Who Needs The Merchant Cash Advance Keyword Anyway?
May 31, 2022
Almost five years since Google banned its search engine from displaying ads when queries contain the phrase “cash advance,” the loss of business attributed to that has probably been nil to the small business finance space.
According to Google, despite there being between 100,000 to 1 million searches for “cash advance” each month on average, only 1,000 to 10,000 searches per month are specifically for “merchant cash advance.”
People are ~10x more likely to search for business line of credit, business loan, working capital, or business credit card, according to Google’s estimates.
This is somewhat in line with findings from the Federal Reserve, whose recent study determined that 7x more business owners seek out a loan or line of credit than they do a merchant cash advance.
But putting that aside, the ban on paid advertising for all things cash advance has had an upside for some lucky companies. Without ads, Google has inadvertently (or maybe intentionally) elevated funding providers that are local to the searcher to the top of the organic results. That means listings on Google Maps that contain keywords matching the search queries are reaping the benefits of being prominently placed at the top of the page and are potentially capturing all the clicks along with it. The end result is an old-fashioned SEO war to win what few searches there are.
Compare that to a search for sba loan where paid advertising is fair game. In the era of PPP and EIDL, it’s perhaps no surprise that there are between 100,000 to 1 million searches per month for that keyword on average. Many of those searchers will probably not be eligible for an SBA loan so perhaps the next best fit would be equipment leasing or invoice factoring, two queries that are on par with merchant cash advance in average monthly searches, meaning volume is relatively low.
But how does low search volume turn into the large volume of funding originated? Well, another factor has changed since Google implemented the cash advance advertising restriction in 2017, and that is that Google is not as relevant as it used to be. Business owners are more likely to discover a potential capital source from social media or a fintech platform they already have a relationship with than ever before. According to a recent study, 25% of people claimed they had actually used either Alexa, Siri, or another voice assistant to find information about financial services, signaling a major departure from how traditional searching used to be conducted.
All of which means that the paid advertising restriction on a niche keyword on Google is unlikely to make any kind of difference in the big picture. Odds are you might not have known this restriction even existed. Bing, on the other hand, has no qualms with cash advances and allows paid advertising on it.
The Real Small Business Funding Demand Has Yet to Kick In
May 26, 2022
Now that small and medium sized businesses received crucial PPP and EIDL funding during the COVID-19 pandemic, they have become more familiar with other options to obtain capital.
“…they’re learning that they can borrow money based on their revenue, not based on their credit and assets,” stated Sean Feighan, Co-founder and President of Cash Buoy. Feighan explained that the exercise of obtaining capital during Covid to stay in business created or further developed an appetite for small businesses to borrow money in general.
As these businesses are still utilizing the remaining government aid, the real demand has not truly begun, according to Dylan J Howell, CEO of Liquidibee. “…we have yet to see the real big demand that’s about to kick in, in my opinion, over the next six to twelve months, I believe that a lot more demand will come in,” Howell said. “A lot of companies received a good injection of government stimulus. And they’ve enjoyed that over the last year, year and a half. And as that comes to an end, companies are always looking for additional capital, whether it be to grow or foster future growth of their company.”
“I think we’re beginning now to see a new phase within small business,” said Avi Wernick, VP of Partnerships at FinTap. Because of the money that’s still lingering from the stimulus efforts, he thinks that alternative finance companies will soon see more demand in the coming months. But at the same time, those finance companies will have to determine if they’re even a good fit for their products. “I think some businesses will be more adversely affected. I think it depends a lot on the nature of the business owners, you know there are better business owners out there that are able to manage [their] finances more responsibly, and there are others that are kind of just more reactive.”
Erez Stamler, CEO and Managing Director of Fresh Funding, echoed a similar sentiment. He said that increased risk factors of a business coming out of Covid can make it harder to get them approved. Besides, a business now predisposed to forgivable funding or ultra long terms at very low interest may not necessarily demand other products in the market.
