Financing
Depending on your financial needs, you may need to obtain additional financing at some point, especially if contributions from co-op members are not sufficient to cover all your initial startup expenses. As mentioned, crowdfunding and startup business grants are a couple of potential ways co-op startups get capital, and certain online lenders might be willing to extend you a startup loan as well.
Note that if you are converting an established company to a co-op, this process will look different. In addition to incorporating as a cooperative, writing bylaws, etc., you will also need to buy out the original owners/founders and then redistribute that money to the co-op.
Final Thoughts
A business cooperative can be the perfect business structure for certain organizations, particularly those with a democratic business ethos. A strong corporate culture and reduced costs are just two of the many benefits that cooperative businesses enjoy. However, co-ops are also limited in certain ways, and are not appropriate for every business type.
Don’t think a co-op is right for you? Take a look at our business structures explainer to learn about other business structures and their pros and cons.
The post Should You Form A Business Cooperative? Consider These 9 Advantages And Disadvantages Before Getting Started appeared first on Merchant Maverick.
The holiday season is upon us! For many small businesses, this is the busiest time of the year for sales and shipping, so busy that UPS is said to have delivered over 800 million packages in 2018 during the holidays alone.
In today’s world, consumers are accustomed to inexpensive and fast shipping, which means making a holiday shipping plan is essential. But how do you prepare for such a busy season as a business owner? What are your best shipping options? And how do you get the best rates to make your customers happy and compete in a space with Amazon and other two-day shipping providers?
Heading into the holiday season blind, without information about shipping rates and times, is an expensive mistake you can’t afford to make. It’s important to understand what customers want in shipping rates, the shipping methods customers prefer, and how to navigate general holiday busyness. We’ll answer all these questions and more to help your business handle holiday shipping with ease.
Here is what you need to know about holiday shipping 2019.
The Best Holiday Shipping Options For Your Business
Holiday shipping choices are an integral part of your overall business strategy, especially during the holidays. Even though the small business holiday season starts with Halloween, don’t let your shipping start with a scare. Learn what shipping options you have ahead of time so you can be prepared and ease the stress of the holidays.
In today’s small business world, there are more shipping options than ever, whether you outsource or use software apps and software. That means the holiday shipping rush doesn’t need to be crazy. Still, when it comes to shipping options, there are really three major contenders: The United States Postal Service (USPS), United Parcel Service (UPS), and FedEx.
We’ll explain what services each provides, how much they cost, and which is the best to use for your shipping needs. And, if none of these fit your needs, we’ll also cover the best shipping software and outsourcing options.
Small Business Shipping Options
Best For
USPS
Affordability and saving money when packages don’t need to arrive quickly
UPS
Fast deliveries with guaranteed shipping, package tracking, and no peak surcharges
FedEx
Fast deliveries with package tracking and Saturday shipping
Shipping Software
Streamlining your shipping process and integrating with your eCommerce site
Outsourcing
Business owners who are too busy to handle shipping themselves
useful and easy-to-navigate shipping calculator. You can use it to get an estimate for your shipping rate. If your shipping method is available via their Click-N-Ship® option, you can sign-in to your account, select shipping type, pay, and print your label. Small businesses can use Click-N-Ship® to create batch shipments or order flat-rate boxes to be delivered directly to your home/place of business. Pick-up at residences and almost all business locations is free.
For international shipping prices, visit the USPS business prices page. Prices listed below are up-to-date as of October 30, 2019.
Shipping Service
Price
Delivery Time
Price Details
USPS Retail Ground
Starts at $7.35
2-8 days
Prices based on package weight, size, and destination location; only available in-person at a post office
First-Class Mail
Starts at $0.33
1-3 days
Prices based on package weight, size, and destination location; for envelopes or small packages up to 13oz
Priority Mail
Starts at $7.35; *flat-rate boxes available
1-3 days
Flat-rate boxes prices do not vary based on weight or destination location; non-flat-rate box priority mail rates are based on weight, size, and destination location
Priority Mail Express
Starts at $25.50
Overnight
Prices based on package weight, size, and destination location
Media Mail
Starts at $2.75
2-10 days
Only available in-person at a post office
*USPS also has flat-rate prices their priority mail service. With flat-rate boxes and envelopes, weight and destination do not affect pricing. If you can fit it, it’ll ship for the pre-determined price. Prices listed below are up-to-date as of October 30, 2019.
Package Type
Size
Price
Letter Envelope
12 1/2″ x 9 1/2″
$6.95
Small Envelopes
10” x 6”
$6.95
Padded Envelopes
12 1/2″ x 9 1/2″
$7.55
Small Box
8 11/16″ x 5 7/16″ x 1 3/4″
$7.50
Medium Box
11 1/4″ x 8 3/4″ x 6″ or 14″ x 12″ x 3 1/2″
$12.80
Large Box
12-1/4″ x 12-1/4″ x 6″ or 24-1/16″ x 11-7/8″ x 3-1/8″
$17.60
APO/FPO Box
12-1/4″ x 12-1/4″ x 6″
$16.10
When To Use USPS For Holiday Shipping?
If you are a low-volume merchant, USPS does free pick-up, and you can use the Click-N-Ship® method for the shipping services available. The entire process is quick and simple. Click-N-Ship® is the most economical, it reaches all households/PO Boxes, and can be a great option this holiday season when time isn’t of the essence. USPS overwhelmingly provides the best experience for most small businesses and eCommerce merchants. UPS and FedEx can’t compete with the prices and speed for lightweight (under 2lbs) packages. If that applies to your shipments, then this is your best choice.
UPS
Best for fast deliveries with guaranteed shipping, package tracking, and no peak surcharges.
We recognize those trademark brown vans anywhere. UPS (United Parcel Service) is a favorite among merchants because of their amazing customer service, package tracking abilities, and reliability. However, it is the most expensive option whether you ship from a regular pick-up or from a retail shop. It is notable, though, that UPS does not have any peak pricing or peak surcharges this year.
Pros
Great tracking
Reliable expedited shipping
No holiday peak pricing surcharges
Cons
No free pick-up
More expensive than most
No Saturday delivery
a handy calculator to determine shipping costs. Prices for shipping are different for daily rates or retail rates. Daily rates are for businesses with a scheduled UPS pick-up. Retail rates are the shipping rates you will pay if you go into a local UPS retail location. The fees for scheduling a pick-up start at $13.45.
Here’s a breakdown of UPS’s shipping by service. Prices listed below are up-to-date as of October 30, 2019.
Shipping Service
Price
Delivery Time
Price Details
Ground
Starts at $12.32
1-5 days
Prices based on package weight, size, and destination location
UPS 3-day Select
Starts at $11.23
3 days
Prices based on package weight, size, and destination location
UPS 2nd Day Air
Starts at $18.40
2 days
Prices based on package weight, size, and destination location
UPS Next Day Air
Starts at $24.70
Next business day
Prices based on package weight, size, and destination location
UPS Express Critical
Varies
Contact UPS
Prices based on package weight, size, and destination location
When To Use UPS For Holiday Shipping?
UPS has great tracking. If you have a package you need delivered fast and you want to keep a close eye on its travels, then UPS might be worth the extra cost. Tracking and guaranteed speed are the two reasons to choose UPS over USPS. While some small businesses have amazing relationships with their UPS drivers, most small businesses and eCommerce sites won’t want to pay the pick-up fees or increased rate prices by heading into a store.
are negligible. However, FedEx, like USPS, does have Saturday delivery, and they tout a more involved tracking system, too. There are fewer FedEx stores in the United States, so locations are limited, and that could add time to delivery for remote locations.
Pros
Excellent tracking
Saturday delivery
Cons
Fewer locations
No free pick-up
Can be expensive
Holiday peak pricing/surcharges
FedEx Services
Source: FedEx
FedEx offers several shipping options, which vary depending on how quickly you need your packages to arrive.
Ground: Prices for Ground shipping are based on package weight, size, and destination location. Shipments will arrive between 1-7 business days. Ground shipping is only provided for Monday-Friday delivery days.
FedEx Express Saver®: Prices for the FedEx Express Saver® shipping are based on package weight, size, and destination location. Your shipment will arrive between 1-3 business days.Â
FedEx 2Day Air®: Prices for FedEx 2Day Air® are based on package weight, size, and destination location. Your shipment will arrive by the end of business on the 2nd day. (You can also purchase 2Day® AM and make sure your package is delivered by the morning.)
FedEx Standard Overnight®: Prices are based on package weight, size, and destination location. Your package will arrive by the next business day.Â
FedEx Priority Overnight®: Your package will arrive by mid-morning the next business day.Â
How Much Does FedEx Holiday Shipping Cost?
For the holiday 2019 season, FedEx does have peak and surcharge fees. Surcharge fees start at $4.20. You may also need to pay a fee for a package traveling to a remote area. You can use their rate calculator here and view a breakdown of their pricing details below. Prices listed below are up-to-date as of October 30, 2019.
