Archive for 2010

Financing Business Startups: What ISOs Should Know

December 22, 2010
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This is the exact title of an article published in December’s issue of The Green Sheet. It informs the merchant processing industry that businesses have several financing options available to them and wait for it…. wait for it….. it talks all about bank loans. Thank you Green Sheet for neglecting to state the most feasible, obvious solution for both businesses and merchant processing reps, Merchant Cash Advance (MCA).

The author advises that ISOs should partner up with bankers to help their merchants obtain loans and then contradicts his argument by saying that partnering up with banks is a far fetched idea that isn’t likely to work. An excerpt: “One of the best contacts you can cultivate as an ISO or MLS is a local lender who specializes in Small Business Administration financing. Generally, this will be a “community bank,” typically a small, local financial institution. A small business will almost always start at a community bank and only graduate to a larger bank because it needs a line of credit that is bigger than the bank’s legal lending limit. But even a community bank SBA officer may not be able to make a loan happen…”

So what is a processing rep to do? The article reads; “Find one that does these loans – and does them well. The bank has to “sell” loans to the nearest SBA district office, and banks get a semi-permanent reputation there for either understanding or not understanding credit risk. Required documents include a written document stating the reason for the loan request, history of the business, lease agreements, percentage ownership breakdown, estimated profits and cash flows, and projected opening day balance sheet. An existing small business applying for an SBA loan needs to include three years’ financials, aging of accounts receivable and accounts payable, and debt schedules. Keep in mind that most small businesses do not want to pay taxes, so they minimize profit – not good when you are applying for a loan. For the same reason, they will not have audited financials.”

That can be summarized as “Go find someone who can help and helps you well.” Not very informative, nor does the rest of the paragraph inspire any confidence in being able help solidify financing for your merchant.

The Green Sheet is very familiar with the MCA Industry. Therefore the idea that MCA would be left out of a small business funding discussion for processing reps was hopefully an intentional omission. The article seems to be one overextended segue to promote “The Receivables Exchange,” a live online marketplace for Accounts Receivable factoring. Not that we have anything against it, but if the article is going to be titled What ISOs Should Know, then they Should Know that MCA is the the easiest, fastest, and most flexible financing product you can offer to a merchant.

A relationship with a community bank is great but if you can’t leverage that relationship to actually get your client the capital, you’re not adding any value. A MCA carries no fixed payment terms or collateral. The underwriting process is quick and credit is not a major factor.

You may now think that our long winded bashing of The Green Sheet article was just a segue to promote the Merchant Cash Advance industry. Ironically you’re right, but then again if you’re in the merchant processing industry and need to know about financing young businesses, then MCA is What ISOs Should Know.

deBanked

https://debanked.com

Most Small Business Owners Have Never Heard of a Merchant Cash Advance

November 5, 2010
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Sales representatives within the industry report on a whole that the Merchant Cash Advance program has to be explained from the ground up quite often with potential clients. Ranging from ‘not understanding how it works’ to ‘having never heard of it before’, all signs seem to indicate that there is a vast market still unaware of this powerful source of capital. New businesses are born every day, adding to the list of prospects that will eventually find out banks are not there to help them… We hope business owners can find some information here and as always, choose your funding source wisely.

Merchant Cash Advance and Startup Businesses

October 20, 2010
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dollar billsKudos to the entrepreneurs taking a chance in the worst economic period of modern times. Starting a business is already a truly challenging task in itself but before we shower you with praise for being the ultimate warrior of capitalism, let’s put everything into perspective.

Risk takers are a minority in today’s startup community. A persistently high rate of unemployment is breeding a culture of survivalists; Individuals that have been pushed to the limit via pay cuts, layoffs, and robo-signing foreclosing bankers. It’s resumé rejection, employer double talk, and anger at how Wall Street bankers continue to live. The new entrepreneurs are a resounding chorus of “If I can’t get a job, I’ll make my own job!” These people are going for it on 4th Down and Long and running it up the middle for a touchdown. It’s as if Charles Darwin spiked their Corn Flakes.

