The amount of money you withdraw via your payment system will directly impact the success of your business.

Due to payment processing, small businesses face numerous challenges, but dealing with that challenge helps turn a profit. Any time you can decrease expenses or increase revenue, it’s good for your bottom line. Here are seven ways you can do both:

1. Do Your Research

Before selecting a payment system, do some research on your options and what will work best for your business. The Federal Reserve Payment Study offers an incredible amount of information, including details on the average costs merchants pay to accept debit and credit cards. 

This will help you gain a better understanding of the industry standard for merchant fees.

2. Know Your Federal Reserve Rules

The Federal Reserve mandates which merchants can be charged, how much they can be taxed and when they can charge those prices. Merchants who disregard these rules could find themselves severely constrained or completely cut off from payment processing services. For instance, if your business accepts credit cards and you charge more than what the Federal Reserve requires, your processors will likely cut you off. However, even if merchants do follow these rules, they may still be charged higher prices by their processing banks. 

Consumer protection laws also protect cardholders who plan to make purchases with a debit or credit card. If a merchant is charging an excessive fee, the cardholder can dispute it.

3. Shop Around For The Best Rates

Once you’ve decided which payment system(s) is best for your business, you can begin shopping around for the best rates. Most processing companies have a long history of working with businesses just like yours and will offer competitive rates. Getting quotes from two or three different processors should be more than enough to find a deal that’s right for you.

4. Make The Most Of Fees

The fees a processing bank charges a merchant can be expensive, but there are ways you can save money. If your business accepts checks, for example, have the customer pay with a company check. This cuts down on costs associated with processing paper checks and cuts out any risk of bounced payments. Most processors will pass these savings onto their customers.  

5. Offer Discounts For Fast Payment

Your customers typically have 30 days to pay their bills after purchase, so you can set up your payment system to offer discounts for faster payments. This will encourage customers to get the bill delivered sooner and help you get paid faster to collect more revenue on time.

6. Encourage Customers To Pay With Debit

Not all customers carry a credit card, but virtually everyone has a debit card. Encourage your customers to pay with their own money by offering incentives for quick payment or discounts for debit payments. When funds are pulled from a customer’s bank account, it saves processing fees and ensures greater control.

7. Offer A Monthly Payment Plan

Accepting credit cards is difficult for some business owners because their customers can’t pay until they’ve received their monthly statement. Offering a monthly payment plan may be the solution you’re looking for. Processing banks can set up automatic payments that are deducted from your customer’s bank account every month, which will save you time and allow you to receive funds more quickly. If your customer struggles to pay their bill in full, offering a monthly payment plan may be the solution.

Conclusion

The payment processing industry is competitive, and rates can change daily, so business owners must shop around and compare rates regularly. Letting customers know they will receive discounts for faster payments or offering incentives to pay with debit cards instead of credit cards will help keep costs low and maximize your profits.

From company to company, depending on its capital, what are the expectations from the funding and many other factors?

This quick guide can help you understand different types of Startup funding & give your business better insight into the details of each one of them.

Early Stage: Seed Funding

Startups with low capital looking for funding make use of this option. Often termed “Seed” funding, it is also called venture funds, angel investments and bootstrapping.

If you run a company in this sector, you’ll need to build a product or working model to enhance your chances of receiving funding for it.

No or minimal initial capital is required under this form of funding. Besides that, no major formalities are involved either. It is slowly gaining popularity among new businesses as many entrepreneurs believe that this funding type can help them save money on legal & administrative fees and other related costs.

This form of funding is provided by an individual or a group of people, usually called angel investors or seed accelerators. These individuals receive equity stakes in the business along with the founders.

Seed Funding

Seed Funding involves a lot of risks. Large or established Venture Capital funds do not get involved in this form of funding because it is more likely that the business fails due to being under-funded and hence less prepared for all the challenges out there.

This funding type follows a simple pattern: one party offers money to another party in exchange for some equity. It is often fixed as an interest rate. The other terms & conditions vary from business to business and the nature of the investment.

The first seed funding round happens early before starting up your own company or even developing a product/service prototype.

Series A

After completing the Seed Funding, if your startup can show growth potential and meet investors’ expectations, it is time for Series A.