Shipping Service
Price
Delivery Time
Price Details
Ground
Starts at $7.85
1-7 days
Prices based on package weight, size, and destination location
FedEx Express Saver
Starts at $16.07
1-3 days
Prices based on package weight, size, and destination location
FedEx 2Day Air
Starts at $18.22
2 days
Prices based on package weight, size, and destination location
FedEx Standard Overnight
Starts at $27.19
Next business day
Prices based on package weight, size, and destination location
FedEx Priority Overnight
Starts at $29.18
Mid-morning on the next business day
Prices based on package weight, size, and destination location
FedEx also has flat-rate prices. With flat-rate boxes and envelopes, weight and destination do not affect pricing. If you can fit it, it’ll ship for the pre-determined price. Prices listed below are up-to-date as of October 30, 2019.
Source: FedEx
When To Use FedEx For Holiday Shipping?
If you are close to a FedEx store or need a very detailed tracking provider, this is a solid choice. Pricing between UPS and FedEx is similar and inconsistent (some years one is more economical, the next year the other one is; it’s impossible to tell you which one is the best option). So, this comes down to your own preference. This year, FedEx does have peak/surcharge pricing for the holiday season (which UPS does not have this year), but the pricing differences between UPS and FedEx are negligible.
Shipping software is a helpful tool to streamline the shipping aspect of your business. If the information about shipping prices and options above made your head hurt a little, that’s okay. If you don’t have the time or inclination to do shipping calculations yourself, finding shipping software that works for you can cut time off your precious holiday work hours.
What can shipping software do? It can: give real rates, print labels in bulk, manage shipments, and it works with your eCommerce site. Here are the top choices you should look into.
Best Shipping Software For The Holidays
Merchant Maverick’s top-rated shipping software is a great place to start to find a shipping software that works for you. Here are a few of the top merchants we recommend:
Shipping Easy:Â Shipping Easy is, you guessed it, easy to use and its pricing is excellent. That makes it one of our favorites at Merchant Maverick. A bonus of partnering with Shipping Easy is the partnership with USPS, and it’s an affordable option for low-volume merchants.
ShipStation:Â ShipStation is one of the leaders in eCommerce shipping and it has integrations for UPS/FedEx/USPS.
Ordoro: Ordoro has great dropshipping options where you can send packages directly from a supplier, which might be an amazing step for the holiday rush.
Stamps.com: Stamps.com works directly with the United States Postal Service. This is a flat-rate service; you pay a flat monthly fee no matter how many packages you ship. With free pick-up from USPS at almost all residences and businesses, for companies looking for a great economical option, Stamps.com is a great choice.
How Shipping Software Can Help For The Holidays
Shipping software takes some of the labor of shipping and moves it into a streamlined process. Time is money and time is limited. If you have a dedicated person working on shipping, that’s amazing, but human error is bound to happen, and shipping software helps take some of the labor out of your shipping process.
Here are the top reasons why you should invest in shipping software:
Saves you time
Reduces chances for error
Simplifies your shipping craziness
Streamlines your shipping process
Keeps shipping information in a single location
These shipping software companies are prepared for the holiday rush and they can help you, too. Anytime you can economically outsource, you should.
Is it worth the cost? Keep on reading!
How Much Does Shipping Software Cost?
Shipping software is an expense, and rates vary. However, many of theses shipping software companies have worked on shipping discounts and cheaper rates for their clients, and that makes the differences in price negligible vs. not using shipping software.
If you acquire help via a shipping app that is saving you up to 40% on shipping costs, it’s worth it to pay a monthly fee for that type of discount — that fee is absorbed by savings on shipping costs. When you look at the bottom-line, there is no way to go wrong with a shipping software company if your company ships enough products to benefit.
Read our post on the advantages of shipping software to learn if this option is right for you.
Outsourcing shipping is really just the act of saying, “Let’s not hassle with this craziness!”
You might be a smaller merchant who is hoping to get to the level where you can outsource. The savings threshold is 25 orders a day. If you fulfill over 25 orders a day, you can economically benefit from outsourcing. (And we’re cheering for you to get to that level or above!)
One important thing to consider: Third-party shippers are better equipped for dealing with the holiday shipping madness, and it’s nice to hand a difficult task off to someone else. Read our complete post on outsourcing to learn if this option is right for you.
Best Options To Outsource Holiday Shipping
There are multiple options to outsource your holiday shipping. Finding a way to keep yourself as hands-off as possible is a small business owner’s dream. Here are a few options for holiday outsourcing:
Amazon: Fulfillment By Amazon (FBA) Multi-Channel Fulfillment is a great way to get your items to customers by using the Amazon platform. Using the Prime shipping feature is a huge benefit. It’s indisputable that Amazon is the leader in commerce in 2019; why not ride on their coattails?
Fulfillrite: This company has same-day shipping and amazing cost plans. If your eCommerce site is looking to outsource, this is an option that works directly with your business.
Shipware: Shipware says that through their program, they have saved $1,321,250 per year for small business merchants in shipping.
FedEx Fulfillment: FedEx also has a fulfillment service to help businesses reach their customers. This is a great option if FedEx is a close and competitive selection for your business.
How Outsourcing Shipping Can Help For The Holidays
Outsourcing your shipping gives you the freedom to focus on all the other important business issues during the holidays. Timely customer service is still a huge part of consumer decisions. When choosing whether to outsource, ask yourself:
How fast am I able to fulfill orders?
What are my plans for returns/refunds?
Can I respond to issue situations immediately?
If the answers to these questions are inducing a heart attack, stop right now. Outsourcing may be the cure for you.
How Much Does Outsourcing Shipping Cost?
To set up an outsourcing system for your company, you will need to find an outsourcing company and set up an account through them. There are initial set-up fees and fees based on use and inventory. Costs for outsourcing vary. The average industry cost for outsourcing shipping is $2 per order, with negotiated rates.
When To Outsource Your Holiday Shipping
If you are struggling with shipping your holiday orders, outsourcing is a no-brainer. Here is the best way to assess if you need to outsource. Close your eyes. Imagine that you don’t have to worry about fulfillment regulations, inventory space, the time spend on shipping, training staff to ship, or where you’ll keep holiday inventory. If this vision has you relaxing for the first time since the Back To School supplies hit the shelves, then you need to find a way to outsource.
Remember: in general, if you have more than 25 shipments a day, it may be cost-effective to outsource.
Holiday Shipping Schedule for 2019
As a small business, it’s important to fulfill your shipping promises. Knowing the shipping deadlines and understanding the holiday schedule will help you plan and set your own shipping costs and let customers know when to expect their items. We’ve all had one or two close-calls or misses with holiday packages. (Or those packages that came just a few days late…)
Deadlines listed below are up-to-date as of October 30, 2019.
USPS Holiday Shipping Deadlines
With USPS the last day to ship a package and have it arrive by Christmas is December 23. However, for cheaper shipping options, you’ll want to send your packages well before this date. See the deadlines below:
USPS Shipping Deadlines
December 13
Last day to mail USPS Retail Ground service
December 19
Last day to mail First-Class Mail
December 20
Last day to mail First-class packages (up to 15.99 ounces)
December 21
Last day to mail Priority Mail
December 23
Last day to mail Priority Mail Express
UPS Holiday Shipping Deadlines
With UPS, the last day to ship a package and have it arrive by Christmas is December 23. However, if you don’t want to be stuck paying for NextDay Air, you’ll want to use another one of UPS’s shipping services and get those packages in sooner. See the deadlines below:
UPS Shipping Deadlines
December 13
Last day to mail Ground packages
December 19
Last day to mail UPS 3 Day Select®
December 20
Last day to ship via UPS 2nd Day Air®
December 21
Last day to mail UPS 2nd Day Air® with Saturday service
December 23
Last day to mail Priority Mail Express/UPS Next Day Air®
FedEx Holiday Shipping Deadlines
With FedEx, the last day to ship a package and have it arrive by Christmas is December 25. But, if you want to save some money, and save a poor soul from having to work on Christmas day, you’ll want to send your packages before this date. See the deadlines below:
FedEx Shipping Deadlines
December 16
Last day to mail FedEx Ground shipments
December 16
Last day to mail FedEx Home Delivery shipments
December 19
Last day to mail FedEx Express Saver shipments
December 20
Last day to mail FedEx 2Day and 2Day A.M. shipments
December 23
Last day to mail FedEx Standard Overnight, Priority Overnight and First Overnight shipments
December 25
Last day to mail FedEx SameDay shipments
5 Tips To Make Holiday Shipping Easier For You & Your Customers
Shipping is crucial and people invest in your business because of what you promise to deliver. According to a recent study, 70% of customers navigate away from a shopping cart because of questions about shipping and shipping timing, so it is 100% true that shipping can make or break a sale. It’s gut-wrenching to get a customer to that final click and lose him/her/them with shipping speeds and prices.
With that in mind, how can you make holiday shipping easier for both you and your customers? It’s easy. Think about your own needs as a customer in today’s holiday market and try to meet those needs for your customers. Here are a few tips:
Tip #1: Keep Your Inventory In Stock
This should go without saying but I’ll say it anyway: keep your inventory in stock during the holiday season. Nothing creates a headache like running out of an important item during the busiest time of the year. (Is this the appropriate place to incorporate an anecdote about the time I worked for a chain restaurant famous for ribs, and a man actually threw a pitcher of water at me one day when we ran out of those ribs? Stay in stock, people!)
