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MCA in Conversation: Where do we go from here?

July 27, 2020
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Heather Francis is the CEO of Elevate Funding. To learn more visit:

moving forwardDeBanked Magazine recently posted the “Underwriter’s Song” to highlight an entire industry’s yearning for simpler times, claiming it was the MCA soundtrack for 2020. But I disagree and nominate a different song. You see, growing up in the south with a close-knit family gave way to a childhood filled with generations worth of entertainment. Many of my summers and holiday vacations were spent with the Turner Classic Movie channel playing in the background, and songs from the Oldies Country station on the radio. I tell you this to explain how I am reminded of a song I’ve heard countless times before, and is more applicable today than ever before. That song is “If We Make It Through to December” by the venerable Merle Haggard, a tune whose message resonates with not only the merchant cash advance industry, but our entire country.

The Expectations and Reality

Way back in March and April, the consensus appeared to be an expected return to “normal” by June, while areas hit hardest by COVID-19 would return by July. Yet here we are, teeter-tottering on the fence of moving forward. Now, our country is faced with the possibility of a second wave of shutdowns, rising crime, riots, a fourth stimulus, and funders whose workforce remains remote or have yet to resume funding. The proverbial “goal post” has moved yet again, and with it the expectations of many of us in the industry. Over the past few weeks, I had the opportunity to speak with a number of our referral partners to gauge their thoughts on the current state of our industry. A common theme in our discussions was the desire for validation. Not just as a business owner, but as an employer. They wanted to be reassured that they were taking the best steps forward and not alone in their decision making. To help those seeking the same validation, here is what the majority had to say:

  • Yes, all had to terminate or furlough staff on various levels.
  • Yes, all adjusted marketing budgets.
  • Yes, all are struggling with managing remote employees.
  • Yes, all are finding it harder to place files.
  • Yes, all are seeing interruptions in relationships with funders and merchants alike.
  • Yes, all are competing against the Government’s low-cost products.
  • Yes, all are having files killed in late stages of funding or having offers adjusted.
  • Yes, all are struggling to predict what comes next.
  • Yes, all are managing unrealistic expectations from clients.
  • Yes, all are having merchants walk away from fair and just offers.
  • Yes, all are struggling to remain motivated.
  • And yes, all of you are doing the best you can!

The New Normal

The Word Cloud below describes the state of the MCA industry using our partners’ own words. I find that the overall thoughts are best visualized by taking a step back to see which stand out the most. Our conversation was focused on the industry as a whole, then a discussion specific to Elevate Funding and how we’ve pivoted during these unprecedented times. As you can see, some of the keywords that stand out the most are; merchants, PPP, offers, funders, and marketing.

Much of the conversations focused around merchants and their new funding expectations. Each partner I spoke with agreed the demand for money is there, but the willingness to move forward on offers was very low. This reluctance is driven in part by low cost expectations based on PPP and SBA product rates, as well as uncertainty over increased debt in an unstable market. We’re also seeing a change in merchant demographics, where the mid-sized small businesses who previously did not qualify for SBA loans, now have access to these products. As a result, the remaining merchants whose best option is an MCA are now located on the opposite extreme ends of the spectrum; either those who did not qualify for PPP or SBA EIDL, and the large-scale businesses whose lines were revoked by their bank. Our response as a company has been to adjust our offers to better suit merchant’s expectations, and to shift from underwriting a business owner’s activity to underwriting the consumers’ activity. Monitoring government restrictions down to a county level countrywide and understanding consumer trends has enabled us to further mitigate risk during a time of uncertainty, and not only fund deals, but fund deals that will perform.

Meanwhile, our industry is seeing credit profiles and business profiles that have never applied in our space before, as a decreasing number of providers are available to service current merchants. During our conversations, some expressed a concern over lack of A-paper funders. Many of whom have either paused funding or entirely moved over to servicing PPP products. Another concern was the mental toll of having deals fall apart at the eleventh hour due to fast changing qualifications, variations in merchant revenue, or funders deciding to pause funding at inopportune times. These factors combined with the increasingly common “bait-and-switch” technique of funders providing a large offer, only to change to a much lower offer in the final stages of funding, has left many broker shops and ISOs feeling very discouraged.

The Path Upward and Onward

The conversations were not entirely negative, as new marketing opportunities have opened up with the goliaths of the industry such as Kabbage, OnDeck, Lendio, and Square shifting their marketing dollars towards PPP and SBA products. Many folks are finding their advertising dollars across marketing platforms are stretching further, particularly with search engine optimization. While this opens up an increased likelihood of fraud and in applicants who fall below qualifications, it has enabled many shops to operate on an even playing field with inbound marketing. Many small funders, including Elevate Funding, have already created new products to cater to lower revenue merchants and those directly affected by COVID-19. We’ve already received tremendous response on this change from partners and merchants alike. As merchants slowly shift back towards alternative financing solutions once the government runs out of money for its loan products, we remain optimistic there will be increased opportunities in terms of both volume and quality.

While the Word Cloud highlighted a number of topics, it also highlighted important topics that were not discussed; Expectations, Renewals, Commission, Aggression, and Repositioning.

Expectations in particular, is of note as it is different from opinions. Everyone has an opinion, but there is a tremendous sense of uncertainty going forward and it’s very difficult to create expectations or goals when forecasting is not possible. Many companies are doing away with forecasting models altogether, and switching to a dashboard for production goals and expectations based on real time data.

The drastic change we’re seeing now should demonstrate the importance of renewals and customer retention. Neither of which were brought up during all of my partner discussions. Over time, the industry has moved away from a “residual mindset” to seeking instant gratification of new fundings in the quest for market share supremacy. As funders, we have to ask ourselves; Are we inadvertently throwing out the baby with the bathwater with new deal bonus structures and monthly promotional campaigns to drive new deal growth? Or perhaps, renewals were scarce in discussions because when funders said when funding stopped, they meant all funding? While I can’t speak to each funder’s operations, Elevate has continued to fund throughout the pandemic with established merchants and renewals being a saving grace to drive our momentum forward. In my opinion, client retention has never been more important during an ever-changing landscape.

I was shocked to see commission taking a backseat to approvals and banks during our discussion. But the focus has seemingly move towards approvals and conversions, which will in turn lead to commissions returning. Which brings me to Aggression and Repositioning. The state of our industry is a timid one, and it’s neither the fault of the funders or the merchants. Many experts will tell you that our space was overdue for a market correction of sorts, because many were far too aggressive for far too long. This aggression gave way to bad habits such as lowered underwriting standards and lack of consideration for merchant ability to repay. More and more funders are shifting back to “normal” guidelines, providing fair and just offers. This is an encouraging sign that we are finding our way back to sustainable positive growth. But it will take time for the industry to fully reposition itself. Something that is being delayed by products from the PPP, SBA, and the hope for a third round of stimulus.

But hope is on the horizon. While the pessimists will look at that word as a form of denial, I challenge all of you to take a glass half-full approach. Hope is the confident expectation of good. The change and adjustments we’re experiencing now are what life is all about, and will ultimately lend way to better things. If you’re in need of a little dose of hope, or want a sounding board to know you’re not alone through this, feel free to drop me a line at

Stay safe, be well, and do not lose hope.