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Merchant Cash Advance: The 2020 Guide

EXCELCAP_ MERCHANT CASH ADVANCE

What is a merchant cash advance?

As opposed to a traditional loan where a lender provides funds in exchange for an interest-based repayment plan, a merchant cash advance (or MCA), sometimes called split funding, is a purchase of future credit and/or debit card sales in exchange for a fee.

In addition to this, a MCA is generally much faster than a traditional loan, with the ability to be approved and have your account funded in as little as 24 hours in some cases.

And you can use split funding for virtually anything, including:

  • Inventory purchases
  • Equipment upgrades
  • Hiring and training
  • Payroll
  • Taxes

For those who need capital fast, who don’t have great credit, or don’t have any applicable collateral that could be placed down to secure a traditional loan, an MCA may be the perfect funding solution.

As small business financing alternatives go, split funding is one of the most convenient when it comes to repayment.

MERCHANT CASH ADVANCE

How a merchant cash advance works

An MCA is an advance on future credit card sales. Therefore, it’s best for businesses who function mostly off credit and debit card sales.

What is convenient about split funding is the advance is repaid, typically via an ACH or automatic withdrawal, based on a percentage of those daily sales. The amount which is automatically paid towards the loan is typically called the “holdback” amount.

That means if you have a dip in regular sales, the amount taken out for those days will also be reduced, making it easier to pay back the advance when business is down.

The most unique aspect of an MCA is that it doesn’t use a typical APR interest fee but rather what is typically called a factor rate.

Click here to apply for a merchant cash advance and find out what your options are: Apply Now


What is a factor rate?

The factor rate, which takes the place of interest as the primary fee associated with MCA’s, typically ranges from anywhere between 1.14 and 1.48.

By multiplying your loan amount by the factor rate, you’ll have a rough estimate of the total amount you’re expected to pay once you’re done repaying your MCA.

For example, if you get an advance of $25,000, and your factor rate is 1.3, you’ll pay $32,500 before paying off the advance.

The factor rate associated with split funding is generally considered to be steep compared to the interest on something such as an unsecured business loan.

However, it trades increased fees (in some but not all cases, and depending on the lender) for hyper-convenience, speed, and reduced credit requirements.


Example of a Merchant Cash Advance

Let’s take a closer look at how an MCA works with an example:

MERCHANT CASH ADVANCE EXAMPLE

Jerrett, the owner of a local cafe, needs $20,000 for the purchase of new high-grade barista equipment and a few additional hires to meet a recent increase to traffic at his location.

Jerrett doesn’t have much business credit history, only having been in business at his location for about a year. So, he can’t depend on a bank loan to get him out of his pinch.

Instead, he decides to apply for a merchant cash advance. Because he has the necessary credit card sales, so he’s approved for the $20,000 advance and is off to the races. He gets all the equipment he needs and gets some help around the cafe. Business is booming.

Now that the advance has been issued, he can begin paying it back with a percentage of his regular credit card sales.

If his factor rate is 1.25, on $20,000 he’ll be paying back a total of $25,000. The repayment period on an MCA is typically between 3 and 12 months, all depending on how high your regular credit card sales are.

However, because the repayment period is based on the volume of credit card sales, it doesn’t affect how much you pay. Instead, your regular holdback amount is based on a set percentage decided by the lender.

Let’s say your holdback percentage is 10%. If you average $20,000 in monthly credit card sales, you’d pay about $65 a day ($2,000 total over a month) on average based on that day’s sales towards the advance and have it paid back in full within about 10 months.

The exact method which is used to repay an MCA varies, so in the next section, we’ll quickly cover each of them.


Ways to set up a merchant cash advance

There are 3 ways that repayment on a merchant cash advance can be set up. Here’s a rundown on the 3 methods:

1. Direct split

With this method, the lender uses one of several trusted credit card processors to place a “split” on your credit card sales (hence why it’s sometimes referred to as split funding), directing the percentage notated in your agreement from your credit card sales.

Each time you batch out, that percentage is automatically removed behind the scenes and you receive your deposit in exactly the same way as you usually would with zero delays.

2. Lockbox

If you’d prefer to not change your payment processor, or your merchant processor has early termination fees you’d prefer to avoid, this may be a more preferable method.

With lockbox funding, instead of switching merchant accounts a lockbox account, also known as a bridge account, is set up to split your credit and debit batches.

A lockbox account is a typical bank account which you’re given credentials to, however, with your lockbox account, each time a batch is settled the account automatically “splits” the amount by sending the designated repayment percentage via ACH to the corresponding account and deposits the rest of your amount into the account for your use.

The only drawback with this method vs. a direct split through a credit card processor is that there is typically a 24-48-hour delay in the typical amount of time it takes for you to receive your deposit after batching.

To set up a lockbox account, you’ll be asked to sign the lockbox form given by your MCA provider. Once your bank letter arrives in the mail for the lockbox account, the only thing left to do is call your card provider to have your deposits redirected to the lockbox account (which typically takes up to 48 hours).

3. Variable ACH

The final way to set up an MCA is as a variable ACH.

This is ideal when your merchant processor isn’t already one of the provider’s friendly accounts (i.e. a direct split won’t work) and you as the business owner don’t want to deal with the 24-48-hour delay between when your batches are settled and when the MCA holdback percentage is removed (as in a lockbox account).

A variable ACH requires your MCA provider’s collections department to have access to your merchant processor’s login portal. Your provider will log in to your processor’s portal each to check your batch amount and then issue an ACH transfer for the holdback amount.

This method of repayment requires that your provider always has access to your merchant processor portal, otherwise the account is considered to be in default.

It’s generally harder to be approved for a variable ACH as, unlike when using split funding or a lockbox account, variable ACH approval is dependent largely upon your average ledger balance.

In other words, while you can be approved for both split funding and the lockbox method with a high number of non-sufficient funds (NSF’s) or overdrafts, with a variable ACH your average balance must be high to ensure that the full holdback amount can be collected regularly.

Click here to apply for a merchant cash advance and find out what your options are: Apply Now


Pros and cons of business merchant cash advances

Here are the primary benefits, and drawbacks, of a split funding:

As a merchant cash advance is a unique small business financing solution, it has a unique collection of pros and cons which are important to review before deciding if it’s the ideal solution for your needs.

