Money is a pain point for most businesses, but very few people ever talk about when it becomes a source for stress. For some businesses, it’s during the startup phase—some ideas take a lot of money to get going. For others, it’s during an awkward gap between vendor payments and customer purchases. American Express’s Working Capital Terms program hopes to help with the latter.
Working Capital Terms is more than just a bank loan—it’s a tool. With it, business owners will be able to receive quick funding to pay vendor invoices and control cash flow. “Seasonal” businesses and those that rely heavily on supplies and services from vendors will benefit most, but Working Capital Terms is an excellent option for any entrepreneur hoping to cover a cash gap.
So how does it work? First, existing and eligible American Express Card Members apply online—the entire process is digital. Loans range from $1,000 to $750,000 with fixed fees: 0.5 percent for 30 days, 1 percent for 60 days, and 1.5 percent for 90 days. Loans are approved within 60 seconds with no collateral required.
Once the loan is approved, American Express pays vendors directly within two business days through Automated Clearing House (ACH) on the customer’s behalf, making it clear the payment came from the business itself. The only catch? Once the loan’s term is up, the full amount of the loan plus a fee is auto-debited form the business’s bank account. Gradual payments aren’t accepted.
“While the small and mid-size enterprise lending space is crowded, there is still a significant gap in the marketplace as access to capital continues to be a concern for business owners. We know that small and mid-size enterprises often need access to greater funding capacities than some products offer to help them ease cash flow constraints, take advantage of pivotal growth moments, or navigate business crises. Therefore, we feel our broad lending product suite offers a number of solutions for them to get access to the funds they really need quickly and easily,” says Brett Sussman, VP of Working Capital Products at American Express. “We see this product as sitting squarely in between the offerings from traditional banks and those of online lenders. It offers a fast and easy digital experience typically found with online lenders, but with small or large loans at competitive prices, and all with the trust, security and service that American Express is known for.”
American Express also advertises the product as a great way of building business credit, which is perfect for business owners who may want to borrow capital for scaling purposes later on. American Express will report payment history in the same way that it does for AmEx OPEN cardholders: both positive and negative payment history will be reported to the Small Business Financial Exchange, and negative information will be reported to Dun & Bradstreet.
Working Capital Terms may be a fantastic option for some businesses, but American Express is careful to note that it may not be ideal for others. Businesses who have flexible trade terms with their vendors but would like extra cash for growth will miss out, as Working Capital Terms are only offered to finance vendor invoices. Arizona businesses who’d like to ease financial stress between vendor payments and customer purchases are perfect candidates for Working Capital Terms.
American Express is slowly rolling out Working Capital Terms to existing AmEx cardholders, with plans to expand access in the near future. If you’re an AmEx customer, keep your eye out for an invite!