5 Tips for Better MCA Collections
February 3, 2023Shaya Gorkin is an experienced attorney and the COO of Monetaria Group, a premier collections agency specializing in merchant cash advance and commercial debt recovery. To connect with Shaya, email shaya@merelcorp.com.
With the benefit of our collective decade of experience working in collections for the merchant cash advance industry, our team at Monetaria Group has come to understand all too well the importance of recovering funds for our clients and all the difficulties associated with that. The MCA sector poses distinct obstacles and challenges for collections; but, by implementing the correct systems and strategies, we’ve found that outstanding payments be recovered, without it having to be a painful and drawn-out experience.
Here are five key strategies for better MCA collections that we have implemented with our clients, that can help you too:
1. Be familiar with the industry you’re being asked to advance.
Often, MCA companies offer small businesses short-term funding in their moments of need. This means that the funders are betting on the business’s ability to take advantage of the opportunity being offered to them and turn the ship around, enabling them to repay the advance without any complications or issues.
To ensure you are giving your company the best chance of getting its money back, it is essential for funders to have an understanding of the industry and the businesses they are working with to be able to evaluate their advance worthiness and anticipate fluctuations in repayment ability.
2. Establish relationships and overcommunicate.
Having strong relationships goes a long way in MCA collections, for both the funders and their clients. Establishing trust and open communication with clients will inevitably lead to a better understanding of their specific needs and challenges. Additionally, it goes without saying that developing positive customer relationships can lead to more successful negotiations and repayment agreements.
3. Be proactive and offer solutions.
Instead of passively waiting for merchants to default, proactively reach out to them to check in and see if it’s time to discuss reconciliation and other solutions. This shows a willingness to work with them and allows for potential issues to be addressed before they become major problems.
4. Utilize the best available technology.
Over the past decade, the merchant cash advance space has seen an explosion in the creation CRMs and softwares to service and assist the MCA businesses. Utilizing these technologies will greatly improve the efficiency and effectiveness of your business and will be a great asset in ensuring you are collecting all that is owed to you. Look for the services that offer the features you need, such as custom reports, client breakdowns, automated payment reminders, online portals for customers to make payments, and data analytics- they are all out there ready to assist you.
5. Have a contingency plan.
Despite your best efforts, some merchants will still default. Having a well-crafted contingency plan in place that doesn’t put all your eggs in one basket will minimize the potential negative impact on your business. This includes doing a very thorough underwriting of the merchant’s business. Additionally, be prepared to explore your options in terms of collecting what is owed to you. This may include selling the debt, restructuring the payment, hiring a qualified third-party debt recovery agency, or legal action.
Having all these in place will more than adequately prepare you for a successful MCA collections experience, and help you avoid all the stress and headaches it can present otherwise.
Reliant Funding Shifts Gears
February 3, 2023
Reliant Funding has begun a sale of its portfolio, deBanked has learned, a move complemented by some material adjustments internally. For example, posts on social media have revealed that numerous members of Reliant’s staff are suddenly seeking new employment.
A source familiar with events taking place inside the company confirmed that Reliant is indeed right-sizing its team and that funding on balance sheet has paused. Due to its ability to get deals funded off balance sheet, however, January was actually the company’s strongest month ever for originations.
Market conditions and the rapid rise of interest rates may be related to the sudden shift at Reliant, which has been in operation since late 2008. At the time the Federal Funds Rate had dropped to 0% and it had remained exceptionally low until recently.
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.”
Bitty Bets Big
February 1, 2023
“It’s a new product, it’s a new pricing structure, for deals that are $20,000 up to $125,000,” said Daniel Dames, VP of Operations at Bitty Advance.
Bitty Advance formally announced at deBanked Connect Miami that they will now be taking on bigger deals up to $125,000. They had started doing a few big deals back in November with select partners but now their new product, known as “Big Bitty,” is in full effect. Historically, the company had focused on microfunding, now known as “Core Bitty,” which they will still continue to do.
Better rates, longer terms, and lower fees is the new approach Bitty is taking with increased funding, according to Dames, and it calls for a bit more diligence on the underwriting and funding side. A merchant interview is required with Big Bitty as opposed to the strictly automated process enjoyed with Core Bitty, for example.
“This is Bitty, this is just a new product,” said Dames. “You submit the same way, you do everything the same way that you’re used to, really the difference is they see the numbers, they see the larger amount, they see the lower fees, they see the better rates, and they see the longer terms.”
