Johny Fernandez: What is a true up?
Sean Murray: A true up? Okay, good question. What is a true
up? So a true up, in the circumstance, I'm assuming in
the context of which I'm assuming it was asked is it true
up is, this would be part probably part of a merchant cash
advance deal. And in a merchant cash advance payments are
supposed to be collected in accordance with the revenue that
a merchant generates. So there are some companies that will
debit out a fixed amount per day. And that's supposed to be
tied to how much they're actually doing in revenue, it's
based on a projection. Now, let's say that the merchants
revenue doubled. And the amount that they the funder or lender
collected, this is the funder because it's the MCA, the amount
that the funder collected was really tied to what the normal
volume would be. But now they found out that the volume
doubled, they technically would be entitled to take double the
money, because that would be consistent with the revenue
that's being generated. And a merchant could choose to true up
the deal by saying please debit out even more than what you've
already taken, so that we're living up to the, you know, the
exact precise arrangement of the contract. However, on the flip
side, and here's where it's most often talked about, because most
merchants don't want to pay more sooner is, let's say the the
business, the revenue dropped in half. And the merchant said, you
took this amount of money, and that was supposed to be in
relationship, this volume of revenue, but my revenue dropped
in half. And so now the amount you took, is technically more
than you were supposed to. So they can true it up by saying,
here's what my actual revenue was, you know, this shows some
kind of proof. Here's my bank statement. And then the funder
is supposed to, as long as the merchant has everything that
they're supposed to, the funder is supposed to refund, the
overage that they collected to be consistent for the collection
to have been consistent with the terms of the actual MCA
arrangement and they call that truing it up or a true up.