Monday, April 20 2020
Have you been considering selling merchant cash advances as part of your merchant services business? For the uninitiated, a merchant cash advance is basically when the credit card processor buys the future credit card sales, giving the merchant a lump sum of liquid cash upfront. This sort of deal can be arranged much faster than a loan from a bank, and approval rates are much higher as well. If you sell merchant services, it's a good idea to make cash advances a part of your offerings.
Cash advances can be very lucrative for your business. Not only are they a fairly easy sell for the kind of merchant who needs money fast, but selling merchant cash advances can result in handsome commissions from the processor. In addition, depending on what program you choose, you can also often provide some of the funding yourself with your own money, which will net you even more revenue. If you're looking for a good added value product to increase revenue, this is a very flexible service that you can sell to the right merchants.
Why would a merchant even need a cash advance in the first place? - Well, there can be many different reasons. They might want the money for growth reasons, for example if they have a great opportunity to upgrade their equipment, but they don't have the liquid cash to do it. Perhaps they are unable to get a normal line of credit for whatever reason and they need to buy inventory in bulk in order to keep costs down. Often, however, you will find that, just as with the more common paycheck cash advances that consumers use, the merchant probably needs the money to cover some unexpected expense or an emergency situation. This is perfectly fine, so long as the merchant is consistently bringing in revenue regardless.
How much the merchant can get depends largely on how much revenue they are bringing in via credit card transactions. Ordinarily, the processor will allow them a loan of between roughly 80% and 120% of their monthly credit card sales.
What do you need to sell a merchant cash advance? - Selling merchant cash advances doesn't have to be hard, but there are a few key things that you will need. First of all, your processor will have to have a cash advance program, ideally one with the possibility of syndication (which is when you are able to also invest your own money). Next, you will need a merchant that is bringing in at least $5,000 or so in credit card revenue every month. The processor also won't consider the business unless it has been running at the very least for 12 months and has a record of processing credit cards for at least 6.
How do you find merchants that need cash advances in the first place? - Of course, not all of the merchants that fit the description above will actually need a cash advance. Really, it is a very all-or-nothing issue with not a lot of space in between: a business either needs cash quickly, or it doesn't. Because of the high interest rate, most business owners wouldn't even consider a cash advance of this kind unless they were hurting for a large lump sum of money.
The best way to find these kinds of merchants is to simply ask the ones that you're already working with. Let them know that you offer these kinds of short term loans, and that you can have the money to them within days, instead of weeks or months like the banks. Network with as many merchants as you can, even those with whom you currently don't work with, and make sure that people are aware that you can bring them the liquid cash that they need as quickly as possible.
How do you present the cash advance to clients? - Selling merchant cash advances is like any other kind of selling in that the presentation is important. Be mindful not to insult your client. The best way to bring up the issue of cash advances is probably when you are consulting with a merchant in order to sell them some other service.
For example, if you are working with a merchant to sell them on a new contract with your processor, mention that you offer merchant cash advances as well. You will find that most of the merchants aren't interested, and this is expected.
Do not push it because the fact of the matter is that most merchants genuinely have no use for this kind of loan, and are understandably wary because they are expensive. However, if the merchant's ears seem to perk up a the prospect of a quick loan, this probably means that he does indeed need some money. Tell him that you can help his business grow and emphasize the ease of this kind of deal. Mention as well that you will be able to help him through the process in person, and that you can take care of much of the paperwork. Make it as easy as possible for the merchant, and try to get them the best deal if you can.
What can you expect to make when you're selling merchant cash advances? - How much you make really depends on a number of factors and also on how much of your own money you're willing to put in. In terms of commissions, this varies a lot between processors as well, and every one of them is different, so make sure to ask ahead of time before you sign up for a program. Typically, though, the higher the factor, the higher the percentage of your commission will be. Also, if the cash advance is for a very short-term period—say, 3 months—your commission will also be higher because the processor is taking less of a risk.
Does selling merchant cash advances sound like something you would like to try? It all comes down to finding the right merchants in need and partnering with a worthwhile merchant services company.
