Credit Card Company Financing that Doesn’t Max Out Your Card

    By | Small Business

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    Todd Warner refinanced his house and took friends-and-family loans to open his first Tailwaggers pet supply store in Los Angeles’s Hollywood Hills neighborhood 12 years ago.

    The former Aaron Spelling television show editor had dreamed of a career change that would get him out of dark, windowless production studios, and, even better, keep him connected to his animal rescue advocacy work. So when a retail shop vacancy opened up in a little market near his home, he jumped at the chance to open a pet store. “I love animals and thought it would give me an opportunity to host adoption and rescue events,” he says. “I saved up and sought additional money and loans everywhere I could.”

    In the following years, Warner also self-funded a pet grooming salon and a second retail location. Then he discovered “merchant financing” and used it to fund a 2012 expansion of his first store.

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    He has since come to rely on Merchant Financing from American Express to manage his business. “I use it every month like clockwork to get in on product specials and deals at the beginning of month”–when his cash is tied up making payroll. The financing, he says, enables him to buy larger quantities of products at once to get better rates. And he pays back the loan in full each month through transactions.

    Ed Jay oversees the Merchant Financing Program that American Express launched in 2011 to fill the gap left by banks that had backed off from small business lending during the recession. Jay says the program provided almost $1 billion in loans in 2014 to help small and midsize businesses run and grow their businesses. Currently, he says, the program provides loans as large as $2 million to fill the gap between traditional bank loans and alternative online lender financing.

    Applications can be processed online, fees are low, and paybacks are automatic through a merchant’s receivables. Jay says the financing program works with businesses that accept American Express cards, have been accepting credit cards for at least two years, and have at least $50,000 in annual card receivables. “When we have a lot of information on how a business is performing, that lets us make better decisions with less paper work,” he says. “Is this person able to pay back their loans? We can see how the business has been performing over last few years and make a decision about supplying loan to this merchant. It cuts down on paperwork and the time frame.”

    Warner says that what he saves by being able to purchasing inventory in bulk early more than makes up for the $100 monthly financing fee that American Express charges him. “It’s like getting a fresh loan at the beginning of every month and paying it back at end,” he says. Warner calls the service “a lifesaver” at times when everything is hitting his business at once and says the process is “much easier than taking a loan or line of credit from a bank.”

    He explains, “I already had a relationship with American Express as a merchant, so they already had a history of my sales. They know what kind of business I do. It was a very easy application and less than 30 days to set up.”

    Now, he says, “I don’t have to think about. It just kind of happens, it’s always being paid, I always have money left over, it’s an easy way to get money up front.”

    Warner says the cash also comes in handy for emergency repairs. “One time our grooming shop suffered damage to a salon area. I remember thinking, ‘I don’t have the money in the bank to pay for this.’ I was going to have to shut down one of our grooming stations, then I realized I had the financing coming in three days and I could make the repairs right away. That kept us up and running and we were able to do the repairs without interruption to our business.”

    Today, Warner is undertaking another expansion. “Because our business has grown, the financing amount available from American Express has grown,” he says. “It grows with your business. So I’m hoping to open up another retail store and expand into daycare as well.”

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