Pros

  • Get funds fast: An MCA is a good idea if you need cash fast as you can have the funds within your account within 1-2 business days. As opposed to a traditional loan, this makes an MCA lightning fast.
  • No collateral: They don’t require traditional collateral, instead using your future credit card sales as a kind of “soft” collateral. That means you don’t have to risk losing something valuable such as your property or important equipment in the case of defaulting on the loan.
  • Good credit not required: Depending on the lender, fair or even bad credit is acceptable for an MCA. This makes it an invaluable funding solution for business owners who don’t have the credit to be approved for any kind of business loan.
  • Repayment terms fluctuate with business: If business is down, your payment goes down with it. This makes split funding one of the most flexible and convenient small business funding solutions available.

Con: The factor rate can be high

An MCA offers several significant benefits. However, every funding solution has both pros and cons, and a merchant cash advance is no exception.

However, while many funding solutions have several different drawbacks, an MCA really only has one, though it can be a big one.

The factor rate on split funding can be very high, as low as an equivalent 15% interest in some cases, but as high as triple digits in others depending on various factors.

For that reason, it’s important to know what the terms are of your advance going in, how much you’re paying and are able to pay, and whether it’s worth it for you.

It may be the perfect vehicle to get you out of a tough spot, help you buy new equipment that can drive sales, or help you hire the seasonal assistance you need to make full use of a busy season. Whatever the case, weigh the cost and benefits to decide if an MCA or another funding vehicle is the ideal fit for you.


Who is a merchant cash advance best for?

Still wondering if a merchant cash advance is the right funding solution for you and your business.

Consider these factors when deciding whether an MCA is a good fit. It’s ideal for those who:

  • Accept credit card sales: If you accept credit and/or debit card sales, split funding may offer a more convenient repayment plan than a traditional loan.
  • Need a fast funding solution: If your funding needs are an emergency, an MCA is one of the best.
  • Don’t have great credit or enough credit history: Split funding doesn’t require great or even good credit, making it accessible to many who otherwise wouldn’t be able to qualify for a traditional business loan.
  • Don’t have available collateral to offer: Similarly, if you don’t have collateral to offer for a traditional bank loan, you won’t be able to qualify for a typical bank loan. However, an MCA doesn’t require typical hard collateral such as property or liquid cash.

How to apply for a merchant cash advance

Because a merchant cash advance doesn’t require good credit or a hard form of collateral, it’s generally easier to be approved for one vs. a typical loan which requires sufficient proof that you’ll be able to repay the debt.

However, there are still qualification requirements and an application process you should be aware of. The more you know, the more likely you’ll be to get approved and the better terms you’ll be able to get.


How to qualify

The first and most basic eligibility requirement of an MCA is which has been mentioned already: a large portion of your revenue must come from credit card sales.

Additional qualification requirements include:

  • In business at least two months
  • $7,500 or more in monthly credit card sales
  • $10,000 or more in gross monthly sales
  • No open bankruptcies

Merchant cash advance: Good or bad credit vs. credit card sales volume: Which is more important?

We touched on an MCA’s credit card sales volume requirements in this and previous sections as well as its credit requirements.

However, if you’re already convinced an MCA is the ideal financing option for your business and you skipped to this section to see how to qualify, keep this in mind:


Credit is not the most important factor, your credit card sales volume is.

With a merchant cash advance, your credit card sales volume triples as:

  1. The primary qualification factor
  2. The main factor which decides how much you can be approved for, and
  3. Your estimated future credit card sales volume serves as a kind of soft collateral that guarantees to a lender that they’ll be able to collect on the advance

All of this taken together makes your credit card sales volume by far the most important factor for approval.


How to apply

If you’ve been operating in business for more than two months and meet the monthly sales requirements, acquiring a merchant cash advance is a simple matter of being approved.

To be approved for split funding, you’ll simply need to submit an application along with four months of bank and credit card processing statements.

However, in addition to this, you’ll want to gather several documents that may be requested after applying for approval.

A lender will review your credit card processing and bank statements to see that you fulfill the minimum monthly sales numbers. If you qualify, they’ll typically request additional documentation to finalize the approval.

Documents you’ll want to have in order to streamline approval include:

  • Driver’s license
  • Voided business check
  • Credit score
  • Business tax returns

Merchant cash advance alternatives

As we’ve reviewed throughout this guide, a merchant cash advance has several notable benefits.

However, if the tradeoff isn’t to your liking, it’s worth considering an alternative funding method. No matter what it is you need to pay for, the options below are fast and allow approval without perfect credit.


Term loan

Short-term and medium-term loans are closest to a traditional bank loan in that you receive a lump sum in exchange for repayment with interest. The repayment term on short-term loans is typically between 3 months and 2 years and medium-term loans up 5 years.


Business line of credit

With a business line of credit, you get access to a pool of funds which you can tap into whenever the need arises. And, provided you pay back what you borrow, you can then tap into that line of credit again.

Learn more about business lines of credit here.


Get the funds your business needs– fast– with a merchant cash advance

A merchant cash advance is both a fast and convenient funding solution.

In addition to this, it’s an ideal source of extra capital for business owners who either don’t have stellar credit or any form of hard collateral to offer and therefore wouldn’t be approved for a bank loan.

Traditional bank financing takes months for approval. So, whether you need funding fast or need access to capital and don’t qualify for a traditional bank loan, an MCA is an effective source of additional capital worth considering.

Click here to apply for a merchant cash advance and find out what your options are: Apply Now

Frequently Asked Questions

Is a merchant cash advance a safe option?


Before signing a contract with an MCA provider, it’s important to first make sure that an MCA is the right funding method for you and your situation.

An MCA is based on your business’s regular flow of income, so if your business income is in a volatile period, a loan would likely be a better option for you. 

However, if your business income is consistent, even growing, then an MCA may be a good option for you and your business. 

What happens if you default on a merchant cash advance? 


If you find yourself in a position where you can’t pay back your MCA, start by looking at your contract to see what options are available to you in default as it all depends on the advance, provider, and your particular situation.

MCAs are considered a purchase agreement, not a loan, so they’re not subject to the same usury laws as typical business loans. Depending on your provider, they’ll have various options and actions they may take if you breach your contract and go into default. 

For example, your provider may sue for breach of contract, though defaulting doesn’t necessarily mean you breached your contract. For example, if you defaulted because your business closed down, that isn’t a breach of contract and there would be no recourse whatsoever.

If you’re having trouble paying your MCA, give your provider a call to ask what your options are for setting up a revised repayment plan and getting back to current.

Truck Overhaul Financing: How It Can Help Your Business

Truck Overhaul Financing: How It Can Help Your Business | Excel Capital Management

The trucking industry can be a highly competitive and taxing. Training drivers to operate new equipment and trucks, the length of your payment terms with various vendors, the price of fuel, and maintenance are all expenses that need to be considered. From driving through hilly terrain to hauling heavy loads, a lot of stress is put on your truck’s engine. Despite staying on top of fixing small problems before they become bigger problems you will eventually have to put money towards a major fix. This is where truck overhaul financing can help.

