MCA Agents Getting More Diversified

The response to the last blog post on the current state of the merchant cash advance (MCA) agent landscape was overwhelming. Ninety-five percent positive and a few negative criticisms. Many of you emailed asking for more insight about the agent network. So here it goes.

American Finance Solutions as a funding company is seeing a more diverse agent network in the past 12 months. Yes, our core agents are traditional ISOs that sell credit card processing along side merchant cash advances. However, we are seeing the majority of new inquiries coming from those that have never represented the product and quite often they just learned about the MCA product through a client, friend of colleague.

So who are these new agents? Most often they are current financial advisers or offer ancillary financial services; such as accountants, CPA firms, business brokers and attorneys. As the popularity and acceptance of merchant cash advances grows, I think we'll see more and more of these types of agents offering MCA in their product mix.

These new agents do however offer new challenges to funding companies in the way of training. First off they've usually lack complete product knowledge and often confuse the MCA with a traditional credit line. I cannot count the number of times I've been on the phone with a CPA and say for the tenth time, "There is no interest rate!" It is important to have simple, step-by-step, training materials for this type of new agent. AFS recently rolled out a new Agent Portal which we've been told has the most comprehensive training materials in the industry.

The larger challenge is that these agents have never sold credit card processing. It is very difficult to successfully sell a MCA without selling processing (which in my opinion takes ten times the product knowledge with equipment, POS systems, rates, etc). To effectively sell you need to effective sell both products with the basics feature/benefits.

At American Finance Solutions we never take a cut of the processing and thus do not benefit financially from the processing. While we attempt to educate these new agents to the best of our ability, it is really in their best benefit to partner up or hire someone/processor with the experience in merchant services that will take the time and patience to show them the ropes. AFS has developed relationships with processors that have great training and customer support teams that take the time to walk new agents through the application, pricing and conversion process to signing up (known as "boarding" in the industry) new merchants.

While these agents do not provide the volume of applications and funded deals, they do tend to submit high quality deals that usually have an approval rate well above 75% which makes sense. Their current clientele is generally a more established, sophisticated client that cannot access capital as in previous years. Also, the clients are usually not seeking maximum cash from the MCA which allows for shorter expected payback times and thus lower factor rates (and much less risk for the funding company).

Funding companies may not see the sheer volume out of this agent network, but if we take the time to educate and train them, the quality of clientele and overall portfolio will improve.

No Business Left Behind!

In today’s credit crunch most business owners across America are feeling left behind. Most of them are telling us that with the recession in full swing they have not been able secure a loan and a new line of credit. Businesses of all sizes have really taken a beating the last 18 months with the meltdown of the global economy, the credit crunch and lack of normal revenue from their customer base. Like the US homeowner that has been unable to continue to pay their mortgages and getting behind with payments the same thing has happen with business owners. They have trouble paying rent or leases, paying their employees, purchasing needed equipment to stay open and with cash flow issues. They are having the feeling of being left behind.

American Finance Solutions (AFS) FAST CASH program was rolled out to assure that “No Business is Left Behind”. With 175 business types 100% pre-approved and another 65 business types 95% pre-approved for AFS’ Fast Cash program. The underwriting process is streamlined and inclusive for this new financing product. Now business owners can have a recent Bankruptcy, liens and a low credit score (in fact credit isn't even considered) and still get approved for FAST CASH.

The FAST CASH product is really more inclusive to those that have been really affected by the present recession. A lot of these clients are good owner-operators that have had some bad luck with not being able to pay bills on time or have had to file for bankruptcy. The FAST CASH product allows these merchants to navigate through some really tough financial times and get caught up on a few bills and get above water.

AFS will fund a business with the FAST CASH product in 24-48 hours and them qualify for between $2,500 to $9,500.

The requirements for FAST CASH financing are as follows:

1. Must process at least $4500 per month in credit cards
2. Have no current cash advance accounts open
3. AFS must obtain a landlord verification and must not be behind in rent more than one month
4. Minimum of 15 credit card batches per month

The business owners who receive the FAST CASH product are not the only ones who benefit. AFS allows the ISO partner agents to keep 100% of all the processing residuals and they also get a great upfront and back end commission on the deal. Merchants who complete three FAST CASH programs are then approved for a traditional cash advance.

Welcome To Merchant Cash Advances Blog

Hello all and welcome to the Merchant Cash Advances blog. This blog is dedicated to providing information and ongoing updates to the Merchant Cash Advance industry for both clients and sales agents (resellers) of the industry. We welcome all input and encourage communication from all to promote the industry and fairly represent the financial service that we offer.

The Merchant Cash Advance (aka MCA) has become increasingly popular over the past four years as a viable finance option for many small- and medium-sized businesses. While the industry as been around for over a decade the economic downturn and credit crisis that started in 2007 has resulted in tremendous growth. This tremendous growth brought numerous new MCA providers and thousands of resellers into the marketplace.

As the United States economy continued its collapse throughout 2008, the MCA providers who made poor decisions on which clients to finance paid the price with dramatically increase defaults. The resulting shakeout in the industry has left a core group of MCA providers, including American Finance Solutions.

To give an overview, a merchant cash advance is NOT a loan, but a factoring product where a business sells a portion of its future credit card receivables for cash today. The MCA provider offers an alternative financing option to provide working capital to small- and medium-sized businesses that do not qualify for under traditional financing. To summarize, a Merchant Cash Advance provides fast, low-documentation funding that is uncollateralized for businesses. The premium of this service is more expensive than traditional financing given the risk associated with financing.

Our industry has seen various website and blogs that come and go on the industry over the years. As the CEO of a mid-tier MCA provider who has been around for the past three years as a hand-on manager my goal is to provide unbiased information about industry. As this blog evolves it should will become the prominent resource for the industry for all to comment, educate and gain information on product and those who benefit from it.

Please email me with any questions, comments, etc. about this blog and the merchant cash advance industry. I look forward to developing this resource with your input sent to me at scott@americanfinancesolutions.com.