For years, the business funding industry has been something like the wild west, complete with lawlessness (lack of regulation), crime (fraud, theft, etc.), and downright predatory practices.
Business owners desperate for working capital have been at the mercy of money hungry lenders and brokers who know exactly how badly the capital is needed, and exploit them at every opportunity. I wish I could say that tomorrow was already here with more regulation, or that financial reps of ANY kind were trained to behave more like fiduciaries, instead of the commission-motivated, sales-quota oriented participants that crowd the merchant cash advance industry to this day.
Demand for merchant cash advances continues to grow. Because of the solid growth that the merchant cash advance, or "MCA" industry is enjoying, the market has recently been flooded with many new companies doing the same old (but profitable) thing. There are some pros to this explosion. As more talent enters the space, we are seeing leaps and bounds in technology. The "application" as we know it, does not exist at the savviest funding companies, and even the sending of bank statements will soon be obsolete, and we are personally working on making that happen as we speak, using technology to increase turnaround time and efficiencies. This technology and others, combined with proprietary automation, results in faster funding, and greater efficiencies that allow these top companies to forgo the crazy fees typically associated with the business funding industry. These advances and increased competition create the kind of environment that favors the customer. From the rates that lenders charge, to the fees associated with the funding process, we see the entire industry getting squeezed. One great example is a relative rarity becoming a regular phenomenon; Merchants today are getting better rates on SECOND AND THIRD positions than they got on their first. Again, it was never unheard of, especially if revenue rose or the credit score improved significantly. But we are seeing all the signs of technology and competition benefiting the merhcant. Things are getting better for the small to medium-sized businesses looking for capital, stay tuned for more!