And Now Florida Has Introduced a Commercial Financing Disclosure Bill
March 16, 2023
Florida has joined the chorus of states introducing commercial financing disclosure bills. While Florida’s bill looks more like Utah’s than it does California’s or New York’s, it seems to make a point about brokers using potentially deceptive business practices. Brokers take note, especially the last paragraph.
A broker may not:
Assess, collect, or solicit an advance fee from a business to provide services as a broker. However, this subsection does not preclude a broker from soliciting a business to pay for, or preclude a business from paying for, actual services necessary to apply for a commercial financing product, including, but not limited to, a credit check or an appraisal of security, if such payment is made by check or money order payable to a party independent of the broker;
Make or use any false or misleading representation or omit any material fact in the offer or sale of the services of a broker or engage, directly or indirectly, in any act that operates or would operate as fraud or deception upon any person in connection with the offer or sale of the services of a broker, notwithstanding the absence of reliance by the business;
Make or use any false or deceptive representation in its business dealings; or
Offer the services of a broker by making, publishing, disseminating, circulating, or placing before the public within the state an advertisement in a newspaper or other publication or an advertisement in the form of a book, notice, handbill, poster, sign, billboard, bill, circular, pamphlet, letter, photograph, or motion picture or an advertisement circulated by radio, loudspeaker, telephone, television, telegraph, or in any other way, in which the offer or advertisement does not disclose the name, business address, and telephone number of the broker. For purposes of this subsection, the broker shall disclose the actual address and telephone number of the business of the broker in addition to the address and telephone number of any forwarding service that the broker may use.
Both the State Senate and House versions of the bill were introduced by republicans.
All Registered Sales-based Financing Providers in Virginia (List)
March 11, 2023Is the revenue-based financing provider you do business with registered to operate in Virginia? On July 1, 2022, Virginia’s commercial financing disclosure law went into effect and with that the necessity to register one’s business. As of March 8, 2023, this is the official list of registered sales-based financing providers:
- Advance Servicing Inc.
- Accredited Business Solutions LLC dba The Accredited Group
- Advance Funds Network LLC dba Advance Funds Network
- AdvancePoint Capital LLC dba advancepoint
- Ally Merchant Services LLC
- Alpine Funding Partners, LLC
- Business Capital LLC
- Byzfunder NY LLC dba Tandem dba Nano-FI
- Bridge Capital Services, LLC
- CFG Merchant Solutions, LLC
- Clarify Capital II LLC dba Clarify Capital
- Cloudfund VA LLC dba Cloudfund LLC
- Capflow Funding Group Managers LLC
- Clear Finance Technology (U.S.) Corp. dba Clearco
- Coast Premier LLC dba Coast Funding
- Commercial Servicing Company, LLC
- Corporate Lodging Consultants, Inc.
- Crown Funding Source LLC dba Crown Funding Source
- Diesel Funding LLC
- Direct Capital Source Inc.
- Dealstruck Capital LLC
- EBF Holdings, LLC
- Essential Funding Group Inc
- Errant Ventures LLC
- FC Capital Holdings, LLC FundCanna
- Fidelity Funding Group LLC
- Front Capital LLC
- Finova Capital, LLC
- Fintegra, LLC
- First Data Merchant Services LLC
- FleetCor Technologies Operating Company, LLC
- Flexibility Capital Inc.
- Fora Financial East LLC
- Forward Financing LLC
- Fox Capital Group Inc.
- Fundamental Capital LLC
- Funding Metrics, LLC dba Quick Fix Capital
- Good Funding, LLC
- Granite Merchant Funding, LLC
- Invision Funding LLC
- Itria Ventures LLC
- Jaydee Ventures, LLC dba 1 West Capital dba 1 West Commercial
- Kapitus LLC
- Knight Capital Funding III, LLC
- Lexington Capital Holdings Ltd
- LG Funding LLC
- Legend Advance Funding II, LLC dba Legend Funding
- Liberis US Inc.
- Libertas Funding, LLC
- Liquidibee 1 LLC dba Liquidibee LLC dba Altfunding.com
- Loanability, Inc.
- Millstone Funding Inc.
- National Funding, Inc.
- Nav Technologies, Inc.
- Pearl Alpha Funding, LLC
- Pearl Beta Funding, LLC
- Pearl Delta Funding, LLC
- Proto Financial Corp.