While you should take your truck to a shop for analysis, you can also use your senses (sight, hearing, smell, and touch) to monitor their condition. If your truck is showing any of these signs, it could mean that it’s time for an overhaul:

  • Increased oil consumption: This is caused if the valve guides are worn, or if there’s too much space between the valve stems and guides, or if the valve guide seals are worn, missing, broken or not installed correctly. The engine may still have good compression, but it will use a lot of oil.
  • Excessive Exhaust: Since they positioned in the back of the truck, your tailpipes can go unnoticed. However, knowing if it blows excessive smoke, that’s a good indication that it’s time for an engine rebuild. Thick and dark is another clue. Just keep an eye on the tailpipe and take notice of any unusual smoke or a larger amount of it is coming out of your tailpipe.
  • Black, blue, or white exhaust: See if your truck is emitting exhaust that is blue, black or white in color.
  • Water in the oil: If there’s water in the oil, it will create a foam or gunk on the fill cap or the dipstick. Water that has formed on the dipstick will also cause rust to develop.
  • Engine knocking: Listen for changes in the way your trucks sounds when running. Rough running and pinging are both signs. If you ever hear a sound coming from your engine that sounds bad, it would have to be the knocking sound that gets louder when you rev the engine. This can sound like someone is actually knocking on your engine. This sound is not just annoying, but not a good indicator. It is not normal and sometimes it can lead to other auto problems if not addressed properly.
  • Oil pressure gauge: Even if the gauge isn’t calibrated perfectly,  look out for any noticeable change in its reading.
  • Sludge: If you notice oil sludge on your oil pin when you clean and replace your oil, then you know your engine is not working well. Oil or coolant sludge is not just gross, it’s also a sure sign that you will need an engine overhaul in the immediate future. Sludge is wasted oil or coolant that is not going to be used. Plus it can cause issues that may make your engine not run very well.
  • Overheating oil: Oil that’s overheating smells like burning oil.
  • Reduction in  acceleration: This is a sign of loss of cylinder compression.
  • Low fuel economy: Fuel is be pricey and can be a nuisance if you constant have to refill our tank, especially during long distance hauls. When the engine is slow or not working well, it can uses a lot more gas just to run.
  • Low oil pressure: This happens when the oil pump does not create pressure, and as a result, oil doesn’t all of the components. It’s often due to worn rod bearings or a broken oil pump.

Truck Overhaul Financing Options

Overhauling an engine can be costly and you may need additional working capital to help. The following are some of the trucking overhaul financing options available:

  • Equipment Financing: Used to help business owners purchase any type of equipment needed to run the business. The loan amount is dependent upon the type of equipment needed, as the repayment term is usually as long as the expected life of the piece of equipment and if it is used or new.
  • Merchant Cash Advance (Split Funding): Transactions that are collected through a set percentage of your Visa and MasterCard sales that are accepted at your place of business. Probably the most common term used in the industry. These do not have a set repayment schedule and are based on the volume of your businesses credit card processing sales. These are usually only guaranteed by the future sales of your business.
  • Term Loans: A loan that is backed by a bank for an exact amount that has a specified repayment timetable and interest rate that are adjusted accordingly. Terms mature between 1 and 10 years.
  • ACH Loan: These loans may need personal guarantees, and have a fixed repayment schedule that is paid either daily, weekly or monthly. These products are catered to industries that do not accept credit cards and need a fixed payment.
  • Business Lines of Credit: A rotating loan that gives business owners access to a fixed amount of money, which they can use day-to-day according to their need for cash. Interest is only paid on the amount of the advance actually used.
  • Emergency Business Loans: Loans that are funded quickly to help your business get out of a jam quick. Generally funded within 24 hours.

Application Process

Once a business has been approved, they can be funded in a little as a week. Usually, the documentation that is initially submitted is enough for this to happen in most cases, but there are instances when additional documentation may be requested depending on the lender. The following is the standard business documentation you should have prepared when starting the application process:

  • Business license
  • Voided check for the business account
  • Clear copies of identification for all owners
  • Proof of ownership
  • Trade references
  • Four months of bank statements
  • Four months of credit card statements (if applicable)

If it’s time to get some work done, trucking overhaul financing could be right for your small business. Excel Capital Management’s funding specialists are here to help and guide you every step of the way. Excel Capital Management will work to match your business capital needs. Give us a call at 877-880-8086 or APPLY NOW!

An ACH Loan Could Be The Perfect Funding Solution for Your Business

ACH Cash Advance or ACH Loan for Your Bar or Restaurant

Deciding if an ACH Business Loan is right for your business:

Applying for funding for your business can be quite daunting. Do you go the traditional bank loan route or work with an alternative lender? ACH Loans make Funding Quick and Easy

Well, traditional bank  financing can be quite tedious, tiresome, and unfortunately, not always the best solution.

Alternative lenders like Excel Capital Management can offer better funding products depending on your business’ needs such as an ACH Business Loan. Let’s take a closer look at how ACH  Loans work and how one could benefit your business.

What Are ACH Loans?

money exchange | Excel Capital Management

To start, the primary purpose of an ACH Business Loan is to service the working capital needs of small to medium-sized business owners. They are a popular funding solution for businesses that do not accept credit cards or want a set repayment schedule.

Whether you need the working capital obtained through an ACH Business Loan for inventory purchases, new hires, employee training, additional office space, or almost anything else for your business, this funding solution can be extremely beneficial.

Unlike traditional business loans, funds from  ACH Business Loans are disbursed in as little as one business day after being approved for funding.

Additionally, this funding product does not require a minimum credit score to qualify, which means many up and coming businesses or businesses experiencing a rough financial period. Having collateral is not necessary to qualify, so business owners who have poor credit or lack business history can still apply for this great funding solution.

Lenders use the ACH (automated clearing house) system provided by many banks to set up automatic recurring payments to collect payments. This is the main set up for Unsecured Business Loans.

Payments are usually remitted via daily or weekly ACH’s and provide micropayments instead of one large payment due at the end of every month.  This ACH loan process reduces the risk for many higher-risk industries such as restaurants, car dealerships and trucking. Allowing alternative lenders to provide restaurant business loans, Cardealer funding and truck financing when most other traditional banks would not consider funding.

