Related Headlines
| 01/04/2024 | Lightspeed: 'Our MCA biz is growing' |
| 06/21/2023 | Lightspeed expands MCAs to UK, AUS, NZ, QC |
| 02/02/2023 | Lightspeed's MCA business is growing |
| 04/27/2017 | OnDeck Canada partners with Lightspeed |
Stories
Lightspeed’s Merchant Cash Advance Business is Accelerating
February 8, 2024
“Our capital business has grown—it’s doubled from over a year ago and we expect that trajectory to continue. And capital revenue comes in at a 95% gross margin,” said Lightspeed CFO Asha Bakshani in the company’s most recent quarterly earnings call.
Although Lightspeed is more widely known as a global e-commerce platform, analysts have been encouraging the company to ramp up its merchant cash advance business because of the considerable margins it produces. As such Lightspeed through Lightspeed Capital has been doing just that. And not just in the US. “We launched Lightspeed Capital in France, the Netherlands and Belgium this quarter, and Germany shortly after the quarter, expanding our global footprint for this high-margin offering,” said company CEO Jean Paul Chauvet.
Origination growth has been slow, however, because the company has been concerned with the potential impact it will have on its own available operating cash. This fear seems slightly overblown as Lightspeed reported having $750M in cash as of the close of the most recent quarter and said that merchant cash advance originations were responsible for using up only $8.3M in cash during the quarter.
Lightspeed Capital: ‘we intend to grow our MCA business’
January 4, 2024After facing criticism from stock analysts for not doing enough merchant cash advances, Lightspeed CFO Asha Bakshani said that the POS company intends to grow its MCA business. The comment came during the company’s fiscal Q2 2024 earnings call, where it revealed that it had originated $10.1M in MCAs for the quarter.
Bakshani noted, however, that by doing these deals on balance sheet, it has to balance its origination goals with its available working capital. Revenue on its MCAs were up 120% YoY.
One interesting detail is that the company revealed that its gross margin on MCAs is 95%.
Lightspeed is publicly traded on the NYSE under LSPD.
Should Lightspeed Ramp Up its Merchant Cash Advance Business?
August 18, 2023Analysts are wondering if Lightspeed should be doing even more merchant cash advances than the company’s currently doing. The company generated just $8.1M in revenue from them over the last fiscal year, a number that amounted to just 1% of total revenue.
“Under normal circumstances, we would likely be pushing [Lightspeed] Capital even harder,” said Lightspeed CFO Asha Bakshani during the Q1 2024 FY earnings call this month, “however, given the current macro environment, we’re being conservative on the ramp. There’s no lack of demand from our customers, and we believe our high GTV customer base is an ideal demographic to use this financial service, especially in the long term. Risk of business failure is much lower with high GTV customers, but the need for capital is still substantial.”
When Lightspeed touted that it had increased its total merchant cash advance receivable balance by $11M for the quarter, an analyst from Bank of America Merrill Lynch wondered if they were being too conservative. “You mentioned that you would be pushing harder, but given the macro, you’re being conservative on the ramp,” the analyst said, “But then, you also mentioned that there is demand for it, so if there is demand, why not push a little bit harder for capital?”
“Yeah, you’re absolutely right,” Bakshani replied. “Capital is a very promising business for us, but what we have to keep in mind is that it still represents today a low single-digit millions in terms of revenue. And so when our sales teams are fully focused on unified payments, there was some distraction in the quarter on capital. And in addition, we want to make sure that in today’s macro that we’re not rushing anything. We want to make sure that we ensure that we stick with the very high rated credit-rated customers for eligibility. But you’re absolutely right, there’s tons of demand. We’re just taking our time intentionally given the macro. Our default rates still remain extremely low, but we definitely should see that pick back up in the back half of the year when unified payments is behind us.”
Lightspeed’s merchant cash advance program was repeatedly raised during the call in very positive terms.
“Once you’re on Lightspeed payments, we underwrite you for capital so you can have access to capital,” said Jean Paul Chauvet, CEO of Lightspeed. “That is a big win for them and our customers.”
Lightspeed Capital Generated $8.1M in MCA Revenue Last Year
June 23, 2023When Lightspeed announced it was expanding its MCA program to the United Kingdom, Australia, New Zealand and Quebec, one may have been wondering who they were. The POS e-commerce platform has actually been around since 2005 and has been slowly building up its MCA offerings. Indeed, last quarter deBanked pointed out that the company had been increasing its volume.
As of the company’s fiscal year-end of March 31, 2023, the company had an MCA receivable balance of $29.5M, up from $6.3M YoY. Altogether, Lightspeed generated $8.1M in revenue in FY 2022, amounting to only about 1% of its overall revenue. That means there’s still a lot more room for growth.
“We believe real-time access to capital is one of the largest challenges facing merchants today,” said JP Chauvet, Lightspeed CEO in a press release. “This expansion of Lightspeed Capital provides a simple, streamlined opportunity for our merchants to invest in their business. Our goal is to help turbocharge their operations … all through a single, integrated commerce solution.
Lightspeed’s MCA Business is Growing
February 2, 2023Lightspeed Commerce, a global e-commerce platform for merchants, reported an increase in its merchant cash advance business in its latest earnings report. As of December 31, 2022, $15.8M of mcas were outstanding, up 25% from the previous quarter, the company announced.
Lightspeed is no small company. It reported $188.7M in total revenues for the most recent fiscal quarter, $74.5M of which was drawn from subscriptions and $107.2M from transactions.
“To further complement our core cloud solutions, we offer a merchant cash advance program called Lightspeed Capital,” the company said in its quarterly statements. “This program provides cash advances to eligible merchants and is designed to help them with overall business growth and cash management.”