Waiting for a shipment yourself will slow down the shipping process. Be ready to ship as close to receiving an order as you can. That’s what most customers expect.
Tip #2: Make Shipping Work For Your Business
Whether this involves utilizing free shipping options or putting effort into tracking packages, shipping needs to be an integral part of your business plan and not an afterthought. Instead of feeling like shipping is bringing you down, make a shipping plan.
Maybe your shipping plan involves utilizing all shipping options (USPS/UPS/FedEx) depending on price. Maybe you promise free ground shipping, knowing you can absorb the cost. Research your business and what your customers expect for holiday shipping options.
Tip #3: Provide Shipping Information In Your Meta-data
It’s the year 2019. We don’t quite have the fully automated-flying cars we were all promised, but we do have a robust internet that is an incredible resource for small businesses.
If customers are looking for your product and a way to ship fast or free, advertise and capitalize on your ability to provide that option. Lead people to your site or product by offering up transparency.
Tip #4: Make Shipping Information Clear For Everyone
Will you provide tracking? Do you have a ship-by date? When will packages arrive?
Transparency is the number one most important quality in a business.
If you advertise certain shipping speeds, be ready to make good on those claims. Customers and clients who go into a sale with clear expectations are often the most satisfied. Whether the shipping takes one day, three days, or 14 days, as long as the customer can decide and choose, they will be happy.
However, it should go without saying, if you make a promise, stick with it and keep customers informed.
Tip #5: Prepare For Returns
Lastly: No matter how you ship, it’s important to prepare for returns. It’s inevitable that someone will need or want to return a product.
Do you have a return policy? How will customers return incorrect or damaged items? These are critical components of the shipping process. Implementing an automated return process is integral. Also, customers may be looking for information on returns before making a purchase, so communicate your return policy in a clear, public location.
Get Started On Your Holiday Shipping
Holiday shipping is crucial. If you and a competitor are equal in all other things, you’d better make sure you have the better shipping options. How do you do that? By knowing your inventory inside and out, including how much it weighs; by checking prices between the carriers and deciding on a shipping plan to utilize during the holiday season; and by understanding whether outsourcing or using a shipping service is the right choice.
The holiday shipping rush starts now. People are already thinking about holiday purchases; make it easy for them to choose your business. Check out our other articles on shipping to make sure you are prepared for the holiday rush.
The post The Complete 2019 Small Business Guide To Holiday Shipping: Deadlines, Prices, And How To Save appeared first on Merchant Maverick.
So, you’ve started a nonprofit. You’re passionate about your cause and have put together an inspiring team, united by your shared mission to make a positive difference in the world. But you need some money to help finance your venture. Unfortunately, in our profit-motivated society, it can be extremely difficult to find a lender or other party who has financial incentive to extend you some capital. Whether you need an infusion of capital to maintain your existing nonprofit, or you want to secure financing to get your fledgling nonprofit off the ground, you may have to turn over a lot of stones before you find an interested lender. However, obtaining financing as a nonprofit is not entirely impossible, as long as you know where to look.
Is a business loan a viable option for a nonprofit organization? Where else can nonprofit businesses get financing? Read on to learn the answers to these questions.
Why Nonprofits Have Trouble Getting Business Loans
Nonprofit organizations are, of course, not about turning a profit. Any money they make—if they bring in any money at all—is meant to be reinvested in the organization. Banks, which are all about profits, have little to no interest in helping nonprofit organizations. Lenders consider nonprofit organizations to be “high-risk borrowers,” because they do not trust that you will make enough money to repay a loan. If they do not receive any additional financial incentive to do so—for example, a government subsidy or a “corporate giving” PR campaign—banks typically will not lend to a nonprofit that is not bringing in significant revenues. Such is capitalism.
7 Ways To Get Financing For Your Organization
Fundraising, donations, and member fees are typically the main sources of funds that drive a nonprofit organization. If you need additional money on top of what your organization is able to bring in through these channels, you’ll face a pretty steep climb. However, while it’s not easy, there are ways to finance your nonprofit, even if you can’t get a loan. Also, a loan is not necessarily out of the question, particularly for a more established nonprofit. The appropriate type of funding for your organization will depend on various factors, which I’ll describe in more detail in the sections below.
1) Community Development Financial Institutions (CDFIs)
Short for “Community Development Financial Institution,” a CDFI is a financial institution with a mission to facilitate community growth by providing financial assistance to businesses and consumers in low-income or disadvantaged areas. CDFIs are typically not-for-profit or nonprofit organizations, but may take the form of traditional banks/credit unions or venture capitalists. Usually, they do not operate on a national scale, so you will need to seek out CDFI opportunities in your local area.
CDFIs may be microlenders offering loans of $50K or less, while some CDFIs also issue larger loans to more established businesses. City First Bank in Washington D.C. is an example of a CDFI that offers loans to nonprofits.
While CDFIs can be a viable source of capital to nonprofit organizations, particularly to those that operate in disadvantaged regions, there are some downsides. CDFIs usually charge higher rates than banks do (though lower than you’d get with short-term or payday loans) and typically require you to submit a lot of documentation. It can also take a long time for the funds to come through.
Learn more about CDFIs by reading our comprehensive CDFI loans article, and search for CDFIs in your region on the CDFI Fund website.
2) Banks & Credit Unions
Though it’s much harder to qualify a loan from a traditional bank, there are some banks that offer loans to nonprofits. Big corporations — banks included — often like to flex their philanthropic muscles via nonprofit grants or loans programs. However, banks may charge higher interest rates on loans to nonprofits due to the higher risk involved, and you will likely have to have an established nonprofit with documentation to show your revenue, expenses, fundraising plans, and other financial information.
Credit unions, being nonprofit themselves, are more likely than traditional banks to offer nonprofit loan or grant programs (or serve as CDFIs). As nonprofits, credit unions do not have to pay taxes and can offer very competitive interest rates. A credit union may also be more likely than a bank to extend a loan to a newer or smaller nonprofit. Credit union loans are typically offered in smaller amounts than bank loans and you may have to have a checking or savings account with that credit union in order to qualify.
It’s important to only apply for funding to banks and credit unions that specifically advertise that they work with nonprofits/have a lending program for nonprofits. These institutions will better understand your needs as a nonprofit, and will be more likely to accept your application.
Learn more about credit union loans for businesses (including nonprofit businesses) and how they differ from bank loans.
3) Crowdfunding Platforms
For startup nonprofit organizations that are less likely to qualify for bank loans, crowdfunding can be a good option. There are various types of crowdfunding, but charitable/donation lending is the one most suited to nonprofit businesses. Depending on the crowdfunding platform you use, you may be able to obtain free capital for your nonprofit, in the form of online donations you do not have to repay. Or, you may qualify for a no-interest crowdfunded loan, and you’ll only have to repay the principal on the loan.
It is extremely important to familiarize yourself with the laws regulating nonprofit fundraising in the state or states in which you will be operating. You may have to register your charitable nonprofit with the state before you begin soliciting donations.
If you’re ready to explore fundraising online, start by looking at these 6 platforms that do crowdfunding for nonprofits.
4) Nonprofit Grants
Business grants are another form of funding that nonprofits may be eligible for. Grant money for nonprofits can come from government sources, business associations, corporations, or other nonprofit organizations. Typically, grant money is intended for very specific purposes, and government grants, in particular, require a rigorous vetting and application process. Additionally, they will want to see what you’ve achieved with your nonprofit thus far. Most non-government grants are for smaller amounts (less than $50K) and may resemble a contest or competition in which you’re competing with other organizations. Make sure you check that the grant you’re interested in is open to nonprofit businesses; some grants only apply to for-profit businesses.
When searching for grants, you can check grants.gov, the centralized source for all U.S. government grants. You should also do a more targeted search for grants in your particular region, as many grants only apply to applicants living in a certain state, city, or municipality. For example, the state of Maryland has a lot of business financing programs including grants, many of which apply only to applicants in certain counties. If you operate in an economically distressed region or serve a disadvantaged demographic, you might also be eligible for special grant opportunities. For example, there are business grants for women, business grants for minorities, and business grants for veterans.
You can learn more about business grants for nonprofit organizations by reading our nonprofit grants article.
5) Nonprofit Loan Funds
Nonprofit loan funds are another viable source of capital for nonprofit organizations to investigate when looking for funding opportunities. These institutions, often nonprofits themselves, offer loans to nonprofits in need of funding, and especially to nonprofits in underserved communities. Typically, nonprofit loan funds charge less interest than do traditional lending institutions; in some scenarios, the loans may be interest-free.
Some nonprofit loan funds include:
Nonprofit Finance Fund
Growth Partners Arizona (formerly the Nonprofit Loan Fund of Tucson and Southern Arizona)
The Loan Fund (New Mexico)
Open Road Ventures
Propel Nonprofits (created from the 2017 merger of Nonprofits Assistance Fund and MAP for Nonprofits)
Nonprofit loan funds differ from nonprofit grants in that you will have to repay whatever you borrow. Nonprofit loan funds may also be CDFIs. As with other loans, nonprofit loan funds typically require an operating history—meaning your nonprofit startup may not be eligible.