- PWCC Marketplace, LLC
- Parafin, Inc.
- PayPal, Inc.
- Payability Commercial Factors, LLC
- Pinnacle Business Funding LLC dba Custom Capital USA dba EnN OD Capital
- Platform Funding LLC
- Prosperum Capital Partners LLC dba Arsenal Funding
- QFS Capital LLC
- RFG USA Inc.
- Rival Funding, LLC
- Riverpoint Financial Group Inc.
- Rocket Capital NY LLC
- ROKFI LLC
- Ruby Capital Group LLC
- Rapid Financial Services, LLC
- Reliant Services Group, LLC
- Retail Capital LLC dba Credibly
- Revenued LLC
- Rewards Network Establishment Services Inc.
- Secure Capital Solutions Inc.
- Sky Bridge Business Funding, LLC
- SMB Compass LLC dba SMB Compass
- Santa Barbara Tax Products Group, LLC
- SellersFunding Corp.
- Sharpe Capital, LLC
- Shine Capital Group LLC
- Shopify Capital Inc.
- Shore Funding Solutions Inc.
- Streamline Funding, LLC
- Stripe Brokering, Inc.
- The LCF Group, Inc.
- United Capital Source Inc.
- Upfront Rent Holdings LLC
- Upper Line Capital LLC
- Vader Servicing, LLC
- Velocity Capital Group LLC
- Vivian Capital Group LLC
- Vox Funding, LLC
- ZING Funding I, LLC
In The Funding Biz? Here’s What to Know
March 9, 2023Are you in the biz of funding small biz? Listen to these execs tell you how to make it work!
Effective Broker Training
Successful Digital Marketing With Zack Fiddle
Measuring the Impact of Technology on Your Funding Business With Adam Schwartz
Building a Successful Funding Brokerage With Frankie DiAntonio
“Aggressive” Funding
March 7, 2023
Sometimes it pays to be aggressive!
“I think [aggressive funding] is a good phrase, I think in particular in the ISO organization as you’re speaking to the merchant you have to present yourself that you’re going to take an aggressive position to help them,” said Steve Kietz, CEO at Reliant Funding, “to help them get the biggest MCA deal size that you can get them, the best pricing that you can get them, be aggressive in terms of speed to try to get money for that merchant.”
And once that deal is in a broker’s hands, they may turn around and expect their network of funding partnerships to make that happen. Some lenders and funders lean into this style of courtship and market themselves as being similarly aggressive with their approvals.
“The word aggressive, that’s like my favorite word in this industry, because I guess it’s supposed to turn brokers on,” said Amanda Kingsley, Director of Marketing and Development at Merchant Marketplace.
The level of aggressiveness may depend on the attractiveness of the deal itself. According to Joseph Vaknen, Head of Business Development at SuperFastCap, funders will get more aggressive with their offers when there’s a “hot deal” on the table and it will kick off something similar to an auction or a bidding war. That scenario could potentially lead to the best outcome for the merchant just as intended and the broker essentially proves their value.
One’s aggressiveness can also be used to describe an overall risk appetite in general. “If you are considered an aggressive funder in the sense that you are funding bad deals then more likely than not the rate is super high and the term is super short,” said Vaknen. In that case, it’s important that all involved understand what is meant by aggressive.
And on the contrary, plenty of funding providers distance themselves from any such connotations of aggressiveness and are happy to be branded the opposite, conservative in their ways. That too can provide its own attractiveness depending on the circumstances. Aggressiveness, as one is surely aware in the financial services industry, can carry a certain stigma attached to it anyway.
“I think it’s a word that does have a negative connotation, but – you know, the word that we’ll add is caveat emptor buyer beware — as long as the customer knows what he or she is doing, having an aggressive ISO can be a good thing for them,” said Kietz of Reliant.
Give Him a Try. “He’s a Good Guy”
February 23, 2023
He may be a good guy, but does he pay his loans on time? The infamous, he’s a good guy line circulates in this business daily. Citing what an admirable individual they are should require a bit more verification than that. And trusting a reliable source in the industry may not always unfold the way it’s supposed to. Therefore, is pushing for a merchant, company, or any party based solely on personal traits enough to create a depiction of who they are?
