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Accepting Bitcoin at Your Business: Pros, Cons and How to Get Started

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The allure of overnight riches can outshine the fact that Bitcoin was first used in an everyday transaction — to buy a pizza. Today, even the tastiest slice won’t come close to the 10,000 Bitcoins that order cost in 2010 — an amount now worth more than half a billion dollars.

Accepting cryptocurrency at a business has become easier and more widespread in the decade since. But it’s still more complicated than simply acquiring it as an individual. The checklist to get started includes finding a payments partner (probably), working through integration questions and thinking about your cash-conversion strategy.

Who accepts Bitcoin and crypto?

The first high-profile businesses to accept crypto payments reflected its inception in the world of tech: Companies like Microsoft and PayPal have been accepting it to some extent for years. Shopping website Overstock took adoption a step further, funding new blockchain projects in addition to allowing customers to buy a new side table, a juicer or whatever else using Bitcoin. In recent years, less techy companies have started coming online: Whole Foods, Home Depot and the NBA, to name a few.

Global companies like these can make headlines if they start accepting crypto, but thousands of small businesses dotted across the world also take payments, capturing some of the more than $1 billion worth of daily transactions in Bitcoin alone.

Why accept Bitcoin or crypto payments

Quicker, cheaper payments can be an attractive proposition for existing businesses. Crypto payments also might unlock new business models, similar to how the rise of card payments enabled the growth of online shopping.

“What we see in this space historically is that once you bring the cost of access down, you might see some new and interesting businesses you haven’t seen before,” says Roy Zhang, group product manager at Coinbase, a crypto exchange platform.

What to consider before accepting Bitcoin and crypto

Go it alone or with a payments tool?

Peer-to-peer transactions are an integral part of cryptocurrencies. In other words, you don’t need a third-party processor. This is the cheapest route to go — Bitcoin, for example, is free to receive and can be free to send.

However, building a payment workflow is a time-consuming job that demands technological expertise. Third-party payment tools address this need by giving businesses a way to quickly start accepting crypto payments. You’ll likely need to submit information about your business in an application, and more information might be needed if you plan to convert crypto to cash through the service provider.

These services are not payment processor replacements, as they do not process card payments. If you want to accept card payments and cryptocurrency, you’ll need both.

Which cryptocurrencies will you accept?

There are thousands of cryptocurrencies, but not every one is accepted on every service. The most popular, Bitcoin, is generally supported everywhere. But if you’re interested in accepting Mooncoin or Alice, for example, you might need to search harder.

What are the tax and accounting issues?

It’s a good idea to talk to your accountant or bookkeeper if you are thinking about accepting crypto.

  • First, you should be aware of the tax implications, especially if you plan on holding on to any crypto you receive.

  • Second, think through how information from your point-of-sale system gets to your accountant. For example, if you rely on a cloud-based system like QuickBooks or Xero, you’ll want to know if your crypto payments tool integrates with it.

Converting to cash — if, when and how?

This can have huge implications on your business, as big price swings mean the value of your crypto could rise — or fall — in a short amount of time. Will you hold on to whatever crypto you receive indefinitely? Will you convert to cash immediately? Will you convert it on a scheduled basis?

If you rely on consistent cash flow for your operations, these questions are all the more important. And once you have a plan, make sure your preferred crypto payments service can actually implement it.

Other operational questions

The services provided by crypto payments companies can help smooth out implementation issues, like monitoring price volatility and setting up a modern user interface. However, a company will have operational questions to figure out.

When accepting crypto, there’s no direct cost to you, says Don Apgar, director of the merchant services advisory service at Mercator Advisory Group, a payments industry firm. “But you have incurred a cost: to reformat a report; to train customer service; what happens if someone wants to return; what about disputes?” And time is a limited resource. “Everything you do means something else waits,” he adds.

Operational questions you might want to think through include:

  • What training will staff need?

  • Will you be prepared to answer customer questions?

  • Are there elements of customer service — like issuing refunds — that need to be rethought?

  • How will your crypto payments tool work with your current inventory or reporting practices?

