American Express Merchant Financing Review
- Short-term loans
- Settlement advances
- Working capital loans
- Fast application process
- Low rates and fees
- No origination fee
- Excellent customer service
Founded in 2011, American Express Merchant Financing is Amex’s contribution to the world of online lending. The company offers term loans with lengths of one- or two-years and settlement advances that are dispersed and repaid on a monthly basis.
Although technically Amex offers loans, these loans are structured similarly to merchant cash advances (MCA). Instead of charging interest, Amex charges a “flax, fixed fee,” which means that your total payback amount will be determined before you borrow the funds. To repay, Amex normally collects the principal and the fee by taking a percentage of your credit and debit card sales.
Of course, the biggest difference between Amex and an MCA is that the former tends to be much less expensive. While cash advances notoriously have fees that range from $0.10 – $0.60 per dollar borrowed, Amex’s fees normally land somewhere between $0.06 and $0.26 per dollar. Although technically you can’t calculate an APR on this product, the APR on an equivalent loan would be somewhere between 11% and 27%.
Amex Merchant Financing is available for most businesses that have been in operation for at least two years, make at least $50K in annual revenue and, of course, accept Amex cards. Due to the necessity of daily repayments it’s doubtful that this lender will accept businesses that don’t have a steady cash flow. Seasonal businesses, or those with cash flows that fluctuate greatly, might want to look elsewhere.
For everybody else, however, Amex Merchant Financing is certainly a source of working capital worth considering. Read on for the details!
American Express offers settlement advances and short-term loans.
These are the minimum requirements to get a loan from Amex:
|Time in business:||2 years|
|Business revenue:||$50K/year (with at least $12K/year in debit/credit card sales)|
To be eligible for this service, you must accept Amex cards, and your business cannot be on the company’s list of restricted businesses. Additionally, if you’re interested in two-year financing, you must have a minimum 24-month history processing this company’s cards.
Terms and Fees
|Borrowing amount:||$10K – $1M|
|Term length:||1 year|
|Factor rate:||x1.005 – x1.0067 per month|
|APR range:|| Approx. 11% – 16%|
Amex’s settlement advance is intended to help businesses manage cash flow on a monthly basis. Each month, Amex will disperse a certain amount of money, and you’ll have to repay the principal plus a fee over the course of the month.
Amex’s fees are calculated by multiplying the factor rate by the principal. For example, if you received $5,000 and your rate was x1.005 per month, you would have to repay $5,025 ($5,000 x 1.005 = $5,025). On an annual basis, you’re looking at a rate between x1.06 and x1.08, or an effective APR of between about 11% and 16%.
The agreement is for a year in length. It will be automatically renewed at the end of the year, but can be canceled by either party at any time without penalty.
Repayment for settlement advances can happen one of two ways:
- Amex can deduct a percentage of your Amex card transactions until the capital is repaid. For example, the company can deduct 25% of each transaction until they’ve collected the principal and the fee.
- The company can create a bank account for your business that Amex has access to. This way, they can deduct a percentage of all your debit and credit card sales, before sending the rest of the money to your regular business bank account. This type of repayment is called lock box withholding.
One- or Two-Year Financing
|Borrowing amount:||$5K – $2M|
|Term length:||1 or 2 years|
|Factor rate:||x1.06 – x1.28|
|APR range:||Approx. 11% – 27%|
|Collateral:||Personal guarantee for loans under $50K|
These are term loans with a repayment length of either one or two years. The one-year loans carry a factor rate between x1.06 and x1.14 of your loan amount, and the two-year loans carry a rate between x1.12 and x1.28. The effective APR for both loans will be somewhere between 11% and 27%.
Because the fee is only calculated once, normally you wouldn’t be able to save money by repaying early. However, Amex offers prepayment discounts depending upon how early you repay the loan:
- If you repay within 180 days (for the one-year loan) or 360 days (for the two-year loan), you will get a 25% rebate of the remaining balance.
- If you repay within 270 days (for the one-year loan) or 540 days (for the two-year loan), you will get a 10% rebate of the remaining balance.
Much like the settlement advances, there are many different ways to repay Amex’s term loans:
- Amex can set up a lock box. All of your credit card transactions will be deposited into a bank account controlled by Amex; every day, they’ll deduct a certain percentage of your profits, and send the remainder to your business’s bank account.
- Amex can partner with your payments processor. When your processor receives a credit card transaction, they’ll deduct a percentage to send to Amex, along with all the usual transaction fees, before routing the rest on to you.
- Amex can deduct a percentage of all your Amex card transactions. This option is only available for loans above $35K.
- Amex can withdraw a fixed about of money from your business bank account each day via ACH. This option is only available to businesses with one-year loans below $150K.
The application process begins online. Amex will request information such as financial statements, business tax ID, and personal information. Once they’ve made sure your business is eligible, a representative will contact you to discuss your financing options and gather more information about your financial situation and what sort of loan you’re looking for.
If you’re approved for a loan, the funds could be available as soon as the next business day. However, availability is dependent upon other arrangements Amex has to make, such as talking to your credit card processor or setting up a bank account for funds transfer. Regardless, funding should not take more than a few business days.
Sales and Advertising Transparency
Amex provides all the important information up-front on their website. You should have a pretty good understanding of how the whole thing works before you decide whether or not to apply for a loan.
Customer Service and Technical Support
American Express is available by phone. Businesses working with Amex are assigned a single representative who remains their contact throughout the life of the loan.
While I’ve found very few reviewers responding specifically to how customer service reps handle financing questions and concerns, Amex’s customer service as a whole has a very positive reputation on the web.
Negative Reviews and Complaints
Between the rather vague name and the 2,600+ complaints on Amex’s BBB page, I was unable to find a whole lot of poor reviews on the company’s funding service. However, here are the reasons this service may not work for your business.
- Short term lengths: The longest term length Amex offers is two years. Because you are going to have to repay the capital relatively quickly, these loans will probably not work for long-term projects.
- Financial history requirements: Amex requires a much more extensive financial history than other alternate lenders. For a one-year loan, you need to provide a year’s worth of financial statements. For a two-year loan, you need two years worth. While tracking down the documentation might be annoying, be aware that the more detailed the documentation you have to provide, the less the loan normally costs.
- Changing withholding limits: If you fall behind on your payments, Amex will up the withholding limit, even all the way up to 100%, until you get back on track. While this may be frustrating, Amex fully discloses this information on the website.
Positive Reviews and Testimonials
Amex has a few customer testimonials on the funding page of their website. Here is what they like about Amex Merchant Financing:
- Competitive fees: Amex’s fees are some of the lowest in the short-term lending space. Additionally, this is one the few lenders that does not charge an origination fee.
- Automatic repayments: No checks? No problem!
- Online tracking: Track how much you’ve paid off, and how much you still have left to go.
- Reimbursements: With a possible 25% reimbursement if you pay your loan off early enough, Amex’s early repayments deal is certainly the best that I’ve seen.
I was unable to find other positive reviews of this service on the web. If you have any experiences with American Express Merchant Financing, we’d love to hear from you. Good experience or bad? Leave a message in the comments!
As a whole, Amex’s Merchant Financing carries reasonable fees and easy repayments. With effective APRs between 11% and 27%, their rates are comparable to (or better than) most of their peers.
Some businesses might find that they want longer term lengths or fixed monthly repayments. If that describes you, Amex isn’t your only financing option; there are plenty of other lenders that might have what you’re looking for. Otherwise, Amex Merchant Financing is an excellent source for businesses in need of working capital.