“This phrase is interesting in that it often serves as a shortcut for assessing the character of a person or company in the industry, and its prevalence is understandable given the amount of trust that is necessary for successful financial transactions,” said Tony Borchello, General Manager at Finance It Forward. “At the same time, this phrase should not be taken as a full assessment of someone’s character or a complete substitute for due diligence. While it can be helpful in certain contexts, relying too heavily on this phrase can lead to bad investments or other costly mistakes.”
Ultimately this phrase is not meant to be negative, but one’s relationship with a person or company may not replicate the experience for someone else. Finding great partners in the industry plays a role in this too. Without building credible connections to be used for future references, it can be difficult to take anybody’s word.
“You always have people on the outside that are looking out for each other in this industry, which is great, don’t get me wrong,” said Amanda Kingsley, Director of Marketing and Development at Merchant Marketplace. “But everybody is so quick to just use that one phrase to make it seem like ‘Oh he’s a good guy,’ okay I’ll trust you. I’ll do it because you said that.”
Key words are useful to look out for as well when relying on a reference. For example, “promise” may not have the impact intended, Kingsley described. If someone is promising to pay back a loan on behalf of another person, it could actually heighten the risk of it falling through.
“As soon as you hear the word promise, you know that they’re going to break a promise,” said Kingsley.
A person’s credibility in the business should not justify an automatic approval all on its own. While referrals are an obvious and necessary part of the business, doing a thorough examination on the backend is key.
“It’s important to remember that ‘He’s a good guy’ should not be the only factor that’s considered when making a financial decision,” said Borchello. “Instead, this phrase should be used in conjunction with other sources of information such as research, reviews, and interviews, in order to get a more complete picture.”
Shopify Capital Seeing “Incredibly Strong Renewals From Previous Borrowers”
February 16, 2023Shopify Capital originated $393.2M in MCAs and business loans in Q4, an increase of 21% YoY, the company revealed. The company also began funding small businesses in Australia last year, bringing the total countries it does business in to four.
“[Shopify] Capital has acted as a lifeline for merchants, especially through the pandemic and this tough macro environment, allowing them to conveniently access capital when they need it most,” said Shopify President Harley Finkelstein. “Capital is now available in four countries, and our machine-learning algorithms to underwrite merchants keeps getting better.”
Finkelstein also noted that the company is “seeing incredibly strong renewals from previous borrowers.”
The graphic below, illustrating the cumulative growth of Shopify Capital’s originations, was shown in the company’s Q4 earnings presentation:
New Challenge to MCA Legality in New York
February 10, 2023
It’s effectively well settled law, that proper purchases of future receivables are not considered loans in New York State. But a three year-old merchant cash advance case is poised to become center stage for a fresh review of that policy.
At issue is AH Wines Inc., et al. v C6 Capital Funding LLC which the New York Court of Appeals recently agreed to hear. The crux of the plaintiff’s arguments has been that defendant’s purchase of future receivables was actually a usurious loan. The plaintiff was unsuccessful at both the trial court level and appellate level with their case and so appealed to the highest possible court in New York, the Court of Appeals. On February 9, the motion for leave to appeal was granted.
The Merchant Cash Advance Journey from Broker to Funder
February 7, 2023
As merchant cash advances have become a popular financing option for small businesses in recent years, it has quickly become obvious how lucrative it can be to make the transition from working the phones to working the deals.
The transition from broker to funder can provide significant benefits: by becoming a funder, you have the opportunity to control the entire process from start to finish. Driving the deals, you have the opportunity to make more money, and can establish relationships with banks and payment processing systems that align with your business goals. You can choose a CRM system that best fits your needs and invest in a strong legal and accounting infrastructure to ensure compliance and accountability. Additionally, as a funder, you have the ability to diversify your portfolio and make informed decisions on the types of deals you want to fund, which can lead to higher returns and more stable growth.
While many brokers have the gift of the gab and expertise to sell the advances, they may not have the necessary knowledge of systems and processes in place to manage the risk and operational aspects of the business to go to the next level. Additionally, funders, more than brokers, have the relationships with banks, CRM systems, collection firms, and legal entities that are necessary to run a successful merchant cash advance funding business. The lack of these critical components can limit the growth potential of a broker.
The evolution from a broker to a funder is not just a matter of expanding the business, but it requires a complete overhaul of the systems, processes, and legal frameworks. In this article, let’s explore the key steps that a broker needs to take to become a successful merchant cash advance funder.
