The Green Sheet Online Edition
February 23, 2026 • 26:02:02
Street Smarts
Where to get capital to grow your business
Sometimes you have to choose between bootstrapping or going out for investment. Taking on outside funding comes with a tradeoff: you may no longer be working exclusively for yourself, and your new boss will be looking for a fast ROI.
From numerous available funding sources, you may choose to get money from family members, business partners or investors. You may tap into savings or credit card accounts. Don't expect much from your bank. Banks typically lend to companies that don't need cash and are notorious for declining small and midsize business loans.
Ways to access working capital
Here are some popular ways for merchant level salespeople (MLSs) and ISOs to get access to working capital, each with its own pros and cons:
- Residual portfolio sale: MLSs and sub-ISOs can sell to third parties or private parties; their ISOs usually have first right of refusal. These complex deals require due diligence; consider getting an attorney.
- Pro: A residual portfolio sale will not add debt or dilute your ownership; you'll still be your own boss. You'll get money up front and on the backend, such as a payout after 12 months if attrition is low.
- Con: After selling off these merchants, you can no longer re-sign or move them.
- Partial residual sale: MLSs and sub-ISOs can sell a portion of their portfolios. These are also complex deals that require careful review and due diligence. Legal counsel is recommended.
- Pro: you can sell a small portfolio or portion of a portfolio, obtain funding and retain some residual earnings. You can be paid upfront and, in some cases, after 12 months if attrition is low.
- Con: You may be required to support these merchants in exchange for funding, even though the merchants are no longer yours, which means you can't re-sign them or move them.
- Residual loan: MLSs and ISOs can borrow money based on their existing residual flows, which enables them to make monthly payments and keep the portfolio. Some ISOs will provide funding and take payments out of your residuals.
- Pro: they know you and have confidence in your ability to repay the loan, which can make for a fast and simple transaction.
- Con: The loan company usually collects the residual, then sends a remainder that could cause cash flow issues. You need to be careful, especially if you still have agents to pay from that residual flow.
- Traditional loan: Traditional lending sources include family offices, the Small Business Association (SBA) loans, bank loans and lines of credit. These sources tend to be more interested in fintech than in your residuals. They are more likely to fund or provide lines of credit to companies that own some type of technology.
- Pro: These are reputable funding sources with low risk of fraud or foul play.
- Con: These loans are harder to get; some require a personal guarantee or real estate or other assets as collateral. Most don't view your residuals as an asset and are more interested in investing in technology that you own or are building. They may also require monthly data, depending on how the loan is structured.
- Alternative lender: Alternative lenders are non-bank financial institutions that provide loans outside the traditional banking system. There are multiple models to choose from; crowdfunding is a good option for product and service financing. For example, you could use crowdsourced funds to build software and give free licenses to investors.
- Pro: You'll know where you stand with alternative lenders; their approvals and declines are among the fastest in the business. Many use AI and advanced technology to offer funds on-demand, around-the-clock.
- Con: It is not easy to get money from alternative lenders because they don't usually view residuals as collateral.
Portfolio valuation
View the transaction from an investor's lens. How would someone who doesn't know you or your merchants evaluate your book of business? What would they value most? Most investors evaluate portfolios by SIC codes, risk levels and average age of account.
What's worth more to an investor: a bunch of merchants using countertop terminals or agnostic POS systems or merchants using proprietary software that cannot be poached by another ISO or service provider?
What would an investor value more: merchants using generic, easily reprogrammable software or merchants using solutions that are owned by the ISO?
Buyers also care about you and your ISO's reputation. They may ask why you're selling and what you plan to do with the money. Prepare your answers, exude confidence, and know your numbers and valuation. Don't be a serial pump and dumper; investors avoid people who repeatedly build and sell small portfolios. Have a plan for the money Most importantly, before you go out for working capital, have a plan for the money. Will you buy equipment, buy out agents, buy a company, buy residuals from another company, buy an office building or new equipment, or fund a new salaried salesforce?
Let's say you take a loan and give away 100 POS stations. You buy equipment in bulk for a deep discount, then offer merchants "zero percent" with dual pricing. You move those units quickly, rinse and repeat, and get your money back within three to six months.
You may want to buy someone's book of business. Due diligence and negotiation may take more time but could be worth the guaranteed cash flow.
It pays to remember that whenever you take money, you have a new boss. Whenever and however you raise capital, know how you'll use the money. Having a clear plan and solid repayment roadmap will improve your odds of success and reduce your risk of falling into a repeated borrowing cycle.
Stay informed
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Allen Kopelman, a serial entrepreneur, is co-founder and CEO of Nationwide Payment Systems Inc. and host of B2B Vault: The Biz to Biz podcast. Email him at allen@npsbank.com and connect on LinkedIn https://www.linkedin.com/in/allenkopelman/ and Twitter @AllenKopelman.
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