Thursday, December 24, 2009

Merchant Cash Advance Industry 2009 Year End Summary

'Twas the night before Christmas, when all through the house Not a creature was stirring, not even a mouse; This pretty much summarizes the merchant cash advance industry industry the last few months - very quiet compared to previous years. Both from an industry news perspective and from levels of merchant demand compared to other years.

I'm hearing certain merchant cash advance provider's funding levels are down by as much as 40% from this time last year.

2009 was a very challenging year for many merchant cash advance providers - many losing their credit lines / funding sources. Some had to scale back considerably, others had to scale back 100% - meaning they shut down, layed off a large % of their staff, etc.

As I indicated in the middle of the year, many of these merchant cash advance providers could not sustain the huge losses they took by funding unqualified applicants in 2007/2008 or "crushed their cashflow" with too high of a withholding % to retrieve the future credit card receivables purchased.

One of the things I believe is needed to "jump start" demand for alternative financing products like a merchant cash advance from business owners in 2010 is the obvious - the economy needs to improve which will improve business owner confidence. The unemployment rate needs to decrease so consumers are spending more at their local businesses, hence giving local business owners a reason why they want to expand, buy more inventory, advertise/market, etc.

With all that said, there are a few good merchant cash advance providers still standing (no where near the number that there used to be) that make up 90% of the market. I still think 1 or 2 more will fall in 2010.

It will certainly be a interesting time in 2010 and I look forward to being one of the remaining industry leaders left in the merchant cash advance space.

From all of us at AmeriMerchant, we wish all the readers of the Merchant Cash Advance Blog, a Happy and Healthy Holiday and a very prosperous 2010.

Monday, November 23, 2009

Merchant Cash Advance Green Sheet Article

The Green Sheet just published an article on the current state of the merchant cash advance industry entitled, The squeeze in merchant cash advance.

Like I've said all along, the 2007 Merchant Cash Advance model doesn't work. There will only be a few legitimate merchant cash advance providers doing any real volume when the dust settles.

Note to Merchant Cash Advance Providers: It's not how much you fund a month, it's how much you can collect back. To those providers that don't understand, you need to be able to collect the money back to make a profit and stay in business.

Sunday, November 15, 2009

Merchant Cash Advance Twitter

The Merchant Cash Advance Blog has become the most popular blog in the merchant cash advance industry. I am pleased to announce that in the following the steps of this blog, that the Merchant Cash Advance Blog is now on Twitter. I welcome you to follow me on Twitter for the latest updates in the merchant cash advance industry including breaking news, industry trends, etc. You can find this on Twitter at

Saturday, October 17, 2009

SBA Loan Article Indicates More Opportunity For Alternative Financing Such As The Merchant Cash Advance Product

According to a recent article on, titled A grim year for small business lending, "The SBA Loan volume plunged 36% in 2009 as banks slammed their vaults shut to small businesses."

This is yet another example of how an alternative financing program such as a merchant cash advance is starting to be looked at by business owners who in the past utilized traditional loan products such as a SBA loan or a small business unsecured line of credit from their bank.

As the media is reporting time and time again, small businesses can not get access to the necessary capital they need to drive their business. This will lead to an increased opportunity for those in the merchant cash advance industry as we are starting to see an increase in applicants who in the past utilized their local bank as their source of capital.

Furthermore, the lack of traditional loan products readily available in the marketplace can be a tragic situation for many small businesses if they can not get access to capital for the upcoming holiday season - which can amount to 50% - 75% of many retailer's annual sales.

It will be interesting to see the demand levels in the coming weeks for the merchant cash advance product as retailers looking to borrow from their banks are being shut out.

Thursday, October 8, 2009

Merchant Cash Advance Provider CEO David Goldin of AmeriMerchant Featured Again In The New York Times

I want to thank Brent Bowers again of The New York Times for featuring me in a follow up article in today's business section of The New York Times. I believe AmeriMerchant is the first and only merchant cash advance provider to be featured in The New York Times.(now twice). The original article was in August 2007 regarding the AdvanceMe patent situation. This article features four entrepreneurs, myself being one of them, that were previously featured in the paper and following up to see how they are holding up and prospering in this challenging economy. An online version of the article can be found here

Wednesday, September 9, 2009

Even More Positive Merchant Cash Advance News - Survey Indicates That Consumers Plan To Increase Their Restaurant Spending

Restaurants are probably the most common industry that utilize the merchant cash advance product. The amount of working capital a business can receive with a merchant cash advance is based on their sales levels of credit card / debit card sales. Since late 2008 and most of 2009, restaurants have been for the most part hard hit by the economy as consumers were eating out less at restaurants.

