Big Changes in The Merchant Cash Advance Market

Posted: May 30, 2018
Category: Brokers

Traditionally, businesses looking for money would consider a Merchant Cash Advance (MCA) as a last choice. This is because this type of funding has had a reputation for high fees that would be the only option for borrowers with poor credit histories.

As different forms of alternative lending become familiar, competition has increased in the industry as well as the attention it has garnered which has led to increasingly high industry standards.

This has resulted in a shift in the industry that has led to rates that are competitive with traditional banks but have the advantage of an MCA. They can fund merchants quickly and don’t require collateral. At the time of this writing Knight Capital Funding offers a 1.15 rate with a soft credit pull for its “Platinum Plus” deals. This is a real indicator of where the industry is going.

This change hasn’t gone unnoticed. Many small businesses are starting to view MCAs in a positive light. This shift in the industry, along with a noticeable increase among businesses on how they perceive Merchant Cash Advance companies has led to a large interest from investors as well. Credit Suisse has recently invested over $300 million in companies that offer alternative lending.

Companies that offer alternative lending are very different than your standard brick and mortar banks. As a matter of fact, many categorize themselves as “fin-tech” companies. This proves that one of the driving forces in how the alternative lending industry has changed its image is in how it has adapted to technology and innovation. MCAs are constantly using technology to make the application process seamless and less confrontational.

A great example of this is Knight Capital Funding which uses Machine Learning to help underwrite who it funds. By doing so, Knight Capital Funding has been able to help reduce the default rate and find fraud faster and more accurately. This has led to increased savings which are then passed on to merchants and partners. In addition, they are using advanced data science techniques and automation to make the application and funding process faster and easier.

Companies that offer alternative funding have begun making innovative strides that are not only beginning to draw attention to them but also peak the interest of investors and make merchants see them in a different light.  Everyone is beginning to see that alternative funding is the future of business funding.