The merchant cash advance industry is now firmly established in the USA and Canada as a finance solution for all SMEs that previously struggled to secure the funds needed for growth from more traditional avenues of finance. Today there are dozens of merchant cash advance providers operating in North America and hundreds of independent sales organisations (ISOs) geared towards selling the solution to merchants. Following this success in North America, in 2007 the merchant cash advance industry crossed the Atlantic when the company I work for, Merchant Cash Express, opened for business in May. Now I plan to write about the development of the company and the merchant cash advance industry in the UK as a whole as we move into 2008, a year we believe will see the firm establishment of both in the UK business finance market and the collective psyche of the UK's small business owners.
So, what exactly is this exciting new method for small businesses to secure the finance needed for growth, and how does it work?
What makes a merchant cash advance stand out from other avenues of business finance is that advances are provided against non-guaranteed future assets, namely future credit and debit card receivables. A business will usually qualify for around an average month's takings on credit and debit cards as a lump sum. MCE advances this money to the merchant, not as a loan, but to purchase a fixed amount of the merchant’s future card receivables at a discounted rate.
Once the business is funded, the receivables purchased are then directed to MCE over a period of time via the business's card payment terminal(s). This is fully automated. On a daily basis, when the business batches their card terminal, a pre-agreed small percentage of their takings is then diverted to MCE while the remainder is directed to the merchant’s account as normal. This process continues until the card receivables purchased are paid to MCE in full. And it really is that simple.
As the industry in the UK expands and more and more people enter the industry, become interested in the industry, or actually use the solution to generate funds for their business, I hope this blog can be a useful informative tool and a resource for everybody involved in the industry. As time goes on I hope to get input on this blog from the staff here at MCE, including our MD, Frank Capozza, who has many years of experience in the merchant cash advance industry and brought the idea to the UK.
As I continue to write this blog, I would welcome any questions or comments, both about this blog or the merchant cash advance idea. My email address is jonathan.seaton@merchantcashexpress.co.uk.