6) Online Loans
There are various types of online business loans that your nonprofit may be eligible for. Generally, online loans have higher rates and more relaxed requirements compared to loans from banks or credit unions. More established nonprofits may be eligible for a medium-term online loan with a decent interest rate, while newer organizations may have to settle for short-term, high-interest loans. Despite their higher price tags, one benefit of online loans is their speed and convenience; often, an online loan’s time-to-funding—the amount of time from when you apply to when you receive the funds in your account—is only a few days.
For nonprofit startups without any track record, a personal loan could be an appropriate online loan option. You can apply for this type of loan from a personal lender, and the only thing the lender will typically care about is your personal credit score. Personal loans are usually for $50K or less. As these loans come with high interest rates and a short repayment schedule, you might only turn to this type of loan as a last resort. Still, if you choose a reputable personal lender, you will get a better deal than you would from a payday loan or from a cash advance on your credit card.
Some, but not many, online lenders have special loan programs for nonprofits. Accion is an example of one online lender (also a CDFI) that lends to nonprofits.
Note that online loans may require you to sign a personal guarantee which states that you—not your organization—are personally responsible to repay the loan balance.
7) Corporate Giving Programs
Even if you cannot secure a sizable loan or grant, you can benefit from contributions from corporations and even smaller businesses in your community. Whether motivated by generosity or just good PR, it doesn’t really matter: businesses increasingly want to “give back” to their community, and that includes helping nonprofits. Companies in your city or county may have various programs or policies you can benefit from as a nonprofit:
Sponsorship of fundraising events (dinners, dances, 5Ks, etc.)
Paid-release days (days employees are paid to volunteer for a charity)
Taking advantage of corporate giving programs requires some creativity and hard work, as you will have to work together with local businesses to figure out how they can best serve you, typically in combination with your own fundraising efforts. You will also have to generate awareness in your organization about corporate giving programs in your region and frequently reach out to local businesses. The good thing is that businesses are generally happy to display their generosity to the community, as this benefits their organization as well.
How To Improve Your Chances Of Getting Approved
Once you decide to apply for financing, it’s time to find a potential lender and start putting together your application package. If you take the time to properly prepare for the application process, there is a much higher probability that a lender will decide to take a chance on your nonprofit. Here are a few important tips to keep in mind.
Make Sure You Meet The Borrower Requirements
Nonprofit loans are a very specific type of financing, and if you bark up the wrong tree, you’ll just be wasting everyone’s time. Make sure that your organization meets all the minimum borrower requirements for whichever loan you’re considering before you apply. Or if you’re applying for a personal loan, check your credit score to make sure you meet their minimum accepted score. A lender will not make a special exception for you, no matter how awesome your nonprofit sounds.
Choose The Right Type Of Financing
In addition to meeting the minimum requirements for a loan, you also need to choose a loan that will work best for your needs. For example, maybe a line of credit will better meet your organization’s needs than a term loan. Even if you are pre-approved for a loan offer, you must also consider whether you can reasonably afford the loan repayments and are comfortable with the repayment timeframe. If not, you should apply for a smaller loan or consider applying for grants, ramping up your fundraising efforts, etc.
Have A Strong Business Plan
Just like a for-profit business, a nonprofit business needs to have a solid business plan in place, especially when applying for financing. The lender will want to see a specific plan detailing both how your nonprofit organization meets a need in the community and how you plan to use proceeds from a loan, all supported by thoughtful research and strong financial documentation. They’ll also want to see that your organization can successfully raise funds.
Have Your Documents Ready
Whether you’re applying for a loan or a grant, you will be asked to submit certain documents. It is best to have all of these materials on-hand when you apply so you are ready to supply them when asked. Some items you might need include:
Driver’s license or other government issued ID
Your organization’s fundraising case statement
Proof of 501(c)(3) (nonprofit/tax-exempt) status
Recent tax returns
Recent bank statements
Other financial documents such as income reports and cash flow projections
Proof of collateral
Keeping strong records, particularly of your organization’s financial information, will make you better-prepared to supply documentation that supports your nonprofit’s need and eligibility for financing.
Need more loan application help? While we wrote the following articles mainly with for-profit businesses in mind, the same tips for business loan applications generally apply to nonprofit business loan applicants as well:
How To Get A Small Business Loan: The Step-By-Step Guide
20 Tips To Improve Your Business Loan Application
Final Thoughts
Although the nonprofit’s business model is in some ways very different from that of a for-profit business, nonprofits operate similarly to regular businesses in many respects. Working capital, operational expenses, and expansion of services are valid reasons to seek financing, regardless of an organization’s business model. While your financing options as a nonprofit are somewhat limited, you may actually have an advantage over for-profit businesses when applying with organizations such as CDFIs, microlenders, and nonprofit loan funds, and also when applying for government grants.
Has your nonprofit been successful in obtaining financing? Have a favorite nonprofit lender? Sound off in the comments!
The post Why Nonprofits Canât (Usually) Get Business Loans — And How To Get The Financing Your Organization Needs Anyway appeared first on Merchant Maverick.
When you launch a new business, you’re probably aware of how a business credit card can help you smooth out your cash flow to help you get your enterprise off the ground. You may also be aware that a business credit card can help you out in other ways — by helping you build your credit score and earn rewards for your business spending.
However, with your other responsibilities, you may not have the time to spend studying the business credit card universe to determine which cards have the most to offer a young business.
Thankfully for those of you who prioritize pursuing your passion over comparing credit card offers, Merchant Maverick exists! Let us separate the winners from the losers and give you the scoop on the business credit cards best suited to entrepreneurs and startup businesses.
Credit Card
Best For
Chase Ink Business Cash
Overall Best Startup Card
Amex Blue Business Plus
Long 0% Intro APR
Chase Ink Business Preferred
Big Signup Bonus
Capital One Spark Miles Select For Business
Travel Rewards
Brex Corporate Card
No Personal Guarantee
Capital One Spark Classic For Business
Average Credit
Wells Fargo Business Secured Credit Card
Secured Card For Bad Credit
Chase Ink Business Cash: Best Overall Card For Startups
Chase Ink Business Cash
Compare
Annual Fee:
$0
Purchase APR:
15.49% – 21.49%, Variable
Required credit: Good, excellent
Bonus offer: $500 cash back if you spend at least $3,000 in the first three months of opening your account
Purchase intro APR: 0% for the first 12 months
Balance transfer intro APR: N/A
Foreign transaction fee: 3%
Rewards:
5% cash back on the first $25,000 spent in combined purchases at office supply stores and on internet, cable, and phone purchases each account anniversary year
2% cash back on the first $25,000 spent in combined purchases at gas stations and restaurants each account anniversary year
Due to both its overall combination of features and its 5% cash back earning rate on several common purchase categories for new businesses, we’re picking the Chase Ink Business Cash as the best overall credit card for entrepreneurs and startups.
To start off, the Ink Business Cash offers an introductory 0% APR for 12 months on purchases and balance transfers and a bonus offer of $500 cash back when you spend $3,000 on purchases in the first 3 months. The card also lacks an annual fee, which is remarkable for a business credit card that offers this much value.
Startup businesses stand to reap some great rewards when using Ink Business Cash to pay for building up a young company. The card offers 5% cash back on the first $25,000 spent in combined purchases at office supply stores and on internet, cable, and phone services each year. No other business card offers such a high level of cash back for the spending necessary to build your office.
You’ll also earn 2% cash back on the first $25,000 spent in combined purchases at gas stations and restaurants and 1% cash back on everything else. All in all, few cards tailor their reward structures to the needs of startups better than Ink Business Cash. Despite this, the card offers a very competitive variable APR of 15.49% to 21.49%.
You can redeem your cash back for statement credits, travel (via Chase Ultimate Rewards), shopping at amazon.com, and gift cards. The card also includes handy benefits such as an auto rental collision damage waiver, travel and emergency assistance services, roadside dispatch, and purchase protection.
American Express Blue Business Plus: Best For Long 0% Intro APR
Blue Business Plus Credit Card from American Express
Compare
Annual Fee:
$0
Purchase APR:
15.49% – 21.49%, Variable
Required credit: Good, excellent
Bonus offer: None
Purchase intro APR: 0% for the first 12 months
Balance transfer intro APR: 0% for the first 12 months
Foreign transaction fee: 2.7%
Rewards:
2 points per dollar spent on all purchases, up to $50,000 per year
1 point per dollar on all purchases after $50,000
Notable perks & benefits:
Expanded buying power â buy above your credit limit with no penalty fees
The Blue Business Plus Credit Card from American Express has one distinguishing feature that should be of particular benefit to those starting a business.
The card offers a 15-month intro 0% APR on purchases and balance transfers — the longest such period offered by any business credit card issuer. So while circumstance may force you to carry a balance on your card as your business gets on its feet, you’ll have 15 months before you start having to worry about paying interest.