10 Things Your ISO Partner Should Provide
Merchant services such as POS systems and credit card processing are an invaluable part of any retail business, and as such the job of a merchant service company is critical. The role that the merchant sales agents of these companies play is just as important, as they are the intermediaries that make all of these deals work. If you are a merchant services agent, you are going to need a partner company that is on your side, or else you are not setting yourself up for success, and you are bound to disappoint your customers as well.
As a merchant services sales rep, you're running a business, so it's actually your responsibility to make sure that you have everything that you need to get the job done. Part of that responsibility encompasses choosing a merchant services company that you would be proud to be partners with. In business, relationships are everything, and you need to choose the kind of relationship that will benefit all parties involved, or else it won't be sustainable. Because of this, it is important to “shop around” and make sure that you have carefully examined the terms that you will be working with.
Not all companies will be worth it because they may be trying to get you to push a shoddy product or to try to sell way above market price, so you must choose carefully. There are a few key things that you should keep an eye out for that will indicate a promising choice, and ideally the company that you choose as your partner should exhibit all of these traits and provide you with all of these resources. Let's take a look at them closely to get a better idea of what your business will require:
1) A Win-Win Partnership
Of course, a business (even yours) will always act in its own self-interest, so agreements will often be skewed at least slightly in the favor of the merchant service company that you're working with. The point is to carefully review the terms and make sure that they are at least fair before you go ahead and sign up. It may seem like overkill, but you might even want to hire a specialized lawyer to look over the paperwork if you feel like you might miss something or if you're not totally sure what you're getting into. At any rate, make sure you have an exact idea of what the terms are before you get started or it may come back to haunt you later. As “the little guy,” you have a lot more to lose when things go wrong.
Here are a few things you're going to want to keep in mind when you're looking over your agreement:
- You shouldn't be liable for your merchant's losses or chargebacks.
Make sure that this is stated plainly in black and white. You shouldn't have to bear any of the risk of the merchants and should be held blameless in the event of losses. You also shouldn't have to pay for any chargebacks that the merchant experiences.
- Your revenue sharing model should be balanced.
This is especially true when it comes to your residuals. Make sure that you have a fair amount coming to you for every sale. You do all of the heavy lifting to get the lead, so you deserve a cut of the profits for as long as that customer pays.
- Don't let them force you into exclusivity.
Don't allow yourself to be seduced by a single company because you never know how things are going to turn out, especially if you're new to the business. Relationships can fall apart, or you might notice better deals with new companies as you work. Never paint yourself into a corner and sign any kind of exclusivity agreement.
- Make sure that you get what you're entitled to, even after a contract ends.
Part of what makes merchant services so lucrative is that you will have access to residual income streams even long after your initial sale. As the sales agent who established that lead, you are entitled to the residuals from the merchants that you have sold to. It doesn't matter if your contract with the merchant services company expires or is severed in some other way, you must be able to still receive that income for the life of the merchant's account. More importantly, you should be able to sell these residual streams as well, or secure loans against them.
- Make sure that you can move your merchants to another processor in the event that you are not paid.
Normally, payment processors aren't going to want you to take the leads you gave them and then switch them to another processor, but you may have to do this to protect your asset. This may take some negotiation, but you're going to want to establish that if the merchant services company fails to pay you your residuals from a given merchant, that you can switch the merchant to another service provider.
This is not a completely exhaustive list, which is why you will want to check with a lawyer if you can. Speaking of lawyers, make sure that your contract specifies that you can recover attorney's fees in the even of a lawsuit.
2) A Price Model That Works
Selling merchant services is a line of work with a huge potential for both active and passive income. As you might expect, this means that you're certainly not the only merchant services agent out there and that you have tons of competition. Though it is always best to not attempt to compete on price, and to focus on value creation for your customer, you won't get very far if your prices are too high.