Startup survivalists are just as inspiring as their risk taking counterparts. Both groups have the drive and that’s essential. But you can’t forego some basic tools. Financing is a must. No capital, no business. Unless you are fortunate to start with deep pockets, you need access to cash.

New businesses are not likely to be offered credit terms by vendors, nor can you push back overhead expenses such as rent, until you’re generating revenue. If unforeseen demand overwhelms your capacity, a cash shortage can do irreparable damage to your success.

Rather than spew rhetoric about the importance of funds, and shortchange you with a bullet point list of vague sources whom in reality are so illiquid, they’re not actually viable, we’ll offer our real 2 cents.

Banks. For a startup? Not happening. Angel Investors and Venture Capitalists? Slim to no chance. Unless these private investors live in your community, they’re not going to invest in your business. More than 90% of startups fail. For an investor to take that much risk, they’re going to do some hands on management or want to follow you around and critique how you’re spending their money. That’s not necessarily a bad thing. It just means that one can’t reasonably expect a return on their investment without intimate knowledge of the demographics and community the business is situated in.

Looking for private investors over the internet? Don’t. Your pro forma financial statements, data research, and business plan won’t help. Do you know how many businesses fail to open even after they incorporate, sign a lease, purchase inventory, advertise, and make preliminary hires? An astounding number are eclipsed by failed health inspections, license/permit rejections, and building code violations. This reasserts that unless an investor is personally intimate with your progress, the odds are stacked against them.

Lastly, you need not pay to get approved for capital. We’ve spoken with many start ups over the last year and are flabbergasted by the amount of new businesses that are convinced they have to pay a $3,000 upfront fee to get approved for a loan. The ones that actually pay are quick to learn what town the lender is based in; It’s called Scam City.

Real Option? Merchant Cash Advance. A Merchant Cash Advance offers a business with a lump sum of capital upfront. In return, a piece of every sale the business makes will go towards paying it back plus a predetermined fee. There is no due date or set term for repayment. That means if sales are slow to get off the ground, then funds will be repaid slower and with no penalty.

A Merchant Cash Advance provider entrusts you with their capital because of the unique security the repayment method offers. The business itself must accept credit cards as a form of payment. The credit card processing company will automatically deduct the agreed percentage piece of each sale transacted and forward it to the Merchant Cash Advance provider on your behalf for repayment.

A startup can qualify with as little as 1 week in business. As long as you open, you can get funding. Credit can play a limited factor and the cost can be hefty, but the access to capital is unmatched. From the date you apply, funds can be received in as little as 5 days.

Purchase inventory, pay the rent, advertise, hire, or seize an opportunity. Whichever shortcoming you face, it can be overcome with a Merchant Cash Advance. Industry experts project that funding is on pace to reach over $600 Million for 2010 alone. With advances ranging from as small as $1,000 to as high as $500,000, there is proof that numerous deals are being made every day.

We’ve seen the same books, guides, and expert advice columns that you’ve seen and all of them seem to be a reprint of useless suggestions like the SBA and searching for angel investors online. These people earn a living writing. Whether or not the money expert column in your newspaper actually helps you, makes no difference to them. We have many years experience in the Merchant Cash Advance industry and we make careers out of funding you, not telling you about funding.

We try not to promote any one company over another. There is no harm in enlisting the service of a middleman or reseller for one of the direct funding sources. It may actually benefit you. If you are open for business, you can obtain a Merchant Cash Advance. If you have been in business for a long time, a Merchant Cash Advance is still a fantastic option.

It’s 4th Down and Long. You’re ambitious, focused, and ready. You are the ultimate warrior of capitalism. A Merchant Cash Advance will supply the cash. Grow, take risks, survive, and don’t be surprised if your Corn Flakes taste funny.

