Roller Coaster Ride: The Current State Of Funding In The World Of MCA

If your selling Merchant Cash Advances, you know that it may seem like a roller coaster ride for the funding companies! While American Finance Solutions continues to consistently fund deals month-in-and-month out at the same rate, we are hearing a completely different story about much of the competition.

One of the larger players in our space recently got a fresh round of funding (a reported $20M) from their private investors and turned the faucet at full blast! Most of in the market place will know who it is. While that is great in the short-term for Agents, what happens when the money stream gets shut off (as it appears to abruptly have)? The key is to find good funding companies that are well financed, operate and underwrite in a consistent manner and are transparent in their deal guidelines and underwriting qualifications.

Those of you representing AFS know that we follow the above guidelines. From what I understand there are two or three other companies that do as well, such as AdvanceMe and BFS. Its interesting to note that the three companies with the best reputation on the street for consistent funding, also have traditional, institutional financing behind them.

This provides two key advantages:

1. It provides us with a low cost of funds, which results in a lower cost for the merchant and/or higher commission rates for the agents.


2. Our financing partners require us to maintain a solid portfolio of clients to protect our and their interest. This results in good operating standards, pricing, underwriting and customer service. Without it, bad debt starts to spiral out of control as soon as you turn on the funding spigot.

If you haven't figured it out by now, these two key advantages lead to long-term stability. Something that is important to remember when calculating your renewal and residual income which quickly grows to the mid- to high-four figures each month for most agents for some reaching into the five-figures each and every month.

Each funding company has it specialties and works in unique ways (such as set pricing programs that are a no-brainier to sell, custom pricing for seasonal merchants, starter advance programs, etc.) If your selling MCAs, its best to work with two or three good funding companies to concentrate your deals and get to know how they operate, what they like and most importantly know what will get funded to get you paid.

As always, AFS, welcomes all reputable agent inquiries, from those whom close a deal every quarter to those closing a couple a week.