A Quick Review of LightSpeed POS for Mac
December 9, 2011A quick review by sean himself…
So being the merchant processing savvy person that I am, I got a trial copy of the software and fiddled with it for about an hour, when I decided it was just as simple, fluid, and appropriate as we both hoped it would be. I wouldn’t call myself an expert on the software now but I am confident enough to provide an introduction on what it can do.
Below is a 23 minute step-by-step video that explains the software as if you had just purchased it today. It differs from the tutorials on LightSpeed’s own website because I stripped out the demo bundled features they use to show it off, none of which would have any relevance to your actual business. I don’t normally do reviews so hopefully you can deal with my style of instruction. 🙂
Feel free to e-mail me feedback. Visit LightSpeed’s website to learn more.
Description: POS Software for Mac and iPhone
Review by: Sean Murray
Product Reviewed: LightSpeed POS
Date of Review: 12/09/2011
Rating: 5 out of 5 stars
What Big Publicly Traded Companies Say About Merchant Cash Advances
March 13, 2024deBanked examined the public messaging from some of the largest publicly traded merchant cash advance facilitators in the US and this is what it found:
SHOPIFY
A merchant cash advance is a purchase of your future sales, also known as receivables. If your application for funding is accepted, then Shopify provides you a lump sum of money for a fixed fee. Under the Shopify capital agreement, this lump sum is known as the amount advanced, and the total to remit is the amount advanced plus the fixed fee. In return, you pay Shopify Capital a percentage of your daily sales until Shopify receives the total to remit. The percentage of your daily sales that you must remit to Shopify is known as the remittance rate. The amount advanced and the remittance rate depend on your risk profile.
For example, Shopify Capital might advance you 5,000 USD for 5,650 USD paid from your store’s future sales, with a remittance rate of 10%. The 5,000 USD amount that you receive is transferred to your business bank account specified in your admin, and Shopify Capital receives 10% of your store’s gross daily sales until the full 5,650 USD total to remit has been remitted. You have the option, at any time, to remit any outstanding balance in a single lump sum.
There is no deadline for remitting the total to Shopify Capital. The daily remittance amount in USD is determined by your store’s daily sales, because the remittance rate is a percentage of your store’s daily sales. The remittance amount is automatically debited from your business bank account.
DOORDASH
DoorDash Capital is a cash advance, not a loan. With a cash advance, the offer is based on your sales and account history, and includes a simple, transparent one-time fee that you’ll know before you decide to accept the offer. A loan operates using interest, which can compound over time, and often includes other fees in addition to the stated interest rate.
LIGHTSPEED
AMAZON
A [merchant cash advance is a] non-revolving sum of funding with flexible payment, no personal collateral required and no late fees. With flexible payment, no personal collateral required and no late fees, a merchant cash advance provides sellers funding to help run and grow their business. Unlike interest-bearing loans, the advance ties payment to a portion of a seller’s future sales for a fixed capital fee, there are no additional fees or interest charged.
NERDWALLET
Fixed withdrawals from a bank account
Merchant cash advance companies can also withdraw funds directly from your business bank account. In this case, fixed repayments are made daily or weekly from your account regardless of how much you earn in sales, and the fixed repayment amount is determined based on an estimate of your monthly revenue.
PAYPAL
A merchant cash advance is not a loan, but rather a type of financing that business owners pay back with a percentage of their future sales.
Loan Volumes Strong, Approvals Cautious in Small Business Finance Space
August 22, 2023
In this current environment, small business finance companies are proceeding cautiously.
“In 2022, the company’s turndown rate stood at 8%, but it has surged to 12% this year,” said David Miles, VP and Director of Credit for Eastern Funding. Eastern Funding primarily serves coin laundromats, grocery stores, and car washes but also operates two subsidiaries that focus on assets like commercial vehicles & tow trucks and fitness & wellness equipment. While Miles said that loan volume has remained strong, the percentage of transactions being turned down has increased.
“…I think that’s fairly indicative of the market or the environment that we’re currently in, which is high interest rates,” said Miles. “You have consumers that are carrying a lot of debt and it’s somewhat of a precursor to a potential downturn or recession.”
The circumstances are being felt all across the lending spectrum. According to a recent consumer lending study from the Federal Reserve, the overall rejection rate for credit applicants was 21.8% in June, the highest level in five years. That study looked primarily at mortgages, credit cards, and auto loans.
But in the commercial universe where Eastern Funding operates, the sentiment seems to be matching the shift in the numbers. On a recent quarterly earnings call, for example, Lightspeed CFO Asha Bakshani said of their MCA program, “There’s tons of demand. We’re just taking our time intentionally given the macro.” On unsecured business loans, Enova CEO David Fisher recently said that “we’re just not convinced the risk/reward is there right now, again, given the uncertainty in the economy, an extra few percentages of origination growth for us this year is pretty inconsequential.” Both Lightspeed and Enova are also still experiencing strong volume despite the conservative approach.
“We’ve definitely seen credit quality go down compared to prior years but that’s the main challenge,” said Miles of Eastern Funding. “And we want to make sure that especially in this environment, that we continue to make good loans, we make loans that don’t go to collections, that don’t go to work-out, and we don’t experience any losses across any of the three divisions.”
One challenge of being cautious, however, is communicating the situation to potential customers who may still be stuck in the mindset of 1-2 years ago.
“Our focus is on making sure that the people that do have credit authority, that they’re well aware of the environment that we’re currently in, and that there is enhanced risk just to do with the macroeconomic environment that we’re operating in,” Miles said.
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