Merchant Cash Advances Are Not Loans – Take the Online Course to Learn Why (And Get a Certificate)November 3, 2016 | By: Sean Murray
A New York Supreme Court decision in June was pretty deliberate when it said a purchase of future receivables was not a loan.
Essentially, usury laws are applicable only to loans or forbearances, and if the transaction is not a loan, there can be no usury. As onerous as a repayment requirement may be, it is not usurious if it does not constitute a loan or forbearance. The Agreement was for the purchase of future receivables in return for an upfront payment. The repayment was based upon a percentage of daily receipts, and the period over which such payment would take place was indeterminate. Plaintiff took the risk that there could be no daily receipts, and defendants took the risk that, if receipts were substantially greater than anticipated, repayment of the obligation could occur over an abbreviated period, with the sum over and above the amount advanced being more than 25%. The request for the Court to convert the Agreement to a loan, with interest in excess of 25%, would require unwarranted speculation, and would contradict the explicit terms of the sale of future receivables in accordance with the Merchant Agreement.
Lawyers around the country are pointing to this published decision and other similar ones as becoming the standard rule of law in New York State.
Finally, there are extracurricular steps you can take as a sales rep, underwriter, or other participant in the industry to educate yourself on what it means to buy future receivables at a discount versus a loan.
A new online course created by law firm Hudson Cook LLP, teaches the basic and unique characteristics of merchant cash advance contracts. New entrants and veterans alike can take the course and corresponding exams to brush up on the core fundamentals of MCA. Those that pass will receive a certificate of completion in “Merchant Cash Advance Basics” that is valid for two years. There are even video tutorials in case you don’t like to read.
Co-produced by deBanked as part of an effort to foster educational standards in the industry, the course just only recently went live. An educated sales force is no doubt integral to the success of the industry and the businesses it serves.
This in no way implies that company in-house training programs are currently insufficient. Instead, companies can use the course to supplement their own in-house training efforts with new hires or to test current employee education levels. More comprehensive versions of the course or new components of it may be developed in the future. We realize this can be evolved to cover more, but for now, it’s the basics.
Can YOU pass MCA Basics?
That’s a copy of my real certificate on the right (shrunken down to fit in this story). I got a perfect score.
Hosted on Counselor Library, you can sign up to purchase the course here.
Update 11/4: Link to the course in the story has been fixed: http://www.counselorlibrary.com/public/courses-mca.cfmLast modified: December 18, 2016
Sean Murray is the founder of deBanked, an 11-year veteran of the merchant cash advance industry, a casual Lending Club and Prosper note investor, the co-founder of Daily Funder, an alternative lending speaker, consultant, writer, and enthusiast. Connect with me on LinkedIn or follow me on twitter.