We have developed this complete guide to credit card processing fees to help you make the financial decisions that make the most sense for your business. We will explain what credit card processing fees are, their average cost, and how your company will be charged by different providers to accept credit cards.

What are credit card processing fees?

At the most basic level, credit card processing fees are the cost that a business owner pays to accept payments by credit card. There are many components that are involved which determine the total cost including transaction fees, flat fees, and incidental fees. The average credit card processing fees generally range from 1.7%  to 3.5% per transaction.  These fees are the price your company pays to process credit cards.

It is a crucial move for business development to accept credit cards as a means of payment. However, it can be challenging learning how to accept credit cards, both at your point of sale or online, and learning and understanding all the credit card fees involved. Learning about these credit card processing fees may not be the most thrilling part of running a small business. But these credit card processing fees can add up and become a significant aspect of your overall finances. We have developed this complete guide to credit card processing fees to help you make the financial decisions that make the most sense for your business. We will explain what credit card processing fees are, their average cost, and how your company will be charged by different providers to accept credit cards.

What Are Transaction Fees for Credit Card Processing?

Transaction fees are fees that you will be charged per each transaction you process with a credit card. These fees are made up of interchange rates, the assessment fee, and the payment processor markup.

Flat fees are fees that you will have to pay typically on a monthly basis for working with a gateway or merchant service provider, which is the cost for using their service.

Incidental fees are fees that you are charged for a particular occurrence such as a chargeback (voided dispute or fraudulent claim) or non-sufficient funds (NSF).

Credit Card Processing Fees/Transaction Fees

Now that you grasp the types of fees involved with the processing of credit cards, let’s break it down in terms of both expense and procedure, what each means and what you should anticipate as a business owner. Every time a customer taps, dips, or swipes their card these are the parties that are involved:

Issuing bank: This is the institution that has provided a credit card to your customer.

Credit Card Network: This is usually one of four main firms, Visa, Mastercard, Discover, and American Express, while foreign purchases may include others.

Receiving Bank: This is the bank that collects the funds from the issuing bank and deposits the funds in the bank account of your organization.

Payment Processor: This is the intermediary between the collecting bank and the issuing bank. Your payment processor may be a merchant service provider or a payment gateway, based on your specific company. The processor addresses problems such as authentication of the cardholder and account conflicts.. Each transaction charge consists of the exchange rate, evaluation fee, and markup of the payment processor, and each of the aforementioned parties earns a portion of this amount that you pay as the business owner. 

Interchange Rate: The exchange rate is a fee paid to the receiving bank by the issuing bank when a consumer uses their credit card. That is how the issuing bank benefits from credit card transactions. You, the merchant, are going to compensate any or more of the exchange rate directly or with an exchange refund— which may be marginally cheaper than the entire exchange rate. Usually, exchange rates or returns are measured as a percentage of the gross purchase price. Each card network decides its own prices, which differ depending on factors such as:

  • The card carrier
  • The type of card; debit, credit, business
  • How risky the card network considers the merchant’s business and industry
  • The various ways the merchant can accept credit card payment 

The Assessment Fee: The exchange rate is how the issuing bank gains from utilizing a credit card. What about the card network itself, what fees do they charge? This is when the appraisal charge falls into effect. The network charges a flat price on each purchase, in addition to the interchange cost or refund. The evaluation charge plus the interchange rate or rebate is also known collectively as the interchange fee. Each network sets its interexchange fees), and is modified twice a year. The measurement model is incredibly complicated and quite obscure, but the card network uses some codes to help them calculate the danger of which any particular seller is exposed— the possibility of default or theft. The appraisal charge comes straight from the card network and is part of the total conversion fee, it is a non-negotiable fee, and would be set independent of the payment method.

Payment Processor Markup

You’ll never get out of paying all of these fees, but you can negotiate the payment processor fee, this fee is charged on top of the interchange fee. The markup depends on the specific payment provider you choose, with various pricing plans. Whatever package you want, avoid long-term contracts. This way, you can compare plans and change processors at any point, as your business grows

Payment processors typically offer their services in three packages: Tiered Plans, Interchange – Plus Plans, and Flat-Rate Plans. While it might be clearer to grasp tiered plans than other arrangements, the processor itself decides which category a given sale falls under. You can never be absolutely sure which tier the purchases of your client would fall into, which in the long run can prove costly. While Interchange–Plus Plans provide more transparency for future expenses, the drawback is that your statements are more complex, and you may or may not actually end up saving.  For brand-new small business owners who don’t yet have the volume required to negotiate with payment suppliers, a flat-rate contract is a smart option. Additionally, since flat rates are often focused on a proportion of the larger purchase, if the purchases are on the smaller side, the added expense will not be too expensive.

