Next-Day Funding in Ecommerce: How Faster Access to Funds Impacts Online Merchants

A lot goes into running a business, and while many merchants love their work, at the end of the day it’s all about the money. Unfortunately for many merchants, particularly ecommerce merchants, the fruits of their labor are often delayed by the logistics involved in electronic payment processing. Every dollar that doesn’t come in as cash is a dollar delayed. In a competitive and rapidly changing sales environment being rocked by a global pandemic, delays are a big problem. While access to credit and debit card payments is never instant, there is a way merchants with a strong operating history can reduce the delay from a matter of days to a matter of hours – next-day funding. 

What is Next-Day Funding?

When a merchant makes a credit or debit card sale, the funds from the customer’s account are transferred by their bank to the payment processor. The processor then pays the funds out to the acquiring bank, minus the transaction fees. In most cases, the second half of that process – the payout – is delayed by two, three, or even four business days in some extreme cases. The delay is known in the industry as a “standard hold,” and it represents a way for payment processors to mitigate the risk presented by fraud and chargeback abuse. 

Next-day funding eliminates the standard hold, providing merchants with access to their funds the very next business day. In some cases, funds can become available as little as 10 to 12 hours after a sale is made. As long as a transaction is batched by the stated cut-off time, it will qualify for next-day funding and the standard hold will be waived. Unfortunately, not all processors offer next-day funding because most processors don’t have the ability to absorb the risk involved. Additionally, because of the risk it represents, next-day funding is generally not available to brand new merchants or merchants that have had difficulties with chargebacks or fraud. Instead, it requires a certain level of business history and a record of trustworthy operations in order to ensure the processor that the inherent risk involved with paying out early is at least mitigated. While not everyone can get it, merchants with the credentials to access next-day funding – especially ecommerce merchants – stand to gain a lot from it thanks to the many benefits it offers to a company’s financial health.

Why Next Day Funding is So Important for Ecommerce Merchants

Traditional merchants operating brick and mortar businesses love next-day funding just as much as their ecommerce counterparts. But B&M stores have one major advantage when it comes to accessing their money – cash sales. Because part of a traditional merchant’s sales will always be in cash, the merchant will always have immediate access to a significant portion of their revenue immediately. Ecommerce merchants don’t have that luxury, as 100% of their sales are generally made with credit cards or some other form of digital payment. As effectively all of their revenue is delayed, standard holds running multiple business days have a huge impact on operations. Businesses making sales on a Friday after a processor’s funding cut-off could see their funds held for almost an entire calendar week, making next-day funding an absolute must for every eligible ecommerce merchant.

The Benefits of Next-Day Funding in Ecommerce

Next-day funding offers ecommerce merchants major benefits that can make operating both easier and less risky while also promoting long-term growth. Benefits of next-day funding include improved cash flow and financial health, an improved ability to cope with emergencies, better planning, and more. 

Healthier Cash Flow

Cash flow is the lifeblood of all businesses. Cash flow determines a company’s ability to meet their ongoing short-term obligations, from interest payments to payroll and beyond. Next-day funding gets a merchant’s money into their account faster, improving cash flow and in turn the overall financial health of their business. Stronger cash flow has a positive effect on everything from a company’s attractiveness to lenders, to an owner’s peace of mind, making it a top priority for most owners. 

Better Emergency Resilience

The COVID-19 pandemic taught businesses all around the world how quickly things can change and how important it is to have a strong emergency plan in place. While a healthy emergency fund is always the best bet for large and long-term disruptions like a pandemic, having strong cash flow and fast access to funds is an extremely important factor when dealing with smaller, more immediate emergencies. Credit is always an option as a last resort, but taking on more debt comes at a cost, and it’s far better to have cash on hand when things go wrong. 

Better Long-Term Planning

Growth depends on strong planning, and sporadic and delayed cash flow hinders the ability of business owners to plan ahead and make accurate projections. With next-day funding, merchants can plan for future growth, including capital purchases, knowing with a high level of confidence that they won’t face liquidity pinches that have the potential to damage their ability to make payments.

Accessing Next-Day Funding

While not all merchants are eligible for next-day funding, no merchants can access it if they aren’t partnered with the right processor. Merchants with a strong business history should inquire as to whether or not their current processor offers next-day funding. If not, the easiest way to access it is to make the switch to a new merchant services company with better funding terms. 

BAMS not only offers merchants next-day funding, but also the guaranteed lowest transaction fees in the industry thanks to our interchange-plus pricing model. BAMS also offers a wide variety of value-added services, including advanced fraud protection, PCI assistance, digital wallet integration, and much more. BAMS merchants can even get access to up to $500,000 in small business financing in a matter of minutes through our unique partnership with Fundomate. 

To find out more about how BAMS can slash your monthly merchant statement, get your money into your account faster, and improve all aspects of your payment operations, click here to start your free 5-point price comparison now.