Loan against credit card receivables: Purpose and Benefits

Point of Sale’ or POS terminal can also help you get a business loan? So, that gives you another reason to make the transition to POS systems from old cash-registers. POS credit is an innovative financing method for merchants who accept payments via credit card terminals.  Loan against credit card receivables financing option is a quick method to get working capital for a short term.

What is Loan against Credit card receivables?

Loan against credit card receivables is a great financing option as this is an unsecured kind of loan, therefore doesn’t require any collateral. Businesses with a low credit score/ CIBIL Score can also go for a loan application. Such loans are still unconventional but the ease of access makes them highly favorable for people looking for quick financial help. Business owners looking for credit on immediate basis can opt for a loan against credit card sales.

Purpose of Loans against Credit Cards Receivables

  • An opportunity for small enterprise owners to build company credit history and increase the probability of getting a traditional loan or line of credit in the future.
  • Credit cards for small business owners widen the opportunities to build company credit history and escalate the probability to secure a traditional line of credit. Business owners resort to personal credit cards and overlook the benefits that credit cards for small businesses may bring to them.
  • They are quick and easy! The lenders will only look at a few things such as your business’s daily credit card receipt record to determine if you are the right candidate.
  • A business with a below average credit score or without much collateral can consider opting for loans against credit card sales to fulfill its funding needs. Still wondering how? Ask Finbucket to arrange those funds for you!

Benefits of Loan against credit card receivables

  • Control on Employee Spending

With a Business Credit Card, it becomes possible for an employer to set limits on spending for its employees.

  • Enhancement of Credit Rating

A business’ credit rating gets enhanced if the card is not misused and payments are made on time. So, To do business with suppliers who regularly report transactions to credit bureaus is important.

  • Extension of Credit Limits

Credit Cards for small businesses typically have some limited credit limit that and thus opens the scope for entrepreneurs to make major business purchases that otherwise may not be possible with a personal credit card or cash.

  • Uniqueness of Business Credit Cards

Personal credit rating never gets reflected in transactions with a Business Credit Card and it stands out on its own. So, now with the credit card in hand, there is no need to analyze business and personal transactions when the time comes to pay taxes.

  • Helps in Bookkeeping

Making payments for all business purchases and meeting related expenses with a single credit card, paves the way for better ‘bookkeeping’ of the company. It simply refer to their card statements on a monthly, quarterly or yearly basis and know their expenses at a glance. Each month Payment for all purchases can be made, thus facilitating ease of managing a business checking account.

  • Allows Issuance of Additional Cards

Entrepreneurs to find additional cards in the names of key employees who possess a Business Credit Card. It saves time of the company as these types of cards can be used to make purchases whenever the management approves.

How Loans Against Credit Card Swipes Work?

A loan against card swipes can be granted to a merchant based on the number of card swipes into his bank account through the POS terminal. The loan amount varies from bank to bank and may range between Rs. 50 lakh to Rs. 3 crore. However, it is primarily dependent on the repayment capability of the business as well as the number of card swipes.

Different banks have different eligibility criteria. Some of them require 3 years in business while some of them only ask for 6 months of establishment. Sole proprietorship, partnership and private limited companies are eligible for this kind of credit. The interest rates differ from bank to bank but will usually be based on a financial assessment, business profile, loan amount, past record and tenure.

 

By | 2018-01-09T12:40:15+00:00 November 15th, 2017|Credit Card|0 Comments

About the Author:

Pulkit Jain is the founder of LegalRaasta – India's top portal for registration, trademark, return filing and loans. Pulkit is a veteran CA with over 10+ of experience.

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