At a glance: accepting Bitcoin vs. credit cards

Cryptocurrency is fundamentally different from credit cards. However, they share similarities that are important to businesses. Specifically, they both provide a way for customers to pay electronically, which is convenient for in-person transactions and a necessity for online sales.

A side-by-side comparison illustrates where key differences lie.

Credit card

Payments not required to run through a payment tool.

Payments must run through a payment processor.

0% if done directly with customer. Can be 1% or so using a payment tool.

Standard flat rate is 2.9% plus 30 cents per transaction, but varies by processor.

Safety and security

Little to no responsibility for compliance or fraud.

Responsibility for compliance and (via fees) for fraud.

Resolving customer issues

No legal protections or chargebacks to manage, but you’ll likely need to make clear your own policies.

Decisions often in the hands of card networks, and they often favor the customer.

Settlement

Flexible and fast, but also can be volatile.

Slower, but likely more stable.

Regulatory oversight

Not much now, for better or worse, but stay tuned.

Stable and uniform, and comes with lots of compliance effort.

Convenience

Transactions are comparatively fast, but there are some learning curves.

Transactions are quick and how-to is well known, but underlying processes can be hairier.

How to start accepting Bitcoin and crypto payments

A typical peer-to-peer crypto transaction might look like:

  1. A customer choosing to pay with crypto is presented with a QR code.

  2. That QR code tells the customer’s crypto wallet or app where to send the crypto, a destination known as an address. This is similar to an email address, however it’s typically generated and used just once.

  3. To verify the transaction is legitimate, the customer enters their password, called a private key.

  4. Before the transaction is complete, it must be verified and added to the public ledger, a process completed by users around the world running special computer programs. This process can take time — about 10 minutes for Bitcoin.

A business that accepts crypto payments using a payments firm might have a few differences, such as faster completion times and a window during which the rate is locked to limit volatility.

The companies below offer tools that allow customers to pay with cryptocurrency:

BitPay

Price per transaction: 1% of each transaction for most businesses.

Volatility management:

  • When a customer initiates a payment, Bitpay compares rates on multiple exchanges, uses the most competitive rate and does not charge a markup. The exchange rate presented to the customer is guaranteed for 15 minutes.

  • If a merchant chooses settlement in the cryptocurrency used for the transaction, the actual amount received is equal to the amount the customer paid as denominated in that cryptocurrency, even if the exchange rate changes later in the day. If settlement occurs in U.S. dollars (or other currency), the amount a merchant receives equals the original price stated in dollars — a $98 jacket will result in a $98 deposit, less the 1% fee, even if the exchange rate of the crypto used changes throughout the day.

Payment options: BitPay supports 11 currencies.

Notable feature: BitPay has a partnership with Verifone to make in-person payments with cryptocurrency easier. While most payment tools enable merchants to accept in-person cryptocurrency payments through a QR code displayed on a mobile device, this partnership allows the QR code to be displayed on the same card reader the point-of-sale system uses to accept cards. This simplifies the checkout process and makes it more familiar for customers.

Coinbase

Price per transaction: 1%.

Volatility management: The exchange rate locks the moment a customer starts the checkout process, and the merchant can adjust the amount of time the price is locked.

Payment options: Coinbase accepts seven cryptocurrencies.

Notable feature: Coinbase offers two account types. The pricing is the same, but there are differences in the level of hands-on control a user experiences:

Self-Managed:

  • You can set up an account in minutes.

  • Cryptocurrency payments go directly to your wallet for you to manage directly.

  • To convert to U.S. dollars, you’ll need to create a Coinbase Exchange account, transfer your crypto there and sell on the exchange.

Coinbase-Managed:

  • Requires a compliance review that can take up to a month.

  • Transferring money to a bank account is made easier.

  • Coinbase manages your wallet and private keys.

  • Some or all of the cryptocurrency payment can automatically be converted to U.S. dollars or other currencies.

PayPal

It’s worth noting that PayPal allows shoppers to pay using cryptocurrency. What makes PayPal different from other services is that merchants neither choose to allow this option, nor do they have the option to be paid in crypto. Instead, a PayPal user who holds cryptocurrency in their PayPal account can choose to pay with it. PayPal credits the merchant’s account with U.S. dollars.

While this option provides no functional direct exposure to crypto transactions to the merchant, you are giving some customers the option to pay in this way.

