What Does a Payment Gateway Do?

Payment Gateway

Anything sold online will require the use of a payment gateway. After a product has been selected and the customer decides they want to buy it, somehow, their financial information needs to be exchanged so they can be billed and the seller can get paid. That’s exactly what a secure payment gateway is meant to accomplish. These processors use advanced cryptography methods to ensure that customer information remains confidential, but the seller can still receive their funds. Without a payment gateway, there are no payments, plain and simple. How exactly does a payment gateway work, you ask? Well, here are the main aspects of what any processor gets up to:

Authorization

This portion doesn’t involve any actual transfer of funds whatsoever, but instead concerns itself with ensuring that the funds are actually present. If the funds are there, payment will be authorized ahead of time. This allows businesses to get a product ready to ship or manufacture without the risk of being left high and dry.

Capture

Once payment is authorized, the funds will then be “captured.” At this point, the money goes from the customer’s bank account into the vendor’s merchant account. Capture can happen immediately after authorization or a few days after, depending on the merchant and payment gateway.

Sale

A combination of the two above transactions, a sale is an immediate authorization and capture of funds from the customer. Any service that’s delivered immediately (e-books, subscriptions, etc.) typically uses a sale transaction. A sale is perhaps the most common form of transaction done by payment processors, as fewer businesses are satisfied with being paid at a slightly later date than they were previously.

Refund

Should the customer be dissatisfied with their product and desire their money back, a refund can be authorized once everything has been discussed between the customer and the vendor. The same payment processor that made the sale will now reverse the transaction and put money back into the customer’s account.

Void

A void is very similar to refunds, but is done after authorization but before a capture. A voided transaction won’t be charged to the customer’s account. Voids are often used when a customer decides they would rather not get the item, or if a merchant’s stock of an item should unexpectedly not be able to meet demand.

Conclusion

These five transactions make up the backbone of any payment gateway. Each different transaction is treated differently by the processor, something that might reflect differently in your billing cycle for using their service depending on how they operate. Some payment gateways only take money when money is received, i.e., through capture or sale. Others, however, charge to perform refunds or even voids, so always be sure to know what your agreement is with any particular payment gateway. Any industry that deals with a high number of refunds should choose a gateway that won’t charge high fees to handle refunds, plain and simple. Besides that, mostly everything done by a payment gateway is fairly straightforward. But then, what you’re really paying for is their digital infrastructure that actually does all of the moving and shaking on top of the encryption of customer data.

Smart Reasons to Get a Loan for Your Small Business

Small Business Loans

Most business owners think about getting a loan for their small business at some point, though it’s something to be avoided if possible—until you really need it. There are plenty of options out there to secure that loan, from banks to private lenders and from payday lenders to friends and family. If you’re wondering if it’s time to check with one of these options for a loan for your small business, read on below for a few reasons it might be the right thing to do.

You Need Equipment for the Business

Whether it’s a document scanner app or a whole new set of computers, replacing equipment or adding equipment to a business can be an expense that requires you to get a little help. It’s a fact that your business needs equipment such as computers, IT services, and other machinery to make a go of it, and for it to continue to be a success.

However, take the time to consider the must-haves for your business, as opposed to the “nice-to-haves” before deciding to take out an equipment loan for the products you need.

You’re Looking to Expand to a New Location

There comes a time in every successful business owner’s life when they decide it’s time to expand their business. Signs that it’s time to expand include not having enough room for customers or having a ton more product than you do space for storage.

Before you look for a way to secure a loan, however, make sure to figure out how you will pay for this expansion in the long run. The last thing you want is loan payments coming due, and not having enough customers to make the money you’ll need to pay the payment. In other words, don’t rush into expanding without doing the research and creating the projections you’ll need to help make that expansion a success first.

You’re Trying to Build Credit for the Future

If you’re just starting out, it’s possible that you don’t have enough credit built up to be able to get the loan you want to expand or add more inventory to your business. A short-term loan is perfect for looking out for the future, as it helps you build the credit you need for that expansion when the time comes. There are quite a few ways that you can go about building your business credit, you just have to know where to look for them.

You Need More Employees to Run Your Business

When your business starts expanding, you’ll be wearing more hats. After a while, as your business continues to grow, you’ll need help with different things. Whether it’s hiring more employees for the front of the house in your diner or hiring a bookkeeper or someone to handle marketing, employing people takes money. This is something you can get a loan for, just make sure that you really need the employees and won’t have a hard time paying long term, before you apply for the loan and go on a hiring spree.

You Want to Add More Inventory

Inventory is what you offer your customers, and the more widespread your business becomes, the more inventory you’re going to need. Since inventory is one of the most expensive parts of running a business, it stands to reason that you might need a loan to be able to afford to add more inventory when the time comes. Create a sales projection to ensure adding more inventory is the right choice at this moment first, however.

These are just a few reasons that you might want to get a loan as a business owner. From expanding to hiring and from building your business credit to adding new equipment, these are concrete reasons to ask for a loan, and possibly get one as well.