Merchant Consumer Financing – Hits & Misses

consumerfinancingThere is no doubt that many businesses should consider offering consumer financing as part of their payment arsenal in order to maximize their potential.

Consider that less than 10% of consumers use cash or check for purchases over $1,000. Thirty two percent of consumers don’t own a credit card and 68% of US credit card holders are within 5% of their available credit limit.

Also consider that nearly fifty percent of Americans have credit scores below 660 in a lending environment where 700 is considered prime credit. So, there is no doubt a void that merchants need to fill in order to connect with these consumers. But if you are a business interested in offering financing, what are your options?


No Credit Check Accounts Receivable Financing

Pros: Great messaging to drive consumers to your business. Most successful with small transactions under $1,000.

Cons: While there are some true no credit check products out there, there is still a vetting process and in some cases, the process is quite involved. Most programs involve an income check (pay stubs required) and some require bank statements. For all programs, a checking account is required. All programs require a fairly substantial initial deposit at the time of sale. Some programs require the merchant to purchase or lease equipment. Because it’s accounts receivable financing, these programs come with a substantial discount. In most cases, the discount is passed onto the consumer and tacked onto the finance amount.

The Bottom Line: More smoke than fire. We have offered these programs for quite some time and the merchant satisfaction level is quite low. The process is complex and the approval rate is lower than credit based programs we have been involved with. With one program in particular, there is a great deal of uncertainty as to how the funds are distributed to the merchant. In most cases, the merchant must wait for the distribution of some or all of their funds over the term of the financing. For the most part, these lenders are not looking to incur more risk. They are simply looking for consumers looking to leverage their purchase. Unfortunately, this contradicts the motive of most merchants as well as consumers.


No Credit Check Lease To Purchase Financing

Pros: Great messaging to drive consumers to your business. Small initial deposit required. High approval rating. No additional cost, beyond the initial deposit, if paid within 90 days. Simple on-line process with instant decisions in most cases.

Cons: Can only be used for retail businesses on tangible products. If not paid in 90 days, the lease kicks in and the pay back can be 80% or higher. Not as transparent as it could be so some consumers face ticket shock.

The Bottom Line: This can be a powerful product for the retail marketplace. It’s fairly easy to sell the almost “same as cash” feature because most consumers believe they will pay it off in the given time frame, though few actually do. For some businesses, there is a concern over their association with the high cost should it not be paid in 90 days. We generally package this product as part of a broader offer to provide consumers with a traditional financing option for those that prefer it.


Credit Based Financing

Pros: Great messaging if highlighting broad credit acceptance or interest free or deferred interest features. Can be used for most business types, particularly powerful for homes services, medical and retail. Can finance large amounts that are not available through other programs. The longer terms mean the payments are usually more affordable. This is the most accepted financing option with traditional players like GE and Wells Fargo anchoring the marketplace for prime consumers. Most programs provide an easy on-line application and approval process.

Cons: Some programs offer a great deal of uncertainty with regards to interest rate to the consumer and discount to the merchant. Some programs require intense merchant involvement.

The Bottom Line: This is a powerful product if positioned properly. We have had a few misses in this area. We have finally put together a multi-lender platform that can accommodate consumers with prime credit and compete with the traditional lenders while at the same time, accommodate consumers that are sub-prime. We have also, for the most part, solved the certainty problem by offering fixed cost products for prime customers and merchant discount tolerance for sub-prime consumers. Also, we have learned that merchants really don’t want to be overly involved in the process, so our platform does most of the interacting with the consumer. This is the best bet for most merchants, but may not be suitable for very small businesses. And it’s really not a one size fits all.


I have been at this financing stuff long enough to now know that it is imperative to offer a broad product but understanding that we can’t be everything to everyone. We have weeded out some programs that simply did not work as promised or was too confusing for merchants to use.

While sales growth is important to almost every business, they will not trade off inconvenience for it. In other words, if it’s too hard, they will skip it and stick with what they know. The best product(s) need to fit seamlessly into their business practices.



Bob Lovinger, VP Business Development

Banc Certified Merchant Services


Call BCMS today at (877) 861-8008 or visit!

What are Interchange Fees?

Credit CardsInterchange fees account for the majority of credit card processing expense, and a familiarity with interchange is vital knowledge for any business owner or manager. Interchange is the cost of the money transferred from the acquiring bank to the issuing bank for each bankcard transaction. These interchange fees are established by the card brands (Visa, MasterCard, Discover, JCB, Union Pay).