What Can an ACH Loan Be Used For?

cash 3 | Excel Capital Management

The great thing about ACH Loans is that they are a funding solution that can be used for businesses in all industries and for virtually anything as long as it pertains to the business itself. Here are some common uses of working capital acquired through an ACH Business Loan:

Business Permits & Licenses – Depending on your industry and state of operation, your business may be obligated to obtain and display certain permits and licenses. Renewing these documents can be costly, but are necessary since not having the proper documentation at any point of operation can cause major legal issues in the future.

Office Space & Business Locations – Maybe you need an office space or facility in order to properly operate. Business capital can be used to acquire new space or to improve and expand an existing location.

Inventory Purchases – Business capital acquired through an ACH Business Loan can be used for bulk inventory purchases so there is never a shortage of goods and products. Often times, purchasing inventory in bulk has it’s benefits and is much cheaper than individual purchases.

Marketing & Advertising –  Website development, paid ads, and social media marketing is a big job, and hiring a team of professionals can be pricey. Having enough business capital in order to cover these expenses can help tremendously.

Research & Development – Constantly developing your products, goods, and services is essential for staying ahead of the competition in your industry. Additionally, doing the proper market research and analyzing your target audience and consumers is key to knowing what your customers want. Business capital can certainly be used to help fund this process.

Product Manufacturing – Similar to research and development, product manufacturing may be a constant need depending on your industry and business capital may be needed during slow periods or when business is so great, that you must quickly meet the demand.

Employee Hiring & Training – Consider using the capital obtained through an ACH Business Loan to hire additional employees or to train existing staff on new business operations.

How are ACH Business Loans Paid Back?

The process of collecting payments on an ACH Business Loan is typically done through the Automated Clearing House (ACH) withholding method with fixed daily, weekly, or monthly payments. Lenders are able to withdraw a predetermined amount from you business’ bank account. The less common, but just as efficient, method is through a lockbox agreement. This process is a little more involved as all of a business’ daily credit and debit sales are deposited into a lockbox account with the lender withdrawing a predetermined repayment amount.

Deciding if an ACH Business Loan is Right for You

paperwork 2 | Excel Capital Management

Many business owners feel ashamed when it comes to applying for some sort of financing, but not to worry. Almost all successful businesses have reached out for additional working capital at one point or another. In fact, many businesses that are doing incredibly well obtain additional working capital through a business loan for continued growth and expansion. Here are a few steps to take in order to decide if an ACH Business Loan is right for you.

Identify Your Business’ Needs – First things first, why does your business need a loan in the first place? Sit down with your core staff members, financial advisors, or simply yourself to determine your business’ needs and how a quick business loan could help. Do you need to purchase inventory, hire additional staff, catch up on bills? Having a plan of execution once the loan is acquired is essential for success, as well as a plan for paying the loan back.

Do the Due Diligence – You may hear the phrase, “do the due diligence” a lot when researching quick business loans. In simpler terms, this means doing the necessary research before applying and accepting an offer with a lender. There are thousands of lenders and brokers out there – traditional and alternative. Don’t take everything at face value. Learn as much as you can about each lender you are interested in, compare pricing, read reviews, ask questions, and follow your gut if something just doesn’t seem right. You have the right to protect yourself and your business. The last thing you want to do is put your business in more of a financial bind or have setbacks. Research and knowledge is key. Do your due diligence.

Choose the Best Quick Business Loan Option – Maybe you did this when identifying why your business needs a quick business loan, but it’s a good idea to confirm again the type of loan product your business truly needs. Could your business benefit from an SBA Loan, Term Loan, Startup Loan, or something else? Speak with your chosen lender to go over all of your options and get a better understanding of how everything works.

Find Out What’s Needed To Qualify and Apply – All lenders have different business loan qualification guidelines. Depending on your business’ financial standing the amount of money you are looking to obtain, the documentation needed to be presented with an approval will vary. It is a good idea to at least have your last six months of business bank and credit card processing statements available, as well as additional financial documents like P&L and Balance Sheets and tax returns easily accessible.

What is the Application Process for an Ach Loan Like?

loan application | Excel Capital Management

Typically, most lenders that offer ACH Loans require minimal paperwork in order to present your business with an offer and approval. As mentioned, your business’ bank account can even be funded in as little as three business days! Here is a list of items to have ready when applying:

  • Completed application provided by your chosen lender
  • Four months of recent business bank statements
  • Four months of recent credit card processing statements (if your business accepts credit cards)
  • Clear copies of identification for all business owners
  • Voided check for the business bank account that is to be funded

*additional documentation may be requested prior to funding*

 

How An ACH Loan Can Help Your Restaurant or Bar:

While it is a trendy and thriving industry, owning and operating a bar or restaurant isn’t so simple. The business is constantly growing, changing, and will forever be one of the most competitive. These issues on top of the fact that business owners of all kinds will inevitably run into some financial hurdles overtime can be overwhelming to think about. So what do you do when your bar or restaurant is in need of working capital to fix cash flow issues? What do you do when the traditional big banks decline your business loan application? There are options. Introducing the ACH Cash Advance and ACH Loan or Unsecured Business loan.

As mentioned, all business owners will be in need of working capital at some point over their business’ lifetime. Whether additional funds are needed to fix your bar or restaurant’s cash flow issues during a slow period, train new wait staff, hire more bartenders, purchase inventory, or repair kitchen appliances, A quick Business loan can help.  Two popular reasons many bar and restaurant owners reach out for capital is due to the turnaround of employees and the fact that their business may be cyclical.

For instance, employees in the bar and restaurant industry do not tend to stay at a job very long due to constantly looking for additional or better work opportunities. It’s a fast paced industry that many work in on the side to make extra cash. The causes many issues for business owners who can’t compete with other bars or restaurants that pay better. Additional capital could help you to give deserving employees a raise or promotion. Similarly, many bars and restaurant are cyclical, meaning they are open 2 to 4 days per week. Thus, generating enough revenue to pay rent for the business and cover expenses and payroll can be tough.

To acquire working capital from a traditional bank via a business loan is no easy task. BIg banks require lengthy applications, lots of paperwork, and tend to take a few weeks for processing and an approval or decline. Not to mention, due to the unsteady industry, an approval can be even more difficult to receive. (Check out our recent blog, “Why Business Loans Declined For 3 Reasons” for more on that).

Luckily, alternative financing is available, and the most popular financing solutions tend to be the Merchant Cash Advance or ACH Loan. The primary purpose of a Merchant Cash Advance or ACH  Loan is to service the financial needs of small to medium sized business owners. Unlike traditional business loans, funds from a cash advance or ACH Bank Loan disburse in as little as three to four business days. They do not require a minimum credit score to qualify, therefore, many rising businesses or businesses that run into a rough patch over the years opt to use this financing solution.