Big Bitty isn’t just about doing bigger deals for the sake of doing bigger deals. Dames explained that they witnessed the challenges brokers face when having to send deals to multiple places and they recognized the value of being a one-stop shop for them.
deBanked CONNECT MIAMI 2023 Photos
January 22, 2023Photos from deBanked CONNECT MIAMI 2023 are now online. Thank to you all the speakers, sponsors, and attendees that made the day possible.
deBanked CONNECT MIAMI is Thursday
January 17, 2023deBanked CONNECT MIAMI takes place this Thursday. This event is sold out and no walk-ins will be accepted.
For registered attendees, please take care to note that check-in BEGINS AT 1PM on January 19th at the Miami Beach Convention Center. The agenda can be found here. The networking reception ends at 8pm.
deBanked CONNECT events (Miami, San Diego, Toronto, etc.) are different from Broker Fair, which takes place each year in New York City.
This will be deBanked’s 5th event in Miami since 2018. It’s the ultimate networking experience for brokers, lenders, funders, fintech, collectors, lead generators, investors, software companies, law firms, and more. Thank you to Bitty Advance for being this year’s title sponsor.
The Next Frontier: Financing the ERC
January 11, 2023
“I have never sold a product that has no daily, no weekly, or no monthly payments,” said David Goldin. That is until now, he explained, because of the Employee Retention Credit from the IRS that’s sweeping the country. Goldin’s new company, Finance ERC, that he co-founded with Newtek co-founder Jeffrey Rubin, is buying the future ERC receivables of small businesses that have filed for it. A key feature? No payments.
“You basically drop off the money, they don’t pay you out of cash flow, we get paid when the checks arrive,” Goldin said. “It’s an amazing offering.”
Goldin is no stranger to the SMB finance game. He is one of the reasons that the MCA product exists today in the United States. A documentary about it was the second most watched in all of 2022, for example. And he’s still a busy guy. One of his other businesses, Capify, finances small businesses on two continents every day.
“I’m busy in the morning with the UK and I’m busy at night with Australia, but I had a lot of free time during the day,” he said about how he was able to pursue yet another venture. “I approached Jeff and we were seeing that there was a gap in the market that the checks don’t arrive.”
The ERC, a potentially generous tax credit available to eligible businesses, has recently enjoyed greater awareness since it was included in the March 2020 CARES Act. Businesses that qualify can amend previous returns to receive a refund. Folks in the small business finance industry, already in direct communication with businesses about their financial needs, have taken notice.
Finance ERC won’t do the filing itself for a business. They have to had filed already to seek out the funding, which can go up to $1 million at present. It’s the waiting game between filing and actually receiving the refund that leaves merchants in a crunch. Goldin said the wait time is “best case scenario three months, worst case scenario a year plus.” And there’s no guarantee that the claims will be paid. That’s a risk they bear.
The deals come in from a variety of sources, business loan brokers, MCA platforms, ERC filing companies and more. The funding amounts can be significantly larger than an MCA and with no payments to be made, is incredibly competitive. A number of other financial service providers are charging a fee just for helping the businesses file for the credit in the first place, which in itself can be lucrative, but Finance ERC sticks just to the funding.
“We work with the funding companies, we work with the brokers, the various ISOs, it’s a great product,” Goldin said.
But the life span of the ERC is purportedly capped. Some experts say that businesses can only amend their 2020 tax return through April 2024 and their 2021 return through April 2025 [dyor]. But then that’s supposed to be it, allegedly.
“That presumes the government is not going to offer any future tax incentives,” Goldin said. “What we’re building at Finance ERC is a platform to finance tax credits. [The ERC] is the first credit.”
The opportunity, he explained, is preparing now for what may repeat often in the future.
“We put together the right players and vendors,” Goldin said. “We’ve hired a super senior management team.” It’s a system that includes sales, marketing, operations, finance, underwriting and more, to be prepared to scale.
But even in the present, opportunity abounds.
“The best estimates I’ve read are 5-6 million ERC are still eligible,” Goldin said. “People in this industry call it America’s best kept secret.”
And thus as marketing of the ERC continues to grow all around, Finance ERC is ready to work with businesses, brokers, and filers going through the process. Businesses can even use the funding from Finance ERC to pay the fee to file in the first place.
“So now all of a sudden they put the risk to me which I’m happy to do for a file that we like, and I pay the filing company / the broker gets paid right away,” Goldin said.
2023 Is Here. Are You Ready?
January 1, 2023Happy New Year! deBanked CONNECT MIAMI is now only 2 and a half weeks away. Hosted at the Miami Beach Convention Center in South Beach on January 19th, this event will set the industry’s course for 2023.
