Merchant Cash Advance Outlook for 2011
Happy New Year! Over the past few weeks we spoke with many Merchant Cash Advance(MCA) industry professionals, read blogs, and scanned forums to find out what is predicted for 2011. Here is what we learned:
The number of businesses facing tax liens will rise, making it increasingly difficult for them to obtain a traditional MCA. Their only resort may be “starter” or “decline” programs, which come with low capital and high costs. Business owners that have difficulty understanding why their tax liens are an issue at all, should realize their assets and future sales are technically the property of the government. As per the IRS: By filing notice of a lien, your creditors are publicly notified that we have a claim against all your property, including property you acquire after the lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate.The lien attaches to all your property (such as your house or car) and to all your rights to property (such as your accounts receivable, if you are a business). MCA providers with a claim on future credit card sales can easily find themselves usurped by the IRS.
Credit card processors(CCPs) will venture into funding their own clients. Over the past few years, CCPs were a necessary third party to a MCA transaction. The CCP would split the business’s batch to allow the MCA provider to collect on their purchased receivables. Their years as a third party have granted them incredible insight into the funding business. In the latter half of 2010, some CCPs tested the waters and funded businesses on their own. In 2011, we will begin to see the role of MCA provider and CCP gradually merge into solitary entities.
Resellers of MCA began to drift away from their dependence on funding providers in 2010. In 2011, there will be a surge in the number of resellers funding businesses on their own. The MCA industry will become largely decentralized and may give rise to new challenges.
Businesses hanging on by a thread are less likely to obtain funds in 2011. Bank loans were never meant as a means to stave off bankruptcy and neither is a MCA. Most detractors of the MCA industry were business owners on the verge of bankruptcy before obtaining capital. This is not a lifeline. Good businesses grow, bad businesses fail. That’s the way it has to work in order for the economy and capitalism to be functional.
The Federal Reserve’s 12 cent debit fee cap may negatively impact resellers that depend on merchant residuals.
The MCA industry will continue to use less expensive means of marketing. Expensive regional trade shows are becoming less popular and UCC hunting is on the rise.
2011 is yet to be told. One thing is for sure, MCA providers are not unlike the businesses they fund. It’s a tumultuous economy and there is no guarantee that we’ll all still be standing in 2012. Remember those who have come before us(look at the bottom of this page). Much luck to all!
-The Merchant Cash Advance Resource
Last modified: February 21, 2013
Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.