Since American Express small business loans come with benefits that you may not find elsewhere, they are certainly worth considering. In this blog post, we'll explain what you can expect if you choose to pursue this type of business loan.
What is American Express Merchant Financing?
While American Express small business loans fall under a category known as American Express Merchant Financing, they are not merchant cash advances.
With a merchant cash advance, you receive lump sum funding in exchange for a percentage of your future credit card sales. The American Express Merchant Financing program is different as it offers
unsecured business loans. These include short-term loans and settlement advance loans.
American Express Loan Terms and Amounts
If you opt for
American Express Merchant Financing, you can choose from a one or two-year loan term. The one-year loan comes with a loan amount that ranges from $5,000 to $2 million and is based on how much your business earns through credit card and debit card purchases. The two-year loan terms start at $36,000 and go all the way up to $2 million.
No matter which term you choose, you’ll receive the funds upfront in one lump sum. It’s important to note that if you’d like a revolving line of credit, you'll need to seek another financial provider as American Express
business lines of credit aren't currently available.
American Express Loan Fees
You may be surprised to learn that there are no interest rates with American Express small business loans. Instead of paying interest, you’ll pay a fixed fee when you take out the loan. The fee may be between 6% and 14% with the one-year term loan.
For the two-year loan term, it can range from 12% to 14%. Before you sign on the dotted line, it’s a good idea to do the math and figure out the total cost of the loan with the fee. Like with any financial product, reading the terms of service is key before securing an American Express business loan.
How to Repay American Express Small Business Loans
In order to repay your American Express small business loan, you'll use your business's credit and debit card receivables.
To do so, American Express may set up a lockbox so that all of your card transactions get deposited into a special bank account. The card issuer will then deduct a certain percentage of your profits on a daily basis.
Your payment processor may also help you repay your loan. They can deduct a percentage of each transaction and send it to American Express. After they do, they’ll distribute the remainder of your profits to your business bank account. If your business loan exceeds $35,000, American Express may deduct a percentage of all of your American Express transactions.
Last but not least, they may withdraw a fixed amount from your account daily through ACH. This repayment method, however, is only available if you go with a one-year loan that’s less than $150,000.
American Express Working Capital Loans
If you need some cash to cover your day-to-day expenses, rather than long-term business assets, an American Express
working capital loan can help. With an American Express working capital loan, you’ll select a vendor. Then, you’ll repay American Express based on the terms in your contract. You won’t receive the funds because American Express will pay your vendor directly.
American Express working capital loans range from $1,000 to $750,000 and terms of 30, 60, or 90 days.
Just like the previous small business loan options we discussed, there are no interest charges. Instead, you’ll pay a fixed fee for this business loan. American Express may auto-debit your repayment amount at the end of the term or you may pay the money back as you go.
American Express Small Business Loan Qualifications
To get approved for an American Express small business loan, you must accept
American Express credit cards or use them for your small business. You should also earn at least $50,000 in annual revenue and a minimum of $12,000 in card receivables.
In addition, you must prove that your business has been around for at least 24 months. Unfortunately, you won’t qualify if you run a business in an industry such as insurance, ticket sales, and adult entertainment.
American Express Small Business Loan Application Process
It’s relatively fast and easy to apply for an American Express small business loan. If you believe you meet the card issuer’s requirements, you can apply online on their website. Just make sure you have your tax returns, bank statements, and monthly credit card processor statements handy.
Conclusion: Meet Your Business Goals with an American Express Business Loan
An American Express business loan can help you meet a variety of business goals. As long as you qualify, it should definitely be on your radar. Depending on your situation, you can get approved quickly and receive the money the very next business day.
Be sure to look into all the American Express loan options available to you and weigh the pros and cons of each. This way you can make an informed decision. American Express business cards are also a viable option for small business owners.
Of course, other lenders provide small business loans as well. At Fora Financial, we provide flexible financing options to small business owners nationwide.