American Express is giving small businesses in need of capital a new option for financing: The credit card company has just started rolling out its new Working Capital Terms loans, which provide funding specifically to pay off vendor invoices.
American Express Business Card members can enroll in the program via an online platform and then request funds of between $1,000 and $750,000 whenever they need them. Approval is based on information that American Express already has about the card members, including their accounts with American Express. Approval decisions can be provided in just minutes, the company says.
"The time when [small business owners] need to pay vendors and the time when they get paid themselves do not always match up, which creates a cash-flow imbalance," Brett Sussman, vice president of working capital products at American Express, Global Commercial Payments, told Business News Daily. "Working Capital Terms provides a short-term financing solution specifically to help small and midsized businesses better manage their cash flow by providing them with more time to pay for their key vendor invoices."
When requesting a loan, businesses choose the vendor they want to pay and how much they want to pay the vendor. Then, businesses choose the term length that works best for them: 30, 60 or 90 days. [See Related Story: Best Alternative Small Business Loans 2016]
For businesses that are approved, American Express then pays the vendor within two business days on the customer's behalf. American Express said it will be clear that the payment came from the business rather than American Express.
At the end of the loan's term, the full amount of the loan, plus a fee, will be auto-debited from the business's linked bank account. Fees range from 0.5 percent for 30-day loans to 1.5 percent for 90-day loans.
Currently, this new loan program is available only to a select group of American Express Business Card members on an invite-only basis. In the coming months, American Express will begin offering this loan program to more of its customers.
American Express said it is rolling out the program slowly in order to gather customer data and feedback that will help inform and guide how the company creates and improves the loans.
"This product is intended for U.S.-based small and midsize Business Card members across a wide variety of industries who are looking for funding to help them better manage their business's vendor payments and alleviate cash-flow constraints," Sussman said. "While this is a pain point that small and midsize businesses in any industry could experience, we see this often in industries that experience seasonal or cyclical business fluctuations and rely heavily on supplies and services from their vendors to keep their business moving forward."
In addition to this new loan program, American Express offers merchant financing loans. With this option, businesses can receive loan amounts of between $10,000 and $100,000; a percentage of a business's American Express receivables is used to repay the loan.
"Our suite of card and loan products for small and midsized businesses could actually be leveraged together to fulfill different needs and use cases for small businesses," Sussman said.