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Learning AboutMerchant Cash AdvancesPrepared byElliot Goldberg,Independent Registered Investment Advisor(610) 999-3599 eg@goldata.com
DisclaimerThis E-book is designed to provide educationalinformation on an investment class called MerchantCash Advances.It is not intended to provide any specific legal or taxadvice and cannot be used to avoid tax penalties orto promote, market, or recommend any tax plan orarrangement.Nothing contained in this E-book constitutes asolicitation or an offer to buy or sell any security.The information contained in this E-book is believedto be correct but is subject to change and correction.It is suggested that any actions you decide to takebased on this E-book be reviewed at that time by aprofessional to make sure the information is currentand correct.2
What areMerchant Cash Advances?Merchant Cash Advances are purchases of apiece of a merchant’s future revenue in exchangefor providing the merchant with cash today.Few banks now cater to the needs of smallmerchants. Even those banks who do have alengthy time period for processing and fundingloans or cash advances.Successful and growing merchants can haveunexpected needs that must be met quickly, andbanks are not willing to meet their timetable.Firms, which I’ll refer to as Cash Providers, havestepped in to provide these merchants with theimmediate funds they need to continue to operateand grow their businesses.3
The OpportunityCash Providers have a continual need forfunds to provide Merchant Cash Advances toqualified merchants.Lenders provide these funds on a short-termbasis – typically less than one year dependenton the Cash Provider.Each Lender will typically own a smallpercentage of a portfolio of Merchant CashAdvances. The size of the portfolio can rangefrom under one hundred to literally thousands.The historical annual return to Lenders havebeen in excess of 10% net of all fees and baddebt, but vary based on the Cash Provider.4
Look who’s involved inMerchant Cash AdvancesClick the screen to watch the videoKevin O’LearyIOU FinancialBarbara CorcoranOnDeck
FAQs What is a Cash Provider?A Cash Provider is the marketing and underwriting firm that identifies, underwritesand services a portfolio of Merchant Cash Advances. Each one has uniqueoperating goals so check with each one for specifics. What is a Lender?A Lender provides funds to the Cash Provider so that they can make Merchant CashAdvances in excess of their own capital. What has been the historical annual return toLenders?In excess of 10% but vary depending on the Cash Provider. How large is the portfolio of a Cash Provider?A Cash Provider’s portfolio of merchants who have an outstanding Cash Advance istypically in the hundreds. Larger Cash Providers have portfolios in the thousands. How do Cash Providers identify merchants inneed of cash advances?Internet MarketingIndependent Sales Organizations (ISO’s)In-house AgentsRepeat Business What is the average size and maturity of aMerchant Cash Advance.Typically it is 50,000 with a term of less than 1 year. What has been the average annual write-off rateon Merchant Cash Advances?Typically it is less 10%. How often do Lenders receive status reports ontheir account?Lenders statements are typically generated monthly and most Cash Providers havepassword protected on-line account status on a 24/7 basis.6
FAQs How long does it take an application for aMerchant Cash Advance to be processed andfunded?Most Cash Providers can process an application within 24 hours assuming allstipulations required from the merchant are received in a timely manner. What instruments are issued to Lenderslending money to Cash Providers as evidenceof indebtedness?Typically, it is a Promissory Note or a Memorandum of Indebtedness,depending upon the state and the Cash Provider. How do Merchants repay the advances theyreceive from Cash Providers?Typically, merchants make stipulated payments either daily, weekly ormonthly via ACH debit from their business operating bank account or creditcard merchant account What underwriting tools are used to analyzemerchants for cash advances?Cash Providers use services such as Clear Report, a program forbackground checks, and Experion Report, for business and personal creditscores, as well as Decision Logic to verify banking information. Can I invest in this through my IRA?Typically, yes. It is done through a self-directed IRA.7
Want more information?Please call me for a no-cost, noobligation conversation. I’m happy tospend some time with you an answerall of your questions.Elliot Goldberg,Independent Registered Investment Advisor(610) 999-3599 eg@goldata.com8
A Cash Provider is the marketing and underwriting firm that identifies, underwrites and services a portfolio of Merchant Cash Advances. Each one has unique operating goals so check with each one for specifics. What is a Lender? A Lender provides funds to the Cash Provider so that they can make Merchant Cash Advances in excess of their own capital.