As for spending rewards, they’ll come in the form of Membership Rewards points. You’ll earn 2X points on your first $50,000 in annual purchases with no category restrictions whatsoever. All purchases beyond this $50K annual double points limit will earn you 1 point per dollar spent.
Just as with some other Amex business cards, the Blue Business Plus lets you spend above your credit limit. There’s also no annual fee. On the downside, there’s no bonus offer, and the card carries a foreign transaction fee of 2.7%.
Chase Ink Business Preferred: Best For Big Signup Bonus
Chase Ink Business Preferred
CompareÂ
Annual Fee:
$95
Purchase APR:
18.24% – 23.24%, Variable
Required credit: Good, excellent
Bonus offer:Â 80,000 points if you spend at least $5,000 within the first three months of opening your account
Purchase intro APR:Â N/A
Balance transfer intro APR:Â N/A
Foreign transaction fee: None
Rewards:
3 points per dollar spent on the first $150,000 in combined purchases on travel, shipping purchases, internet/cable/phone services, and advertising purchases made with social media and search engines each account anniversary year
1 point per dollar on all other purchases
Notable Perks & Benefits:Â
Points are worth 25% more if redeemed for travel via Chase Ultimate Rewards
Points can be transferred to other travel programs on a 1:1 point basis
Business credit cards don’t typically come with bonus offers as generous as that offered by Chase’s Ink Business Preferred card.
The card offers 80,000 bonus points when you spend $5,000+ on purchases in the first 3 months. Because your points are worth 25% more when you redeem for travel through Chase Ultimate Rewards, these 80,000 points can be worth $1,000 when spent on travel. For entrepreneurs needing to travel for business, this $1,000 bonus can be a godsend.
As for earning points, you can earn 3 points per $1 on the first $150,000 spent annually in combined purchases on the following items:
Travel
Shipping purchases
Internet/cable/phone services
Advertising purchases made with social media sites and search engines
You’ll earn 1 point per $1 spent on all purchases in these categories after the $150K annual high-earning limit and on all other purchases. The card also carries some great travel benefits, has no foreign transaction fee, and you can transfer your points to various airline and hotel travel reward programs on a 1:1 basis.
Sadly, the card carries a $95 annual fee, no introductory 0% APR, and a higher purchase APR than that offered by Chase’s Ink Business Cash card.
Capital One Spark Miles Select For Business: Best For Travel Rewards
Spark Miles Select From Capital One
Compare
Annual Fee:
$0
Purchase APR:
15.24% – 23.24%, Variable
Required credit: Good, excellent
Bonus offer:Â 20,000 miles if you spend $3,000 on purchases within the first 3 months of opening your account
Purchase intro APR: 0% for the first 9 months
Balance transfer intro APR: N/A
Foreign transaction fee: None
Rewards:
1.5 miles per dollar spent on all purchases
Notable perks & benefits:
Free employee cards
Redeem miles for any airline tickets, hotel stays, vacation packages and more with no expiration date
Transfer points to over 10+ travel partners on a 1:1 basis
The beauty of Capital One’s Spark Miles Select For Business lies in its simple travel rewards earning scheme: Earn an unlimited 1.5X miles on your every business purchase with no blackouts or seat restrictions and no minimum to redeem. Considering that you can redeem rewards directly for flights, this card can really benefit the startup that incurs a lot of travel expenses.
The Spark Miles Select card has no annual fee, no foreign transaction fee, and carries a 0% intro APR for 9 months on purchases, but not on balance transfers. However, there is no balance transfer fee.
The card’s bonus offer —Â 20,000 miles ($200 for travel) when you spend $3,000+ on purchases in the first 3 months — is more modest than that of many of the other cards featured in this article.
Brex Corporate Card: Best For No Personal Guarantee
Brex Corporate Card
Compare
Annual Fee:
$0
Purchase APR:
N/A (this is a charge card)
Required credit: No credit requirements, though your business must have at least $100K in the bank
Bonus offer:Â None (though over $25,000 in discounts and credits for Brex’s partner services becomes available to you upon approval)
Purchase intro APR: N/A (this is a charge card)
Balance transfer intro APR: N/A
Foreign transaction fee: None
Rewards:
7 points per dollar spent on rideshares and taxis (all points multipliers are for Brex Exclusive members only)
4 points per dollar spent on travel booked through Brex Travel
3 points per dollar spent at restaurants
2 points per dollar spent on recurring software/SaaS purchases
1 point per dollar spent on everything else
Notable perks & benefits:
No personal guarantee required
Get 5 free cards when you open your account (additional cards cost $5 per user per month)
And now for something completely different. The Brex Corporate Card is a unique product — created in 2018 — that aims to disrupt the world of business credit cards. How does it do so?
The card does not require a personal guarantee. That means that in the event that your business goes under, you won’t be personally liable for the debt on your card and your personal assets will be safe!
Brex doesn’t even check your personal credit score when you apply for the card. Instead, Brex relies solely on the health and potential of your business when considering your application.
The Brex Corporate Card is a great fit for tech startups with at least some history, but not so much for entrepreneurs just starting out or the mom-and-pop dry cleaning place down the street. Your business will need at least $100,000 in cash assets in order to qualify for the card.
The Brex card offers some truly impressive points-earning rates on common startup expenses as well:
7 points per dollar spent on rideshares and taxis
4 points per dollar spent on travel booked through Brex Travel
3 points per dollar spent on restaurant purchases
2 points per dollar spent on software subscriptions
1 point per dollar spent on everything else (Brex Exclusive membership not required)
The only drawback is that to earn points at these rates (except for the 1 point per dollar on general spending), you need to make Brex your exclusive corporate card. You won’t be able to use any other cards for company-related purchases.
The Brex card is a charge card, so you won’t be able to carry a balance from month to month. Thankfully, there’s no annual fee.
Capital One Spark Classic For Business: Best For Average Credit
Entrepreneurs trying to realize their plans while dealing with average credit will find a lot to like about the Capital One Spark Classic For Business credit card.
Being a card for business owners with average personal credit, the Spark Classic For Business doesn’t come with much in the way of bells and whistles. There’s no signup bonus, no intro 0% APR, you’ll get only 1% cash back for your purchases, and the APR is high (currently 25.24% variable).
However, if your credit is less than good and your startup doesn’t fit the profile of a business that would be eligible for the Brex card, the Spark Classic For Business is one of the few ways you can actually fund your business operations. Furthermore, the card has no annual fee, no foreign transaction fees, and there are no transaction fees applied to balance transfers (though the high APR still applies).
While the Spark Classic For Business can be a godsend, try not to carry a large balance from month to month.
Wells Fargo Business Secured Credit Card: Best Secured Card For Bad Credit
Wells Fargo Business Secured Credit Card
Compare
Annual Fee:
$25
Purchase APR:
Prime + 11.90%
Required credit: Poor
Bonus offer: None
Purchase intro APR: N/A
Balance transfer intro APR: N/A
Foreign transaction fee:Â None
Rewards:
If you choose cash back rewards:
Unlimited 1.5% cash back on net purchases
Receive cash back automatically as a credit to your account or to an eligible checking or savings account each quarter
If you choose reward points:
1 point for every dollar spent on net purchases
1,000 bonus points when your company spends $1,000 in a billing period
Redeem points for gift cards, merchandise, airline tickets, and more
10% bonus if you redeem points online
Extra bonus points or discounts from Earn More Mall retailers
As hard as it is to access startup capital when you’ve got average credit, it’s even worse when you’ve got bad credit. That’s where secured business cards like the Wells Fargo Business Secured Credit Card come in.
With the Wells Fargo Business Secured Credit Card, you make a security deposit of between $500 and $25,000. This becomes your credit limit, as you are essentially borrowing from your own money. Not ideal, but when your credit is bad, entrepreneurial beggars can’t be choosers.
If your credit stinks but your startup business is thriving, check out the Brex card instead. But for entrepreneurs with bad credit just getting out of the gate, the Wells Fargo Business Secured card is a solid option in the secured business card market. You can choose to enroll in either the Cash Back or the Rewards Points program. The first option gets you 1.5% cash back on every dollar you spend while the second option gets you 1,000 bonus points when your company’s spending is $1,000+ in any monthly billing period. Not bad for a secured card!
Unfortunately, there’s a $25 annual fee for each card you get (you can add up to 10 employee cards).
What You Need To Apply For A Business Credit Card
Here’s what you’ll need in order to apply for a business credit card.
Your business name — Note that your business doesn’t necessarily have to be a corporation or even an LLC. You sole proprietors and freelancers can just give your own name (or another name if you’ve filed for a DBA)
Your tax identification number — This can be your Employer Identification Number (if your business is a corporation/LLC/partnership) or your Social Security number (if you’re a freelancer/sole proprietor)
Your business type — Corporation, limited liability partnership, sole proprietorship, etc
The nature of the business you’re in — Designing apps, running a restaurant, selling hats for dogs on Etsy, etc.