However, Nation's Restaurant News, a leading news provider for the foodservice industry, is reporting today that Atlanta-based RBC Capital Markets' September restaurant spending survey, indicated that consumers plan on spending 14% more in restaurants compared to September 2008.

This can only help the merchant cash advance industry as it will not only help build restaurant owner's business confidence, but will also increase the amount of working capital they will qualify for in a few months if there credit card sales increase due to an increase in consumer spending at restaurants.

Monday, September 7, 2009

Merchant Cash Advance Demand - More Positive News - Small Business Confidence Rises To Highest Level In 18 Months

As I've pointed out previously, in order for the merchant cash advance industry and/or traditional business loan products to see an increase in sales, there has to be business owner demand for the product.

What drives demand? One key factor is a business owner's willingness to take on additional debt or obligation. What drives this willingness? Economic Confidence - they have to be confident they can pay it back, they have to be confident they can do something productive with the money, they have to be confident it makes sense to open a new business, market/advertise, renovate, etc. In most cases, be on "offense" rather than "defense."

The good news is according to the latest Discover® Small Business WatchSM, economic confidence among small business owners jumped to the highest level in in 18 months in August as more owners expressed faith that the U.S. economy is on the rise and gave signs that they are more willing to invest in advertising and new inventory. While we aren't out of the forest yet, this is all good news and what I predict will be a large demand for retailers to stockup with inventory for the holiday season. If a retailer isn't properly stocked for the holiday season with inventory to sell, they may as well close their doors....

Monday, August 3, 2009

Can Merchant Cash Advance Demand Be On The Rise As Small Business Confidence Rises For Second Consecutive Month In Spite of Cash Flow Concerns?

The nature of the merchant cash advance product requires business owners to have a positive need for this alternative financing product. What consititues a "positive need"? Typically functions associated with "expanding" such as opening up a new business / new location, buying additional inventory, advertising / marketing, renovating, etc. which obviously does not occur as frequently in a down economy. The merchant cash advance industry has seen a decrease in demand for the product since early 2009 which I attribute to a lack of small business owner confidence.

One positive sign that may show this trend flattening out or even reversing slightly is that economic confidence among small business owners rose for the second consecutive month, although concerns about being able to pay their bills jumped significantly in July as measured by the latest Discover® Small Business WatchSM. The index rose to 82.1, up from 80.9 in June.

One part of the report that I found very interesting was:

"Those who are borrowing aren't using traditional sources. When asked if they have applied for new credit cards, lines of credit or loans, 82 percent said they had not, while 17 percent said they had and 2 percent weren’t sure. Of those who did apply for loans or credit, 44 percent said their applications were approved, 31 percent were rejected, 7 percent were pending and 18 percent weren't sure."

While I don't think 82% of the people utilized a merchant cash advance when indicating they weren't using "traditional sources" - it reiterates the need for alternative financing solutions such as the merchant cash advance.

It will be interesting to see what happens if small business confidence continues to rise. My theory is there will be a direct correlation to business owners looking to "expand" again and thus seeking alternative financing options such as a merchant cash advance as traditional business loan products are still very challenging for business owners to obtain.

Monday, June 29, 2009

AmeriMerchant Launches Merchant Cash Advance Portfolio Servicing Program

AmeriMerchant, one of the oldest merchant cash advance providers in the industry, announced today its new Merchant Cash Advance Portfolio Servicing Program. This program is designed for companies that are funding merchant cash advances and looking to reduce their overhead associated with the MCA business. In addition, this program can be used for creditors / investors / lenders of Merchant Cash Advance providers that are looking to preserve their capital and are interested in exiting the business as well as generating additional revenue in the future.

Editor's Note:The author of this blog is also the President & CEO of AmeriMerchant

Saturday, June 27, 2009

Merchant Cash Advances A Solution For Advanta Cardholders?