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Banking

How to Get a Loan to Buy a Business

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Not everyone wants to take on the challenge of building a business from the ground up. An attractive alternative can be to step into a business that’s already up and running by purchasing it from the current owner. Some advantages of buying a business may include easier financing, an established customer base and an existing cash flow.

Buying a business is different from buying a franchise. Franchises have a set business model that’s proven to work. However, when you buy an independently operated business, it’s important to show the lender that you, your previous business experience and the business you want to buy are a winning combination.

What lenders look at when you want to buy a business

Because lenders can view the performance record of an existing business, it’s typically easier to get a loan to purchase an existing business compared with startup funding. However, your personal credit history, experience and details about the acquisition business still matter.

Your personal credit and experience

Through credit reports and credit scores, lenders are able to assess how you’ve managed debt in the past and potentially gain insights into how you will handle it in the future. Your education and experience will also be evaluated.

Solid credit history: Lenders look to see if you have a history of paying your debts. Foreclosures, bankruptcies, repossessions, charge-offs and other situations where you haven’t paid off the full amount will be noted.

Business experience: Having worked in the same industry as the business you want to purchase is helpful. Related education can also be viewed as a positive.

Other businesses you’ve owned

Having a track record of operating other successful businesses can have a positive influence on lenders when it comes to buying a new operation.

Record of generating revenue: Business financial statements can help a lender document that your current or past businesses were well-managed and turned a profit.

Positive credit record: Lenders review business credit scores and reports to verify creditworthiness and to identify liens, foreclosures, bankruptcies and late payments associated with your other businesses.

The business you want to buy

Just because a business is operating doesn’t mean it’s a good investment. Lenders will ask for documentation, often provided by the current owner, to assess the health of the operation.

Value of the business: Like you, your lender will want to ensure that you’re buying a business that has value and that you’re paying a fair price.

Past-due debts: Lenders will be interested in the business’s past-due debts, which may include liens, various types of taxes, utility bills and collection accounts.

Documentation

Most lenders will let you know what they want included in the loan application package, but there are some personal documents that are typically requested, as well as ones related to the business you want to purchase.

Personal documents

The following documents are used to evaluate your personal finances, business history and plans for operating the business after its purchase:

  • Personal tax returns.

  • Personal bank statements.

  • Financial statements for any of your other businesses.

  • Letter of intent.

Business documents

Documents from the current business owner will also be evaluated. Some common ones requested by lenders include:

  • Business tax returns.

  • Profit and loss, or P&L, statements.

  • Business balance sheet.

  • Proposed bill of sale.

  • Asking price for inventory, machinery, equipment, furniture and other items included in the sale.

Where to get a loan to buy a business

Compared with finding a loan to start a business, getting funding to buy an existing business may be easier. Here are three popular funding options to check into for a business loan:

Bank loans

Banks generally offer the lowest interest rates and best terms for business loans. To qualify for this type of loan, you’ll typically need a strong credit history, plus the existing business will need to be in operation for a certain minimum of years and generate a minimum annual revenue amount set by the lender.

SBA loans

If borrowers don’t qualify for a traditional bank loan, then SBA loans, ones partially guaranteed by the Small Business Administration, may be the next option to explore. Because there is less risk to the lender, these loans can be easier to qualify for. Banks and credit unions frequently offer SBA loans in addition to traditional bank loans.

Online business loans

Another option to consider is online business loans. Online business loans may offer more flexibility when it comes to qualification, compared with bank and SBA loans. Minimum credit score requirements can be as low as 600, and in a few cases lower. Generally, interest rates are higher than what’s available with a traditional bank loan.

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Accounts Receivable Financing: Best Options, How It Works

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Accounts receivable financing, also known as invoice financing, allows businesses to borrow capital against the value of their accounts receivable — in other words, their unpaid invoices. A lender advances a portion of the business’s outstanding invoices, in the form of a loan or line of credit, and the invoices serve as collateral on the financing.

Accounts receivable, or AR, financing can be a good option if you need funding fast for situations such as covering cash flow gaps or paying for short-term expenses. Because AR financing is self-securing, it can also be a good choice if you can’t qualify for other small-business loans.