Your role in the business
Your business phone number/address
Time in business
Number of employees
Annual business revenue — Brand new businesses can just put “$0” here
Your estimated monthly business spending
Remember, though you’re applying for a business credit card, your chances of getting approved will depend to a significant degree on your personal credit, and you’ll have to sign a personal guarantee, thus making you responsible for your business debt. (Note that this is not the case for the Brex card)
Final Thoughts
Great business ideas can come from anybody and anywhere. Unfortunately, startup capital is notoriously hard to access for those who were not born into wealth or privilege. Business credit cards may be an imperfect instrument for entrepreneurs trying to stake their claim to the ever-receding American Dream, but if you’re careful, they can help you manage your expenses and set you up for greater success.
Still trying to make sense of the world of credit? Here are some helpful articles for you!
Doâs and donâts of business credit cards
Best business credit cards for 2019
Using personal cards for business
The post The Best Business Credit Cards For Startups And Entrepreneurs appeared first on Merchant Maverick.
Being a first-time business owner can be a daunting experience. In addition to having to comply with a dizzying array of legal requirements, youâll also have to have at least a working knowledge of credit card processing, inventory management, and other topics. At one point or another, youâre going to encounter the term merchant services, and youâll want to know what it’s all about.
To put it in the simplest terms, unless youâre only going to accept cash and paper check payments in your business, youâll need to understand merchant services: what they are and where to get them from. Merchant services â and the providers who offer them â are essential to providing your customers with the largest range of convenient and secure payment methods. Signing up through a merchant services provider will â provided you choose the right one for your business â result in increased sales that more than offset the cost of those services.
In this article, weâll explain what merchant services are, and provide explanations of each of the primary products that are available from merchant services providers. Weâll also tell you how to find the best merchant services for your business, and what features you should look for in choosing a provider. Finally, weâll give you a brief overview of the best merchant services providers in the industry for small businesses, and explain which providers are the best choice for certain types of companies.
What Are Merchant Services?
The term âmerchant servicesâ can be confusing, because there are a lot of different definitions floating around out there, and they donât all agree on every detail. For our purposes, weâll define merchant services as the products and services a business needs to accept and process any form of payment other than cash or paper checks. This includes processing services for credit cards, debit cards, eChecks, ACH payments, and the newer mobile wallet services such as Apple Pay and Google Pay. It also encompasses hardware and software, such as credit card terminals, point-of-sale (POS) systems, payment gateways, virtual terminals, and mobile processing systems.
Note that there are also a variety of ancillary services that are often bundled with merchant services, including inventory management software, gift card/loyalty programs, online reporting features, merchant cash advances, and many others. These are not considered to fall under the rubric of merchant services, as theyâre not strictly necessary to enable your business to process credit card transactions. They can still be pretty useful, however.
Where do you go to get merchant services? Why, to a merchant services provider (MSP), of course! Again, the term âmerchant services providerâ is an umbrella term that covers any type of business offering merchant services. However, there are really two main types of merchant services providers: (1) merchant account providers, who offer true full-service merchant accounts with a unique merchant identification number for your business, and (2) payment services providers (PSPs), who offer credit card processing services, but donât provide a true merchant account. PSPs aggregate your account with that of other businesses using their services â a low-cost solution that can be very affordable for a small business thatâs just starting out.
Hereâs a brief description of the primary merchant services that your business will need to accept credit cards, debit cards, and eCheck/ACH payments:
Credit/Debit Card Processing: Of all the merchant services you might want to add to your business, credit (and debit) card processing is obviously the most important one. If a customer pays for a purchase with a credit card, youâll undoubtedly want some cold, hard cash to make its way into your bank account â and that wonât happen unless you have a service to process the transaction. As weâve noted above, you can get credit card processing through either a merchant account provider or a payment services provider (PSP). In either case, your provider will usually rely on a larger, direct processor (also called a backend processor) to approve and process transactions. While large direct processors such as First Data and Elavon offer merchant services, they arenât good choices for a small business. Popular payment services providers (PSPs) include Square (see our review) and Stripe. Traditional merchant account providers are much more numerous, with Dharma Merchant Services (see our review), National Processing (see our review), and Payment Depot (see our review) among the best choices for small and medium-sized businesses.
eCheck/ACH Processing: In addition to accepting credit and debit cards, you might also want to allow your customers to pay by check. While old-fashioned paper checks are rapidly declining in popularity, they can be accepted without the need for a check processing service. However, youâll have to take the check to the bank yourself, wait for it to clear, and hope that it doesnât bounce. eCheck and ACH (Automated Clearing House) payments bring advanced security and convenience to paying by check, allowing you to scan physical checks for processing or accept an ACH payment from a customer on your website. While some providers include these features with every merchant account, itâs more common for them to be offered as optional add-ons. In this case, youâll usually pay an additional monthly fee (typically around $20 – $30) for the service. For more information about these alternative payment methods, see our articles Everything You Need To Know About Accepting ACH Payments and The Complete eCheck Payment Guide.
Credit Card Terminals: Obviously, youâre going to need some type of physical credit card terminal to accept card-present transactions in a traditional retail setting. Options range from simple mobile card readers that require a smartphone or tablet (and the appropriate app) to function all the way up to complex point-of-sale (POS) systems that also include a variety of software features to help you run your business. While magstripe technology was the only option for many years, today EMV (i.e., chip card) is the standard acceptance method in the United States, Canada, and Europe. We also recommend that you seriously consider investing in hardware that also accepts NFC-based payment methods such as Apple Pay and Google Pay, as theyâre rapidly gaining in popularity and offer a higher degree of security than either magstripe or EMV. We also recommend that you buy your equipment outright. Terminal leases are wildly over-priced and should be avoided at all costs. Buying your hardware directly from your processor is usually the best option, but in some cases, you can save money by buying from a third party and having your equipment reprogrammed by your provider. For an overview of some great equipment options, see our article The Best Credit Card Machines And Terminals.
Point-Of-Sale (POS) Systems: As weâve mentioned above, a POS system is basically a credit card terminal with additional integrated software services built-in. Inventory management is a popular option, but there are also software add-ons for employee management and scheduling, online reporting, customer information management, and many others. While a POS system is a worthwhile investment for some businesses (such as restaurants), theyâre overkill for others. Beware of sales representatives trying to sell you a POS system if your business doesnât really need one. For more information on how to select a POS system thatâs right for your business, see our article POS 101: Choosing A POS System.
Payment Gateways: If your business has an online presence and makes sales through your website, youâre going to need a payment gateway to process those transactions. Payment gateways essentially perform the same function as physical credit card terminals, connecting your customerâs payment information with your providerâs processing network to approve the transaction and send you the money from the sale. Because not all merchants need a payment gateway, theyâre often offered as a separate feature (with an additional monthly gateway fee). However, itâs becoming increasingly common for providers to offer a gateway thatâs part of an integrated payment processing system designed to support both retail and eCommerce sales channels. For more information on what to look for in a payment gateway, see our article The Complete Guide To Online Credit Card Processing With A Payment Gateway.
Virtual Terminals: Used primarily by mail-order or telephone-order businesses, a virtual terminal is a software application that allows a laptop or desktop computer to function as a credit card terminal. Transactions can be manually keyed in or swiped/dipped with a compatible card reader (these usually connect via USB or Bluetooth). Retail merchants should be aware that, in most cases, youâll pay significantly higher processing rates if you manually enter the card data rather than using a card reader.
Integrated Payment Platforms: One common complaint we hear from merchants is that they often have to sign up with one vendor for a merchant account, another vendor for a payment gateway that has the special features they need, and possibly other vendors for things like online shopping carts or POS systems. Merchant services providers are well aware of this problem, and in recent years theyâve started to offer integrated, cloud-based processing systems that combine all these separate features into a single product. Obviously, they have a vested interest in keeping you tied to their particular ecosystem. However, there are genuine benefits to this approach for merchants as well. You wonât have to worry about compatibility problems or dealing with multiple customer service departments to keep everything humming along. Integrated systems can also (usually) save you money over signing up with multiple service providers. Finally, having all your business data accessible through the cloud is a significant advantage, even for smaller retail-only merchants who donât have a website. At the same time, youâll want to ensure that a vendorâs integrated system has all the features you need for your business before signing up.
Security & Fraud Prevention Features: Ensuring the security of your customersâ credit card data is essential for any business â retail, online, or a combination of the two. Obviously, you also want to take every step possible to minimize the chances of a fraudulent transaction. Security features such as tokenization and encryption protect your customersâ payment data and reduce the chances of experiencing a data breach. For online companies, fraud prevention features such as Address Verification Service (AVS) and card verification features such as CVV, CVV2, or CVC should be available through your provider at a minimum.
For more in-depth information on merchant services and merchant services providers, please refer to the following articles:
What Is A Merchant Services Provider?
What Is A Payment Service Provider?
What Is A Merchant Account?
High-Risk Merchant Services
Finding a good merchant services provider is challenging enough, but itâs even harder if your business is considered high-risk by the processing industry. What does it mean to be high-risk? Basically, certain business types are considered to be a riskier underwriting proposition by processors, and theyâll either refuse to give you a merchant account or put you in a high-risk account that invariably will be more limited and more expensive than what a comparable low-risk business would receive.