Credit Card Processing Fees

Flat rate: The processing charge is shared by many separate parties. For the whole company credit card fee, the flat rates you pay to receive credit card payments come straight from the payment processor. In other words, this fee is what you pay the processor to access the multiple aspects of their service. The exact payments differ depending on the specific payment provider, they are usually periodic on a monthly or annual basis. However, it is necessary to remember that with such programs, the payment provider can also charge one-time flat rates. 

Recurring Flat Fees: Based on which payment processor you use, you may need to pay a variation of the following flat fees:

Monthly or annual account fees: It is a monthly cost to hold the account open with the payment processor and to operate the processing platform.

Monthly minimum processing fee: There is a recurring minimum charge for certain payment card processing firms. You will have to compensate for the variance between how much you have incurred in processing fees and their monthly minimum if you have not met the necessary minimum sum of fees per month.

Terminal lease or rental fees: Many payment processors require or encourage you to buy or lease a credit card processing machine.

Withdrawal fee: If you transfer funds from your payment processor account into your business bank account, a processor can impose a charge.

Payment gateway provider fee: Note that you’ll likely need a payment gateway provider if you offer goods or services online. If you use this feature, you may want to compare various supplier rates.

Statement fees: A processor can charge a fee for preparing your statements, in paper or online.

IRS reporting fee: Certain payment processors charge you for reporting your transactions to the IRS and for sending you the necessary tax reporting forms. You should dispute this charge on your monthly statement. Industry standards require the processor to deliver the service free of charge. 

Payment card industry (PCI) fees: PCI Data Security Standard (DSS) is a series of requirements for data storage that extends to all credit card authorizing institutions. While not federally mandated, most major card providers demand that certain requirements are adhered to for all companies associated with them and several states have enacted them into legislation. Failure to comply with PCI DSS leaves a corporation vulnerable to fines, civil proceedings, and even government investigations, but you may be paid a fee from the payment provider to offset the expense of enforcement. And the payment provider may offer help to guarantee that you are in line with PCI DSS should you incur this charge. But these are hidden costs much of the time that retailers don’t notice on their statements. Ask about it if you notice these charges on your statements. 

One Time Flat FeeSometimes the above payments are subject to negotiation, and you could ask a payment provider to completely waive them. Some companies charge more flat rates than others but when searching for specific policies, you will want to remember this. The avoidance of these payments is also marketed by such providers as an advantage to their specific service. A couple of the flat payments you will find more often are:

Account setup fee: This may involve a technician who sets up the appropriate devices, or who offers customer service on the phone with the setup. There may be a fee for the setup of the merchant account.

Terminal purchase fee: You should buy a credit card terminal, which can be a decent investment relative to rented or leasing facilities, although you should try to negotiate. 

Cancellation fee: This is a fine for early termination of the deal paid by the payment processor, and it may be expensive. Check if this charge can be forgiven by the processor, and be sure that the agreement you sign allows for such a waiver. 

Incidental feesIncidental fees are the last factor involved in the total cost of accepting credit cards for your company. These payments come straight from the payment processor, like the flat fees, which are a product of a single case, ensuring you may not face either of these fees for several months. The exact fee will differ from processor to processor. Here are some of the more typical incidental fees:

Cardholder dispute fees: The processor might charge a fee for each time a customer disputes a charge.

Chargeback fees: If the customer conflict ends in a chargeback, which results in a credit to the cardholder, you will be required to pay a fee.

Non-sufficient funds fee (NSF): They will charge you an extra fee if you do not have sufficient funds in your business banking account to pay your payment processor.

Batch payment processing fee: Each time your company submits a batch of payment card payments, perhaps as much as once or twice a day, your processor can charge a fee.

In general, we simply worry about purchase costs while talking about average credit card fees, and not generally flat fees or incidental fees. As a company owner, the biggest challenge is calculating how much you are paying with each purchase, because this payment derives straight from the sales. The cost of processing credit cards usually falls between 1.7% and 3.5%. Of course, this number depends on the considerations we listed before, such as how the purchase is made, the market, the card form, etc.

Payment Service Provider vs Merchant Account

There are various payment processors, each with different characteristics, resources and rates. PSP (payment service providers)  have been trying to simplify credit card processing transaction costs by offering flat prices for each transaction of the same nature and avoiding lengthy contracts and secret fees. You don’t have to buy pricey business computing machines to use a PSP, nor do you need to sign a long-term deal or think about undisclosed costs. While these services might have easy-to-grasp price models, they may not always be cheaper than conventional merchant account providers. 

For card-presented purchases, card-not-present payments, and internet payments, PSPs charge an annual fee. For example, if you accept a credit card in your retail store, you can incur a lower price. If a consumer wishes to buy electronically on the website, even if you use payment information that is saved on a register, you pay a higher price. In general, payment processing providers have improved security from chargebacks relative to commercial processors.

