http://www.omnicapitalservices.com/pages/blog/index.php Copyright 2012, Leo Leo en-US SPHPBLOG 0.7.0 http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry120120-145741
A merchant cash advance is the sale of future credit card sales or other receivables. Companies with predictable cash flow from sales can use this practice to smooth out cash flow. Essentially, the financier offers money up front for the right to collect a portion of a company's future sales. The financier generally replaces the merchant's credit card terminal with one that can direct part of those credit card sales to the financier's accounts. Often, this kind of financing is offered in conjunction with credit card processing services. Rates tend to be higher than traditional financial sources, but the service is usually available to any merchant processing more than $2000 to $3000 in credit card transactions each month.

Industries like grocery stores, restaurants, and auto-repair shops have a harder time than most when looking for traditional funding, due to lower profit margins, and the difficulties in recovering funds if the borrower defaults. If you're one of the many businesses which can't qualify for traditional bank loans, even though you have good credit, Merchant Cash Advance might be the best solution for you to get the working capital you're looking for. Most MCA programs allow you to use funds to pay off vendors and loans, advertise, purchase equipment or inventory, or expand into a new location.

Merchant cash advance companies lend out their money to merchants in return for the merchant's future credit card sales at a discounted rate. The investor's profits come from taking a percentage of the merchant's credit card receivables until the merchant has paid back the amount borrowed. Since all payments are automatically taken from every credit card transaction, there is no way for the merchant to incur late fees, and therefore no need to guaranty the loan with collateral. If the merchant's business slows down, then the merchant simply pays the advance back slower, with no penalties, extra interest, or more punitive sanctions. Another advantage of MCA is that the merchant can usually receive more funding before their current cash advance is paid in full.]]> http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry120120-145741 Leo Fri, 20 Jan 2012 19:57:41 GMT http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry120116-200051
Strong Credit Card Sales Leave Merchants With an Alternative to Business Loans:

Regulators are now swooping down in terms of scrutiny and the merchants are in a huddle to promote industry standards. These merchant cash advance providers offer a lump sum payment to businesses. In exchange, they get a share of sales in the future. Companies that are targeted are mostly retail, restaurant and service oriented businesses. These usually have strong credit card sales but have bad credit. This means they don't qualify for loans. The question here for businesses that take avail of the offer is how much do these advances compare to an interest on a loan or credit line.

Keep in mind, receiving Merchant Cash in Advance is NOT a loan. No collateral or require requirements. MerchantCashinAdvance estimated a 95% approval rate for new merchants looking to obtain merchant cash advances.

According to Leonard C. Wright, an accountant for San Diego and a columnist for the American Institute of CPAs, the interest rates can go from 60% to 200% APR. He recommends businesses to have no other options to go for the cash advance but fully understand what the costs are. Merchant cash advance providers are protesting the allegation. They remain that they are not loans. Instead, the deal they get from the cash advance is a purchase or a sale of an income that they will get in the future.
Can pay less

Interestingly enough, merchant cash advances are not under the obligation of law that otherwise regulates lenders and puts ceilings on interest rates. They do not require a fixed payment and instead collects a regular percentage out of the merchant's daily credit card sales. This goes on until the advance and premium is recovered ideally in less than 12 months. The advantage to this says merchant cash advance business owners is that their payment is dependent with their cash flow.

Uniquely, MerchantCashinAdvance.com charges 0 percent interest on merchant cash advances.

"They can pay less when business is slow in certain months."

Merchant Cash Advances have NO scheduled due date or monthly payments. Most importantly, businesses have opted for merchant cash in advance because it has no reflect on the applicant's credit.

This differs from a credit or loan where there is a set date when they need to pay. Fixed payments also have to be done on a schedule.