Another benefit is that Merchant Cash Advances or ACH Bank Loans do not require any collateral to qualify, so business owners who have little to no collateral (or poor credit or limited business history) to offer can rest assured that nothing will be taken from them. Finally, since ACH Cash Advances and ACH Bank Loans do not necessarily have fixed payments, business owners who run into financial troubles over time do not carry the burden of large monthly payments, balloon payments and do not accrue over time (since they are classified as a purchase of future sales at a discount).

When it comes to paying back your ACH  Cash Advance or ACH Loan, there are two common collection processes. With a Merchant Cash Advance, payments come from a set percentage of credit and debit sales. With  ACH Loans (this financing product is typical for businesses that do not accept credit cards or want a set repayment schedule) the collection process is done through the Automated Clearing House (ACH) process. collection process is through the Automated Clearing House withholding method with fixed daily, weekly or monthly payments. This method allows the lender to withdraw a predetermined amount from your business bank account. Lastly, a lesser common method of collection is through a lockbox agreement. With this method, all of a business’s daily credit and debit sales are deposited into a lockbox account, in which the agreed upon repayment amount is removed by the lender.

Guest Blog presented by Kabbage: How Fintech Has Helped the Small Business Lending Industry Grow

How Fintech Has Helped the Small Business Lending Industry Grow | Excel Capital Management | Kabbage

It is amusing the way popular art often foreshadows or even predicts the future. Science fiction movies focused on space travel long before the first probes were sent to explore the galaxy, and self-driving automobiles were part of novels on the future long before they even became a possibility. Perhaps the best example of popular culture accurately predicting the future happened in 1984. The movie “Revenge of the Nerds” depicted a ragtag crew of science geeks getting revenge on the jocks and popular kids at their school. 

Today, as foreshadowed in the movie, nerds indeed have taken over the world. From one of the wealthiest men in the world, Bill Gates to the domination of the geek and nerd driven internet, the nerd now is in global positions of power. These same nerds, while long in the institutional financial space, have decided to shift their focus to the retail financial sector.

The Emergence of Fintech

Fintech has capitalized on the relationships that can be formed between finance and technology to drive innovation for everyone from businesses to everyday consumers. Whether it is having the capability to access a bank account on a tablet or paying for an in-store product with a mobile phone, these ties formed between finance and technology are the epitome of fintech.

The so-called fintech industry is targeting a treasure chest of over $4.7 trillion once dominated by old school players. Following in the footsteps of the other disruptive nerd driven technology, the fintech sector is on fire in regards to growth. The sector drew $12 billion investor dollars in 2014, an over 40% increase from the previous year.

Within the retail financial sector, small business lending, personal loans and loans for professionals have already been radically improved by the growth of fintech. This is not just speculation about the future – every day, small business owners are taking advantage of the new world of lending powered by the fintech revolution. 

Fintech vs. Traditional Lending

The fintech revolution has the traditional institutions very concerned. Jamie Dimon, JPMorgan Chase’s CEO, warned in his investor letter that “Silicon Valley is coming.” Jim Marous wrote in The Financial Brand, The impact of digital technology and the digital consumer is transforming the way consumers access financial products and services. Beyond simple transactions, such as checking balances, the intersection of finance and technology (fintech) is impacting virtually all categories of financial services at an increasing rate, reshaping the industry’s status quo.

Backing up his contention, Marous cited, Results from a PwC survey, ‘Blurred Lines: How FinTech is Shaping Financial Services’, found that the majority of survey participants see consumer banking and fund transfer and payments as the sectors most likely to be affected over the next five years. The report included responses from 544 CEOs, Heads of Innovation, CIOs and top management involved in digital and technological transformation across the financial services industry in 46 countries.

While these projections and warnings remains premature, it is a tell as to what the future holds for the overall financial sector from the fintech revolution. Truth be told, the fintech lending space remains a tiny part of the overall lending industry. One example of the size differential could be considered with $9 billion in loans funded by a fintech firm. While $9 billion is a tremendous amount of money, it is peanuts compared to the total loan volume. Even just compared to the $885 billion in total credit card debt outstanding in America, it is like a flea on an elephant’s back. 

An Analysis of the New Lending Industry

Traditional institutions stand to gain from the growth of fintech. Fintech has accelerated the growth of the small business lending sector in multiple ways. First, and perhaps most critically, fintech has lowered the cost of making loans for the lender. These savings can then be passed down to the borrower, creating a less-expensive product. Lending costs have been slashed by cutting out physical branches, legacy IT systems and burdensome regulations, allowing a more direct connection with the borrower.

Also, by moving the application process to the internet, additional costs can be cut from no more physical paper application processing. For example, the standard loan cost for a traditional lending institution is 5-7%.  Fintech lenders can cut this number down into the 2% zone. 

Next, fintech has opened up an entirely new clientele for business lenders.  Due to a lack of pertinent data and ways of processing it, traditional small business lenders are forced to rely on the old fashion ways of approving borrowers. The old style approval process takes into account credit score of the business and owner as well as the collateral to secure the loan.

The new fintech small business lending firms consider hundreds of data points, often in real time, to make credit decisions. This practical use of big data enables the new wave of fintech small business lenders to make loans that were previously impossible by traditional means. Credit-worthy customers may not have the collateral or perfect credit score to qualify at a bank for small business financing. However, the new wave of fintech small business lenders can be secure in making these once impossible loans.   

Finally, fintech is in the process of creating a more stable credit environment. The reason for this is the simple fact that banks rely on borrowed money to fund loans whereas fintech small business lenders use investor’s money directly to fund loans. This helps eliminate the inherent risks of borrowing to lend.

Wrapping things up, as you can see, fintech has revolutionized the financial industry and online business lending in particular. Although fintech remains a tiny part of the overall financial sector, it is rapidly growing. Using big data and high-speed processing computers, fintech firms can make loans that were once considered impossible by traditional lending institutions. In the process, fintech is super-charging the small business lending world with growth and new possibilities.

Kabbage is the industry leader in providing working capital online. Kabbage is dedicated to supporting the small business community and has funded more than $1.6 billion to help business grow.

Summertime Sadness: How to Curb Slow Summer Business

Summertime Sadness: How to Curb Slow Summer Business

So you’ve gotten through the holiday rush and spring sale seasons only to have business come to a slow creep. Don’t panic; you’re not alone. Unless you run an ice cream shop or sell beach gear, your business is bound to experience slow sales during the summer months. The following are 3 tips on how to help build your business by utilizing this time the best way possible.