Here’s what you need to know about how accounts receivable financing works and some of the best options for small businesses.

How Much Do You Need?

with Fundera by NerdWallet

How does accounts receivable financing work?

With accounts receivable financing, a lender advances you a percentage of the value of your receivables, potentially as much as 90%. When a customer pays their invoice, you receive the remaining percentage, minus the lender’s fees.

Accounts receivable financing fees are typically charged as a flat percentage of the invoice value, and generally range from 1% to 5%. The amount you pay in fees is based on how long it takes your customer to pay their invoice.

Here’s a breakdown of how the process works:

  1. You apply for and receive financing. Say you decide to finance a $50,000 invoice with 60-day repayment terms. You apply for accounts receivable financing and the lender approves you for an advance of 80% ($40,000).

  2. You use the funds and the lender charges fees. After receiving the financing, you use it to pay for business expenses. During this time, the lender charges a 3% fee for each week it takes your customer to pay the invoice.

  3. You collect payment from your customer. Your customer pays their invoice after three weeks. You owe the lender a $4,500 fee: 3% of the total invoice amount of $50,000 ($1,500) for each week.

  4. You repay the lender. Now that your customer has paid you, you’ll keep $5,500 and repay the lender the original advance amount, plus fees, $44,500. You paid a total of $4,500 in fees, which calculates to an approximate annual percentage rate of 65.7%.

Because accounts receivable financing companies don’t charge traditional interest, it’s important to calculate your fees into an APR to understand the true cost of borrowing. APRs on accounts receivable financing can reach as high as 79%.

Accounts receivable financing vs. factoring

Accounts receivable financing is often confused with accounts receivable factoring, which is also referred to as invoice factoring. Although AR financing and factoring are similar, there are differences.

With invoice factoring, you sell your outstanding receivables to a factoring company at a discount. The factoring company pays you a percentage of the invoice’s value, then collects payment directly from your customer. When your customer pays, the factoring company gives you the rest of the money you’re owed, minus its fees.

With accounts receivable financing, on the other hand, your invoices serve as collateral on your financing. You retain control of your receivables at all times and collect repayment from your customers. After your customer has paid their invoice, you repay what you borrowed from the lender, plus the agreed-upon fees.

Invoice factoring can be a good financing option if you don’t mind giving up control of your invoices and you can trust a factoring company to professionally collect customer payments. If you’d rather maintain control of your invoices and work directly with your customers, AR financing is likely a better option.

Best accounts receivable financing options

Accounts receivable financing is usually offered by online lenders and fintech companies, many of which specialize in this type of business funding. Certain banks offer AR financing as well.

If you’re looking for a place to start your search, here are a few of the best accounts receivable financing companies to consider.

altLINE

A division of the Southern Bank Company, altLINE is a lender that specializes in AR financing. AltLINE offers both accounts receivable financing and invoice factoring, working with small businesses in a variety of industries, including startups and those that can’t qualify for traditional loans.

AltLINE offers advances of up to 90% of the value of your invoices with fees starting at 0.50%. To get a free quote from altLINE, call a representative or fill out a brief application on the lender’s website. If you apply online, a representative will contact you within 24 hours.

AltLINE’s website also contains a range of articles for small-business owners, covering AR and invoice financing, payroll funding, cash flow management and more. AltLINE is accredited by the Better Business Bureau and is rated 4.7 out of 5 stars on Trustpilot.

1st Commercial Credit

1st Commercial Credit offers accounts receivable financing in addition to other forms of asset-based lending, such as invoice factoring, equipment financing and purchase order financing. The company works with small and medium-sized businesses, including startups and businesses with bad credit.

With 1st Commercial Credit, you can finance $10,000 to $10 million in receivables with fees ranging from 0.69% to 1.59%. You can start the application process by calling a sales representative or filling out a free quote form on the company’s website. After your application is approved, it typically takes three to five business days to set up your account, then you can receive funds within 24 hours.

1st Commercial Credit is accredited by the Better Business Bureau and has an A+ rating.

Porter Capital

Porter Capital is an alternative lender specializing in invoice factoring and accounts receivable financing. The company also has a special division, Porter Freight Funding, which is dedicated to working with businesses in the transportation industry.

