Credit card processing loans, also known as PDQ loans or merchant cash advances, are a quick and simple alternative to a conventional bank loan. They secure the lending using your business’ card terminal, taking repayments as a percentage of every transaction processed through the ‘Process Data Quickly’ (PDQ) machine. Loans of this type are ideal for businesses that operate on a seasonal basis, as repayments are minimal on low turnover months and larger when your turnover increases. With a huge number of businesses now regularly taking card payments, this is fast becoming a superb way for businesses to obtain finance quickly and easily.
- Credit card processing loans defined
- A snapshot of credit card processing loans
- How much do credit card processing loans cost?
- How do you qualify for a credit card processing loan?
- Reasons to get a credit card processing loan
- Understanding merchant card terminals
- Final note on credit card processing loans
Credit card processing loans defined
A credit card processing loan is provided to small businesses by a finance company based on the revenue generated by credit card processing on a monthly basis. It is typically a short-term finance option, and can be used to fund emergency fixes or new initiatives and paid off in a seamless, affordable way.
A snapshot of credit card processing loans
Here is a brief outline of how a credit card processing loan works, and what sets it apart from more conventional loans offered by finance providers:
- They do not rely solely on your credit rating – a credit check will be performed, but this will not make or break an application.
- The amount you are granted is based on your monthly credit card sales, which provide the means to predict the amount you will be able to pay off over the payback period.
- You can be approved and receive funding in less than 24 hours in some cases.
- The actual fees, which come in the form of a factor rate, are generally higher than the APR associated with a conventional business loan.
- They typically have a short payback period – usually six to 18 months.
Who offers credit card processing loans or PDQ loans?
These types of loans are offered by a growing number of financial providers. However, many of the companies offering them involve intermediaries who take commission from every payment in the process. Capify is a direct lender offering this type of loan, so you know exactly who you are dealing with at all times.
How much do credit card processing loans cost?
At Capify, we can lend an amount that totals up to 150% of what a merchant processes each month. So if you process £20,000 in a month, we could lend you anything up to £30,000. Instead of being offered with an interest rate like in conventional loans, a credit card processing loan uses a factor rate, typically of 1.2 to 1.5. This means that if you borrow £10,000, you will repay £12,000 to £15,000 over the course of the repayment schedule. With interest, you can save money by paying off the loan more quickly, but this isn’t the case with factor rates. Over the course of the repayment schedule, you will have a monthly payment percentage from your revenue (usually between 10 and 20%).
This type of loan ensures businesses can access the finance they need, even when conventional lenders turn them down. Businesses accessing finance fuels the growth of the nation’s economy, and we aim to promote this as best we can.
How do you qualify for a credit card processing loan?
The basic eligibility criteria at Capify are quite simple. You need to:
- Run a UK-based business
- Take monthly card payments totalling at least £5,000
- Have trading records dating back at least six months
Reasons to get a credit card processing loan
There are many reasons why you may want to obtain this type of loan. It is a great option for businesses that can’t obtain financing through conventional means due to poor credit. And the capital you receive could be used for many business expenses, including:
- Refurbishment and renovation of premises
- Investment in new business technology
- Providing training and education for staff
- Enhancing your marketing and advertising efforts
For more information on eligibility criteria and more reasons to get a credit card processing loan, take a look at this page.
Understanding merchant card terminals
There are various merchant card terminals available, each with their own unique features. You can access detailed information about the options here, but here’s a quick rundown of the main types of terminal and who they’re best suited to:
- Countertop chip and PIN machines: supplied to process and authorise transactions quickly from the counter, including contactless payments. There are different designs suited to different work environments.
- Mobile machines: a brilliant option for merchants on the move or in hospitality environments, these devices can handle swift transactions all around the room at your premises.
- Portable machines: when you need to travel from one place to another, these Bluetooth-based devices can connect to smartphones and tablets to access the mobile internet and process transactions on the move.
Final note on credit card processing loans
Before you make a decision on whether a credit card processing loan is the right option for your business, make sure you’ve learnt all the facts and know exactly what sort of agreement you are entering into. There are lots of options out there, and comparing them takes research and a little calculation. These loans can be a superb solution for some businesses when they make the right choices, but if you enter into an agreement that costs your business too much money you could find yourself having some serious regrets. Contact our friendly team at Capify to find out more about what would be the right choice for your business.
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