The Stanford University Business School was announced their forecast of default rates on small business loans. Based on analysis of PayNet data the default ratio is expected to decline from 4.6% in 2010 to 3.9% in 2011.
Since 2006 the average rate of small business has averaged 6.9%. This means that small businesses in general are defaulting on their obligations less. Merchant Cash Advance funding companies are also see their default rates drop at approximately the same ratios. As compared ot 2008, the default ratio has dropped by 1/3 and looks likes the trend is continuing.
This drop has allowed MCA companies to do a couple of things:
This drop has allowed MCA companies to do a couple of things:
1. Agressively price quality contracts, with a lower bad debt; funders can offer lower factor rates
2. Write deeper in their portfolio, again with the lower factor rate we can afford to take risks on some contracts
3. Offer contracts with longer expected repayment terms, as the we push out the timeframe risk increases
2011 is shaping up to be a record year for the entire industry. With falling bad debt, banks still siezed up and total lack of liquidity in most other alternative financing products, the MCA is becoming a viable alternative for almost all merchants.
If your marketing MCA their has never been a better time to build your book of business!
