Next Day Funding And Your Business

Next day funding is a credit card processing feature that sees the funds from a merchant’s sales hit their bank account in a single business day.  If you’re currently taking credit card payments, you’re probably used to waiting at least two business days to access your funds. Next day funding eliminates that wait. It shortens the payout process by anywhere from a couple of days to as much as almost a week, and helps you generate healthier cash flow, better emergency resilience, and much more.

How Merchant Funding Normally Works

Whether you’re selling in-store or online, your sales don’t actually go into the credit card processor one at a time. Instead, the approved transactions build up throughout the day, and then once or twice a day (depending on how many sales you make on average), all the transactions are “batched” – sent to the processor all at once, in a bundle,  to be settled.

With the transactions off to the processor, the settlement process begins. Settlement involves each transaction going to the customer’s card issuing bank, which then releases the funds from the customer’s account and sends them to the payment processor for disbursement. While transaction approval is near-instantaneous, settlement is not, and can easily take a day or more. 

To account for the time the settlement process takes and the risk involved in paying out merchants, credit card processing companies impose a waiting period – known in the industry as a “standard hold” – on every payout. Standard holds generally last for two to three business days, and provide the processor with a safety net that ensures they don’t end up on the hook for fraudulent transactions or refused refunds from fly-by-night merchants. 

Unfortunately, the standard hold means the vast majority of merchants have to wait at least two business days to see the money from a sale hit their account. That’s an annoyance for all businesses, but it can be a big issue if you’re doing heavy business on Friday nights or over the weekend because it could mean a wait of five calendar days before funds finally arrive.

Standard Hold Funding Example:

Monday, 6 PM EST: You batch the day’s transactions, and your three-business-day standard hold timer begins. 

Tuesday: Hold applies.

Wednesday: Hold applies.

Thursday: Hold applies.

Friday, 8 AM EST: The funds from your sales finally reach your merchant account and become useful.

How Next Day Funding Works

With next day funding, the standard hold is eliminated, and you get access to the money from sales the morning of the next business day. It’s a much faster, much more beneficial system (for merchants) than the standard hold funding model.

To be clear, transaction settlement doesn’t happen any faster in the background. And the risks credit card processing companies face around fraud, chargebacks, and refunds don’t go away. Instead, processors advance the money to you early and accept the risks that come along with that. Why? Because next day funding is an extremely valuable feature that helps payment processors compete and bring in new business. In credit card processing, merchants with next day funding are happier clients, which means they’re also more loyal, and being able to recruit and keep more high-quality merchants is the key to any processor’s success. So, some extra risk is often worth it if it means a processor can bring in more top merchants.

There is one caveat to the “next day” part of next day funding: you need to batch your transactions by a specific cutoff time each day in order to access the funds the following morning. Any funds batched after the cutoff time aren’t available the following business day, but one business day after that – still faster than many standard holds.  

Next Day Funding Example:

Monday, 6 PM EST: You batch the day’s transactions before their 7 PM EST cutoff time.

Tuesday, 8 AM EST: The funds from your sales reach your merchant account and are ready to use immediately. 

Why Next Day Funding is So Important for Your Business

Your funds belong in your bank account, and next day funding helps them get there quicker. But, beyond just feeling good about having access to your funds faster, next day funding offers some significant benefits to your business and operations. Most importantly, it provides you with more consistent access to liquid cash, improving your cash flow and, in turn, the health of your company’s finances. That faster access to cash enables you to do a lot of things better, from planning short-term staffing to weathering emergencies to ensuring your vendors are always paid on time, and more.

Eligibility for Next Day Funding

Because processors offering next day funding are fronting the money to the merchant and accepting the risk involved in that, they don’t offer it to every merchant. Brand new merchants, merchants in high-risk sectors like cannabis or gambling, and merchants with any issues with chargebacks or fraud are likely to find themselves ineligible. But if your business has a strong operating history and no prior processing issues, next day funding may be available.

Next Day Funding with BAMS Credit Card Processing

BAMS offers next day funding to more of our merchants than our competitors, and we also offer a 9 PM EST cutoff time – one of the latest in the processing industry. As a result, it’ll be easier for you to batch your transactions on time. With BAMS next day funding, any transactions batched by 9 PM EST will be available in your merchant account by 7 AM EST the following business day – as little as ten hours later. 

To find out more about BAMS merchant accounts, our next day funding, or our guaranteed competitive pricing, reach out to a member of the team or start your free five-point price comparison today.