Social Media Revamp

The summer months are the perfect time to focus on your social media presence. Many make the mistake of thinking that posting regularly is the same as successfully socializing with their followers, however, having a lot of content doesn’t help unless it is of quality and you engage your followers. Run summer themed contests, share photos of your staff enjoying the nice weather, post vacation pics or plans. Have fun and be creative! 

Tax Prep

Despite it occurring the same time every year, tax season always seems to take people by surprise. You promise yourself that you will never wait until the last minute again only to fall into the same trap. Prepare for the inevitable by gathering your receipts and organizing your finances. *Attention restaurant owners, we wrote a helpful a few months back titled: Tax Filing Tips for Restaurant Owners. Check it out!

Reevaluate and Reflect

Now that you’ve reached the midway point reevaluate your business’ goals for the year. Celebrate the goals you’ve successfully implemented and take steps to improve on the rest. Make sure that your daily actions reflect the goals you’ve set.

Reach Out for Working Capital


Just because business is a little slow, doesn’t mean you have to stop growing. Now may be the perfect time to reach out for working capital from an alternative lender. Alternative financing products such as the popular Merchant Cash Advance is a great solution for your business to purchase necessary inventory, hire new employees, train existing employees on new systems and business techniques, implement marketing campaigns, and much more!

At Excel Capital Management we know what you need to for your business to grow. Grant Cardone also wrote a great piece for Entrepreneur titled, 5 Sales Tips to Recharge During the Lazy Days of Summer.” Check it out! 

Exploring Funding Options for LGBT Owned Businesses

Alternative Funding Options for LGBT Owned Businesses

June is Lesbian, Gay, Bisexual, and Transgender Pride month each year in honor of the 1969 Stonewall riots, a major turning point in the U.S. Gay Liberation Movement,  in Manhattan, NYC. Since those days, great strides have been made in terms of progressive thinking and equality. The LGBT community also makes up a large number of business owners in the United States.

As we know, most businesses will need to apply for some sort of working capital during their lifetime. Traditional loans are not always an option to many business owners due to the lengthy paperwork required and strict rules and guidelines, however, progress is being made when it comes to providing the LGBT community with business-funding options. For instance, the Small Business Administration (SBA) has set up a few different programs and outreach initiatives. Aside from the SBA and other traditional business loan options,

There are many alternative funding solutions that may be more suitable and easier for LGBT-owned businesses to obtain when it comes to growing their businesses. Here are a few options:

Merchant Cash Advance: Short-term financing transactions that are collected through a set percentage of your visa and mastercard sales  that are accepted at your place of business. Probably the most common term used in the industry. These do not have a set repayment schedule and are based on the volume of your businesses credit card processing sales. These are usually only guaranteed by the future sales of your business.

Minority Business Loans: There are many options avaialable in this category and its not just catered to the LGBT community. We have put togher a full list of Minority Business Loan options available. Many of these are grants and offer zero interest funding programs.

ACH Loan Products: These are a bit different than cash advances as they are considered loans and may have personal guarantees. They have a fixed repayment schedule that is paid either daily, weekly or monthly. These products are catered to industries that do not accept credit cards and need a fixed payment.

Accounts Receivables Financing: This is one of the oldest forms of funding in history. This is used mainly when a business is due some sort of capital for work complete and is billed on a net 30, 60 or 90. for example, ABC Trucking delivered goods for xyz logistics but only receives payment from xyz logistics in 60 days. ABC can then factor the money due from XYZ at discount to receive the capital due in 60 days today.

Invoice Factoring: The purchase of accounts receivable for immediate cash.

Equipment Financing: A type of loan or extension of credit to a business, with the purpose of helping the business acquire new equipment. Equipment Financing Extends only the capital needed to purchase a specific piece of equipment and is most commonly written as a lease.

Business Lines of Credit: A rotating loan that gives business owners access to a fixed amount of money, which they can use day-to-day according to their need for cash. Interest is only paid on the amount of the advance actually used.

Start-Up Funding/Loan: A type of loan that provides a new business/company with sufficient upfront capital to get off the ground.

Asset Based Loans: A business loan secured by collateral.

SBA LOANs 504 Loans: The US Small Business Administration 504 Loan or Certified Development Company program is designed to provide financing for the purchase of fixed assets, which usually means real estate, buildings and machinery, at below market rates.

Term Loans: A loan that is backed by a bank for an exact amount that has a specified repayment timetable and  interest rate that are adjusted accordingly. Terms mature between 1 and 10 years.

Excel Capital Management is a proud supporter of the LGBT community, and we are here to help with all of your business funding needs! For more information on Excel and the funding solutions we offer, APPLY NOW! For even faster service, contact one of our funding specialists TODAY at 877-880-8086.

3 Reasons Why Applications For Business Loan Get Declined

3 Reasons Why Business Loan Applications Get Declined By Traditional Lenders and Alternative Financing Solutions

Almost all business owners apply for some sort of financing to grow their company at one point or another. When it comes to applying for for this financing through a traditional bank or lender, the process can be a tough one, and many business owners walk away with a big fat decline. While this may be disheartening, there are many reasons why business loan applications get declined and lenders are so strict, and there are still other options out there. Let’s take a look at the three main reasons why business loan applications get declined by traditional banks and lenders, and then take a look at the great alternatives that are available!

Why Traditional Lenders Decline Business Loan Applications:

  • Low Cash Flow: If a traditional lender decides to give your business a loan, they will want to see the ability to make payments back on the loan amount in addition to covering all other business expenses. Unfortunately, tough times do occur where businesses don’t generate enough revenue at certain times of the year – maybe they are a seasonal business. Some business owners, such as contractors, aren’t paid until jobs are completed or they must pay inventory suppliers upfront before they get paid. Tight margins typically do not sit well with traditional lenders and you could get your business loan declined.
  • Poor Credit, Bad Credit, or No Credit: Like NorthShore Advisory Inc. Credit Expert Tracy Becker told us in our exclusive interview, “in today’s fast-paced business world, more partners, lenders, and potential accounts need to make quick decisions as to which suppliers, borrowers, and partners they want to work with; decision-makers use a variety of business credit scores, indexes, and reports to discard unqualified candidates from being considered for a partnership or a loan.” A business’ credit score is a major factor when a traditional lender considers approving them for financing. Poor credit, bad credit, or simply no credit can almost always guarantee a decline. To learn more about how businesses can improve their credit score, visit: http://www.northshoreadvisory.com/
  • No Collateral: Traditional banks and lenders almost always require some sort of collateral to secure a loan. Collateral can come in the form of a vehicle, personal or business property, equipment, and/or other assets. If a business owner defaults on the loan, this collateral will then be seized for nonpayment. Unfortunately, many business owners (especially young business owners or startups) do not have collateral to put up when it comes to acquiring a loan, or the lender may not deem anything the business owner has as anything of value.