In Summary

Credit card payment costs, as you will see, can be a bit complicated and challenging to understand. However, breaking down all the multiple elements adding to the total expense and how payment processors arrange their prices will help you overcome this. In the end, the processing of credit card payments can be an important (but necessary) cost for your company, so the most important thing is to consider what types of fees you will be facing so that you are willing to budget your finances appropriately. Selecting the right payment processor will make a big difference in the reduction of credit card charges. You may want to use the particulars of your market-business, revenue amount, payment acceptability, etc.-to decide which payment processing provider or merchant services fit better for you. In order to ensure that you have a good deal, you should pay particular attention to the features and facilities provided by any provider of flat or incidental fees and to discuss your costs wherever possible. Companies like Square and PayPal have generally simplified the expense of issuing credit cards dramatically and have rendered conventional account processors inefficient. This ensures that your credit card processing costs are more manageable and simpler to understand.

Depending on the lender you are negotiating with some of the conditions you may need to follow can fluctuate extensively. For example, a loan from a bank will have different requirements than one from an online lender. However, there are also some eligibility standards for small business loans that apply in all cases. The following loan criteria may not be needed for all lenders, but in most cases, you should be prepared to show certain key metrics such as your personal credit score, annual sales, and amount of time in business.

Depending on the lender you are working with and the type of financing you are applying for, the conditions for commercial funding can vary widely. We will break down the most common conditions for business loans in this guide, as well as how to qualify and apply for a small business loan.

What are the requirements for a small business loan?

Depending on the lender you are negotiating with some of the conditions you may need to follow can fluctuate extensively. For example, a loan from a bank will have different requirements than one from an online lender. However, there are also some eligibility standards for small business loans that apply in all cases. The following loan criteria may not be needed for all lenders, but in most cases, you should be prepared to show certain key metrics such as your personal credit score, annual sales, and amount of  time in business.

There are 18 qualifications that you will likely need when applying for a business loan:

1. Duration of Business

Every creditor is likely to ask how long you have been operating your business. The longer you have been in business, the stronger the application is, as it indicates to an investor that the business has been profitable for the long run., It is not impossible to get a loan if your business is under two years old, but it does limit your options. While banks may be less willing to lend to companies under two years of age, online lenders may be more flexible.

2. Personal Credit Score & Business Credit Score

Your personal credit score is one of the most significant factors in applying for funding. In order to determine the chances that you can pay back your loan, lenders will ask for your personal background records and financial details. If your personal finances are solid, lenders believe this implies that you will be able to handle your company finances. Not only will your personal credit score impact whether or not you are approved, but it will also play a part in deciding the interest rate of your loan. In the end, the higher your personal credit score is the more credit opportunities you will have at your hands. If you are trying to apply for a bank or SBA loan, ideally, you would want your credit score to be 600 or above.

Your business credit score tests the creditworthiness of the organization, similar to the way your personal credit score shows your personal background as a borrower. Your business credit score is determined by your company’s history of payments to vendors and lenders. The sector, scale, and sales of your organization will also affect the metric. Most entrepreneurs are unaware that their organization has a credit score, or even that it is a basic condition for small business loans. 

There are three major business credit rating organizations, and each has its own system for determining the business credit score. In addition, many lenders use the FICO SBSS score to determine your loan application, since it is focused on a mixture of the other three agencies company credit score, your personal credit score and the financials of your corporation.

Therefore, it is important to get a sense of what your company credit score looks like when applying for a small business loan. Although not all lenders check this score, for those who do, it can be a very important factor.

3. Company Annual Revenue, Profits, and Earnings

The annual revenue and profits of your business is one of the most common requirements for small business loans that you see across various lenders. Generally, lenders will want to see both a year-to-date profit and loss statement, updated within the past 60 days, and statements from the previous two years. Generally, banks would like to see that the organization is successful before it approves funding for you. Whereas, some alternative lenders will not necessarily look at long term profitability, but often require a minimum level of annual sales.

Regardless of the particular lender’s requirement, the better the business financials appear (as seen by your annual sales and profits) the more likely you are to qualify for credit and business financing at the most affordable and competitive pricing.

4. Bank Statements

In order to determine whether you can repay the loan, lenders review your bank statements. Bank statements will also provide lenders with some understanding into how well you manage the funds flowing into the business. Therefore, lenders would typically ask for business bank statements for the past three months, at a minimum, to justify your financial record claims of the firm. If you are applying for an SBA loan or traditional bank loan, you should be prepared to provide additional bank statements.

5. Personal and Business Tax Returns

Lenders may look to your business records, including taxes, in addition to your personal financial statements, to determine your capacity to afford and pay back a business loan. Typically, you would need to include your personal tax returns covering at least the last two years. If you have a pass-through entity (such as a sole proprietorship, corporation, or S-corp), where you disclose the income and expenses of your business on a personal tax return, these records would be essential. However, if you have a corporation or an LLC (that is taxed separately from you as an individual), your business tax returns would be especially relevant. Under these circumstances, the previous two years of business tax returns will be used by the lender to check your income, benefit, and expenses.