Merchant Cash Advance Industry Funded $254 Million in First Half of 2010

October 16, 2010
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The Merchant Cash Advance Resource estimates that approximately $254 Million dollars in Merchant Cash Advances were funded in the first 6 months of 2010.


Using anonymous inside connections, we were able to determine precise monthly funding volume from some of the top 20 major funding firms. Using existing UCC filing research, private data, and mathematical analysis, we were able to come up with the closest estimate of the industry’s activity. We will however give our figure a margin of error of $20 Million.


Our research also determined that funding volume increased by 35% in the 2nd quarter over the 1st quarter. This comes as no surprise as retail activity in January – March is traditionally weak.


Given the likely strength of the 4th quarter, the industry aims to hit approximately $600 Million for the year.


– The Merchant Cash Advance Resource

October Kicks Off Merchant Cash Advance Rush for Holiday Inventory Stock

October 15, 2010
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Every October, retailers eagerly plan their strategy to capitalize on the impending holiday consumerism. 2010 is much like last year or worse. The long lasting recession has caused wholesalers and distributors to eliminate much needed payment terms for inventory purchases. It has become extremely challenging for retailers to purchase the amount of inventory required for the holidays when Cash on Delivery is the only policy.

The profit on the sales will more than pay for the costs paid but if the cash isn’t there to buy the inventory in the first place, there’s a problem. Hence a major cash flow problem is inevitably created even for the most robust business.

That being said, Merchant Cash Advance companies will experience application overflow and marathon work hours. It is much like what accountants experience during tax season. The Merchant Cash Advance underwriting process tends to slow significantly in late November.

Business owners!: Poor credit, fair credit, good credit? There are options for all of you with a Merchant Cash Advance. From Starter Advances to Platinum programs. The next 4 weeks is a great time to look into and apply for funds before it may be too late!

We wish you all the best as the peak retail season approaches and as always, make sure you choose one of the reputable firms.

– deBanked

Direct Merchant Cash Advance Funders / Lenders

October 10, 2010
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Many ISOs are dabbling with funding their own merchants these days. The industry is maturing into a whole new generation of Broker/Funding hybrids. A great $10,000 deal might be worth your own private investment. 😀

The Merchant Cash Advance Resource has been compiling a directory of actual funding sources and invite you to be listed on our site. There is no cost and this site merely serves as an impartial central hub for industry information. This site receives over 100 visitors every day from ISOs, Funders, Merchants, Financial Firms, Processors, etc. Your company will receive widespread positive exposure to all the right people. If your company has a blog, we will link the feed right to your profile.

To be added, you must be an actual direct funder capable of showing us 5 recent UCC filings as evidence of your advances. We will also seek to verify your status with other insiders in the industry. Hybrid firms are acceptable as long as you also provide your own capital to clients. To be added, please e-mail us at merchantprocessingresource@gmail.com

If you enjoy our site and wish to share information, stories, or news about the Merchant Cash Advance industry, you can submit your articles here to share with others.

New York Funding Race 2010

October 8, 2010
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New York State ranks in the top 5 for Merchant Cash Advance volume. We checked with the Secretary of state to find out just how many deals had been done in NY this year so far. Here is what we found:


1/1/2010 through 9/30/2010


  1. AdvanceMe                                          163 deals
  2. Merchant Cash and Capital                 144 deals
  3. First Funds                                           120 deals
  4. Strategic Funding Source                      50 deals
  5. 1st Merchant Funding                            40 deals
  6. Merchants Capital Access                     36 deals
  7. Business Financial Services                  31 deals
  8. AmeriMerchant                                      31 deals
  9. Max Advance                                         21 deals
  10. Capital For Merchants                           20 deals
  11. RapidAdvance                                       17 deals   (don’t always file UCCs)
  12. Snap Advances                                     14 deals
  13. Sterling Funding                                     13 deals
  14. Greystone Business Resources             12 deals
  15. American Finance Solutions                   12 deals
  16. Bankcard Funding                                  10 deals
  17. GRP Funding                                           9 deals   (don’t always file UCCs)
  18. Merchant Capital Source                         7 deals
  19. Centerboard Funding                               2 deals
  20. The Business Backer                               0 deals



