Lightspeed: ‘MCAs continue to be popular’
December 10, 2024
“Lightspeed Capital revenue grew to $9.3 million from $4.2 million in Q2 of last year, up 121% year over year as the program continues to be popular with our customers,”” said Lightspeed CFO Asha Bakshani. “Lightspeed Capital offers fast access to capital and automatic repayment through Lightspeed Payments.”
“Overall, Lightspeed generated $277M in revenue for FY Q2 2025 of which only $9.3M was attributed to their MCA business (less than 3.5%). Still, the company says the extreme gross margins are creating a material impact for the business.
“We’re definitely seeing an impact from Lightspeed Capital,” Bakshani said. “I mean when we think about the numbers, and you’ll see them in our disclosure docs, we’re looking at high single digits per quarter in revenue. But because that comes in at 95% plus gross margins, it definitely has an impact already in offsetting both the residuals moving over to payments and also just more, more of our revenue coming in at Lightspeed Payments gross margin.”
Lightspeed is a publicly traded retail POS company with a current market cap of $3.68B CAD and $105M in MCAs on its balance sheet.
Smaller Funder? How to Get Fast Tracked With Big Investors
December 4, 2024Looking 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.”
Rewarding Loyalty in Revenue Based Finance
November 13, 2024
Everyone’s heard the pitch that if a deal goes well there could be better terms on the next one, but how much better are we talking about precisely? Well, after conducting an internal study, Pennsylvania-based Funding Metrics decided to actually codify incentives for success into a fully fledged loyalty rewards program that enables merchants to get a precise factor rate reduction, origination fee discount, and additional estimated remittances on subsequent advances.
“Early 2023 we took a deep dive into our customer experience and how it directly correlated to merchant retention,” said Melissa Flagg, Vice President of Operations for Funding Metrics. “We listened to the pain points our ISOs shared, with customer retention always driving the conversation. Most ISOs we spoke with seemed to face similar retention challenges and were coming up short with solutions.”
The challenge is that merchants tend to shop around on subsequent deals even if they are happy with what they got the first time. The loyalty program was the eventual outcome of what they learned and it’s open to merchants funded by Lendini and Quick Fix Capital. As Flagg tells it, there are three ways for merchants to accrue points. First, points simply for opting in, which they must do in order to take advantage of it. Second, additional points for each 1% they remit toward the purchased amount, and third, points for each renewal. There are six total milestones that range from Bronze Level to Diamond+ Level. While the tiers, conditions, and corresponding discounts are published right on their website, merchants can easily track their points through the Funding Metrics mobile app.
“There’s no need for a redemption email or request,” said Flagg. “Points don’t deduct, they continually accrue as long as merchants continue to remit, and discounts automatically associated with the loyalty level apply on their next offer.”
She added that it’s quickly been recognized as a great way to incentivize a merchant not to shop around. It’s also been used to secure a renewal or win back an old customer that had left. This logically helps the ISOs involved.
Most readers are already familiar with the Lendini brand through their constant mix of on- and offline marketing. Members of their team usually show up in large numbers at major industry events, for example. Flagg said that 2024 has been a big year for the company. “In Q2, we successfully launched Instant Offers, and we’re proud to report that we’re now averaging a turnaround time of under 5 minutes for offers up to $75,000,” she said. Their new mobile app, while still in beta, allows merchants to track offers, remittances, and engage with the Resolutions Team.
“Over the past two years, we’ve prioritized elevating the customer experience by creating accessible tools that empower merchants to navigate the financing process with ease and transparency,” Flagg said. “This is only the beginning. Funding Metrics is dedicated to continuously enhancing these experiences that put merchants in greater control of their business financing and making every step from offer to origination as seamless as possible.”
OppFi Encouraged By Early Results With Bitty
November 10, 2024OppFi achieved a new record in Q3.
“The record quarterly net income was a result of credit initiatives that continue to drive strong loss payment and recovery performance, marketing cost efficiency and prudent expense discipline across the organization,” said OppFi CEO Todd Schwartz during the quarterly earnings call. One part of that organization is Bitty Advance, which it acquired a 35% stake in this past summer. “We are encouraged by the early results and potential opportunity of this platform and the strength of our relationship with Bitty,” Schwartz said of the progress so far. “We continue to explore similar opportunities that would be accretive and align with OppFi’s strategic vision.”
One analyst on the call inquired further about what similar opportunities Schwartz might be referring to on the M&A front. Schwartz responded with the following:
I mean I think whatever it is, it’s got to be something that’s highly accretive. I mean, OppFi’s vision is to be a platform for digital alternative financial service products where we see large supply-demand imbalances in large addressable markets. There’s definitely different profiles of business out there, different situations are pretty — it’s pretty bespoke, but we’re prepared to handle either-or. So it has to make sense for us, though. And obviously, we’re going to protect and mitigate risk with anything we do to make sure that it’s successful and make sure that we’re going to be getting a return on our capital and it’s highly accretive to shareholders.
eBay: ‘We’ve Already Done $40M in MCAs’
November 3, 2024
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.