Try to negotiate to get the best deal with the payment processor or else you are going to have a hard time selling your wares. The fees for your merchant can really add up, so make sure that you are passing on the savings. In the long run, the better deal your clients get, the better your residuals are likely to be. Remember that you are helping your merchants to stay in business.
Perform your due diligence and make all the calculations before you determine if a deal is worth it or not.
3) Multiple Payment Processors
Your merchant service partner ideally should allow your merchant to use many different payment processing services. The more options, the better, because there's nothing worse than losing a
potential lead simply because they want to use their current processor. Whatever POS system that you are selling, it should be flexible and allow for many different processors and payment methods.
4) Good Customer Service
Customers are the heart of your business, and without them, you can't hope to thrive. Ideally, since so much of your business is based on residuals, you want to acquire customers that you can serve over the long-term. One of the things that will absolutely kill customer retention is bad technical support and customer service. You may be doing the best you can to solve your client's problems, but if the merchant services company can't hold up their end of the bargain when it comes to customer support, it is like you have wasted all of your efforts.
Makes sure to ask lots of questions before you sign a contract and do plenty of research about the company, because you are ultimately putting your valuable merchant connections into their hands. Take a few of these factors into consideration:
- The size of their customer support department.
What kind of investment, in terms of labor, do they make in the realm of customer support? If you or your clients call to fix some technical issues, how long will you have to wait before you can talk to a human being?
- The quality of the customer support.
Are the people on the other end of the line well-trained? Do they actually successful solve your clients' problems in a timely manner, or do they seem under-trained and clueless? Do novel problems that don't follow their script make them confused?
- The hours of their customer support lines.
Do their customer support call centers have decent hours? Ideally, they would be available around the clock, though this isn't always realistic, of course. Another thing you will want to consider is what happens if a client calls and it is after-hours.
- Whether they do out-calls.
Is the merchant service company willing to send tech support technicians out to your merchant's location? Many times, this can actually be faster and easier for your merchant than their having sit there on the line with a remote technician, especially if the problem is hardware-related.
- What is the training like?
What kind of help does the merchant service provider give to your client to get them up and running? Do they offer training material? Do representatives from the company go on-site to show them?
- Are you informed about customer service issues or kept in the dark?
At the very least, you should get a call or some form of notification when your merchant is having technical trouble. Even better, it would be great if they provide you with a way to remotely access all of your client's trouble tickets.
Remember all of these factors when you are choosing a good partner company. It can mean a lot when it comes to customer retention. The thing is, it may be hard to determine some of these things—like, for example, the exact quality of their customer service team—until you are actively working with them. This is why it is so important to never sign an exclusivity deal with any one company when you are first starting out, as there are always going to be a few unknowns that you can't quite fathom until you're out there helping your merchants to succeed.
5) Upsells That Actually Provide Value
A large percentage of the income that you will be making will come in the form of upells because it's simply easier to sell to an existing customer than it is to sell to a potential one. This is a classic example of the “foot in the door” technique, and you will find that you will be using it a lot.
Upselling can be a great source of income for you, but what about your customer? These are going to be long-term relationships for you, so you don't want to rip your clients off by selling them useless services that they don't need. This is why you want your partner to offer genuinely high-quality products that you can upsell to your clients. For example, if you sold a POS system to a merchant, and you learn from your regular communications with him that he is in need of liquid cash, you might be able to make a decent profit if your merchant services partner also allows you to sell short-term merchant loans.
6) Free Credit Card Terminals
Sometimes clients aren't going to want to pay for hardware upfront, especially if they are going to be paying a substantial monthly fee. A similar evolution has happened in other subscription-based electronics industries, such as the cell phone industry, where the customer receives the hardware for free or at a huge discount, but pays a service fee for its use. Nowadays, the POS industry is leaning in this direction, so don't be surprised if your clients don't expect to pay anything upfront.