Georgia Funding Race 2010

October 6, 2010
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Of the 20 major Direct Funding firms, who are the real players? Where do small businesses in Georgia have the best odds of obtaining capital? We checked with the Georgia Secretary of State to find out just how many deals each of these funders have done this year so far. Here is what we found:


From 1/1/2010 through 9/30/2010


  1. AdvanceMe                                    114 deals
  2. Merchant Cash and Capital             81 deals
  3. First Funds                                       35 deals
  4. Business Financial Services            34 deals
  5. 1st Merchant Funding                      25 deals
  6. Greystone Business Resources      18 deals
  7. Capital For Merchants                     17 deals
  8. Strategic Funding Source                15 deals
  9. RapidAdvance                                 14 deals (don’t always file UCCs)
  10. Max Advance                                   13 deals     
  11. Merchants Capital Access               12 deals       
  12. Merchant Capital Source                   9 deals
  13. GRP Funding                                     9 deals (don’t always file UCCs)
  14. AmeriMerchant                                  7 deals
  15. Snap Advances                                 5 deals
  16. American Finance Solutions              4 deals
  17. Sterling Funding                                 4 deals    
  18. Bankcard Funding                              4 deals
  19. The Business Backer                         3 deals
  20. Centerboard Funding                         0 deals  



Merchant Cash Advance Blacklist

August 5, 2010
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If you default on a Merchant Cash Advance naturally or by breach of contract, there is virtually no chance you will be able to obtain a Merchant Cash Advance in the future. 2008 was a particularly brutal year for Merchant Cash Advance firms. Not only had the recession weakened the most aggressive players but merchant fraud was abundant. 90% of the time this business is conducted by phone. Being vastly easier to obtain than a loan, many merchants rigged the process to get funding from multiple firms at the same time. Some would “go out of business” only to obtain more funds under a different name.

Merchant Cash Advance providers have stuck by their mantra of providing a simple process to their clients and have created solutions to prevent fraud. Industry groups such as the North American Merchant Advance Association provide a live database exchange of clients in default. A merchant’s most sensitive information is not revealed but public information such as legal name, dba, owner name, business address, and phone numbers (to name a few) are all stored in the database. Live funding activity is also shared in some capacity. For instance, if you apply to funding firm A and funding firm B at the same time but are funded by firm A today, then Firm B will automatically be alerted not to fund you.

These deterrents and live databases are not broadcast to the public and thus some businesses try to obtain additional advances after having defaulted on one already. If you are a merchant and you are trying to hide the fact that you currently have an advance or defaulted on one previously, you will not be successful in obtaining funds from another firm.

How Did Merchant Cash Advance Companies Get My Information?

August 4, 2010
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I used a Merchant Cash Advance program and now I am being solicited because of it. How did these companies get my information?

The Merchant Cash Advance industry is a competitive business. Most firms file a UCC-1 (public notice with your secretary of state) on your business to let potential creditors, lawyers, and other Merchant Cash Advance firms know your future credit card receivables have been purchased. This is customary for a loan as well, although the language in the filing is different.

Since this information is public, it is possible to request a list of all UCC-1’s filed by a particular funding company from the states. Each UCC-1 includes the DBA, Business Address, and Date it was filed. Computer programs or manual google searches can fill in the blanks and obtain the owner’s name and business phone number.

In just a few minutes, a competing Merchant Cash Advance firm or reseller can determine when you received funding and where you got it from. For the competition, It’s a free, easy way to create a marketing list.

The same can be done for traditional loans and equipment leases.

Am I Talking to a Broker? Does it Matter?

