Accelerating Cash Advance

The latest issue of The Green Sheet has an updated article on the merchant cash advance industry entitled, Accelerating Cash Advance.

I think this is a very well written article with quotes from CEOs of such companies as yours truly from AmeriMerchant, American Microloan, Merchant Cash And Capital, North American Bancard and AdvanceMe.

The spirit of article is very similar in line to what many of my postings over the last few months have indicated, the days of merchant cash advance companies approving everything are over. There are some industries that may never qualify for a merchant cash advance again because simply the product doesn't work for it based on the payment flow of the industry / the ability for the customer to control the cash register.

The article also speaks to how agents / ISOs and resellers of this product should be concerned about who they are sending their deals to today. As soon as you hear a company can't fund, RUN! Better yet, don't even get to that place, a lesser, normal commission will be worth more in the long run then what seems like a too good to be true commission from a company that won't be around in the long term.

One positive aspect is that the merchant cash advance industry is coming together to establish best practices for selling the product as well as establishing risk tools to eliminate unscrupulous merchants.

Merchant Cash Advance Market Size

While the merchant cash advance industry is growing at an astounding pace, one question that keeps coming up is how saturated or not is the potential market? While there is no official study, estimates are that somewhere between 5% - 10% of the eligible marketplace has taken a merchant cash advance. I believe it's closer to the 5% range. What I do think is happening is that merchant cash advance salespeople, ISOs and agents are capturing the low hanging fruit, meaning that those merchants that have taken an advance before against their future credit card sales are one of the first to respond to a marketing campaign. The reason for this is they are more willing to listen to a salesperson as they are already familiar with the product. The challenge which takes patience is finding businesses that have never taken a merchant cash advance before, which makes up the other 90% - 95% of the potential market. The most successful merchant cash advance providers will be those that are able to tap into the other 90% - 95% of the market that have not yet taken a merchant cash advance.

Green Sheet Article - Sizing up Merchant Cash Advance

The recent issue of The Green Sheet has an article about the merchant cash advance industry, Sizing Up Merchant Cash Advance.

This article was written by First Annapolis Consulting, a consulting firm that specializes in consulting and investment bank services for the payments industry. Most of their assumptions were previously indicated in this blog including the size of the industry (First Annapolis' best educated guess is $500 million to $700 million in future receivables purchased). I believe it's closer to $1 billion at this point (as mentioned in my October 2007 posting).

They also indicate how there will be some shakeup in the merchant cash advance industry as I predicted in my 2008 Merchant Cash Advance Industry Predictions.