“So you will see demand, but you might not see increased amount of views or volume of deals, because you can’t replace SBA loans with MCA,” Stamler said.
DoorDash Capital Warrants No Mention in Latest Report
May 23, 2022Readers interested in hearing the results of DoorDash’s foray in to MCA funding were keenly disappointed by the last earnings call. It didn’t even come up. The product was formally announced by DoorDash on February 9th. At the time, the company said that it was offering DoorDash merchants MCAs through a partner company named Parafin. The offers would be visible right in the DoorDash portal.
DoorDash reported Q1 revenue of $1.5B and a net loss of $167M. The material impact of DoorDash Capital, only in its infancy, was likely minimal then.
Register for The 4th Annual Alternative Finance Bar Association Conference
May 12, 2022
The fourth annual Alternative Finance Bar Association conference is BACK IN PERSON. This is the go-to event for and with the industry’s leading attorneys.
Mark your calendars for June 15th and June 16th in New York City and register by emailing Lindsey Rohan at lindsey@lrohanlaw.com. Registration is subject to approval and space availability.
Two-day program includes the following panels:
The State of the Industry: Industry experts discuss pending legislation, case law and market hurdles. They have both a regulatory panel ready to discuss what’s new in Virginia, Utah, NY and California as well as a Courtroom panel ready to discuss the winning and losing case law that has come out in the past year.
Bankruptcy: The aftermath of Chicago v. Fulton, In re Shoot the Moon and other pivotal bankruptcy cases that shape industry practices.
Ethics: Challenges faced by internal counsel and ways to navigate those pressures.
Collections: Trends in the post-COJ, post-COVID era.
Employment/Labor Law: The rise of labor use outside the U.S. What challenges arise from having call centers outside the U.S. Tax implications, oversight and practical benefits/detriments. Post-COVID remote work implications. What you need to be aware of to avoid creating liabilities.
The Art of Arbitration: The importance of a carefully drafted Arbitration Clause and the pro/cons of this venue.
Thinking Ahead: What technologies and market conditions will shape the future of the industry. Broad discussion of Blockchain technology, CRM systems, cannabis and what we can imagine will shape the future of Alternative finance.
WEDNESDAY KEYNOTE: David Picon, Esq. – It is with great pride that David Picon of Proskauer Rose will be the Keynote speaker. For years the AFBA has admired his work from afar. Attendees now have an opportunity to learn directly from David what makes for an unstoppable litigator.
THURSDAY SPECIAL EVENT: AFBA Game Show Mash-Up with the Industry’s Legendary Attorneys. Special Guests you will not want to miss!
Speakers:
- Andrew Smith, Covington & Burlington LLP
- Brian Simon, Hollis Public Affairs
- Jamie Polon, Mavrides Moyal Packman & Sadkin, LLP
- Patrick Siegfried, Rapid Finance
- Natalie Pappas, Rapid Finance
- Keith Ellis, Expansion Capital Group
- Kate Fisher, Hudson Cook LLP
- Cathy Brennan, Hudson Cook LLP
- Blake Sims, Hudson Cook LLP
- Steve Denis, Small Business Finance Association
- Christopher R. Murray, Murray Legal PLLC
- Mark Stout, Padfield & Stout
- Shanna Kaminski, Kaminski Law Group
- Michael W. Davis, DTO Law
- John Viskocil, Fora Financial
- Gabriel Mendelberg, Mendelberg P.C.
- Anthony F. Giuliano, Giuliano Law P.C.