Interchange fees for the two largest card brands may change twice annually in April and October. The interchange fee schedules for Visa and MasterCard can be found here:

Here is an infographic from the Strawhecker Group that illustrates an explanation of what merchants pay to accept credit cards, why it’s paid, and the benefits provided to merchants and consumers:

At BCMS, we guarantee the lowest processing rates in the industry, so you never have to worry if you’re paying too much for processing. We offer a cost-plus pricing structure which is the basic interchange rate plus a few basis points to cover our services. To lessen the impact of interchange fees, you may follow this guide:

Interchange Qualification

A number of factors are used to determine where a transaction qualifies at interchange. Some of these factors can be controlled or influenced by the merchant while others can’t.

Factors that merchants can influence include:

  • Processing method: Card-present and card-not-present are the terms used to generally refer to the different ways of processing a credit card transaction. Card-present interchange categories carry smaller fees than card-not-present categories.
    • Card-Present: Card-present transactions are those where a merchant actually swipes a card through a terminal or by an imprinted and signed credit card draft.
    • Card-Not-Present: Card-not-present transactions (CNP, MO/TO, Mail Order / Telephone Order, MOTOEC) are made where the cardholder is not physically present with the card at the time that the payment is effected. This situation is most common for internet, mail-order, or fax transactions and is a major route for credit card fraud.
  • Transaction data: The information supplied with a credit card transaction impacts how it qualifies at interchange. Proper and complete transaction data is especially important for merchants that process card-not-present transactions and for those that deal with corporate and government enhanced data.
  • Merchant Category Code: Specific interchange categories exist for businesses that fall under a certain merchant category code (MCC) designations.

Interchange qualification factors that a merchant can’t control include:

  • Card Type: Separate interchange categories exist for credit and debit card charges.
  • Card Brand: The brand of a bankcard will impact interchange qualification. This criterion is typically associated with credit cards that yield some type of reward for the cardholder.
  • Card Owner: Whether a credit or debit card is issued to an individual, business, corporation or municipal agency impacts interchange qualification.

The extent to which interchange can be optimized for your business depends on several variables. To learn more about interchange fees, please contact us today.

Mobile Payment News: Starbucks’ Square Roll Out a Flop


Incase you haven’t heard, Starbucks recently deployed Square at about 7,000 coffee shops with the intention to help customers pay with debit and credit cards. Last year, Starbucks announced its wide-ranging agreement with Square to have it handle the company’s debit and credit card payment processing; additionally, Starbucks invested $25 million in the payments startup. The promise of paying with Square is that it offers merchants and customers a better user experience. The expensive deployment has been a bit of a flop. Baristas and customers alike are confused by Square. Tests demonstrated that even when baristas worked out how to accept Square payments, they were unable to scan the Square Wallet app from their barcode readers, and resorted to holding the customer’s smartphone and manually entering the barcode number into their register.

Rather than resorting to a inferior mobile payment solution like Square, consider employing one of BCMS’ fantastic mobile payment solutions. With our mobile solutions, we can provide you with a wireless terminal so you can take payments anywhere or we can set you up to take payments directly from your smartphone. Accept credit card payments and increase sales no matter where your business takes you.

BCMS Mobile Payment Solutions

As a merchant, the benefits of mobile payment acceptance are colossal. You have access to online transaction reports, which provide a better understanding of your consumer’s behavior and information on how to better service their needs. You empower your customers by allowing them to pay with their preferred method and funding mechanism, while increasing flexibility at the register and the speed of checkout. With our mobile solutions, the ultimate benefits are the enhanced data security and the reduced cost of processing.

With more than 6 billion mobile phone subscriptions globally, mobile processing solutions are more important than ever before. Stay on the forefront of technology with BCMS Mobile Solutions.


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Contact us today at (877) 861-8008 for more information on any of our products.


Recharge Your Business in 2013


It’s the start of a new year. The holiday rush has come and gone, and now is the perfect time to evaluate last year’s successes and failures. Reflect on last year’s market. Did your business grow? How can you improve? Learn so you can evolve in 2013.

  1. Get your priorities in line. Create a list of everything you need to get done. This can range from short-term goals (clean and organize) to long-term goals (expand your business). After you create your list, assess which tasks are the most important. Rank your goals/tasks to help with time management.
  2. Shut down non-profitable parts of your business. Determine the money makers and the drains on your resources. If you aren’t sure, talk to your accountant.
  3. Increase monthly cash flow. Sounds easy, right? This is the goal of every small business. Take a look at your fixed and variable costs. Where can you make cuts? BCMS can provide you with low rates on credit card processing. Additionally, our division, Certified Utility Services, can reduce your utility rates. Two easy ways to cut costs.
  4. Take a chance. It’s 2013. Now is the time to take that chance to grow your business. Do you want to purchase new equipment, hire more employees, expand into another storefront? We can give you the funding you need to push your business forward. You can receive $5,000-$500,000 from our Merchant Cash Advances.

Good luck! We wish you success in 2013!