Articles by deBanked Staff
Texas Commercial Sales-Based Financing Bill Gets Last Minute ACH Ban Amendment
May 27, 2025The Commercial Sales-Based Financing bill that passed through the Texas House of Representatives two weeks ago has now also passed through the Senate, but with a rather controversial amendment. In the Senate version, passed yesterday, and viewable on the right hand side of this document, sales-based financing providers would not be allowed to automatically debit a merchant’s account unless they have a “validly perfected security interest in the recipient’s account under Chapter 9, Business & Commerce Code, with a first priority against the claims of all other persons.” That means any sales-based funding (like an MCA or revenue-based financing loan) would be prohibited from debiting merchants automatically unless they were in true first position. And not just a first position MCA, but first position on all arrangements the merchant has altogether. AND it would have to be perfected in accordance with this statute.
The Senate Amendment:
CERTAIN AUTOMATIC DEBITS PROHIBITED.
A provider or commercial sales-based financing broker may not establish a mechanism for automatically debiting a recipient’s deposit account unless the provider or broker holds a validly perfected security interest in the recipient’s account under Chapter 9, Business & Commerce Code, with a first priority against the claims of all other persons.
Since the main difference between what the Senate and House passed is that one sentence prohibiting automatic debits, they have until June 2nd to decide which version of the passed bill is final.
Sales-based financing is broad. While the term encompasses sales-based purchase transactions (MCAs), firms like Walmart and PayPal engage in loan-based sales-based financing. Both firms, for example, are registered sales-based financing providers in the state of Virginia.
The Texas Senate amendment language is new. It does not resemble anything passed in a state commercial financing disclosure law to date.
An estimated 10% of all sales-based financing in the US takes place with Texas-based businesses.
The Largest Sales-Based Financing Providers
May 27, 2025Who are some of the largest sales-based financing providers in the US? The following companies are repaid as a percentage of sales or revenue, in which the payment amount may increase or decrease according to the volume of sales made or revenue received by the recipient:
| Sales-Based Financing Providers |
| Square |
| PayPal |
| Amazon (via Parafin) |
| Walmart (via Parafin) |
| Shopify |
| Intuit |
| Stripe |
| DoorDash (via Parafin) |
The State of Washington has also recently announced it will be offering sales-based financing through a Department of Commerce initiative.
Among those listed above, Square recently published a White Paper on the impact of its sales-based financing.
“Square Loans has opened credit to populations who traditionally have had less access to business loans. As of the third quarter of 2024, approximately 58% of Square Loan customers are women-owned businesses, compared to the industry average of 19%.38 And 15% of Square Loans go to Black/African-owned businesses compared to an industry average of 6.6%, while 14% of loans go to Hispanic/Latinx-owned businesses compared to the industry average of 11.3%.”
The State of Washington Launches a Revenue Based Financing Business
May 25, 2025
The State of Washington is getting in to the revenue based financing business. Coinciding with Broker Fair 2025 on May 19th, the Washington State Department of Commerce announced it was launching the Revenue-Based Financing Fund (RBF) loan program for small businesses. Its administered by Grow America.
“This is one of the most innovative loan programs we’ve ever launched,” said Commerce Director Joe Nguyễn. “It’s not a typical business loan. It’s a Pay-As-You-Earn loan that works with the reality of running a small business. Instead of fixed monthly payments, businesses repay based on what they actually make. So if sales slow down, payments stay low. If business picks up, payments adjust. It’s flexible, it’s fair, and it’s the kind of practical solution we need to support small businesses across Washington.”
$13M in funding has been allocated to this program so far. Funding works similar to a business loan from Square or PayPal where there is technically a term and minimum monthly payment required, but the repayment system is based on a percentage of sales, namely 20% of them.
“At Grow America, we’re excited to launch the Washington Revenue-Based Financing Fund,” said Daniel Marsh III, Grow America president. “This program offers flexible capital, empowering Washington’s small businesses, especially entrepreneurs, to scale operations and achieve sustainable success.”
“Revenue-based financing provides you with flexible upfront capital, and its payback terms are customized to your cash flow and fluctuate based on your revenue,” the marketing materials state. “It’s ideal for small businesses that are seasonal, may not have a consistent income, or require an alternative to a traditional loan.”
Another Arrest Made in Advance Fee Business Loan Scheme
May 24, 2025Federal agents have arrested a third individual in connection with an advance fee business loan scheme that was busted last year. In the original scheme, two defendants were alleged to have induced merchants to make payments towards large lines of credit that never actually materialized. One of the defendants pleaded guilty last July. More recently, however, a third member of the scheme, Samuel Selmar, has been arrested for his role in it. Selmar has pleaded guilty to one count of Conspiracy to Commit Wire Fraud. The US Attorney for the Southern District of New York stated that the unlawfully obtained funds from the scheme were wired to a bank account that Selmar’s name was on.