"In a merchant cash advance, there is no schedule of fixed payments and there is no due date" says a representative of MerchantCashinAdvance.com, the pioneer in the merchant cash advance industry.
]]> http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry120116-200051 Leo Tue, 17 Jan 2012 01:00:51 GMT http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry120111-140437
1. Create a logo and put it on everything
Logos work wonders. The sooner you can create an image and/or color scheme that correspond to your business, the sooner customers will be remembering who you are. Not only should you use your logo on correspondences and business cards, but you can also easily add it into your website, and your social media accounts. A business with a strong logo is much more likely to be remembered than its competitors.

2. QR Codes
QR Codes are all the hype these days. However, because they are simply a black and white pattern that look similar to all other QR codes, you will want to think of a way to set your business apart. One creative way of doing this is to create ads that essentially force your audience to scan your QR code to figure out a solution to a problem. For example, your QR code could function as the punchline to a joke or the answer to a tricky question.

3. Spend time on online forums
Social media marketing is not all about Facebook and Twitter. Good old online forums still prove to be valuable sources of information as well as free marketing. Interact with other business owners as well as a targeted group of customers and specialists in your industry. Many forums still permit that you add a link to your own business in the signature of your forum postings, which lets other users know what you're all about.

4. Press Releases
You don't need to go through a PR company to create and distribute a press release about your new business. The reality is, everyone knows at least one person who is a good writer, and any writer who doesn't already know the format of a press release can learn it quickly. Once you have the actual release, there are hundreds of free Press Release directories online that are very inexpensive, if not free, to submit to.

5. Form connections with bloggers
Popular local bloggers can be one of your best assets when spreading the word about your business. Especially if these bloggers specialize on writing about events or locations in your area, you can really capitalize on free advertising by asking the blogger to include an update about your new business. Explain to the blogger what's in it for them; real estate on popular blogs can be pricey, so must bloggers won't want to write about you unless there is at least something small that they get in return.]]> http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry120111-140437 Leo Wed, 11 Jan 2012 19:04:37 GMT http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry120109-141038
As attention grows, providers of the loan alternative are trying to avoid regulators' scrutiny. Here's what you should know about the industry. -- By John Tozzi

Small-business owners who need quick access to capital have a burgeoning industry eager to fund them: merchant cash advance providers. The decade-old industry has grown significantly in the past two years, to more than 50 providers, observers say, and the tight credit environment is fueling demand. As interest in their business grows, providers who charge premiums of 30% or more on the money they advance are trying to promote industry standards to avoid scrutiny from regulators.

Cash advance providers offer businesses a lump sum payment in exchange for a share of future sales. They mostly target retail, restaurant, and service companies that have strong credit-card sales but don't qualify for loans because they have bad credit or little or no collateral. The catch for takers is how much cash advances cost compared with interest on a loan or credit line. The equivalent interest rates can range from 60% to 200% APR, according to Leonard C. Wright, a San Diego accountant and "Money Doctor" columnist for the American Institute of CPAs. He says that may be acceptable for companies with no other options, but business owners need to treat the advance like a loan and understand what the costs are.

Merchant cash advance companies take pains to point out that advances are not loans; instead, the deal is a "purchase and sale of future income." That means that merchant cash advances are not bound by laws that regulate lenders and limit interest rates. Instead of requiring regular fixed payments, they directly collect a set percentage out of a merchant's daily credit card sales until they recover the advance and their premium, usually in fewer than 12 months. Advance providers say businesses benefit because the amount they pay varies with their cash flow, so they pay less in slower months. "When a business takes a loan, they have a firm date that it has to be repaid; they have fixed payments that have to be made on a schedule," says Mark Lorimer, chief marketing officer of Kennesaw (Ga.)-based AdvanceMe, which pioneered the industry in 1998. "In a merchant cash advance, there is no due date, there is no fixed payment."

ROOM FOR GROWTH
Observers see plenty of room for growth in the merchant cash advance industry. Advance providers have penetrated just 10% of a market potentially worth $5 billion to $10 billion in outstanding advances, says Marc Abbey, managing partner at consulting firm First Annapolis, who has researched the industry. Most business owners who use merchant cash advances would prefer conventional credit, Abbey says. But if they're unable to borrow, some swallow hard and take the high-cost advances.