6. Loan Amount & Reason for Loan

You will need to determine the sum you would like to request for your business loan.. Banks typically have access to the most capital and can issue six and seven-figure loans. Therefore, banks would typically not be the ideal path if you are looking for a smaller loan (less than $250,000), in that case, you should shift to alternative lenders for smaller sums of funding, and in certain circumstances, SBA loans. It is important to have a strong grasp of how much money you need, as well as how you are going to use it, and of course, you do not want to apply for more than you can manage.

It might seem obvious, but lenders will want to know why you are seeking a business loan. A statement outlining how you intend to use the loan funds will be required for small business loans. Typically, lenders approve loans for an assortment of reasons, but they want to make sure that the sum of money you are seeking suits the intent of the loan.

7. Business Strategy

Often, business strategy will not be on the list of small business loan requirements, however, it is possible. For example, if applying for a conventional term loan or SBA loans, you will likely need to present a business strategy. You would have to set both your financial targets and your qualitative market goals inside your business strategy, such as potential revenue, earnings, taxes, cash flow, etc. To effectively prove to your lender that you have thought of all the possible possibilities and obstacles for your company and how you are going to develop a profitable business, you may want to use this guide. 

8. Industry Type

Since each industry has a different degree of risk, the industry you are in will impact your eligibility to get a business loan. Most lenders have some sectors to which they would not lend, such as gun firms and adult entertainment companies, which could harm the reputation of the lender. Though, these restrictions will vary from lender to lender, and may even include restrictions on lending to certain states. Therefore, in order to ensure that you fulfill the industry criteria of a lender, before sending the application, you may want to consult with them on any restricted industries.  It is important in your loan application to have correctly defined the industry of your company, as a minor error may prolong your application or even lead a lender to deny it erroneously. The Traditional Industrial Classification (TIC) and the North American Industry Classification System (NAICS) are two main industry coding schemes. You can find your code on the NAICS website.

9. Entity Type

A lender will want to know the corporate structure of your business.,. From the viewpoint of your investor, learning how your company is structured will give them insight into the types of risks and liabilities your company, and you personally, may be vulnerable to.u.

10. Business License and Permits

Your business license or authorization is another common business loan prerequisite. While standards for business licenses differ by state and locality, lenders will want to see your evidence of ownership and authorization to manage a corporation. This will provide the lender with confidence that they are loaning funds to a properly managed, productive organization. 

11. Employer Identification Number (EIN)

While you may not require an EIN on an application for business loans (or even for your business depending on your entity type), if you have one you can include the EIN on an application. An EIN is like a corporate social security number; the IRS uses this special, nine-digit number to track the tax returns of the company. You may apply for an EIN electronically rapidly and conveniently, and again, while this number might not be needed for all firms or all loan applicants, it is nonetheless worth having one.

12. Proof of Collateral

While collateral is not necessarily needed, you may be asked to put up a fixed asset to protect your loan from a lender, such as land or machinery. If you default on your loan, the investor will take the collateral and use it to make up for any of the funds you have not repaid. Alternative lenders usually do not require collateral, however, they will still likely require some protective measures, , such as a personal assurance or blanket lien, in order to lend to your business. 

13. Balance Sheet

Some lenders might want to see a balance sheet as part of their small business lending criteria, in addition to the other financial statements we have mentioned. A lender would want to use the balance sheet to see if you have adequate funds to handle the running costs of the corporation to pay back your loan on schedule and in full. Therefore, as part of the filing, you should have your year-to-date balance sheet and the past two years of balance sheets (if your business has been open that long) ready to be included in your application.

14. Copy of Your Commercial Lease

If you have a brick and mortar company, you should include a copy of your lease enclosed with a commercial loan documentation. A commercial lease shows that, regardless of what happens to the borrower, the company will be allowed to utilize the property for as long as the term of the agreement, and it also reassures the investor that you will be able to conduct business and pay back the loan.

15. Disclosure of Other Debt (Business Debt Schedule)

If your business already has other loans, and does not meet the existing loan obligations, lenders will not want to fund your business. Lenders will also measure your DSCR (debt service coverage ratio) to assess whether the business will be able to manage the loan. If the DSCR ratio is not large enough, after you have further paid off existing debt, the lender will refuse your application or ask you to reapply later.

16. Accounts Receivable Aging and Accounts Payable Aging

One of the most traditional bank loan conditions is current accounts receivable (A/R and accounts payable (A/P) aged reports. A/R and A/P aging studies inform the lender on how efficient the organization is at collecting products and services payments and paying its own bills. 