August 1, 2010
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Many merchant cash advance applicants have found the relationship structure of the companies involved confusing. Others who thought they understood it, later found out they were wrong. There are likely to be at least 3 parties involved in the process. Below is a breakdown of each and their role:

Cash Advance Provider: This is the company taking liability on the advance. They are the entity purchasing your future receivables at a discount. They also handle the decision making on approvals. It is very likely that they do not have an outbound marketing campaign or customer service department. They may rely on Brokers to bring in clients and service the accounts. The Cash Advance Provider pays a commissioned percentage of the advanced amount to the Broker for their services.

Cash Advance Broker: This is the reseller of the cash advance. Their business purpose is to acquire clients and submit their applications to the Cash Advance Provider for approval. They generally will also provide customer service. The Cash Advance Provider pays a commission to the Broker for every client of theirs that is funded. Brokers do not have to charge their clients for their “service” as the Cash Advance Provider is already paying them.

Credit Card Processor: In most cases, repayment of your advance depends on the Processor diverting a percentage of credit card transactions to the Advance Provider.

In order to do so, the Processor has to have contractual agreements with the Advance Provider. That is why in most cases, businesses are required to convert their processing to a new company. There is no Advance Provider that is compatible with all processors.

The Credit Card Processor performs it’s own risk analysis on the business as well. They want to ensure that your transactions are legitimate, secure, and consistent with the stated business model. Approval of an advance conditionally relies upon approval with the Processor.

This being known, some Advance Providers rely solely on Brokers to acquire clients and thus there is no way to apply directly with the Provider directly. For cost purposes this shouldn’t matter. The cost of the advance itself is the same whether a Broker is involved or not. However, SOME brokers charge additional fees for their service to the client themselves. They may try to convince you that it is the Cash Advance Provider’s fee, a set up fee, a reprogramming fee, a legal fee, etc. These are just disguised names for the Broker’s fee.

In some cases the Cash Advance Provider may charge up to $200 to file a UCC1 on the client’s business once the contract has been executed. Any amount higher than that is most likely not a necessary fee to be passed onto the client.

Clients should ask upfront with their account representative if any additional fees will be charged upon execution of the contract. Some will charge, some won’t. Whom the client decides to apply with is their choice.

1 Application Turned into Multiple Credit Pulls

July 30, 2010
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credit pullsMany merchant cash advance applicants have filled out a single form only to later find out their credit was pulled multiple times. This is common amongst brokers. Many brokers will take the application and then submit it to multiple Cash Advance Providers for review. They do this to increase the applicant’s chance of approval and ultimately come out with the best deal.

There is a flip side to this strategy that every applicant should be aware of. Credit inquiries affect FICO score. Though multiple pulls in a very short span of time won’t be as damaging as if they were spread out (Credit Agencies realize that people shop for credit and thus your score isn’t lowered as much), the actual record of the inquiry will remain on the report for 2 years.

If there are upwards of 4 pulls or more, this can have negative implications. Many Cash Advance Providers view inquiries from competitors as a bad sign and there are instances where applicants will be declined simply because they’ve “over shopped.“

If an applicant was credit worthy to begin with and they were planning on obtaining a mortgage or auto loan in the near future, this needs to be seriously considered. That mortgage or car loan may no longer be available because of too many credit inquiries.

Advice: Anyone applying for a merchant cash advance should discuss with their account representative before hand to find out exactly how many times their credit will be pulled and what entities will be pulling it. Authorizing an entity to pull credit does not grant anyone unlimited usage for an indefinite amount of time.

If any applicant feels their credit was pulled more times than was authorized or by unauthorized entities, they should contact the entity responsible. The entity is required by law to prove they had authorization to pull credit. If they made the inquiry in error, they are required to send you a letter stating just that. This letter can then be used to have the inquiry removed when contesting with the Credit Agency.

If the entity does not respond within 30 days, they can be in violation of the Fair Credit Reporting Act.