merchant cash advance overview

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Copyright 2013. Five Components, Inc. All Rights Reserved www.mcasuite.com Merchant Cash Advance Overview April 2013

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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.

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Page 1: Merchant cash advance overview

Copyright 2013. Five Components, Inc. All Rights Reserved www.mcasuite.com

Merchant Cash Advance Overview April 2013

Page 2: Merchant cash advance overview

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.

Copyright 2013. Five Components, Inc. All Rights Reserved 2

Page 3: Merchant cash advance overview

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.

Page 4: Merchant cash advance overview

How Merchant Cash Advance Works?

Copyright 2013. Five Components, Inc. All Rights Reserved 4

Broker Funder

Merchant Collector

Application

Application

Commission

Daily Sales

Funds

Funds Contact Contract

Page 5: Merchant cash advance overview

Broker contacts Merchant

Copyright 2013. Five Components, Inc. All Rights Reserved 5

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.

Page 6: Merchant cash advance overview

Merchant completes Merchant Cash Advance application

Copyright 2013. Five Components, Inc. All Rights Reserved 6

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.

Page 7: Merchant cash advance overview

Broker seeks Funder for Merchant Cash Advance

Copyright 2013. Five Components, Inc. All Rights Reserved 7

Broker Funder Application

§  Broker takes Merchant’s application to its network of Funders to get the Merchant a $10,000 cash advance.

Page 8: Merchant cash advance overview

Funder evaluates the Merchant

Copyright 2013. Five Components, Inc. All Rights Reserved 8

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.

Page 9: Merchant cash advance overview

Funder funds the Merchant

Copyright 2013. Five Components, Inc. All Rights Reserved 9

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.

Page 10: Merchant cash advance overview

Funder contacts Collector

Copyright 2013. Five Components, Inc. All Rights Reserved 10

§  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

Page 11: Merchant cash advance overview

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.

Page 12: Merchant cash advance overview

Collector disburses funds to Funder and Merchant

Copyright 2013. Five Components, Inc. All Rights Reserved 12

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

Page 13: Merchant cash advance overview

MCA Suite Value Proposition

Copyright 2013. Five Components, Inc. All Rights Reserved 13

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

Page 14: Merchant cash advance overview

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 ✔ ✔

Page 15: Merchant cash advance overview

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

[email protected]

twitter.com/MCASuite

Copyright 2013. Five Components, Inc. All Rights Reserved 15