Tony Boulton, owner of the three-person kitchen supply store Design & Grace in Grapevine, Tex., got $20,000 from AdvanceMe in 2007, which cost him $27,000 in credit-card sales. He renewed for the same terms when his first advance was paid for, because he needed the money for working capital. Boulton says he'd rather have a bank line of credit, but he's been repeatedly turned down. "It's the only way that I've found of getting funds that I need," he says. "The sooner I can get out of it, the better. But right now it's the only option I have."

The costly funding is not for every merchant. Jim Amato, a former CPA who now owns a seven-employee wine store in Baltimore with $1 million in sales, considered a merchant cash advance to fund store renovations because banks wouldn't accept his liquor inventory as collateral. Bethesda (Md.)-based RapidAdvance offered him a $42,600 payment in exchange for collecting $59,788 of his credit card sales, which they expected to recoup in nine months by taking 18% of Amato's Visa (V) and MasterCard (MA) transactions. Taking the advance would be the equivalent of borrowing at about 50% APR. "Basically I would be in a loss situation immediately," Amato says. He passed.

Without commenting on Amato's situation specifically, RapidAdvance President Jeremy Brown says responsible merchant cash advance companies are careful not to retrieve so much money from a customer that the business won't be able to survive. "If you're operating under a very thin margin like a grocery store, for example, you have to be very careful with that retrieval rate," he says. Advance providers typically collect between 8% to 10% of gross sales, Brown says, but in the case of a low-margin business, they might collect just 1%. AdvanceMe has a self-imposed limit of retrieving no more than 9% of gross revenues, Lorimer says.

BAD APPLE WORRIES
However, Brown and others in the industry readily admit that some merchant cash advance companies don't act responsibly. Industry leaders say they're trying to promote best practices to avoid attracting regulators' attention. (An AdvanceMe whitepaper describes the challenge: "Regulate ourselves, or someone is likely to do it for us.") To that end, Brown formed a trade group, the North American Merchant Advance Assn. last April. "They all consider a gunslinger to be a real risk for the industry," says Marc Abbey of First Annapolis.

Brown says he's particularly concerned about how merchant cash advances are represented by third-party brokers, who are a major sales channel for the industry. "We do worry about how they're presenting the product. Are they explaining it properly?" he wonders. Reports that out-of-work mortgage brokers are flocking to the merchant cash advance industry—a development one company announced in a press release in March—also raised concerns about responsible business practices.

Some critics say merchant cash advance providers are simply lenders skirting usury laws. Anat Levy, a Beverly Hills attorney, filed a federal class-action suit against AdvanceMe in May claiming that the company's advances are thinly disguised loans and should be regulated as such. AdvanceMe and other merchant cash advance companies say they do not ask for collateral or personal guarantees, and they assume the risk if a business fails. But Levy says business owners who take advances have to agree to "very broad, very ambiguous clauses" that can leave them on the hook if the business goes under. "If you change the pricing of your menus, you've breached the contract," she says.

AdvanceMe would not comment on the pending suit directly, but Lorimer called the idea that the company would pursue an owner's assets based on a menu change "absurd." Lorimer adds that three out of four customers renew their advances, and AdvanceMe has an interest in keeping them healthy. He says AdvanceMe wants to deal with businesses that are using advances to grow or improve their companies, not as emergency rescue funding. "If a business goes out of business, then we take the loss," he says.]]> http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry120109-141038 Leo Mon, 09 Jan 2012 19:10:38 GMT http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry111029-112353
But the financing alternative is technically not a loan.

Why?

Merchant cash advance providers are not subject to the state and federal regulations that apply to banks. Rather than making loans, merchant cash advance providers purchase future receivables at a discount. You give the discount in exchange for the quick access to cash. In subsequent months, every time you make a credit card sale, a portion of the revenue is forwarded to the provider until the entire amount has been repaid.

