merchant cash advance overview
DESCRIPTION
What is Merchant Cash Advance (MCA) and how MCA works. This document describes the players and what is involved in setting up a merchant cash advance deal.TRANSCRIPT
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Merchant Cash Advance Overview April 2013
What is Merchant Cash Advance?
§ A Business (“merchant”) receives upfront cash by signing over its future sales. § Terms are usually less than a year – 3 to 9 month terms. § Merchants repay cash advance on a daily basis. § Merchant cash advances (“MCA”) are not loans in the US. § MCAs are processed faster than traditional business loans. § Most MCA deals do not require business owners to offer collateral.
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Merchant Cash Advance Players
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Broker Funder
Merchant Collector Businesses that will take a lump sum cash today in exchange for future sales.
Companies that connect Merchants with Funders.
Companies that help Funding Companies retrieve future receivables from Merchants.
Companies with cash to buy future receivables from Merchants.
How Merchant Cash Advance Works?
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Broker Funder
Merchant Collector
Application
Application
Commission
Daily Sales
Funds
Funds Contact Contract
Broker contacts Merchant
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Broker
Merchant
Contact
• Broker contacts a Merchant to offer a $10,000 cash advance in exchange for $11,000 of future sales (10% interest rate).
• The Broker will need the Merchant to complete a simple Merchant Cash Advance application.
Merchant completes Merchant Cash Advance application
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Broker
Merchant
Application
§ Merchant returns application with the following documents: » Owner’s personal information (i.e., DoB, etc.); » Business related information (i.e., EIN, etc.); » Six months of Business’ bank statements; » Six months of Business’ credit card
processing history; » Existing liens or judgments against the
business or owners; » Tax returns for the business and its owners.
§ Merchant is current generating $30,000 a month in sales.
Broker seeks Funder for Merchant Cash Advance
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Broker Funder Application
§ Broker takes Merchant’s application to its network of Funders to get the Merchant a $10,000 cash advance.
Funder evaluates the Merchant
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Broker Funder
Commission
§ Funder will evaluate the Merchant’s credit worthiness by putting it through a rigorous underwriting process, which includes: » Confirmation of $30,000 monthly sales. » Owner and business credit scores. » Existing loans, liens, etc.
§ Funder will pay the Broker a commission for introducing the Merchant.
Funder funds the Merchant
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Funder
§ Merchant agrees to the terms. § Merchant and Funder will also
need to agree to a Collector to help divide the daily sales.
§ Funder provides a $10,000 cash infusion to the Merchant’s business.
Merchant
§ Funder makes the following offer to the Merchant: » $10,000 for $11,000 (10% rate). » Merchant must sign over 50% of
its daily sales to repay the advanced amount.
Funder contacts Collector
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§ Funder shares Merchant Cash Advance contact with a Collector who will be responsible for collecting and distributing the Merchant’s daily sales.
§ A Collector can be one of the following companies: » Credit card processor; » ACH processor; » Lockbox provider; » Bank; or » Funder itself
Funder
Collector
Contract
Merchant’s daily sales are collected by the Collector
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Collector Merchant Daily Sales
§ Merchant generates $1,000 in daily credit card sales. § Daily sales are collected by the Collector per the Merchant Cash
Advance agreement with the Funder.
Collector disburses funds to Funder and Merchant
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Funder
Merchant
§ The Collector collects $1,000 per day from the Merchant at sends $500 to the Funder and $500 to the Merchant.
§ Based on current re-payment rate ($500 a day), Merchant repays the $11,000 in about 22 days.
Collector
Funds
Funds
MCA Suite Value Proposition
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Broker Funder
Merchant Collector
Application
Application
Commission
Daily Sales
Funds
Funds Contact Contract
§ Manage underwriting process § Track financial transactions of all deals § Administer commissions
§ Manage contacts § Manage merchant
cash advance applications and related documents
§ Track daily remittance and deal status § Alerts and reports to manage collections
§ Tie daily remittance to deals
§ Integration with payment gateways
MCA Benefits to Brokers & Funders
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Features Brokers Funders
Contact Management ✔ ✔
Document Management ✔ ✔
Deal Tracking – from underwriting to fund tracking ✔
Deal Refinance ✔
Payment Gateway Integration ✔
Commission Administration ✔ ✔
Reporting ✔ ✔
Workflow and Task Management ✔ ✔
MCA Suite Contact Information
To learn more about MCA Suite and how we can improve your merchant cash advance operations, please contact us for a demo:
www.mcasuite.com
twitter.com/MCASuite
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