When payments attorney Stephen Sheinbaum founded Merchant Cash and Capital in 2005, few options for merchant funding existed beyond traditional sources. The process often took days or even weeks without any guarantee of an approval. Flash forward to today. Not only are more competitors in the marketplace, but automation has also streamlined the submission-to-funding approval process, with 24 hours being average for the merchant cash advance (MCA) industry.
MCC today has about 125 employees in its New York office and is approaching the $1 billion funded mark. A major contributor to its growth over the past decade has been the integration of cash advance products with credit card processors. "Many of our contracts and applications and paperwork have become de facto standard type documents throughout the industry, as well as our underwriting guidelines," said Mark Lowenstein, Director of Marketing for MCC.
The company noted it has invested in programs and technologies that enhance the customer experience. "We've really expanded our private-label company called Next Level Funding, our sales company," said Lowenstein. "Our CAMS [Cash Advance Management System] tool and our ASAP [Automated Submission and Pre-approval] tool allow ISOs to log in to our systems and get contracts and approvals in real time."
For example, MCC reported earlier this year that through the ASAP system they were able to fully approve a car wash business in Texas for $42,300 and initiate funding in less than 70 minutes. "The launch of ASAP last year was a revolutionary development in how small businesses access working capital, and has helped to further drive transaction growth," said Sheinbaum, President and Chief Executive Officer of MCC.
The ASAP service is available to MCC's ISO channel partners as a value-added service for vetting potential funding candidates in their merchant portfolios. ASAP is designed to enable ISOs to go online, fill out a quick approval form, have the merchant sign it and then upload the form for approval in a matter of minutes. The typical MCC cash advance ranges from $5,000 to $500,000 per location and funding is generally available within 72 hours. MCC said its approval rate is up to 90 percent for most industries. "We have an ACH [automated clearing house] program and we also have a split funding program," Lowenstein said. "The credit card split is based on a percent of credit card sales, so the credit card processor will split the fund from the merchant account and deposit the amount directly."
With the ACH program, merchants can choose between fixed daily payments or variable payments based on total sales. To qualify for a cash advance, merchants must have been in business at least three months, generate a minimum of $10,000 in average monthly gross revenue and have no open bankruptcies.
As post-recession recovery continues, increased business activity in general contracting, home improvement and other economic sectors is fueling demand for MCAs. In March, MCC secured $75 million in capital to fund additional merchants and expand its programs.
Other factors are driving the industry as well. "It's become more of a mainstream business, which has allowed us to really compete with traditional lenders," Lowenstein said. "As we build relationships with merchants, their rates typically get better as their number of advances increase."
Lowenstein noted MCC is now seeing more merchants with better credit taking on larger advances. The company's average MCA is $45,000, up from $30,000 during the recession. Coupled with that, factor rates are lower for these merchants, making cash advances more affordable, he added. MCAs are also being stretched out to eight months; six months was the previous norm.
For ISO channel partners, MCC pays a commission on the first advance and on any subsequent renewal merchants sign when they seek financing to fund additional projects.
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