A "we take credit/debit cards" sign at a market sales stand.

Last month I had the pleasure of traveling to Las Vegas to attend a seminar offered by Earn.Com. The purpose of this trip was to learn first hand from this group how small firms should address the lack of credit options in the financial market place.

The seminar offered clear indications that the entrepreneurial spirit is alive even as it is being severely tested in the current economic downturn. Indeed, not all of the firms there were facing tough financial times — some are even thriving in certain niches.

Yet even firms enjoying strong results agreed that having the correct credit strategy is essential for the long-term health of a business. Many of the presenters repeated that the best time to build a credit strategy is when you are not in need of immediate financing. Yes, you read correctly — you look for options when you don’t need them. This is so that you are in the best position to secure favorable terms.

A good credit strategy can lead to strong cash flow. That should create the possibility for you to hold or use your cash for as long as possible while collecting on your accounts receivable as quickly as possible. This can give you the ability to purchase equipment, supplies and other materials necessary to produce your product out of cash flow. Ideally, you want to produce your product, get it to your customers and have them pay you before you have to pay for the materials required to produce the product.

Part of any cash-flow analysis includes a look at how your company receives payments, and I spoke with Michelle McBride at PayBizness.com about the value of having a merchant account to handle credit-card payments as part of a cash-flow strategy.

What motivated you to launch PayBizness.com?

I saw a huge need in the marketplace to assist and educate small businesses on how to grow their sales volume and revenue base by accepting credit card transactions from their customers. Research has shown that a business can boost their sales volume by an average of 30% or more when accepting credit cards from their customers. I launched Pay Bizness in 2008 to provide cost-effective credit card and check processing solutions to small business owners. Our merchant account fees are very affordable and we can save business owners an average of 40% in merchant fees that switch from their existing merchant account provider to Pay Bizness. We offer merchant accounts to businesses of all types (retail, wholesale, e-commerce or mobile), whether you are a newly established business, in operation for some time, and regardless of your past credit history. Our motto is that “we don’t quit until we fit your business with a merchant account”!

What are the benefits gained for entrepreneurs by establishing a merchant account?

A merchant account gives a business owner a “mark of credibility and legitimacy” in the marketplace. Accepting credit cards at your business is one of the “basic” services that all businesses should provide to customers because it offers the customer flexibility and convenience in paying for their purchases. As we become more of a “cashless society,” the dependence on credit and debit cards will become a staple for most businesses that want to boost their revenue and profit.

How does the merchant account process work?

The merchant account is a bank checking account that is setup to enable the business to accept the funds (monies) associated with credit card transactions. The funds are transferred from the customer’s account to the business owner’s account within 2 business days of the customer sale. Merchant accounts are setup to process MasterCard, Visa, Discover and American Express transactions. In addition to the merchant checking account, the business will also receive a monthly paper or electronic statement which will detail the monthly credit/debit card transactions and the associated processing fees.

What are some of the issues firms face with establishing a merchant account?

Personal credit scores (FICO) are considered by the bank when opening up a merchant account for a business, regardless if the business has a Tax ID# and is a legal entity such as a Corporation or LLC. Most banks are looking for FICO scores that are higher than 500 to be considered for a merchant account. There are some exceptions to this standard, and business owners that fall below this threshold can still apply for merchant accounts through a select list of “high risk” banks.

What trends are you seeing among small firms as in terms of risks, and/or maintaining a merchant account?

One of the trends that we are seeing is that some business owners don’t recognize the importance of setting up a merchant account and only accept cash or checks from their customers. The problem that we’re seeing with “cash only”-based businesses is that they lose the ability to grow their sales base because customers don’t always have the available cash to pay for purchases and the business often has a “weak” accounting process to track their cash sales. With a merchant account, there is more structure to the revenue that is earned because of the tracking-and-reporting nature of the merchant account. Another trend we see is that some business owners try to process their sales through another business owner’s merchant account. This is illegal and can result in the owner of the merchant account to lose their merchant account.

What is the profile of your primary consumers in terms of key industries, years in business, geography, etc?

Our customers fall into the following key industries: retail stores, online stores (e-commerce) and mobile businesses such as personal coaches, cabs and limos, clothing and jewelry sellers, authors and caterers.

Remember, if you have specific questions regarding raising capital, equity and debt financing, or other business management issues, please send me an email.

To your prosperity!

Stephanie.Ardrey@caribpress.com

Photo from Wikimedia Commons.