The A/R summary reveals the amount of invoices you have submitted to outstanding accounts and the duration of time they are overdue. When there are many accounts shown in this report, it means the organization has not been really successful at collecting payments. However, if there are few outstanding accounts on your A/R report, it means that your methods of repayment collection are effective, you extend credit to the right kind of consumers, and your clients pay off debt efficiently in a timely manner.

The A/P report is the opposite, displaying the amount of invoices you haven’t paid by various firms. A high number of missed payments indicate that you are not efficient in managing your own expenses. Realistically you would want the A/P report to have zero overdue accounts.

17. Ownership and Affiliations

You should be prepared to reveal any ownership that you or your partners have in other companies, as well as any affiliations, such as becoming a board member or contractor in another company, when you apply for a business loan. This knowledge shows any future conflicts of interest the investor might have in the granting of the loan and any synergies the organization might have with other businesses. Having said that if the company has many members, it can be more complicated to qualify for a loan. Different lenders have differing guidelines for how many owners need a loan request to be accepted. For instance, the SBA reviews the personal financial records of someone who holds 20% or more of the corporation and allows any of these shareholders to have a personal pledge.

With this in mind, a copy of their photo ID, a resume, a personal credit score, and any personal financial documents that the investor demands would need to be submitted.

18. Legal Contracts and Agreements

Lastly, when applying for a business loan you may be requested to provide legal contracts and agreements that your company is a party to. Lenders are looking for the following: 

  • Contracts with major suppliers or other third parties
  • Corporate bylaws
  • LLC operating agreement
  • Partnership agreement
  • Franchise agreement
  • Sales agreement, financials, and information about the business you’re purchasing (if you’re using the loan to buy another business)
  • Commercial real estate purchase agreement or equipment purchase agreement (if the loan is being used for purchasing commercial real estate or equipment)

How to qualify and apply for a small business loan

While this list may appear daunting, you may not require all of these requirements for your business loan application, depending on your lender. Finally, since small business loan requirements are so subjective, before submitting an application, it is recommended to contact a lender about the process, so that you can be informed in advance to compile any paperwork or details you may need to apply, which will improve your likelihood of approval. 

These are the essential measures you’ll want to undertake in order to obtain a business loan:  

  1. Determine that a small business loan is important for you.
  2. Evaluate how much debt you can afford.
  3. Compare the options for your loan.
  4. Gather loan documents and paperwork.
  5. Submit your request for your loan.

In Summary

You may want to note that banks and SBA loans will demand the most paperwork and the highest qualifications, but will also provide the most attractive rates and conditions. On the other side, alternative lenders may have faster screening procedures and more lenient qualifications, but typically their loans will have shorter terms, smaller sums, and higher interest rates.  Though ultimately the specific qualifications you need to meet will vary from lender to lender, the more you know about the general framework of business loans and the application process, the better position you will be in to successfully navigate the process and receive a loan.

Many small businesses are not familiar with the distinction between bookkeeping and accounting. There are some significant differences, though, and knowing what they are will allow you to employ the best of each to aid your business. It will also allow you to properly set your expectations for what each can contribute.

Which Do You Need for Your Small Business?

Many small businesses are not familiar with the distinction between bookkeeping and accounting. There are some significant differences, though, and knowing what they are will allow you to employ the best of each to aid your business. It will also allow you to properly set your expectations for what each can contribute.

So, what are the differences?

Many people use the terms Accounting and Bookkeeping interchangeably. That is not completely incorrect, but there are some important distinctions. Bookkeepers do just what their name implies, they keep the books–they pay invoices, collect receivables and receipts, make deposits, and more. Whereas an accountant’s function is less about the day to day balance sheets, and more about the overall financial health of the company–performing audits, producing financial reports, optimizing revenue and reducing expenses, and advising management on financial matters.

Bookkeepers typically manage the daily financial transactions (accounts receivable and payable management (invoicing), bank reconciliations, expenses and petty cash management, production of financial statements (including cash flow, income statement, and balance sheet), payroll processing, and are in charge of preparing the accounts, and producing preliminary accounts at the end of the month). Skilled bookkeepers will usually advise clients on record keeping requirements and methods, cash flow forecasting management and general record keeping.

Accountants generally have a broader purview than bookkeepers, they take more of a consulting position with business owners. Accountants use the financial statements created by the bookkeeper to provide  financial statements and reports that are required by banks and governmental agencies. They additionally provide monthly or quarterly insight into the health of the business. Accountants will use the financial statements prepared by the bookkeeper to provide insight into the company and create plans to help their client grow their business. CPA are certified public accountants, that are regulated by their state board accountancy. They are required to meet the annual minimum educational and experience requirements, which ensures they stay informed on the new laws and regulations. Accountants will also verify the accuracy and completeness of the accounting records, income tax planning, and offer advice on tax law, entity structure, and key financial decisions.