In order to cater to this demand, make sure that your merchant services company offers a free terminal deal, even if they have other options that require paying for hardware. As time goes on, you may find that there will be more and more of an expectation in the market for free credit card terminals, so be prepared. If the merchant services offer all-inclusive package deals that will get the client started for absolutely no upfront cost, that is even better. If your potential client basically has nothing to lose, then the sale is much more likely to happen. A lot of the time, paying upfront for a equipment isn;t really worth it unless there is some major advantage to it, such as greater flexibility and not having to be tied to a specific merchant service provider.
7) Decent Analytics
In our age of technological progress, there's really no excuse for a merchant service to not provide you with analytics on the back-end. This will allow you to manage your business and examine where the money is coming and going. You might have access to a few different kinds of information, including your merchant's sales activity, their history of tech support calls, and maybe even information about your own residuals or the activities of agents who are working under you.
When it comes to any business at all, you can perform the trial and error that you need to perfect your sales strategy much better once you have access to a decent level of analytics. Ask about this before you decide on a merchant service company. Even if you don't plan to make heavy use of these tools (though you should) it at least shows that your partner is technologically advanced and that
they are ready to meet the challenges of the future head-on.
8) Good Training Material
There's no point in your client even purchasing a POS if he isn't going to know how to use it. Examine your merchant service provider's training and information material. You want to do this before you get started selling because 1) you need to familiarize yourself with how the system works if you are going to sell it anyway and 2) you need to decide if the information material is actually decent.
A good service provider will offer more than manuals, too. You want online resources, and some sort of payment processing sales training program, especially one that involves merchant services representatives from the company coming out to the field and showing your client exactly what they need to do. As with providing good customer service, a decent training program of some kind is critical. If your client feels that the system is too difficult or cryptic to use, he is bound to drop you sooner or later, and that is a stream of residuals that you will lose out on.
It just makes good business sense to make sure that your client is on board and that there are no problems from the beginning. Play the long-term game by making sure your merchant has everything that he needs.
Though, as mentioned before, you will probably find that more and more of your clients will expect a free credit card terminal, since the industry is trending in this direction, some clients will still want to lease equipment for various reasons. Perhaps they are interested in something more high-end, for example. Maybe they want a credit card terminal that is not tied to a specific merchant service, so that they have the flexibility to switch if they feel the need, but this means that they must buy the hardware themselves.
Even when a client wants to pay for the equipment, though, he might not have to pay upfront. Having a fair leasing plan means that the client can afford the terminal even if he doesn't have as much capital to spend upfront. This kind of flexibility is key in accommodating all kinds of merchants, and you want to look for a merchant service provider that offers this kind of option just in case.
As with any other kind of sale, you should receive a percentage of the monthly payments that your merchant makes on the equipment. Make sure that this is part of the agreement before you sign up.
10) Help Analyzing Statements
Reading merchant statements and coming up with just the right pricing for your client can be complicated. This can be a headache even for people who have been working as sales agents for awhile, so you can imagine how confusing analyzing all of this unfamiliar financial information can be for someone who is totally new to the business. Make sure that your merchant service company is willing to help you on this front, and that they will provide you with merchant statement analysis services if you should find that you need them.
Getting into merchant service sales is a great choice if you're looking for a challenging and rewarding career where you can legitimately help customers while making a decent income for yourself. There are few lines of work that allow this level of residual income and revenue sharing, and there are many directions that you can take in this business.
The first factor that you should keep in mind, though, since it affects so many other things, is
your choice of partner company in this endeavor. They should be willing to give you a fair cut of the deals, should be willing to negotiate with you on the details, and they should provide good customer service to your merchants that will allow you to retain them as customers for a long time to come. The key here is to find a company with which you can forge a long-term relationship that works for both of you.
Not all merchant service providers are created equal. First and foremost, you will want one with integrity—this is the trait that really encompasses all of the others. A company without integrity is not one that you will be able to work with in the long-term because you will never be able to create trust. Make sure to perform your due diligence an research the reputation of every merchant service that you're considering working with, but a good place to start might be with North American BanCard. We are a solid company to work with and have a great reputation of helping our sales agents every step of the way. Of course, you don't have to take our word for it—always ask for recommendations and look at reviews before you make that first critical partnership decision.