According to, Advanta Corp, a leading provider of small business credit cards, recently terminated its customer credit-card accounts due to a reported astounding 20% bad debt rate. For those former Advanta customers that need access to working capital in this challenging credit environment, perhaps a merchant cash advance can be an excellent alternative solution to a traditional business credit card which requires a personal guarantee unlike a traditional merchant cash advance.

Merchant Cash Advance 2009 Update - Amazing What 12 Months Can Do

The merchant cash advance industry has certainly taken a 180 degree turn from where it was 12 months ago. Due to the economic climate and the tightening of the credit markets has resulted in many cash advance companies that have ceased operations, are only funding renewals and/or were forced to liquidate their portfolios by their credit providers. Furthermore, a good portion of merchant cash advance agents (specifically the large "phone rooms", that received much negative press in 2007/2008) have ceased operation as well. A large portion of these agents were born out of the mortgage industry. The merchant cash advance industry is maturing and there were 10s of millions of dollars worth of advances given in 2007/2008 that never should have been advanced. This may have been industry types that don't work well with this product, holdback %s that created too much risk for the MCA provider and/or providing capital to people that didn't have the credit worthiness to pay it back. Unfortunately, many new merchant cash advance providers learned the hard way that this is not an easy business at all.

The good news is those players that have been established for a while and have strong distribution channels that aren't "pumping junk paper" into their company will reap the benefit as the economy turns around. While banks are still tight with their business lending requirements, many businesses are also hesitatent to take on additional debt / obligations in this economy, which can cause a decrease in demand for alternative financing products.

I think we will see a few more players close up shop in 2009, but those merchant cash advance providers that can ride out 2009 will emerge in 2010 even stronger and the "boat will have left the dock" for any new players trying to make a major penetration into the merchant cash advance market.

Monday, March 16, 2009

SBA Loan Defaults Increase - A Lesson To Be Learned For Merchant Cash Advance Providers?

While a merchant cash advance is not a loan product, the SBA does cater to a similar audience as the MCA industry. Here is an interesting article that indicates SBA loan defaults have JUMPED from 2.4% in 2004, to 8.4% in 2007 to 12% in 2008 (11.8% to be exact).

The scary part is a direct funder of an alternative financing product such as a merchant cash advance product can not make money at 12%, how can the provider of a low margin product such as an SBA loan survive? I guess they can't.......

One key difference, when a business defaults on a SBA loan product, the business owner personally guarantees the loan in most cases and leaves their personal assets exposed. With a traditional merchant cash advance product (Factoring future credit card receivables), the merchant cash advance provider writes off the future receivables purchased from a business that legitimately goes out of business.

Thursday, February 5, 2009

Alternative To A Merchant Cash Advance - Sell Your House?

Here is a link to an interesting story on CNN, entitled Selling their home to keep their small businesses alive. This story is evidence on how difficult it can be for small businesses to obtain traditional loans and the fact that banks are not making small business loans. While many people feel that alternatives to a loan product, such as a merchant cash advance is expensive, I think selling your house can be a lot more expensive....

Monday, February 2, 2009

BusinessWeek Article On Vetting A Merchant Cash Advance Provider

While many mainstream press publications have focused on the cost of the merchant cash advance product compared to a traditional loan product (and for the most part not indicating the benefits of the merchant cash advance product and/or the fact that traditional loans are very challenging to come by these days for small businesses), BusinessWeek recently published an article called How To Vet a Merchant Cash Advance Provider.

The fact that a main stream business publication like BusinessWeek is giving advice to small business owners on how to choose a merchant cash advance provider, further demonstrates how alternative financing solutions are becoming more and more popular for businesses.

While I feel the author of the article, John Tozzi, tried to be fair and balanced as far as indicating some of the pitfalls to look out for, I think it needs to be pointed out that the examples of complaints indicated in the article, probably make up less than 1% of the overall transactions done by the merchant cash advance providers, which is an excellent record for any industry.

I also believe that the industry has taken great steps to weed out the unscrupulous providers of this product and many of them have fallen by the waste side, mainly due to the economy and has taken a positive and successful approach to self regulating itself, especially with the creation of an industry association, The North American Merchant Advance Association.