- Jeffrey S. Cianciulli, Weir Greenblatt Pierce LLP
- David Picon, Proskauer Rose
- Jonathan Nelson, Dedicated Financial GBC
- Lindsey Rohan, BasePoint Capital LLC
- Christina Grigorian, Katten; Zach Miller, Burr & Foreman
- Renata Buhkman, Delta Bridge Funding
- Vanessa Petty, Settle
- Alexis Shapiro, Forward Financing
- Jan Owens, Manatt Phelps
- Scott Pearson, Manatt Phelps
- Jesse Michael Carlson, Kapitus
- Robert Zadek, Buchalter
When:
Day 1 – June 15
9:00am – 4:30pm: Offices of Proskauer Rose (includes light breakfast and lunch)
5:30pm – 7:30pm: Cocktails at Dear Irving
Day 2 – June 16
9:30am – 6:00pm: 15 W. 38th Street, 2nd Fl, Sinatra Room (includes light breakfast and lunch)
4:00pm: Wine & Cheese
Register soon, SPACE IS LIMITED!
deBanked is a sponsor of the event. Industry attorneys are highly encouraged to attend.
Shopify Capital Originated $346.7M in Business Funding in Q1
May 8, 2022
Shopify Capital originated $346.7M in MCAs and business loans in Q1, the company announced. That included merchants in the US, UK, and Canada. Though it was a 12% increase over the same period last year, the figure puts them virtually on par with originations in 2021 if the following three quarters hold steady.
Shopify was one of the only online lenders whose origination volume substantially increased during covid. Most experienced significant drops but have since dramatically recovered.
“The hundreds of thousands of businesses that shifted their business to Shopify during the pandemic and stayed with us since can now take advantage of our powerful retail point-of-sale offering for a unified view of their sales online and offline,” said Shopify CEO Harley Finkelstein during the Q1 earnings call. “Shopify has been developing the world’s best point-of-sale retail software for years, and it’s now at the point where all merchants who came to Shopify during the pandemic can leverage it.”
Large Fintech Companies Helping to Normalize Revenue Based Financing
May 6, 2022
With business increasing for wide-reaching financial technology companies like Square, Paypal, and Shopify, this has brought more attention to revenue-based financing products like the ones they offer. Henry Abenaim, Founder and CEO of Fundingo, said that it brings more businesses to the table.
“…you sometimes think it’s a small world or small group of merchants, and you really come to realize that it’s huge,” he told deBanked. “And the more they’re serviced, the more they need, the more they grow. So it just feels like there’s just more awareness of the product, and then more merchants that are going to come in demand and ask for it, as well as these bigger players are always going to service only a subset of the businesses.”
At the same time, a greater public awareness of options could tighten margins for certain funding providers. “I think it’s going to make the merchants that are way more bankable… get lower price deals, so it’s going to hurt the margins, it’s going to hurt the profits,” Abenaim commented.
John Bulnes, Vice President of Business Development at Fenix Capital Funding, expressed how it is not yet determined what kind of effect the larger mainstream companies will have on the industry. “I do think it’s something that the larger first position MCA companies may feel the effects of first, because they’re going to be competing more or so with taking away clients from those companies first, as opposed to the companies that are smaller that are doing shorter term deals.”
As these big companies operate with larger capital bases, it may indeed become more difficult for smaller companies to compete.
“… it’s going to be something that’s going to constantly adapt and fluctuate as time goes, but I do see it as an expanding industry… it’s kind of a sign that when you see more commercials and we see these bigger companies jumping into the space, that it is something that’s going to continue to grow,” said Bulnes.
And commercials and ads are definitely increasing. One of the largest online small business lenders in the country was asked about their TV and radio campaigns during their recent quarterly earnings call.
“We’ve definitely been ramping [commercials up] hopefully with a little bit more diligence than OnDeck was running ads three or four years ago,” said David Fisher, CEO of Enova. “But we’ve definitely jump back into kind of broader base advertising in that business and it’s been working really well.”
New Domain Name Gold Rush Sets Up Possible Battle for Future of SMB Finance
April 25, 2022
If you could have businessloan.com or businessloans.com as your website, would you jump on the opportunity to get it?
