Wednesday, November 7, 2007

Merchant Cash Advance For $1 Million?

Merchant Cash Advances historically have maxed out in the range up to $150,000 - $200,000 per location, with the average amount being $20,000 - $25,000. There are a handful of companies now that are targeting a new market of $150,000 - $1 million+. These transactions are being structured more like a loan product, with closing fees and at a cost to the merchant comparable to hard money lenders. The credit criteria is much more stringent than a traditional merchant cash advance as the cost is lower. Sales agents shouldn't get excited too quickly, the commissions are typically much lower as well with this large advance product at a lower cost. The commission on a $1 million merchant loan product can be the same as a $200,000 traditional merchant cash advance. Providers of these high volume loans are betting that the bad debt will be lower because the cost is lower and the credit criteria is higher. Are they correct? They jury is still out and it will be interesting to see how this model evolves.

1 comment:

Anonymous said...

I have explored this funders who are trying to get into the larger MCA space. Actually, they call their product a loan, so, it has a lot of differences than MCA companies legally. Low throughput rate and not realistic for agents/iso's to find merchants doing $200K per month in c.c. sales. I don't see these companies attracting many ISO's to resell their product and make money. They are better off hiring their own W-2 staff to search these type of merchants-