Merchant Cash Advances and Bank Loans: How They Differ

Here are other ways in which a merchant cash advance differs from a bank loan:
- Less paperwork. The process of getting a merchant cash advance is quicker and far less onerous than a bank loan. Typically you get cash in less than a week.
- Higher approval rates. You must show a track record of debit or credit card receivables to qualify. Many business that cant qualify for a commercial loan can qualify for a merchant cash advance.
- No collateral. You do not have to put your assets, such as your home, on the line as collateral for a merchant cash advance.
- No use restrictions. You can use the money any way you choose.
- No fixed payback schedule. You repay the cash advance according to your sales. If business is down, your repayment slows.

Merchant Cash Advances Pros and Cons
Critics note that merchant cash advances are more expensive than bank loans. Yet in todays tightened credit market, commercial bank loans and credit lines are difficult to come by, especially for small retail businesses and restaurants. Merchant cash advances are sometimes the only alternatives for businesses to solve cash flow problems or get the money they need to expand.
Our next article in this series provides answers to frequently asked questions about merchant cash advances.]]> http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry111029-112353 Leo Sat, 29 Oct 2011 15:23:53 GMT http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry110917-144657
Your business can exercise other options. Merchant cash advances relinquish immediate cash into the hands of thriving businesses in need. Business cash advances are used as a financial tool for businesses looking to expand, purchase equipment, move locations, etc.

Advances ranging in the hundreds of thousands range can be obtained based on your sales volumes and future credit card sales. There are many positive outcomes in receiving merchant cash advances, but be aware of possible difficulties.

The following is a list of issues and solutions to be aware of in relation to merchant cash advances:

- Closing costs can be pricy. Make it a priority to seek a merchant cash advance that requires no closing costs.

- Attempt to avoid initial, up-front fees. Negotiate or seek a merchant cash advance provider that can wave initial fees.

- Your company may be asked to provide collateral to counter the merchant cash advance. It is suggested to seek services where collateral is not a requirement.

- Some merchant cash advance providers will make financial statements a necessity. It may be preferred that statements only be required when seeking a large cash advance.

- It is a viable anticipation that a service will want you to payoff the merchant cash advance via fixed payments. One of the advantages of a merchant cash advance is that a non-fixed payment method is usually an option. In case of a slow period of your business producing revenue, ask for a non-fixed method.

- Along with the last issue, merchant cash advance providers may ask for your company to pay back the money over a fixed term. It is suggested to inquire if it is possible to engage in a no fixed term agreement.

- A merchant cash advance is a great strategy to employ for young businesses. Some providers require a company to be in business several years in order to receive an advance. If you are a young business, look for services that require only one year to qualify for an advance.

- Obviously, you want your business to have a great credit score. Some merchant cash advance services require a score of at least 680. That is a great score, but sometimes not very realistic. If your business has a lower score, look for providers that require a score above 500.

- Depending on how the money will be used, you may be in need of a large amount. Some merchant cash advance providers will provide a maximum of $50,000. Your business may require more money. Look for service providers that can deliver up to $300,000.

- Along with financial statements, some merchant cash advance services will want to see the last twenty-four months of credit card sales. To make it easier on your business, search for services that will only require records of sales from the most recent six-months where your company has accumulated at least $5,000 in sales. ]]> http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry110917-144657 Leo Sat, 17 Sep 2011 18:46:57 GMT http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry110906-200314
Steven and Michael Spolansky started women's accessories maker Amiee Lynn 15 years ago, shipping belts to a handful of retailers from the basement of their parents' house in Brooklyn and balancing the budget on their credit cards.

In those days, it was hard for the company to get a conventional bank loan, so the Spolansky brothers fueled expansion by turning to a factor.

Factors, financial firms ranging from banking giant Wells Fargo to independent entrepreneurial lenders, purchase a business' outstanding invoices in exchange for interim financing, less a fee, giving the business quick access to cash to fund growth or overcome cash flow woes.

