Smaller Funder? How to Get Fast Tracked With Big Investors

Looking for big money? As a smaller funder your simple financial reports might not cut it when it comes to big investors. In fact, it’s a complaint frequently made by investment bankers and institutional funds looking to get capital deployed in the revenue-based financing space.

“Smaller originators face three key hurdles: first, the lack of institutional-grade portfolio performance and consistency; second, limited data operations and analytics capabilities; and third, a shortage of affordable resources and expertise to close these gaps and engage effectively with capital markets,” said Tomo Matsuo, Managing Partner of AdvanceIQ.ai., “AdvanceIQ.ai was launched to address these challenges head-on through tailored solutions like our new Portfolio Pulse product.”

The Portfolio Pulse is a simple yet robust tear-sheet product that delivers a high-level, third-party validated snapshot of portfolio performance. Designed as a cost-effective tool, it helps funders build credibility and engage institutional investors with confidence. Seamlessly integrating with most industry CRMs, it generates investor-ready metrics tailored for early-stage conversations, enhancing transparency and trust.

But Portfolio Pulse is just one piece of AdvanceIQ.ai’s broader suite of tools. From risk scoring and intelligent lead routing to dynamic portfolio analytics, AdvanceIQ.ai equips funders with the insights and resources to scale efficiently while building investor confidence. These offerings include tools like the SMB Risk Index (SRI), a proprietary scoring system designed for the SMB AltLending sector to predict and enhance asset performance.

Excerpts from Portfolio Pulse:


• Trailing twelve-month (TTM) origination metrics and performance trends.

• Distribution and performance insights segmented by key attributes, including the proprietary SMB Risk Index (SRI).

• Historical repayment trends via collection curve analysis.

“High-quality reporting is an essential first step for smaller funders to break into institutional markets,” Matsuo noted. “Our goal is to provide the transparency and insights that empower them to succeed.”

With deep experience in the SMB AltLending space, Matsuo is no stranger to the challenges funders face. “Having been involved in raising and managing hundreds of millions of dollars in both debt and equity, I’ve seen how difficult it can be for smaller originators to stand out. AdvanceIQ.ai’s offerings are designed to remove those barriers and position them for growth.”

eBay: ‘We’ve Already Done $40M in MCAs’

eBay is coming in hot to the small business financing game. The company reported that it had connected merchants with $100M in funding YTD, over $40M of it being “business cash advances” through Liberis alone.

Liberis is a UK-based company that expanded into North America 4 years ago. It secured $112M in debt funding last year. The partnership between Liberis and eBay only started this past July. eBay’s other big funding partner is Funding Circle.

eBay’s role as a facilitator for funding follows what every other major e-commerce platform is doing. For example, Amazon, Shopify, Walmart, Lightspeed, and DoorDash all offer funding to sellers on their platforms. Technically, eBay was the first considering it had originally partnered up with Kabbage back in 2010. That relationship did not last, however.

How The Interest Rate Cuts Hurt MCAs

David Roitblat is the founder and CEO of Better Accounting Solutions, an accounting firm based in New York City, and a leading authority in specialized accounting for merchant cash advance companies. To connect with David, email david@betteraccountingsolutions.com.

In recent weeks, for the first time since 2020, the Federal Reserve cut interest rates by a historic 50 bps- a percentage that hasn’t been seen since 2008. The cut lines up with the Fed’s projections that inflation is coming down and their hopeful outlook for the economy, and while it might seem like good news for most industries, the merchant cash advance (MCA) sector has its own complex feelings to the dramatic change.

Obviously, unlike traditional businesses that might simply celebrate cheaper borrowing costs, MCAs operate in a space where the time-value of money and risk evaluation play major roles, making this rate cut a more nuanced event for the industry. The effects will be felt across multiple areas of the MCA business, from how funding decisions are made to the shifting expectations of clients seeking advances.

Our entire business exists to serve merchants that can’t easily secure loans from banks or other traditional lenders. These clients often turn to MCA providers for fast capital, even at higher costs, because they can’t wait for lengthy approval processes or don’t meet conventional lending criteria. In an environment where the Fed has reduced rates, traditional banks will also lower their rates, making loans more attractive to a wider pool of businesses. This increase in competition from more traditionally recognized financial institutions could pose a challenge for MCAs, which rely on servicing clients who can’t or won’t pursue standard loans. With lower interest rates, more businesses that typically look to MCAs for funding might find themselves newly eligible for cheaper and more merchant-friendly bank loans.

This shift in the competitive landscape means MCA business must be both more open and more selective in the clients they take on. If more of the relatively creditworthy businesses opt for traditional financing, MCA providers will see a shift in their applicant pool towards higher-risk clients. This introduces an even greater need for vigilance in deal underwriting. The riskier the client, the higher the potential for default, and MCA companies must make careful decisions to avoid unsustainable losses. Rate cuts at the Fed don’t just lower the costs of borrowing—they also squeeze the margins on risk. While banks can afford to cut rates for a broad swath of clients, MCA companies operate on thinner margins due to the nature of the businesses they work with. I’ve long been an advocate of businesses embracing what initially appears to be riskier propositions, but that doesn’t come at the expense of ensuring they have a good chance of paying you back.

Additionally, the Fed’s decision also affects inflation expectations, which in turn impacts how MCA providers price their advances. In a higher inflation environment, MCAs can justify their higher factor rates more easily, as they are providing capital at a time when the value of money is declining faster. But with the rate cuts signaling a more accommodative stance from the Fed, inflation is expected to stabilize, or even decline, over time. This changes the conversation around MCA pricing. Businesses may push back harder on MCA rates, arguing that with cheaper money available elsewhere and stable inflation, the high cost of cash advances feels disproportionate. MCA companies will need to defend their pricing models in a market where the cost of borrowing is generally falling.

Of course, rate cuts can also benefit the MCA industry. Lower interest rates can improve liquidity across the market, which means MCA companies may find it easier to access their own lines of credit or syndicate deals with investors. With cheaper money flowing through the economy, investors might be more willing to syndicate MCA deals, seeing them as a worthwhile risk given the higher returns MCAs can offer compared to more traditional investments. This could lead to more efficient underwriting processes, helping MCA companies better evaluate potential clients and manage their risk portfolios more effectively.

But there is also the longer-term concern of economic volatility to consider. Interest rate cuts are often seen as a tool to stimulate a sluggish economy or to project confidence during an election season, but they can also be a warning sign that things are not going well. If the rate cut is a harbinger of broader economic challenges, MCA providers should brace themselves for increased default rates. When businesses are struggling, they may be more likely to fall behind on their payments, making it harder for MCA companies to collect on advances. The specter of recession looms over any rate cut, and MCA companies, which cater to businesses that may already be operating on the edge, must be prepared for a potential uptick in defaults.

Ultimately, the impact of the rate cut on the MCA industry will depend on how both MCA providers and their clients adapt to the new financial environment. While lower rates might make it harder for MCA companies to compete with traditional lenders, they also open up new avenues for growth, particularly if companies can leverage cheaper credit to improve their operations and attract new investors. The key for MCA companies is to remain vigilant, carefully assess their risk, and be prepared to explain the value they offer in a world where borrowing is getting cheaper. As always, the MCA industry thrives on its ability to respond quickly to market conditions, and this latest development from the Fed will be another chance for the business to prove its resilience.