PayPal is Back to Growing its Merchant Lending Program
October 29, 2024
After taking drastic action over the last year to rein in surging SMB lending charge-offs, PayPal believes it has corrected the issue.
“We have now fully lapped the actions taken last year to tighten credit underwriting and reduce on balance sheet risk,” said PayPal CFO Jamie Miller on the Q3 earnings call. “We’re seeing better performance across the portfolio, and have now started to modestly grow merchant originations. We’ll continue to prudently manage the portfolio’s exposure with the goal of sustaining our balance sheet-business model, while providing our customers with more ways to manage their cash flow, spending and borrowing needs.”
The reduction in originations since the pullback had been severe, down by as much as 50% by deBanked’s prior estimates.
TikTok is Now Offering Business Financing
October 7, 2024
Add TikTok to the list of tech platforms offering business loans. TikTok Shop Capital is now “offering sellers access to fast and flexible business financing,” the company states on its website. Unsurprisingly, one of TikTok Shop’s partners is Parafin but the company also lists Storfund and Kanmon as funding partners. Storfund announced its deal with TikTok earlier today and said that its program would be called Daily Advance.
“TikTok is not a lender or loan broker,” the company website states. “TikTok partners with third-party lenders and financing providers to offer TikTok Shop sellers business financing options.”
The process works different depending on which solution a customer uses. For example, Storfund repayments are automatically debited from TikTok Shop payouts, Parafin repayments are automatically debited from the business bank account associated with TikTok Shop payouts, and Kanmon requires repayment via auto-pay deductions from the business bank account provided during the application process.
The Parafin option does not appear to be a standard merchant cash advance. TikTok says it would actually be a Parafin commercial flex loan issued by Celtic Bank. There is no credit check required for it.
TikTok’s foray into business financing is invite-only. “If a seller has an available pre-qualified and/or pre-approved offer, it will appear within Seller Center under the Finances tab,” the website says.
How the Amazon / Parafin Merchant Cash Advance Deal Came to Be
November 2, 2022Back in December, Parafin, then a fintech startup with 20 employees, submitted a proposal to Amazon to roll out a potential Amazon merchant cash advance product. At the time, Parafin was little known to the general public and its surprise deal with DoorDash wouldn’t even become public until a month later.
The prospect of an MCA would not have been foreign to Amazon given that the company already offers direct business loans, lines of credit through Marcus by Goldman Sachs, and other loans thanks to a successful pilot with Lendistry. But the team behind Parafin were virtual unknowns in the merchant cash advance industry itself. The company’s 3 co-founders, including CEO Sahill Poddar, all hail from Robinhood, the investment app that became wildly popular especially with younger adults over the last several years.
Coincidentally, more than a dozen people employed by Parafin, including the co-founders, are former Robinhood employees, according to profiles reviewed on LinkedIn. It’s part of a trend, it appears, as other members of their team hail from well known Silicon Valley firms like Lending Club, Stripe, Funding Circle, Google, Amazon, Facebook, StreetShares, and more.
Ultimately, Parafin’s big bet paid off. On Tuesday, November 1st, Amazon announced that the Parafin team was the one it had chosen to debut its official merchant cash advance product.
“Amazon is committed to providing convenient and flexible access to capital for our sellers, regardless of their size,” said Tai Koottatep, director and general manager, Amazon WW B2B Payments & Lending, in the announcement. “Today’s launch is another milestone in strengthening Amazon’s commitment to sellers, and builds on the strong portfolio of financial solutions we already provide. This latest offering significantly expands sellers’ reach and capabilities, and broadens their access to capital in a flexible way—one that helps them control their cashflow, and by extension, their entire business.”
“We founded Parafin with the mission to grow small businesses, and we’re thrilled that we have the opportunity to do that by providing Amazon sellers with this merchant cash advance option,” said Vineet Goel, co-founder of Parafin. “It’s a privilege to count ourselves among Amazon’s suite of financial solutions, and we look forward to making a difference for Amazon.com sellers looking to expand their business.”
The product is already listed on Amazon’s website and was rolled out to some US businesses immediately. It will be available to hundreds of thousands of additional sellers by early 2023, the company claims.
Unique to an Amazon MCA is that funding amounts can start as low as $500 and go up to $10 million.
Amazon’s entrance into the merchant cash advance market coincides wih a unique moment in the product’s history as several states are in the midst of imposing strict regulations on their sale.