It’s evident that the market for keyword-based domains has evolved over time. Couldn’t get the .com? You could’ve tried to get the less coveted .net or .org. Don’t like those? Today, you can get the .business, .deals, .financial, .loan, .loans, or hundreds of other customized tlds. With so many to choose from, most experts in the field would advise that if you don’t own the .com version, to not even bother getting cute with customizations for your brand or keyword because customers will just get confused.
But recently, another domain name market has quietly been gaining steam. It’s for something called a .eth, an Ethereum blockchain-based crypto address shortener by the Ethereum Name Service. It’s not necessarily something one could use to build a website with, at least not yet. Originally envisioned as a way to condense long impossible-to-remember crypto wallet addresses into memorable words, users have started to buy up a bunch of keywords that may be familiar to deBanked readers. Just to name a few:
- businessloan.eth
- businessloans.eth
- smbloans.eth
- merchantcashadvance.eth
- ach.eth
- syndication.eth
- lending.eth
- ppploan.eth
- underwriting.eth
- brokers.eth
- loanbroker.eth
- mca.eth
- factoring.eth
- funding.eth
- backdoored.eth
At face-value, this might appear to be a vanity crypto play, one in which one could send crypto to your-name-here.eth instead of trying to type out a long address like: 0x64233eAa064ef0d54ff1A963933D0D2d46ab5829. But an ENS domain name holds much more potential than just that. It’s moving towards becoming the backbone of one’s identity in the upcoming era of the web called web 3.0 (web3 for short). Instead of having to remember passwords for hundreds of websites, identity can be validated through one’s digital wallet. Such a concept is not theoretical. It’s already being used.
Take seanmurray.eth for example. You could send eth, bitcoin, litecoin, or dogecoin to it, but at the same time it’s connected to an email address and a url (this one). Plus it’s linked to an NFT avatar (broker #7 from The Broker NFT collection) which is in that wallet. I can use it to do an e-commerce online checkout in 5 seconds without ever needing to enter any payment information even if I’ve never visited the site before. It’s faster than PayPal and with less steps involved. I can connect it to my twitter account, OpenSea, or use it to vote in an official poll without ever having to create an account on something. The wallet is the identity verification. The .eth name, therefore, has the potential to become the defining baseline of who or what one is on the internet. Not theoretically. It’s already happening.
Crypto is already starting to creep into the small business finance industry. In August, a funding company announced that it would begin offering commissions and fundings in crypto because of the speed potential. Far from being a gimmick, brokers started to choose crypto payments over ACH or a wire because of how fast it would be. There’s also no chargeback risk with crypto.
Currently, the owner of mca.eth has listed the domain for sale on OpenSea at a price of 20 eth (approximately $60,000). That’s less than what MerchantCashInAdvance.com sold for in 2011. Perhaps the value of an Ethereum Name Service domain holds less promise than a website that ranked well on Google in 2011. But then again, being well ranked on Google is not as important as it used to be. It’s impossible to say what, if any impact web3 will have on the small business finance industry long term, but for now there are those out there quietly buying up names like ach and funding and syndication on the chance that they will become something.
Man Who Defrauded MCA Companies Indicted
April 19, 2022
An alleged fraud executed five years ago against merchant cash advance companies did not go unnoticed. A grand jury indicted an El Dorado Hills resident named Suneet Singal on April 7th under seal. The Department of Justice announced it yesterday morning.
According to the Grand Jury, Singal engaged in a scheme to fraudulently induce financing companies to provide merchant cash advances to a company he had previously sold and no longer owned. In doing so, Singal allegedly received six wires from four financing companies between April 12 and May 22, 2017 in the amounts of $197,370, $112,308, $48,500, $294,946, $96,970, and $43,975. The indictment did not cite any of the companies by name. Allegedly, Singal used those funds for various expenses, and the company he did not own was forced to file for bankruptcy. Singal was indicted on 10 counts.
The DOJ did not publish the full indictment but it can viewed in its entirety here. Despite the “sealed” stamp at the top, the court ordered it be unsealed upon Singal’s arrest and is public record.
