As a small business owner trying out an alternative business funding method for the first time, you want to know exactly how a credit card sales advance works before taking advantage of the opportunity.
A lot can be learned about the credit card sales advance, simply by graphing out key numbers. Take a look at the chart below which looks at Natalie’s business after she received a credit card sales advance at the beginning of the year for her spa, with a repayment amount of $30,000, and a 20% holdback percentage.
By graphing the business’s monthly credit card sales, monthly advance payments and the amount of the credit card sales advance remaining to be paid each month, we can see how the monthly payments adjust according to the amount of credit card sales processed in a given month. We also see that the remaining balance steadily decreases each month and that Natalie’s credit card advance was repaid in full in six months, as it typically takes 6 to 8 months for an advance to be repaid.
The chart also shows that during the month of May, Natalie only had $12,000 left to pay on her advance. At this point, she’d repaid 60% of her credit card sales advance and became automatically eligible for a renewal.
*Holdback Percentage - The percentage of each credit card sale that is deducted to repay a business cash advance.