Your Business Loan Application Got Declined By A Traditional Lender – What Are The Alternatives?

Despite the fact that traditional lenders can take weeks to process your loan application and also require a lot of paperwork, there are alternative financing solutions available if you got your business loan declined. Unlike big banks, alternative lenders typically only require you to submit a simple, one-page application, 4 months of recent bank statements, and 4 months of recent credit card processing statements in order to get an offer and approval in a matter of days! Let’s take a closer look at the alternative funding solutions available to your business so even if your business loan was declined your options are open!

Merchant Cash Advance: Short-term financing transactions that are collected through a set percentage of your visa and MasterCard sales that are accepted at your place of business. Probably the most common term used in the industry. These do not have a set repayment schedule and are based on the volume of your business’s credit card processing sales. These are usually only guaranteed by the future sales of your business.

ACH Advance: A form of a merchant cash advance that is repaid on a daily basis by direct ACH debits rather than a merchant account.   These are still a purchase of receivables and the amount debited via ach are determined by the amount of credit card processing sales that are batched out the previous day.

ACH Loan Products: These are a bit different than cash advances as they are considered loans and may have personal guarantees. They have a fixed repayment schedule that is paid either daily, weekly or monthly. These products are catered to industries that do not accept credit cards and need a fixed payment.

Accounts Receivables Financing: This is one of the oldest forms of funding in history. This is used mainly when a business is due some sort of capital for work complete and is billed on a net 30, 60 or 90. for example, ABC Trucking delivered goods for xyz logistics but only receives payment from xyz logistics in 60 days. ABC can then factor the money due from XYZ at discount to receive the capital due in 60 days today.

Invoice Factoring: The purchase of accounts receivable for immediate cash.

Equipment Financing: A type of loan or extension of credit to a business, with the purpose of helping the business acquire new equipment. Equipment Financing Extends only the capital needed to purchase a specific piece of equipment and is most commonly written as a lease.

Business Lines of Credit: A rotating loan that gives business owners access to a fixed amount of money, which they can use day-to-day according to their need for cash. Interest is only paid on the amount of the advance actually used.

Start-Up Funding/Loan: A type of loan that provides a new business/company with sufficient upfront capital to get off the ground.

Asset Based Loans: A business loan secured by collateral.

SBA LOANs 504 Loans: The US Small Business Administration 504 Loan or Certified Development Company program is designed to provide financing for the purchase of fixed assets, which usually means real estate, buildings and machinery, at below market rates.

Term Loans: A loan that is backed by a bank for an exact amount that has a specified repayment timetable and  interest rate that are adjusted accordingly. Terms mature between 1 and 10 years.

It’s pretty clear to see why an alternative lender may be the way to go when it comes to applying for financing for your business. No complicated application process, no lengthy paperwork and documents, and an approval in as little as 3 business days! For more information on alternative financing solutions and what Excel Capital Management can offer your business, visit: https://www.excelcapmanagement.com/loan-form/

Funding: Venture Capital vs. Working Capital

Funding: Venture Capital vs. Working Capital

Most business owners will apply for some sort of capital at least once over the business’ lifetime. This capital can be used for various reasons at various stages of the business life cycle: business start-up, expansion, equipment, purchases, hiring, etc.. When it comes to the growth of any business, money is essential.  What the capital is being used for determines just what type of capital it is – venture or working – and how one goes about acquiring it. No matter what though, as a business owner it is important to do your homework and know what type of funding you are applying for and how it can affect your bottom line in the long run. Let’s take a look at the difference between venture and working capital funding and the funding process for each.

VENTURE CAPITAL FUNDING

Venture Capital is normally sought after by up and coming business owners that are early in the life cycle of their endeavors  – startups and seed stage – but can also be used by business owners who are later in the business cycle but are looking to fund new ideas. If these types of business owners can’t get the money from a friend or family member who believes in their idea (business means big bucks, and a lot of times close acquaintances just can’t help out) they are usually able to do so through a Venture Capital investor who strongly backs their business plan. What complicates this process is the fact that most investors will want to see revenue generated for the long-term. They are now part owner and in it for the long haul just like the main business owner themselves, generally looking for a return of at least 5x their initial investment amount.  

Venture Capital investors or companies will analyze to see if there is a market for a business owner’s idea. If they feel that your business won’t be success, they most likely won’t take the risk of investing any money into it at all. Their goal is to see a big profit and have a hand in many major business decisions. It’s usually not simply a labor of love. Expect for investors to ask for a C-Level title and/or seat on your board of directors if you have one. At the very least, they will usually ask to be an “owner.” This results in relinquishing full control, ownership and an agreed upon percentage of future earning until you have enough capital to buy them out.

When it comes to qualifications, Venture Capital investors or companies typically only fund businesses in the amount of $1M or more, and also only fund specific industries which puts limitations on many business owners. They tend to look for big industry-specific companies with big, commercial ideas, a strong team, and some existing momentum and paying customers. This can be great, however, if you are just starting out, run a company on your own, or don’t necessarily have the plan to back up such a large sum of money, this can prove to be extremely overwhelming. Garage Technology Ventures, an early-stage venture capital funding company highlights the specifics of these qualifications in their article Critical Factors for Obtaining Venture Funding. Aside from all of  this, finding a reputable investor in itself can be a tough task. You should always do extensive research to ensure the investor has you and your business’ best interests at heart. Vivek Wadhwa’s article, Venture Capital: The Good, The Bad, and Ugly on Bloomberg.com highlights some other important factors when it comes to considering Venture Capital. Check it out.

WORKING CAPITAL FUNDING

Working capital is sought after by business owners for any number of reasons during any stage of the business’ lifetime – including the startup stage (normally lenders require a business must be operating for at least 3 months, but this can still be considered the startup stage). The capital is usually used for equipment purchases, new hires, expansion, inventory, and more. While lenders generally do care about the product or service the business offers, what business owners do with the capital (within reason) is their business. They are no way, shape or form now an owner after funding a company and don’t require that you list them as an owner, sponsor, or member of your board of directors. You make all of the business decision and once the funding is paid back their is no further obligations.

Typically, to qualify for working capital funding by a lender, a business owner must provide 4 months of recent bank and credit card statements (if applicable) to show their ability to pay back the advanced money. This capital acquired is generally structured as either a loan with fixed payback terms and fees or a purchase of future receivables at a discount rather than an investment expected to generate 5x the initial amount. Most business owners sleep a little better knowing this much and even reach out for additional capital numerous times over the course of their business’ lifetime. Lenders tend to develop genuine and trusting working relationships with many business owners and offer various financing solutions to work harmoniously with a business.