Step 1: Having The Right Bank Account
Having a proper bank account is the first step towards becoming a merchant cash advance funder.
Traditional banks, such as Chase and Bank of America, are not built for the rapidly brave new world of financing options, and instead cater to the old models. If they see (what they deem to be) ‘irregular’ incoming and outgoing payment just as you begin offering your first few deals, they can cause you a lot of stress, and even shut your account.
Researching all the options available before you begin funding deals is crucial to build up your business and to avoid stress down the road.
Step 2: Finding The Best ACH Payment Processor
The best way to accept the daily payments owed to you is by working with an ACH payment processor that understands the MCA space. While some traditional banks do offer ACH ‘pulling’ for free, their service is often tied to the amount you have sitting in your account at the bank, which means it’s not working for you to make more. For example, some stipulate that your account needs to have three times the amount that you’re planning to pull daily, just sitting there. So if you’re pulling $200,000 a day, now you have to have $600,000 just sitting there in reserve, which you can’t use to fund other deals you could be making money on.
Instead, finding ACH payment processors that specifically understand the business and your needs will free you up to strive to collect as much as you can, every single day. While it might cost you a little bit, you have the option to now make that calculation of whether it’s better to have free ACHs or have the money available to fund deals and make money off of. A wise man would tell you the latter is the right way to go.
Step 3: Picking A CRM System
A CRM system is an essential tool for tracking the deals, payments, and collections. There are about 8-10 mainstream CRM systems that cater to merchant cash advance funders, and the choice of the CRM system depends on the volume of deals you fund, the presence of syndicators, and the type of deals you fund.
Pick a system that best serves your needs: how it accounts for sub deals and tranches, whether it helps you identify the best and worst performing deals, and if it generates the reports you need to make the most informed choices for your business going forward.
Step 4: Setting Up Your Legal Framework
Setting up a legal framework for contracts is an important step in the journey from a broker to a funder. A proper legal framework ensures that the contracts are enforceable and protects your interests.
It is worth consulting with a lawyer familiar with merchant cash advance to help you prepare thorough contracts for the businesses you advance, your ISO’s and brokers, to ensure you are secure from any attempts to avoid payment and backdooring on your own deals.
Step 5: Collections
In an ideal world, every deal a MCA business funds would get paid pack easily and smoothly, but frequently, that is not the case. Too often, business owners prove why they needed the advance in the first place, and repeat the mistakes and bad habit that puts them in a perilous financial position once again.
If they don’t pay you, your business will quickly begin to suffer and face increasing cash flow problems if you don’t handle it quickly, so having a reliable collection system is crucial for the success of a merchant cash advance funder. It’s good to ensure you understand your options to give yourself the best chance of recovering what you’re owed, including working with a third-part collections firm. The choice of a collection firm depends on the success rate and the level of support provided. A good collection firm should have a well-prepared collection attorney, provide timely support and have a strategy to collect on delinquent merchant cash advances.
Step 6: Accounting
Proper accounting is essential for tracking the overall health and viability of your company. It’s also especially important if you have a partnership or investment in place.
Better Accounting Solutions has been the leading accounting firm in the MCA industry for over a decade, and seen how successful a company can be when all their books are in order and the tremendous pressure and stress caused when it’s not.
Working with an accountant that is familiar with the industry and systems will help you ensure your business is legally compliant, trending in the right direction, and that all deals are in a good place.
Step 7: Lead Sourcing
You’ve set up the business, now you need customers!
There are several ways to find people and businesses who could use a merchant cash advance from your new business. You could reach out to family and friends, research and cold-contact people online or work with lead-generation agencies who will send you lists of hot prospects. Additionally, if you’ve already done all the previous steps listed here, then you can speak to the people you’re already familiar with in the industry to point prospects your way. For example, Better Accounting Solutions has drawn on our years of experience in the industry to connect new funders with brokers we know and trust.
Typically, if you’re a broker becoming a funder, than you already have the relationships with people who can direct customers to your new venture, but I always advise our clients to avoid backdooring or doing something with even the slightest inference of unethical business practices; its bad karma and can only hurt you down the line.
So there you have it, the seven steps of going from broker to funder, and taking your merchant cash advance journey to the next level. Wishing you the best of luck!
