Advantages of Offering Credit to SMBs

With the credit power of a business credit card, merchants can fund expansion, take advantage of volume discounts and other sales of supplies or inventory and help build their credit history to enable them to obtain a business loan when they need it.

Much Better Leverage

Several FinTech companies provide debit cards coupled to merchant acquiring, but the debit cards don’t have the same purchasing power as credit cards. By their very nature, a debit card only enables a merchant to buy up to the amount the business has in the connected deposit account, whereas a business credit card expands the merchant’s buying power beyond that account to the limit of the business credit card.

For example, a merchant with $10,000 in a deposit account and a debit card can purchase up to $10,000 in inventory, supplies, etc. or use that money for other purposes. A merchant with $10,000 in a deposit account or in any other form of liquid cash and a business credit card with a $10,000 line of credit, can purchase up to $20,000 in inventory, supplies, etc., or use that money for other purposes.

Therefore, the merchant with the business credit card has twice as much leverage. If a supplier offers a 10 percent discount for volume purchases over $8,000, for example, the first merchant in the example above can get only a $200 savings – 10 percent of the $2,000 ($10,000-$8,000). The merchant with the business credit card, on the other hand, can enjoy a savings up to $1,200, 10 percent of the $12,000 the merchant can buy over the $8,000 volume discount floor.

Even if each a merchant purchases $10,000 from the supplier, so the savings is the same, the first merchant is tapped out, if a better opportunity or surprise expense, like a major piece of equipment failing, the merchant has to wait until receivables come in or seek more expensive short-term financing for additional funds. The merchant with the business credit card, on the other hand, still has access to another $10,000 for other uses.

Additionally, there could be suppliers where the discount doesn’t start until after the first $10,000 – entirely locking out the first merchant, while the second merchant can use the available cash and the credit to take advantage of the discount.

ISOs Should Be the First Choice for a Business Credit Card

Merchants have a few different choices when it comes to business credit cards, but ISOs and Merchant Acquirers have a unique advantage in being the card provider.

When typical bank card issuer offers a business card, the financial institution collects interest on the outstanding debt. So, even with the advantages the card provides, the merchant will sometimes see the interest charges and perceive the card as an expense, rather than as an opportunity.

Win-Win Opportunity

But business credit cards offered by ISOs and Merchant Acquirers represent a tremendous opportunity for the merchants and for the providers. The merchant not only has all of the buying power and other advantages of the business credit card, with the PayVus® business credit card from Aliaswire, the merchant’s daily receivables are split-settled between the card and their existing bank account, with the merchant choosing the portion to go to each.

The more the merchant deposits to the card, the more the merchant saves on processing fees. The savings are immediate and unlimited. Unlike some other business credit products, PayVus has no annual fees. Additionally, since the PayVus card is funded automatically from daily fund deposits, thereby reducing any outstanding credit, the merchant will incur only minimal, if any, interest charges. So the “total cost of ownership” for merchant services is significantly lower.

The Merchant Acquirer receives a significant revenue share from the funds deposited to the PayVus credit card. The Merchant Acquirer can then designate a portion of the revenue share directly to the merchant, helping to reduce the merchant’s interchange rate further. The revenue share, combined with the merchant’s deposits to the PayVus card, can result in ‘Interchange Minus’ pricing for the merchant – a saving that flows directly to the merchant’s bottom line. For ISOs and Merchant Acquirers, the card represents another valuable service being provided to the merchants, helping to sustain and grow the business relationship. Financial service providers learned a long time ago that the more products or services that a customer has with them, the less likely the customer will take his or her business to another provider. Business credit cards also help ISOs, and Merchant Acquirers reduce churn while building their own revenues.

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