These days, Amiee Lynn has 200 employees and produces belts, hosiery, jewelry and cold weather items under labels such as Ellen Tracy, Liz Claiborne, and Alexander Julian. Sales to big retailers such as Macy's and Bloomingdale's have helped push the company's annual revenue to $85 million. But Spolansky still uses his factor, New York-based Capital Business Credit LLC. In 2009, when bank credit tightened up for many firms, factoring helped finance a 200 percent growth spurt as Aimee Lynn expanded into Target, J.C. Penney, and Kohl's. "There used to be a stigma attached to factoring," says Spolansky, the company's CEO. "It meant you weren't healthy enough to go to a bank. But that stigma no longer exists."

As bank loans dried up for midmarket companies such as Aimee Lynn during the recent credit crisis, factoring and other types of untraditional lending took off. Those alternatives also include lease-back programs for funding equipment purchases, microloans and cash advances on credit-card sales or purchase orders. Here's a rundown on how some of these funding alternatives work, as well as the pros and cons of each.

Factoring
Worldwide, factors dole out an estimated $2 trillion per year, with $150 billion of that in the United States, according to Factors Chain International, a global network of 267 independent factoring companies. Factors essentially purchase outstanding invoices, allowing a business immediate access to capital instead of making it wait 30, 60 or 90 days for a customer to pay. "We buy receivables generally without recourse, meaning we assume the credit risk of your customer," says Andrew Tananbaum, president and CEO of Capital Business Credit. "We're prepared to lend money against those receivables or give you an advance against those receivables prior to the time we collect the proceeds from the retailer or the customer."

For a business that needs funds quickly, a factor can be a better business partner than a bank. "You can ramp up your business very quickly," Spolansky says. "Let's say a bank gave me a $25 million credit line. If one division spiked up and I wanted to borrow more, I'd have to renegotiate. Factoring is based off my sales. If I give them sales for $35 million versus $25 million, that's another $10 million I get to borrow against right away."

Factoring's upside: factors assume the credit risk if a customer defaults, and provide other services, including collections and accounts-receivable bookkeeping. Factors will also advance up to 80 percent of a company's receivables. The downside: they charge fees for their services, usually 1 to 5 percent upfront, based on the invoices a company’s borrowing against. That makes the cost of borrowing steeper than with most bank loans. But, factors point out, they also provide credit protection for customers and a collection service, making a comparison to bank loans more difficult.

"There used to be a stigma attached to factoring. It meant you weren't healthy enough to go to a bank. But that stigma no longer exists."
Steven Spolansky, CEO, Amiee Lynn
Equipment Sale and Lease Back
If a business owns expensive equipment or machinery outright anything from a fork lift to a porcelain dental crown machine -- it can find a lender who will buy the equipment for a lump sum and lease it back. During the term of a lease, the lessor owns the equipment. When it ends, the lessee can buy the equipment from the lessor or give it back and get a newer model, says David Criswell, interactive marketing manager of Direct Capital, a Portsmouth, New Hampshire, finance company.

The upside of equipment sales with a lease back: the business retains use of its equipment and gets an infusion of funds. The downside: by purchasing it new and then leasing it back, the business ends up paying more for the equipment, although those costs may be offset by tax savings if it can write off lease payments instead of depreciating the equipment.

Microloans
Long the salvation of small businesses, microloans became a solution for midsized companies when the credit crunch started in 2008. As the name suggests, microloans tend to be smaller in amount, but can run as much as $150,000. "In many cases, that's enough to help them with working capital for a month or so and that's often all they need," says Gary Lindner, chief operating officer of ACCION Texas, one of about 300 U.S. non-profit micro-enterprise lending institutions.

The Association of Enterprise Opportunity, the microloan industry's trade group, says its members help 300,000 U.S. businesses each year and have lent more than $2 billion over the past 10 years. The upside: microloans are awarded to businesses with lower credit scores than banks accept, and they don't require as much documentation. The downside: interest rates are higher than those of bank loans, ranging between 12 and 18 percent depending on the borrower's credit and other factors.

