Next-Day Funding: Is It Necessary for Your Business?

Next-day funding is a payment processing feature that makes the funds from a sale available in the merchant’s bank account in a single day. The uninitiated often assume that when they make a purchase with a debit or credit card at your business, the funds go directly into your account, but, as you know, that couldn’t be further from the truth. While the purchase approval is instant, it can take days for the payment to actually clear, with most payment processors imposing designed delays of two to three business days, known in the industry as standard holds. Avoiding those holds whenever possible should be a top priority, making it important that all merchants understand what next-day funding is, how it works, and how to get set up with it. 

How Next-Day Funding Works

Next-day funding waives the standard holds that traditionally delay deposits, instead giving merchants access to any funds that batch prior to a pre-set cutoff time by the morning of the following business day. However, that doesn’t mean that those batched transactions have actually completed the full clearing process. Instead, the merchant’s payment processor is essentially fronting them the money in a single day and then recouping it when the transactions fully clear. That means two things: one, that processors offering next-day funding are taking on extra risk, and two, their willingness to take on that risk means they truly understand the needs of their merchants. 

However, payment processors aren’t in the business of accepting additional risks for no good reason, and as a result, next-day funding is not something just any merchant can access. Instead, it’s a privilege extended to merchants with an established history of good business practices and problem-free payment processing. Unfortunately, that often means newer merchants or merchants that have had trouble with chargebacks or fraud may be excluded. But, if your business has been around and processing for a number of years without any issues, next-day funding stands to benefit you greatly. 

Why Your Business Needs Next-Day Funding

Next-day funding sees your money hit your bank account faster, and that’s never a bad thing. But, aside from feeling good, what specific benefits does next-day funding offer your business, and is it a need or just a nice to have?

Next-Day Funding Improves Your Cash Flow:

Next-day funding directly improves your cash flow by ensuring the revenues from your sales are as liquid as possible and not tied up in receivables or your processor’s holding accounts. Cash flow is arguably the most important financial aspect of day-to-day operations, and many businesses have suffered or even closed down despite solid sales due to being cash poor. If you can access next-day funding, you should, because anything you can do to shore up the health of your cash flow is worthwhile. 

Next-Day Funding Offers Peace of Mind: 

Emergencies are inevitable, but long stretches of time can pass between them, which can cause business owners to become complacent. However, when major emergencies do hit, you need to have a plan in place and the cash necessary to react and, if necessary, ride out the storm. Next-day funding can offer you extra peace of mind, knowing that, if an emergency does arise and your company finds itself short on cash, you won’t have to wait half a week or more for the money you need to keep your business afloat. 

Next-Day Funding Enables Better Planning:

Knowing you have a consistent flow of cash coming in without delay also makes planning easier. While it can help with planning for long-term capital spending, next-day funding is most beneficial when making shorter-term plans that impact daily operations. For instance, can your company afford to bring on additional temporary staff for busy periods? If your cash is locked up, that can be easier said than done. However, with next-day funding, you can make those kinds of short-term plans and decisions with a high level of confidence because your access to cash is both rapid and consistent.

Accessing Next-Day Funding

Assuming you qualify, accessing next-day funding is often as easy as getting in contact with your merchant services representative and inquiring about it. If your merchant provider doesn’t offer next-day funding (and many don’t), you’ll have to make the switch to a processor that does. In order to minimize headaches or the possibility of changing processors for nothing, it’s important to analyze your next-day funding options carefully and reach out to any potential processing partners specifically to discuss whether or not you’ll be eligible for their next-day funding services. 

BAMS offers next-day funding to many of our merchants, and our 9 PM EST cut-off time is one of the most generous in the industry. BAMS merchants also enjoy the guaranteed lowest transaction fees in the industry thanks to our fully transparent interchange-plus pricing model. 

To find out more about our next-day funding and the criteria your business will need to meet to qualify, reach out to a member of the BAMS team. You can also get started with a free five-point price comparison that will provide you with a comprehensive line-level breakdown of everywhere a BAMS merchant account will reduce your monthly bill.