With Porter Capital, you can receive an advance of 70% to 90% of your receivables and work with an account manager to customize a financing agreement that’s unique to your business. Porter funds startups and established businesses, offering fees as low as 0.75% monthly.

You can provide basic information about your business to get a free quote and receive funding in as little as 24 hours. Although Porter Capital isn’t accredited by the Better Business Bureau, it does have an A+ rating; the company also has 3.7 out of 5 stars on Trustpilot.

Additional options

Although AR financing and factoring are distinct, many companies blur the lines between the two. As you compare options, make sure you understand the type of financing a lender offers.

If you decide that invoice factoring may be a fit for your business, you might consider companies like FundThrough, Triumph Business Capital or RTS Financial.

Find and compare small-business loans

If accounts receivable financing isn’t right for you, check out NerdWallet’s list of the best small-business loans for business owners.

Our recommendations are based on the market scope and track record of lenders, the needs of business owners, and an analysis of rates and other factors, so you can make the right financing decision.

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Finance & Accounting

SBA Loan Collateral vs. Guarantee: What’s the Difference?

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Personal guarantees and collateral are both ways of promising a lender that you’ll make good on your debt. You may have to offer both to get an SBA loan.

Collateral ties a loan to a specific asset, like your business’s inventory or your home, which the lender can seize if your business can’t repay the loan. A personal guarantee promises the lender that you will repay the debt using your personal assets, but may not specify how.

In general, SBA lenders require anyone who owns 20% or more of a business to provide a personal guarantee. SBA loans larger than $25,000 usually require collateral, too.

Do SBA loans require a personal guarantee?

SBA loans usually require unlimited personal guarantees from anyone who owns more than 20% of a business. Lenders may ask for limited or unlimited personal guarantees from other business owners, too.

Unlimited personal guarantee: This is a promise that the guarantor (the business owner) will pay back the loan in full if the business is unable to. The lender doesn’t have to seize collateral or seek payment from any other source before going straight to the loan applicant for loan repayment.

Limited personal guarantee: If you own less than 20% of a business, you may have the option to sign a limited personal guarantee instead. The limited personal guarantee caps the amount you’ll have to pay the lender, either as a dollar limit or a percentage of the debt.

Limited personal guarantees can be secured by collateral, which means the lender will seize those assets when they recoup payment instead of asking you to pay back a certain dollar amount.

Who has to personally guarantee an SBA loan?

The SBA requires personal guarantees from:

  • Individuals who own more than 20% of a business.

  • Spouses who own 5% more of the business, if their combined ownership interest is 20% or more.

  • Trusts, if the trust owns 20% or more of the business.

  • Trustors, if a revocable trust owns 20% or more of the business.

SBA lenders may require additional personal guarantees.

Do SBA loans require collateral?

For SBA 7(a) loans of between $25,000 and $350,000, SBA lenders have to follow collateral policies that are similar to the procedures they’ve established for non-SBA loans. Banks and credit unions are usually the intermediary lenders for SBA 7(a) loans.

If you use an SBA loan to finance specific assets, like an equipment purchase, the lender will take a lien on those assets as collateral. The lender may also use your business’s other fixed assets as collateral, and you may have to offer personal assets, too.

For SBA 7(a) loans larger than $350,000, SBA lenders need collateral worth as much as the loan. The lender will start with your business assets. If they need more collateral, the SBA requires them to turn to the real estate you own personally, as long as you have at least 25% equity in the property.

Live Oak Bank is the largest SBA 7(a) lender in the U.S. by volume. Its loans may require collateral in the form of:

  • Personal residences.

  • Retirement accounts.

  • Commercial real estate.

  • Equipment.

  • Commercial vehicles.

  • Accounts receivable.

  • Inventory.

What if I can’t provide collateral or a personal guarantee?

If you’re seeking any type of SBA loan, there’s a good chance you’ll have to provide both collateral and a personal guarantee. Even SBA microloans usually require collateral and a personal guarantee. Without them, you’ll have trouble getting an SBA loan.

Some online lenders offer unsecured business loans, which don’t require collateral. But you may still have to sign a personal guarantee.

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