At Excel Capital Management, we offer many different financing products to help you obtain the Working Capital your business needs to grow! Our funding specialists will work diligently to ensure that you receive the best products available to achieve business success!
APPLY NOW!

The Excel Interview With deBanked’s, Sean Murray

Debanked

Merchant Cash Advance industry veteran, founder of deBanked, Sean Murray has been an influential part in funding over $100 million to small businesses through sales and underwriting efforts. As a Senior Account Executive at Bizfi (part of the Merchant Cash and Capital family), he grew one of the largest residual portfolios in the history of the company and become a well-respected expert in the industry. After his time at Bizfi, Murray founded Raharney Capital, providing advertising and consulting within the alternative lending industry, and also deBanked – the most popular magazine and resource in the industry where Murray also serves as the Editor-in-Chief. Excel Capital Management recently sat down with Mr. Murray to explore his vast knowledge of the Merchant Cash Advance and alternative finance industry and discuss the future of the business.

deBanked sean murray

Excel: Tell us a little more about your background and what made you get into the alternative finance industry.

Sean: I got into this industry almost immediately after college. That was 10 years ago. A friend of mine told me there was an opportunity to work at a fun financial startup. The job description entailed evaluating small businesses for working capital, ones that had mainly been declined already for a bank loan. Given that I double-majored in Accounting and Finance, I was definitely intrigued and took the job.


Excel:
You’ve been in this niche industry for quite some time. Over the years, how have you seen the industry change and grow?

Sean: In the beginning, the worst part for the small business owners I spoke to was that approval terms were tied entirely to their average monthly credit card processing volume. That meant if cash sales were 90% of their business, we couldn’t consider that, even if that cash was showing up in their bank statements and being declared on their tax return. Over time, funding providers became more creative and flexible. They found ways to better service clients without making it impossibly hard to qualify.

Excel: Did you ever expect the industry to become as popular and as competitive as it is?

Sean: Yes and no. Given that I started before the Great Recession, there was already a big need for non-bank alternatives. The industry already existed and was growing. It wasn’t a byproduct of an economic downturn, it just became more visible during one. People think that when the economy fully heals, that banks will start lending again and the non-bank alternatives will disappear. The truth is that banks never serviced this segment of small businesses. It was and remains to be too expensive, risky, and time consuming for them to underwrite a $20,000 business loan. Sure, they’ll issue you a business credit card, but that’s based on your personal credit, is personally guaranteed, and more often than not the limit is too low. So no, I am not surprised that the industry has become so popular but I am surprised the product mix available to business owners has diversified as much as it has. It’s truly incredible.

sean murray interview
Excel:
In the latest issue of your publication, deBanked, you provide a few predictions on the future of the industry. You specifically mention the fact that it is an election year and touch base on the current state of the stock market. Can you elaborate on these topics and how they relate to the industry?  Also, speaking of the election, Democratic candidate Bernie Sanders has stated that he will impose nationwide interest rate caps that would, in the long run, hurt marketplace lenders. What are your thoughts on this?

Sean: I think what I was trying to say was that a new President sets the regulatory and legislative “tone.” This year we have a colorful group of candidates, many of whom have big ideas on how to grow the economy. Bernie Sanders in particular has made some pretty controversial statements, one being that he is in favor of a 15% federal interest rate cap on consumer loans. I think many people when they hear that, assume that would mean that a lender that normally offered a borrower a 28% interest rate loan would instead offer a 15% interest rate loan to comply with the cap. That’s not what would happen at all. Instead the lender would just decline the application. In effect, a huge portion of the population would not be able to get a loan from anywhere, not even non-bank alternatives. You know the saying, “it takes money to make money?” That goes hand in hand  with the “rich get richer while the poor get poorer.” Borrowing can be used as leverage to grow and in essence become richer. It takes money to make money. If you’re locked out from borrowing, supposedly for your own good, how do you become richer if your risk profile makes it legally impossible to take money and make money? That’s obviously a larger debate but it all feeds back into the upcoming election and who will be running the country. What will their economic views be? And will that “tone” positively or negatively affect small businesses? Nobody likes the uncertainty in the meantime.

As for the stock market, the connections are easy. Declining stocks increases the allure of investing on peer-to-peer platforms where the returns are perceived as both steady and rather lucrative. It can be hard to stomach a 10% loss in your investment portfolio in a matter of weeks like the stock market did in the beginning of this year. Investors, even small retail investors are going to consider alternatives like this industry. A declining stock market also chips away at wealth and this can affect consumer buying behavior which would impact small businesses. It’s all related at the end of the day.

Excel: Along the same lines, what are your the thoughts on the alternative finance industry being regulated? Do you see this happening anytime soon? If so, how will these regulations affect business?

Sean: I think regulation, if any, will focus on disclosure and transparency. If this is indeed where it goes, I just hope the outcome is intelligent, well thought out and logical. It’s early days right now though so it’s hard to speculate. In business-to-business transactions such as the kind your company engages in, I’m a big believer in the invisible hand. It’s commercial finance, not consumer finance. Some of these businesses might be really small, but we’re still for the most part talking about corporations entering into contracts with other corporations. I think regulations should focus on consumer lending, where there is a much lower presumption of sophistication.

Excel: Moving forward, what impact do you believe the collaboration between OnDeck and Chase will have on the industry as whole?

Sean: From what I know about the partnership and from what I know about banks, I believe Chase is probably using this as an opportunity to fast track their online loan underwriting process while they figure out a longer term technological strategy. You have to remember, it’s not uncommon for banks to be using really old systems. I believe some are still using or have just moved away from Windows XP recently. That’s a 15 year old operating system. Between that, constant bank mergers where the acquired banks are using completely different systems, regulations, and the sheer size from a human resources perspective, all make it nearly impossible to catch up, let alone implement a modern underwriting platform that measures 10,000 data points with connections through all sorts of APIs. The easy solution for now is to use a company that can reliably provide that capability and I think it’s great that OnDeck’s platform instills a level of confidence that a famous bank like Chase would attach their brand to. I think OnDeck and others will score more of these partnerships and there is potentially a play for one to be ultimately acquired by a bank just for the technology.

Excel: As this industry continues to grow and more people are entering the market, what is one piece of advice you can share about the do’s and dont’s of our marketplace?

Sean: Do be responsible and act with integrity at all times. Don’t think you are too small or insignificant to make a difference. If you only help fund one small business and they hire new people as a result, there’s a chain reaction that occurs that affects the entire local economy. It’s a beautiful thing to play a role in that.