In a public statement, Secret Service Special Agent in Charge Patrick J. Freaney said: “The deliberate chicanery allegedly carried out by this defendant has had a dire impact on the lives of his victims. By-and-large, these are private citizens who cannot afford to lose a few thousand dollars each. I want to commend the dedication of our Secret Service investigators and the prosecutors at the Southern District of New York for disrupting this insidious operation, and building a strong case that goes a long way toward delivering accountability.”
Equipment Lease Demand & MCA Demand The Same After Eight Years
May 21, 2025For firms with less than 500 employees that sought out financing in the last year, 10% applied for a lease while just 7% applied for a merchant cash advance, according to the latest data published annually by the Federal Reserve. Though each figure has varied slightly by year, the 10% seeking leases and 7% seeking MCAs match the survey results that compared the two back in 2017. So virtually nothing has changed since then.
Notably, 87% of financing applicants applied for a loan or a line of credit in 2017 while the 2025 report found that only 25% applied for a loan and only 22% applied for a line of credit in the last year. Meanwhile, interest in factoring has gone down. Roughly 4% of financing applicants used to seek out factoring specifically but that number has since dropped to 2%.
Small Employer Firms Less Likely to Seek Out Factoring Than a Decade Ago
May 20, 2025The percentage of small employer firms (< 500 employees) that applied for financing or credit that sought out factoring specifically, has dropped over time, according to the Small Business Credit Survey conducted by the Federal Reserve. deBanked pulled the responses published over the last 10 years to compare and found a noticeable change.
Percentage of financing applicants that sought factoring by year:
- 2015: 3%
- 2016: 7%
- 2017: 4%
- 2018: 4%
- 2019: 3%
- 2020: 4%
- 2021: 3%
- 2022: 4%
- 2023: did not ask
- 2024: 2%
- 2025: 2%
The anomalous 7% figure in 2016 is likely due to confusion over factoring with merchant cash advances. The Federal Reserve did not ask respondents if they had sought out merchant cash advances specifically until the 2017 study, at which point they discovered that 7% had actually sought out MCAs in 2017 and only 4% had sought out traditional factoring.
Ready Capital’s Q1 and Fintech Footprint
May 20, 2025Ready Capital originated $343M in SBA loans in the first quarter of 2025. It did an additional $44M in non-SBA small business loans in the same period.
“While we anticipate moderation in volume ahead, we view recent policy updates from the SBA as constructive towards reinforcing the program’s long-term strength and integrity,” said Thomas Capasse, CEO of Ready Capital. “Ready Capital continues to deliver performance above industry benchmarks. Our 12 month default rate was 3.2% versus the industry average of 3.4% and our five year charge-off rate has now declined for the fourth consecutive quarter, reflecting the strength of our credit and servicing practices. Additionally, our 12 month repair and denial rate reached a historic low.”
While Ready Capital is known as the fourth largest SBA lender and by far the largest non-bank SBA lender, the company is also among the biggest fintech innovators in the space.
- 2019: Acquired Knight Capital and iBusiness Funding
- 2023: Launched LenderAI
- 2023: Acquired non-SBA assets and talent from Fountainhead SBF LLC
- 2024: Acquired Funding Circle US
- 2024: Inherited Funding Circle’s funding partnership with eBay
On the last point above, eBay brokered more than $100M in small business funding in 2024 alone, with more than half of that believed to have gone to Funding Circle US, now Ready Capital via iBusiness Funding. On eBay, iBusiness Funding offers term loans up to $500k with repayment terms up to 7 years.
The rest of eBay’s funding volume goes to an MCA provider named Liberis.
See You at Broker Fair
May 18, 2025REGISTERED FOR BROKER FAIR? HERE’S WHAT YOU NEED TO KNOW:
Broker Fair Preshow tonight at JIMMY at ModernHaus (SoHo) 15 Thompson St, New York, NY. Requires the separate preshow ticket. This event is sponsored by Lendini. All food is Kosher.
Broker Fair conference tomorrow at Tribeca 360 is at 10 Desbrosses St, New York, NY. Checkin starts at 9am.
- Agenda here.
- Lunch is sponsored by Triton Recovery Group who created a curated latin flavored menu. All food is Kosher.
- The post-show reception starting at 3:35 is sponsored by Bitty. All food is Kosher.
See you there!
