1
00:00:00.000 --> 00:00:01.230
Johny Fernandez: What is a true
up?

2
00:00:02.850 --> 00:00:05.653
Sean Murray: A true up? Okay,
good question. What is a true

3
00:00:05.714 --> 00:00:09.005
up? So a true up, in the
circumstance, I'm assuming in

4
00:00:09.066 --> 00:00:12.539
the context of which I'm
assuming it was asked is it true

5
00:00:12.600 --> 00:00:16.135
up is, this would be part
probably part of a merchant cash

6
00:00:16.196 --> 00:00:19.669
advance deal. And in a merchant
cash advance payments are

7
00:00:19.730 --> 00:00:23.387
supposed to be collected in
accordance with the revenue that

8
00:00:23.448 --> 00:00:27.043
a merchant generates. So there
are some companies that will

9
00:00:27.104 --> 00:00:30.700
debit out a fixed amount per
day. And that's supposed to be

10
00:00:30.761 --> 00:00:34.173
tied to how much they're
actually doing in revenue, it's

11
00:00:34.234 --> 00:00:37.647
based on a projection. Now,
let's say that the merchants

12
00:00:37.708 --> 00:00:41.486
revenue doubled. And the amount
that they the funder or lender

13
00:00:41.547 --> 00:00:45.326
collected, this is the funder
because it's the MCA, the amount

14
00:00:45.386 --> 00:00:49.043
that the funder collected was
really tied to what the normal

15
00:00:49.104 --> 00:00:52.456
volume would be. But now they
found out that the volume

16
00:00:52.517 --> 00:00:56.295
doubled, they technically would
be entitled to take double the

17
00:00:56.356 --> 00:00:59.769
money, because that would be
consistent with the revenue

18
00:00:59.830 --> 00:01:03.608
that's being generated. And a
merchant could choose to true up

19
00:01:03.669 --> 00:01:07.447
the deal by saying please debit
out even more than what you've

20
00:01:07.508 --> 00:01:11.165
already taken, so that we're
living up to the, you know, the

21
00:01:11.226 --> 00:01:15.065
exact precise arrangement of the
contract. However, on the flip

22
00:01:15.126 --> 00:01:19.087
side, and here's where it's most
often talked about, because most

23
00:01:19.148 --> 00:01:22.865
merchants don't want to pay more
sooner is, let's say the the

24
00:01:22.926 --> 00:01:26.887
business, the revenue dropped in
half. And the merchant said, you

25
00:01:26.948 --> 00:01:30.422
took this amount of money, and
that was supposed to be in

26
00:01:30.483 --> 00:01:34.139
relationship, this volume of
revenue, but my revenue dropped

27
00:01:34.200 --> 00:01:37.857
in half. And so now the amount
you took, is technically more

28
00:01:37.918 --> 00:01:41.574
than you were supposed to. So
they can true it up by saying,

29
00:01:41.635 --> 00:01:45.292
here's what my actual revenue
was, you know, this shows some

30
00:01:45.353 --> 00:01:49.009
kind of proof. Here's my bank
statement. And then the funder

31
00:01:49.070 --> 00:01:52.666
is supposed to, as long as the
merchant has everything that

32
00:01:52.726 --> 00:01:56.261
they're supposed to, the funder
is supposed to refund, the

33
00:01:56.322 --> 00:02:00.161
overage that they collected to
be consistent for the collection

34
00:02:00.222 --> 00:02:03.635
to have been consistent with the
terms of the actual MCA

35
00:02:03.696 --> 00:02:07.170
arrangement and they call that
truing it up or a true up.