To be able to completely represent their clients, accountants and bookkeepers typically work closely together.

The shifting of roles between bookkeeping and accounting

As innovation has changed the way we operate, we have likewise seen a shift in the bookkeeping and accounting industry. Automation has significantly simplified the bookkeeping functions inside accounting software.This has liberated bookkeepers from much of the conventional work of data entry, enabling them to move into more of an advisory role.

Bookkeepers are now spending more time training on a range of solutions, growing the choices for accounting resources and other financial applications at a fast pace. Their aim is to be able to recommend the right “technology stack” for the varying needs of their customers. In addition to calling themselves bookkeepers, many bookkeepers now refer to themselves as “technology experts.” 

Accountants are taking innovative approaches to serve their consumers as well. Tax resolution has become a common subject for many accountants as the tax system becomes more complex and sophisticated. Often, being that accountants are generally well versed in the personal financial condition of their consumers as well as their company, some become tax coaches and qualified financial planners. These fields of specialization help accountants to provide their customers with advanced business tax plans, so that customers can hold on to more of their hard-earned dollars.

So how do bookkeeping and accounting overlap?

Both bookkeepers and accountants offer their clients strategic advice. 

A bookkeeper may tell you how to streamline the accounting processes or help you build a company budget, while an accountant may recommend ways to reduce your tax liability or help you determine whether to integrate your company. Bookkeepers support clients with the particulars of day-to-day business activities, while the accountant or CPA is broader and more focused on big picture goals.

Some jurisdictions have started to limit who can label themselves an accountant as the distinction between bookkeeping vs. accounting has become less clear. In certain states, in order to refer to themselves as accountants, a person has to be a CPA (certified public accountant). In certain jurisdictions, though, the word “accountant” or “accounting” needs no training or credential. Thus, it is necessary to ask the provider of financial services what positions they can fill for you.

Still struggling to understand the difference between what the job of an account is vs. a bookkeeper?

Let us break it down and look at the roles they each play in the financial year:

Income/Accounts Receivable:
The client makes his or her own calculations and invoices, then collects refunds against those invoices. In their accounting scheme, the bookkeeper balances the accounts, so that the business records accurately reflect the bank balance at the end of the month. 

Expenses/Accounts Payable:
A cash flow program may be used by the bookkeeper to handle all vendor payments of an organization. When the vendors email or fax their bills directly to the client’s account, the bookkeeper is notified and then assigns the correct vendor, expense category, and client as an approver.

The client gets informed, then checks the vendor bill and accepts it for payment. Then, the bookkeeper pays the vendor bill, which syncs the bill and bill payment to their accounting program. As they do for withdrawals, the bookkeeper will  match the income and receivables with the bank statements.

Accounts Reconciliation:
Bookkeepers match purchases in their accounting tools against transactions flowing in from the bank feed as the month goes forward. For transactions created outside their accounting software (such as debit transactions, miscellaneous checks, and credit card transactions), bookkeepers add them by assigning payees and/or cost categories as they come in from the bank feed. Bookkeepers collect the customer’s bank / credit card receipts at the end of the month and reconcile each record

Throughout the Year:
To ensure that all expected payments are to be charged, the accountant may check interim financial statements periodically. They can make monthly or quarterly depreciation changes or pay out any prepaid liabilities, such as insurance. In addition , in some cases, they could provide verified financial records

Year-End:
Bookkeepers may aid with processing 1099s for contractors towards the end of the year, because if the customer has payroll, bookkeepers can ensure that all the quarterly returns tie up to the W-2s to support the customer plan and issue W-2s. Bookkeepers collaborate alongside the accountant / tax preparer to guarantee that they provide all the documents they need from the corporation of the customer to prepare the annual reports. The CPA schedules the returns, and they can join them at this point if they have not undergone any changes in the year. They would also assess the total fees that the consumer has to spend in the next year and offer all other tax preparation suggestions.

Does your small business need an accountant or bookkeeper?

Any small business should, as soon as they plan to open their business, work with a trained accountant.

Hiring a good accountant will help a small business owner settle on the proper corporate entity, understand the criteria for tax reporting, and give financial guidance to increase income or mitigate their tax liability.

So do you need a bookkeeper or an accountant for your small business?

Many small business owners struggle to understand the responsibilities of an accountant and bookkeeper and will just have them both. However, when starting a business the owner can efficiently fill the role of a bookkeeper and consider hiring a bookkeeper as the business grows. The bookkeeper compiles the financial data, and manages the day to day transactions, and looks out for changes or financial events that need to be addressed. At the start of your business you will probably be able to do it yourself, considering that your business is still new and small, this will make sure that you understand the financial processes and operations of your business.