Besides being in an inherently high-risk business type (i.e., vape shops, online gambling, etc.), you can also find yourself in the high-risk category if you have an unusually high chargeback rate or your personal credit isnât so great. Fortunately, high-risk merchant service providers are available to serve your business. These providers usually work with a variety of banks (some of them located offshore) and direct processors to get you approved for an account. Your processing rates will be higher, and the terms of your contract wonât be so generous, but youâll have access to a stable account and youâll be able to accept credit and debit cards without any problems.
If youâre having particular difficulties in finding a high-risk account, you might want to consider an eCheck/ACH-only option. We only recommend this option for merchants who have been truly unable to get a merchant account, as youâll potentially lose sales when your customers find out that they canât use their credit cards.
For more details about high-risk industries and high-risk processing, check out our article Are You A High-Risk Merchant?.
How Do You Find Great Merchant Services?
Over the years, the question weâre most frequently asked is some variation of âWhatâs the best provider for my business?â Unfortunately, the sheer number of variables involved usually makes this question difficult to answer. As a very general rule, the best merchant services provider for your business is the one that offers the best combination of features, low processing rates, reasonable account fees, and favorable contract terms. In many cases, this might be such a close call that several providers might be able to offer you a good deal, without any single one standing out above the others.
One point we continually try to impress on merchants is that the best provider for your business is not necessarily the one with the lowest processing rates â or even the lowest costs in general. The most important thing to look for is a provider that offers the best overall value. Things like high-quality customer service are often worth paying a little extra for in the long run.
As a general rule, weâd also point out that payment services providers (PSPs) are usually a better value for small or newly-established businesses, while merchant account providers are more suited to medium-sized or larger companies that have been around for a while and have an established processing history. Signing up with a PSP is usually a good idea when youâre just starting out, but at some point, youâre going to reach a level where youâll need the stability and security of a true merchant account. It will probably cost you less money as well, as lower processing rates become more important as your monthly processing volume increases.
If youâre looking for a good merchant services provider, the resources available here at Merchant Maverick are an excellent place to start. Weâve reviewed almost all of the major players in the industry, and can give you an in-depth look at the pluses and minuses of each provider. As a starting point, we recommend that you look over our Merchant Account Comparison Chart, which compares several of the top-rated providers side-by-side.
How Much Should You Pay For Merchant Services?
No one likes to overpay for anything, and the merchant services industry makes it all too easy to pay too much without even realizing it. With complicated processing rate plans, highly-variable account fees, and surprise incidental fees that can show up on your processing statement without warning, figuring out whether youâre getting the best deal can be very difficult. If youâre new to payment processing, youâll want to evaluate pricing information and rate quotes from several providers before picking one to use for your business. This is also true if you already have a processing service and are thinking about switching to a (hopefully) less expensive provider.
Below is a quick overview of the various processing rate plans that will be the single most significant factor in determining your overall costs. Be aware that different pricing models will be more cost-effective for some businesses than others. Youâll want to have a good idea of your total monthly processing volume and your average ticket size to make valid comparisons between different providers.
Flat-Rate Pricing
The simplest pricing structure is flat-rate pricing. Despite the name, none of the providers offering this type of pricing actually use just a single rate for all transactions. However, youâll usually have only two or three rates to be concerned with, making your costs stable and predictable. Merchant services providers offering flat-rate pricing typically have a single rate for all card-present transactions, and another rate (or two) for card-not-present transactions. Often, there will be a higher rate charged for card-not-present transactions that have been manually keyed-in, rather than processed over a payment gateway.
Flat-rate pricing works best for very small businesses, mostly because you usually wonât have to pay any additional account fees. Be aware, however, that the flat rates themselves are often significantly higher than what youâd pay under an interchange-plus or subscription-based pricing plan (see below). For this reason, flat-rate pricing is usually not a good deal once your monthly processing volume exceeds a certain amount (typically around $10,000 per month).
Payment services providers (PSPs) usually offer flat-rate pricing as their only processing rate option. Popular providers offering this type of pricing include Square (see our review), Stripe, and PayPal.
Interchange-Plus Pricing
Arguably the most cost-effective pricing method for medium-sized businesses, interchange-plus pricing passes your transactionsâ interchange fees on at cost and also includes a fixed markup for your provider. For example, a typical interchange-plus rate quote might look like interchange + 0.30% + $0.15 per transaction. While the underlying interchange rates themselves can vary wildly, this pricing method is more transparent than others because youâll always know exactly how much of a cut your provider is taking.
Interchange-plus pricing is usually only available through a merchant account provider offering a full-service merchant account. Because these types of accounts also typically have a number of monthly and annual fees, they arenât the best choice for very small businesses. Depending on the provider and the particular details of your business, the threshold where youâll start to save money with interchange-plus pricing can be anywhere from $1,500 to $10,000 in monthly processing volume.
Popular providers offering interchange-plus pricing include Dharma Merchant Services and National Processing, among others. While these two companies offer interchange-plus rates exclusively, many run-of-the-mill providers offer a combination of tiered and interchange-plus pricing plans. Unless you specifically negotiate for an interchange-plus plan, youâll usually be given a tiered pricing plan. Although itâs still the most common type of pricing plan in the processing industry, we donât recommend tiered pricing under any circumstances because it makes it impossible to determine how much of a markup your provider is charging for each transaction. Itâs also the most expensive type of rate plan, in most cases.
Membership (Or Subscription) Pricing
A variation of interchange-plus pricing, membership pricing has only been available for a few years from a small number of providers. Pricing is similar to interchange-plus, except that you donât pay a percentage of each transaction as part of your processorâs markup. Thus, a typical membership pricing quote might be interchange + $0.15 per transaction. However, thatâs not all youâll pay. Membership pricing also includes a monthly membership fee that ranges from as little as $49 per month to as high as $199.00 or more per month. This fee combines all of your other account fees into a single charge, plus includes an extra amount to cover the per-transaction percentage markup that you otherwise wouldnât be paying.
Membership pricing isnât for everyone. The high monthly membership fee makes it particularly unsuitable for very small or seasonal businesses. However, high-volume businesses can save a substantial amount of money over what theyâd pay with a traditional interchange-plus pricing plan. In some cases, these savings can amount to several hundred dollars per month.
If youâre interested in seeing whether membership pricing is right for you, we highly recommend both Fattmerchant (see our review) and Payment Depot (see our review). Both of these companies provide excellent service and a full set of features to fulfill the needs of any business.
Monthly Billing VS Pay-As-You-Go
Most merchant services providers use one of two billing methods: (1) monthly billing, or (2) a pay-as-you-go billing model. With monthly billing, youâll pay a variety of separate fees for each service included with your account. These fees will be deducted once a month, at the end of your billing cycle. The processor will deduct any processing fees before sending the funds to your bank account, but if you have a statement fee, software subscription fees, etc. those will be billed at the end of the cycle. Pay-as-you-go billing, on the other hand, doesnât have monthly fees. Youâll only pay for the transactions that you actually process, and those fees are deducted before the processor deposits your funds in your bank account. If you don’t process anything in a month, you won’t pay anything — which is not true of a monthly billing plan.
If you sign up with a traditional merchant account provider, you can expect to be on a monthly billing plan, regardless of whether youâre on a long-term contract or a month-to-month arrangement. Payment services providers, on the other hand, usually use a pay-as-you-go model. This lowers costs for small businesses and also is the best option for seasonal businesses that arenât running year-round. Despite the additional fees, a monthly billing plan can actually save medium-sized or larger businesses money due to the cost savings of using an interchange-plus or membership pricing plan.
The Best Merchant Services For Small Businesses
As weâve noted above, some merchant services providers are a better fit for certain types of businesses than they are for others. Below, weâll briefly introduce our top picks for the most common types of businesses. Note that if your business falls into one of the categories described below, the provider we list wonât be the only good choice available to you. Rather, theyâre generally the best choice for most businesses that are similar to yours. If youâre interested in one of these providers, be sure to read the full review to learn more about them before deciding to sign up.
Vendor
Best For
Monthly Fee
Retail Rate
Online Rate
Contracts
Payment Depot
Mid-sized businesses ($10k-$25k/month)
$49-$199
0% + $0.15 markup*
0% + $0.15 markup
Month-to-month
Fattmerchant
High-volume businesses ($25k+/month)
$99-$199
0% + $0.15 markup*
0% + $0.15 markup
Month-to-month
Dharma Merchant Services
Non-profits
$20
0.15% + $0.07 markup*
0.20% + $0.10 markup
Month-to-month
Square
Micro-merchants & low-volume
$0.00
2.6% + $0.10 total
2.9% + $0.30 total
Month-to-month
PaymentCloud
High-risk businesses
Varies
Varies
Varies
Varies
PayPal
Online businesses
2.70%
2.9% + $0.30 total
$0.00
Month-to-month
Stripe
Tech-driven businesses
N/A
2.9% + $0.30 total
$0.00
Month-to-month
*Markup over standard interchange and assessment rate with interchange-plus pricing (our preferred pricing plan for transparency of fees).
