Real-time Reconciliations on Revenue Based Finance Deals?

In the finance world, taking a percentage of a merchant’s sales at the time a sale is consummated is called a split. It’s how revenue based financing often works when the purchased future receivables are card-based. When it’s all revenue, funding providers often rely on a combination of ACH debits and reconciliations, the frequency of which are governed by the contract. On some big e-commerce platforms, like Walmart Marketplace, for example, sales data is monitored in real-time and the appropriate split is debited out from the merchant’s bank account the next day. Some refer to this as a real-time reconciliation.

Real-time reconciliations have been attempted outside of e-commerce ever since Merchant Cash and Capital aka BizFi (RIP) pioneered this 15 years ago, but it was a manual process riddled with challenges that would hardly hold up in today’s technological world. In 2021, revenue based financing provider FundKite introduced its own system, one that was documented by deBanked at the time.

Back then, FundKite CEO Alex Shvarts said, “This product [where debits vary daily based upon true sales] works better for merchants, it works better for portfolios, if you’re actually reconciling and pulling what you’re supposed to, and not what you’re anticipating.”

Three years later, Shvarts still feels the same way and told deBanked that his daily reconciliation method has been a success and is now a leading driver of its business.

“In order to reconcile we must have access to the merchant bank accounts,” Shvarts said. “We use priority technology to do the reconciliation after we have the data. We use a combination of live Logins, Plaid, Decision logic and another piece of code we wrote. Merchants are automatically notified of the reconciliation and adjustment to the payments before we debit the accounts.”

The company touts this system as its edge on its homepage.

“Payments are based on sales, offering protection during slower periods or when no sales occur,” the site says.

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.