Tuesday, February 5, 2008

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.

4 comments:

Anonymous said...

In an effort to alleviate paranoia to the ISO/Agents of which funding companies will see a "shakeout" is there anyway to post the names of cash advance companies to avoid signing up with or doing business with? We are all doing this to investr in our back end- renewals/residuals for cash advances and would like to avoid any companies who may not be around in 6 months to a year?

Anonymous said...

That's a very difficult undertaking! It's also very speculative. basically stay with the ethical, well capitalized company and you will be fine. Stay away from the new ones, the one that use questionable methods, and the ones that have poor managers... Basically get to know your provider, go visit their centers, compare companies based on levels of accomplishments, stay power, skill set available in the management team etc... I wish I could tell you which I think are good and which are crooks or have a stupid leader but it would not be appropriate!

Anonymous said...

One issue is that any Merchant Cash Provider looking to enter the arena tend to "overlend" to gain market share, knowing full well that the quality will be lower. The premise is that they'll capture enough "good deals" in this basket that they''ll be able to recoup initial losses, plus it all helps to promote ISO loyalty

Anonymous said...

Not only willing to overlend but taking on deals that are high risk industries, merchants with low credit scores, etc. You have to question how long a company is going to be around if they are taking on that much risk.