Best For Micromerchants & Low-Volume Businesses: Square
Square (see our review) has been around since 2009, and has quickly become the leading choice for small businesses looking to accept credit cards with a minimum of fuss and paperwork. Square offers flat-rate pricing and uses a pay-as-you-go billing method that doesnât include any additional monthly account fees (unless you sign up for one of their optional services).
Square
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Squareâs most common processing rates are as follows:
2.75% for all retail and mobile (card-present) transactions
2.9% + $0.30 per transaction for all online (card-not-present) transactions
3.5% + $0.30 per transaction for all manually entered (also card-not-present) transactions
If youâre looking to minimize your up-front costs, Square offers a free mobile card reader that plugs into your smartphone or tablet. However, itâs magstripe-only. We highly recommend that you upgrade to either the $35 EMV-enabled reader or the $49 contactless + chip reader, which adds NFC compatibility and Bluetooth connectivity.
The company has expanded its services tremendously over the last ten years, and now offers far more features than we can discuss here. However, itâs still an excellent choice for merchants looking for a simple, low-cost solution. Squareâs flat-rate pricing is more expensive on a per-transaction basis than interchange-plus, but you’ll save money overall due to the lack of extra account fees. This pricing structure works best for businesses processing less than $3,000 per month, in most cases.
Best For Mid-Sized Businesses ($10K-$25K/Month): Payment Depot
For larger businesses with a stable processing history that need to upgrade to a full-service merchant account, Payment Depot (see our review) is an excellent choice. The company offers membership-based processing rates, true month-to-month billing, and a full range of products and services for retail or online businesses.
Payment Depot
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Membership fees at Payment Depot range from $49 per month up to $199 per month, depending on your monthly processing volume. This single fee covers all your merchant services, so thereâs nothing extra to have to pay. You can also receive a significant discount for paying your membership fees on an annual, rather than monthly, basis.
The companyâs processing rates start at a simple interchange + $0.15 per transaction, and go down with higher monthly processing volumes. There are four basic membership plans, which are tied to your monthly processing volume. For really large businesses, thereâs also a custom pricing option.
As long as your monthly processing volume is high enough that membership-based pricing makes sense for your business, Payment Depot is an excellent choice that will save you a significant amount of money over traditional merchant account providers. Just be aware that the company only serves US-based merchants, and they donât accept high-risk businesses.
Best For High-Volume Businesses (Over $25K/Month): Fattmerchant
Fattmerchant (see our review) also offers a membership-based pricing plan. However, their membership fees are high enough that their pricing structure only works well for an established business with a significant monthly processing volume.
Fattmerchant
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The companyâs membership fees start at $99 per month for businesses processing under $500,000 per year. Above this amount, youâll pay $199 per month. Bear in mind, however, that this one fee covers everything the company provides â unlike traditional vendors who nickel and dime you for every âextraâ service they provide. Processing rates start at interchange + $0.15 per transaction, with lower rates available for higher processing volumes.
Because of the steep monthly subscription fee, Fattmerchant isnât cost-effective for small businesses with a low monthly processing volume. However, if your volume is high enough, you can potentially save hundreds of dollars a month under this pricing structure. All accounts are billed on a month-to-month basis with no early termination fee (ETF), so you can always switch processors if things arenât working out.
Fattmerchant is an excellent choice for businesses that are large enough to benefit from the companyâs pricing structure. They offer excellent customer service and a terrific cloud-based integrated payments platform that will have you up and running in no time. However, they donât accept high-risk merchants, and theyâre only available in the United States.
Best For Online Businesses: PayPal
For a newly-established eCommerce business, you canât go wrong with PayPal. Pay-as-you-go billing means that, in most cases, youâll only pay for your transactions â and nothing else. Note, however, that the companyâs virtual terminal comes with a hefty $30 per month fee, so theyâre not such a great choice for a mail-order or telephone-order business.
PayPal
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PayPalâs flat-rate pricing structure couldnât be any simpler. Online transactions are always 2.9% + $0.30 per transaction, while manually entered and virtual terminal payments are 3.5% + $0.15 per transaction. The companyâs PayFlow Gateway comes bundled with every account, allowing you to quickly and easily integrate it with your website. There are no additional gateway fees, either.
While PayPal is a great choice for a small online business, be aware that the companyâs high processing rates will no longer be cost-effective once your business grows beyond about a $3,000 per month processing volume. At that point, you should seriously consider upgrading to a true merchant account with one of our other recommended vendors. Also, PayPal has relatively limited customer service options and doesnât serve high-risk businesses.
Best For Tech-Driven Businesses: Stripe Payments
If your business is 100% online and you donât plan to ever expand into the retail sector, Stripe Payments is a great choice for your payment processing needs. The company offers simple flat-rate pricing, pay-as-you-go billing with no monthly fees, and a host of developer tools for integrating their platform into your website.
Stripe Payments
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Pricing couldnât be more straightforward. All eCommerce credit and debit card transactions are charged 2.9% + $0.30 per transaction. International cards are also charged an additional 1.0% if currency conversion is needed. ACH payments are charged 0.8%, with a maximum charge of $5.00 per transaction.
As with any payment services provider, account approval is easy and can be accomplished online. However, the chance of later having your account shut down for any number of reasons is also higher. Stripe does a better job than most PSPs when it comes to customer service, offering live chat and telephone support on a 24/7 basis.
Overall, Stripe is a great choice for fledgling eCommerce businesses. Just be aware that your account wonât be as stable as a true merchant account, and the companyâs flat-rate pricing isnât cost-effective at higher processing volumes. Itâs also not available for high-risk merchants.
Best For Nonprofits: Dharma Merchant Services
Nonprofit businesses looking for a full-service merchant account will have a hard time finding a better choice than Dharma Merchant Services. One of our favorite processors, the company seems to be run like a nonprofit itself sometimes. Of course, itâs actually a public benefit corporation (B-corp), something thatâs almost unheard of in the processing industry.
Dharma Merchant Services
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Whether youâre a nonprofit or not, Dharma offers full-service merchant accounts that are billed on a month-to-month basis to all its users. There are no long-term contracts and no early termination fees (although you will have to pay a one-time account closure fee of $25 if you close your account). For nonprofits, the company offers special interchange-plus processing rates of interchange + 0.15% + $0.07 per transaction for retail transactions and interchange + 0.20% + $0.10 per transaction for eCommerce transactions.
Dharma offers a full range of products and services, including the popular Clover lineup of terminals and point-of-sale (POS) systems. The company also provides some of the best customer support in the industry. However, be aware that their pricing structure works best for merchants processing over $10,000 per month, and they donât support international or high-risk businesses.
Best For High-Risk Businesses: PaymentCloud
If youâve read this far, youâve probably noticed by now that most of our top choices for merchant services donât support high-risk businesses. Fortunately, if youâre in the high-risk category, there are high-quality vendors out there that specialize in serving the high-risk community and provide excellent services at a reasonable cost. PaymentCloud is one of our favorites due to their reputation for top-notch customer service and because they offer many features that are typically reserved for low-risk merchants only.
PaymentCloud
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Unlike many of our other top providers, PaymentCloud doesnât disclose their processing rates or account fees on their website. Because they work with a wide variety of banks and direct processors to get you an account, pricing is highly variable and subject to negotiation. While they have a reputation for fair pricing, you can expect to pay more than what a comparable low-risk business would pay. However, this is true with any high-risk merchant account provider.
The company offers a free credit card terminal with each account, which you can use for as long as you keep your account open. They also donât charge an account setup fee, which also helps to set them apart from most traditional high-risk providers. Finally, PaymentCloud is one of the few providers to offer support to the burgeoning CBD oil industry. However, they only allow CBD products that are applied externally â no food items or other ingestibles. If youâve had a hard time finding a merchant account for your high-risk business, be sure to check them out!
If youâre looking for additional options beyond the providers weâve profiled above, check out the following articles for more great choices:
The 5 Best Small Business Credit Card Processing Companies
The Cheapest Credit Card Processing Companies For 2019
How To Accept Credit Card Payments For Your Small Business
The Final Word On Merchant Services
Merchant services can be a complicated subject, and finding a merchant services provider thatâs a good fit for your business is often a real challenge. Youâll want to carefully evaluate the unique needs of your business, and factor in how much you can afford to pay to add the capability to accept credit and debit cards. In most cases, the added expense will more than pay for itself in additional sales.
All of the vendors weâve profiled above are excellent choices in their particular niche. However, they arenât the only good choices out there. So, we encourage you to look over the articles weâve linked to, and carefully read the full reviews of any vendor youâre considering. Most of the best merchant services providers for small businesses offer a very transparent disclosure of their processing rates and account fees on their websites, so check those out as well.
If youâre still having trouble deciding which company is best for you, youâll want to actually âcrunch the numbersâ and make a more informed analysis of what your potential costs will be. An excellent resource for doing this is our Cost Analysis Workbook, which will walk you through the steps necessary to estimate your overall costs with various providers. The workbook also includes spreadsheets to do the math for you â it couldnât be easier!
The post Everything You Need To Know About Merchant Services appeared first on Merchant Maverick.