Series A or Initial Public Offering (IPO) type of funding is provided by Venture Capital funds, Private Equity funds and Institutional Investors. This round can take a while to complete as it involves a lot of paperwork, negotiations & legal formalities.

At this stage, the company is expected to have an established product or a proven model that can be profitable for investors.

On the other hand, it should also have proved itself capable of meeting its financial obligations and should not require additional investments from seed funds or other parties.

Series B

Startups that are looking for funding after passing through an initial stage successfully make use of this option. Series B funding is provided by Venture Capital funds, Private Equity funds, Institutional Investors and angel investors.

A series B, the businesses have a proven track record, and they have been running successfully for quite some time now.

The companies looking for Series B funding are expected to have a clear plan for exponential growth, which will provide returns on investment to the investors and good profits.

Series C

After series B, startups move onto this round of funding to gain further capital and support from Venture Capital funds, Private Equity funds and Institutional Investors. This round is also termed as “growth or late-stage funding”.

Series C funding involves a lot of risk for the investors. This is the last major round of investment before an IPO (initial public offering), which means that if your company fails to get positive results in this round, it would be almost impossible to survive further rounds.

A Series C, companies are already generating good profits from their existing products and services. However, they have plans to expand their service/product offering in newer regions or countries to increase the market share of the company & get more investments for future expansion.

Conclusion:

Although each of these stages is an excellent platform for businesses to develop and expand, it is essential to remember that the majority of new firms fail after 3-5 years due to nonpayment of their financial obligations.

Apart from meeting all the needs required for survival, compa\nies should also aim at creating a huge pool of investors or funds under their wings to support the businesses in times of crisis.

Entrepreneurs must be ready for these stages since opportunities are not very common, especially at the early stages when your business has just started. If you have high ambitions & eventually want to expand globally, then accepting seed funding at an early stage will not be a clever idea.

Who are venture capitalists? 

And what do they want from startups?

The first question is easy – venture capitalists are investors who invest in private companies. They take a percentage of ownership in the company and help it grow by providing money, experience, and resources needed by growing startups.

Most early-stage investments are made through funds run by professional VCs. These people usually have at least ten years of experience working with startups, so when you’re talking to one of them (in the context of funding round), remember that you’re talking to someone who has a decade or two worth of advice they can share with you about how to succeed as a startup.

That should be motivating enough to impress VCs – if any of this sounds like “a challenge,” remember that VCs see thousands of startups a year, and they’re not just going to throw money at everyone.

If you impress them enough with your team, product, traction, and overall potential, it should be obvious why they would want to support your business. 

What Are The Things Venture Capitalists Look For In Startups?

Here are the most common points they consider:

1) Market Size and Growth Potential 

Venture capitalists want to invest in your idea only if they know there will be many people using the product. They need to see how much potential for growth you have and its size as well.

2) Business Model 

When starting a business, there are two types of models you can work with. You could start an online or offline business, and the choice is up to personal preference! However, investors might ask what you plan to do with their money once they provide funding for your company.

3) Team 

Having a good team is the most important thing for VCs. Teams that can execute what they intend to do are attractive to them, and those who can’t will have difficulty raising funds with their business plans. 

A track record of past successes is also an attractive factor for venture capitalists, but it doesn’t mean that you cannot get investments from VCs if you don’t have any success in your background. 

Rather, some investors take great interest in startups led by experienced entrepreneurs because they already have ideas about building a startup into a great company even without prior success records.

4) Competitive Advantage 

What makes your product different from others? Competitive advantage could be identified in various aspects such as business model, technology, or market factors.

5) Investor Track Record 

Investors with a good track record in the past are more attractive to VCs than new ones without any portfolio successes. New investors can still raise funds, but it is much more difficult because they don’t have an established reputation or know what makes these companies successful.

Last Thoughts

You should not be intimidated by the idea of competition because it is good for you. Investors will ultimately give more attention to companies with competitors, and if there are more startups, they’ll have higher valuations on average.

Therefore, do not spend too much time worrying about other startups because you will not delay the inevitable. Instead, build something great, focus on your product and show it to investors. 

Venture Capitalists are looking for opportunities to have that “big idea” breakthrough; however, it is sometimes better to solve a smaller problem with wider appeal. Chances of success might be slim, but the reward can also be great – and more likely than not, you’ll make your investors happy in return!.