Merchant Cash Advance
A handful of independent finance companies will give merchants a lump sum upfront in exchange for a share of their future credit-card sales. Different than a loan or lease arrangement, a merchant cash advance is based on a business' monthly credit-card sales history, says David Goldin, CEO of AmeriMerchant and a founding member of the North American Merchant Advance Association. "It's a buy-and-sell transaction," Goldin says. "We buy $10,000 in future credit card sales today for $8,000 and we get a specified percentage of future sales from customers."

For that reason, cash advances tend to be attractive to mostly retail, service or restaurant businesses that do brisk credit-card sales. The upside: unlike a loan, there are no due dates and no fixed payments and it's faster to get approved. The downside: while there's no traditional interest rate, providers such as AdvanceMe, Merchant Warehouse, or AmeriMerchant will take a cut – called a split -- that is generally 15 to 17 percent of credit-card receivables.

Purchase Order Financing
Businesses turn to purchase order financing if they're afraid they won't be able to promptly fulfill a customer's order and risk losing the sale. A financing agent advances money against a signed purchase order for finished goods or value-added products to help fund manufacturing and fulfillment of the order. This type of arrangement is helpful for companies such as import-export firms, which must pay for raw materials immediately but wait to get paid for their finished goods. Once goods are shipped and customers are invoiced, the transaction is closed out. "It's not an ongoing commitment," says Andrej Suskavcevic, CEO of the Commercial Finance Association, a trade association for 300 asset-based lending companies in the U.S., Canada, and Mexico. "That is just one type of financing a lender might offer, although some of them do it exclusively."

The upside of purchase order financing: it depends more on the credit standing of a business' customer rather than its own. The downside: providers of these advances take a cut of a company's profits, usually in the range of 4 percent or less.

Some businesses are so taken with alternative financing they don't plan to give it up even after the current credit crisis is over. Factoring continues to fulfill accessory maker Amiee Lynn's needs by providing capital financing, credit risk protection and professional advice to help fuel growth. "We get everything we need from our factor," Spolansky says.]]> http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry110906-200314 Leo Wed, 07 Sep 2011 00:03:14 GMT http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry110825-204540
I've been working in the Merchant Cash Advance business since 2004. It's been quite a journey and we've really made a difference to small businesses facing capital shortfalls. The growth has been phenomenal and there have been dramatic shifts both in underwriting standards and the characteristics of our clientele.

While I could sit here and write a book about my experience, it's the phone call I received last week from an old buddy of mine, Bob, that's worth sharing. Bob is a Venture Capitalist(VC) out in California. He's a self proclaimed expert of the hospitality industry and has heard a thousand young entrepreneurs pitch him a thousand different ways.

He's always kept a distance from the Merchant Cash Advance industry and yet is always eager to hear about our tales of success, the achievements of our clients, and our ability to evolve to meet their needs. Last week Bob learned something and gave me a call.

He was sitting in a boardroom in Denver, Colorado. A group of entrepreneurs that made it big with a hotel in Florida, wanted to double their luck and open another hotel there and several in Wisconsin. These were well capitalized individuals and were pitching them for a cool $2 Million.

Bob's firm seeks equity, so when the hotel group flatly stated that they did not intend to give up any shares, some were ready to declare the meeting over.

The powerpoint presentation flashed to the next slide and the entrepreneurs' financial proposal was outlined in detail: "In return for $2 Million, you will be purchasing $2,400,000 of our future credit card sales. We will allow you to withhold 15% of each card transaction up until the purchased amount is paid in full." The withholding percentage would also apply to the location that's already established.

None of the deciding members of the VC firm like loans too much. There's something about one payment per month that seems to not work anymore. Too many young businesses see monthly payments as an opportunity to leverage heavily. Having to make one monthly payment to the VCs enables the business to spend money on 20 other projects, all of which carry their own singular monthly payments. Then at month end, the cash gets spread too thin, and suddenly not all of these monthly payments can be met. Sure there are restrictions and terms that are supposed to prevent the business from doing this while the loan is outstanding, but there's not much anyone can do about it if these terms get violated anyway. By the time the lenders find out, the return on investment is nullified by the cost of fixing it and that's just if the problem can still be remedied at all. Sometimes all the money is just gone and the lenders have no idea until the day the monthly payment is due.