However, it is vital to consult with an accountant, especially at the start of your business. This may seem costly at the start of your business, but look at it as investing in good advice, this can be very valuable in the early days, and save you time, energy and money in the long run. This will help you understand your financial structure and responsibilities for your business. They will also help you pick out the correct corporate structure for your business. Also, when filing taxes it is important that you have them reviewed by an accountant, they will ensure that you are filing correctly and not overpaying. It is best when starting a company to be on top of your financials, and doing the bookkeeping for your business will help you achieve that. If you have any questions regarding the financial data you collected an accountant can help you make sense of it, and provide recommendations.

In Summary

When you have a complete understanding of your accounts, it enables your business to perform well, and bookkeepers and accountants each look at the figures of an organization from different perspectives. The advice of both a bookkeeper and an accountant will ensure that you get the right advice for your business. You get a balanced view of your finances from the viewpoints of each, which helps to put your mind at ease and devote your energy to do what you enjoy, operating your company.

There is a form of business loan called equipment financing, primarily for the purpose of buying new or used equipment such as automobiles, machinery, or technology. You will obtain loans for products comparable to up to 100% of the price of the equipment you are trying to acquire. Over time, these loans are then paid back with interest.

There is a form of business loan called equipment financing, primarily for the purpose of buying new or used equipment such as automobiles, machinery, or technology. You will obtain loans for products comparable to up to 100% of the price of the equipment you are trying to acquire. Over time, these loans are then paid back with interest.

The financing of business equipment, comparable to invoice financing, is a type of asset-based financing in which the equipment itself functions as security for the loan. For this purpose, lending for machinery is also cheaper than other forms of small business loans to apply for. For entrepreneurs, or firms with mediocre or low credit ratings, equipment loans may be perfect choices along these lines.

So how does equipment financing work?

Usually, the financing of machinery performs similarly to a business term loan. For the purpose of buying fresh or used business supplies, you take out a loan and pay it with fixed payments back over a set period of time.

As we mentioned above, the amount of money you may receive can equal up to 100% of the value of the equipment you are trying to acquire. Although the amount can differ, based on the quality and nature of the equipment, as well as the lender and your company credentials. Business equipment financing is a type of asset-based financing, implying that the equipment itself is used to back up or secure the loan. Generally speaking, this suggests that you may not have to offer up additional collateral and you will not be required tto sign a personal guarantee.

However you will be expected to have a down payment of 10% to 25% of the equipment funded by you. The higher your down payment, the lower the interest rates you are likely to receive. Overall, equipment financing rates will typically vary from 4% to 40%, depending, of course, on the lender, the qualifications of your company, and the equipment you are buying. Keeping this in mind, the terms of repayment on financing equipment are normally five or six years, but certain lenders may provide longer terms, up to 10 years. In addition, some lenders will focus the repayment conditions on the equipment’s projected lifespan, but they are also entitled to claim their loss if you default on the loan and they have the ability to seize the equipment and liquidate, or sell, it.

Equipment Financing vs. Equipment Leasing

It is important to distinguish the difference between equipment financing and equipment leasing in order to understand how equipment financing works. While there are some subtle differences between the two, the primary differentiation is that you own the equipment at the end of your repayment period with an equipment loan. With equipment leasing, on the other hand, at the end of the term, you do not own the equipment. Alternatively, you have the option to purchase the machinery directly, or enter into a new lease for the machinery you need, similar to leasing a car. Generally, in the long run, equipment leasing is more costly than equipment financing.

Pros and Cons of Business Equipment Financing

When it comes to it there is no question that equipment finance is a great choice if you are searching for funds to buy equipment for your business. This method of finance will also provide the most ideal rates and requirements for equipment-specific financing. However, equipment financing might not necessarily be the perfect option for every business and circumstance. We will go through all the pros and cons of equipment financing in order to help you decide whether it is right for your needs or not.

PROS

  • Fast funding for equipment purchases: Although it can take weeks or months to finance certain other forms of business loans (such as bank and SBA loans), equipment loans are usually considered a very quick method of financing.
  • Equipment itself functions as debt collateral: One of the greatest advantages of loans for equipment is that they are self-collateralizing. Therefore the machinery itself secures the debt instead of needing to offer up real estate or other commercial properties as leverage. In addition, you will also be able to negotiate with the provider to avoid signing a personal pledge on the loan since the machinery itself acts as collateral.
  • Easier criteria for qualification: relative to other forms of business loans, machinery finance is far easier to qualify for. This is why loans for machinery are a perfect choice for start-ups or firms with poor credit score. Generally, since the machinery secures the debt, lenders are also able to partner for firms with lower credentials, rendering it less expensive for lenders owing to the self-securing aspect of business equipment lending. In addition, most machinery lenders submit to company credit bureaus your payment background, and ensuring on-time payments can boost your credit history and make it easier for you to apply for more loans in the future, which is especially useful for newer firms and firms with bad credit.
  • Affordable interest rates: Machinery funding rates usually vary from 4% to 40%. Even Though the interest rates do vary, they are generally affordable. You can earn rates that are comparable to bank or SBA loans if you slip into the lower end of the interest rate spectrum. In addition, by having the Section 179 corporation tax deduction, you will be able to save more money on the expense of your supplies and your income.
  • Limited documents and fast application process: funding of business machinery is accessible from both banks and alternative lenders. As you would imagine, there would be the quickest and more streamlined processes for new internet lenders, but in general, applying for equipment financing is a quick and easy procedure. Again since lenders are not as concerned with the credentials of your company, you would typically find minimal criteria for paperwork, especially relative to other forms of financing.

CONS

  • By the time the loan is fully repaid, equipment could be obsolete: Simply the biggest downside to business equipment financing is that by the time you have repaid the loan and you own the equipment, the equipment could be outdated or obsolete. This is one of the explanations why as we described above, certain business owners opt for machinery leasing instead of financing. Furthermore, it is important to remember that you do not own the machinery until you have paid off the loan.
  • A down payment may be required: In some cases, you will need to put down 10% to 25% of the value of the equipment to access funding. It may be more difficult for you to get equipment financing if your company does not have the money required for the down payment. If your down payment just meets the criteria of what is required, this might increase your interest rates.
  • Applicable only to companies that need to buy equipment: equipment loans are of course, a very specific type of financing that meets a very specific need. Therefore you will have to explore your other options if you need financing for another business purpose.

Equipment Loans for Startups

For several start-up firms, equipment finance, as we have described, is a worthwhile choice, as these loans are simpler to apply for relative to other forms of business loans. Again in order to be eligible to obtain equipment loans, with the equipment acting as collateral on the loan, you do not actually require several years in company or excellent finances.

Of course, for all of these loans, it is necessary to note that you are more likely to encounter higher interest rates relative to older firms. However, that being said, the stronger your company’s financial statements are the more freedom you would have to negotiate with the investor as a start-up to access the most ideal costs and terms.

Who Qualifies for Equipment Financing?

Many organizations may qualify for machinery finance loans. How much you qualify for and the interest rate you would pay depends on the size of the equipment, the financial background of the company, and your credit score. However, if the credit record is less than stellar, equipment finance may be an amazing choice, as the equipment serves as collateral.

In reality, lenders of equipment are only as concerned about what is securing their loan as with your history of borrowing. So if you are looking to spend your small business equipment loan in a high-value (and value-retaining) piece of equipment, then equipment lenders might be able to partner with you even if your finances are not flawless.

How To Get Financing for Equipment

So if you think one of these top loan choices for equipment could be right for your business, you might be wondering how to actually get the funding you need.

So if you think one of these top loan choices for equipment could be right for your business, you might be wondering how to actually get the funding you need.

Find the equipment you would like to buy: Identifying and selecting the piece of equipment you would like to buy is the first prerequisite for getting equipment financing. Many lenders will request that you give an equipment quote in the application form, as well as information regarding the equipment and its state. It is important to know as much as possible about the equipment you want to purchase.
Test your qualifications: You will be able to start looking at your choices and deciding where you would be able to apply after you have completed the required homework on the equipment you will like to buy.

As seen above, the basic conditions you would need to fulfill to apply for the funding of business equipment will differ depending on the provider, but criteria (annual salary, period in business, credit score) would normally be far more versatile relative to other forms of loans. However, with this in mind, the stronger your financial statements are, the more likely you would be to access the most ideal rates and conditions.

Complete your application: Eventually, you will be able to plan and apply your loan application after you have assessed your credentials and qualifications and then you can decide which lenders are the right choices for your firm.

Usually, very simply and conveniently, you would be able to complete your machinery loan application online. Financing of machinery typically requires limited paperwork and a simplified method of application. However, this being said you should expect to provide any if not any of the following:

  • Driver’s license
  • Voided business check
  • Bank statements
  • Credit score
  • Business tax returns
  • Equipment quote

Online lenders will typically process and finance applications for business equipment funding in only a few days, often quicker. On the other side, if you qualify for a machinery loan from a branch, you will typically have a longer period to finance it.

Undoubtedly, you will want to review options with different lenders and guarantee that you receive the strongest, most favorable rate for your company before you sign an equipment loan agreement and enter the closing process.

In Summary

Equipment finance is a perfect option for financing sales of company equipment. Although some forms of loans may be used to fund these transactions, equipment-specific lending mostly comes with competitive rates, adjustable conditions, and rapid financing periods. In addition, equipment loans are far more available to start-ups and companies with poor credit as a self-collateralizing source of funding.

However, that being said, equipment finance would not be correct for any company especially if you are a highly qualified company who can reach much lower rates through a long-term bank or SBA loan. Ultimately, however, to find what is right fit your business needs, you will want to take the time to analyze and evaluate all of your business loan choices.