A purchase of the hotel's future credit card sales would not classify this proposal as a loan, nor would it rely on a hope that the hotel's books were properly managed and a payment made on time. While the VCs considered the unique level of security in getting repaid, Bob had a Eureka moment and took a timeout from the meeting to call me.

"It's the pay as you go aspect of it that I like. The pace at which we get paid purely depends on the sales volume of the business. Sales up, we get paid more. Sales Down, we get paid less. Good for them, Good for us. If our credit card processing partner is withholding 15 percent of the sales before they're deposited into our client's bank, the hotel guys won't face liquidity issues to meet our payments because we're already getting paid. They can spend what's deposited and we don't have to get nervous on the 29th of the month." and on and on Bob went, to which I replied, "Yes buddy, some of us have figured this out years ago."

While $400,000 was a little bit below their desired return on investment, the VC firm put the entrepreneurial hopefuls up in a hotel for a weekend while they convened. There was an intense debate on the subject of equity vs. the purchase of future sales. One triumphal argument was that since hotels conduct transactions on a daily business, they would be collecting back on their investment every business day. That would allow the VC firm to reinvest those funds immediately.

Without completely spilling the beans on a negotiation that included non-disclosure agreements, a compromise was reached. The entrepreneurs left with a deal where they retained 100% of their equity and a structure where payments are made only at the pace that they are able to generate sales. It may have cost them more than what bank loans were going for in 2005, but like Bob and the other VCs made bluntly clear to them "What's a bank loan? I don't know any banks that are actually in the business of lending anymore."

Bob could tell you that he's been in the Venture Capital business since 1994 and it has been quite a journey. VCs have really made a difference to entrepreneurs with capital shortfalls. The growth was phenomenal until things started to change. The sale of future credit card sales from business to investor is a true mutually benefitting transaction.This structure is not only gaining popularity, but also solidifying a permanent footing in the financial transaction world altogether.

Don't be surprised if John Doe business owner shows up at a local Bank of America branch in 2014 asking for a loan and this happens: "A loan, What's that?" replies the financial officer. "Based on your merchant processing history, we'd like to purchase $30,000 of your future credit card sales."….]]> http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry110825-204540 Leo Fri, 26 Aug 2011 00:45:40 GMT http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry110823-144257
Credit card processors(CCPs) will venture into funding their own clients. Over the past few years, CCPs were a necessary third party to a MCA transaction. The CCP would split the business’s batch to allow the MCA provider to collect on their purchased receivables. Their years as a third party have granted them incredible insight into the funding business. In the latter half of 2010, some CCPs tested the waters and funded businesses on their own. In 2011, we will begin to see the role of MCA provider and CCP gradually merge into solitary entities.

Resellers of MCA began to drift away from their dependence on funding providers in 2010. In 2011, there will be a surge in the number of resellers funding businesses on their own. The MCA industry will become largely decentralized and may give rise to new challenges.

Decentralization will lead to greater competition and create downward pressure on costs. Businesses stand to benefit by the likely trend of decreasing retrieval rates and factor rates.

Businesses hanging on by a thread are less likely to obtain funds in 2011. Bank loans were never meant as a means to stave off bankruptcy and neither is a MCA. Most detractors of the MCA industry were business owners on the verge of bankruptcy before obtaining capital. This is not a lifeline. Good businesses grow, bad businesses fail. That’s the way it has to work in order for the economy and capitalism to be functional.

The Federal Reserve’s 12 cent debit fee cap may negatively impact resellers that depend on merchant residuals.

The MCA industry will continue to use less expensive means of marketing. Expensive regional trade shows are becoming less popular and UCC hunting is on the rise.

2011 is yet to be told. One thing is for sure, MCA providers are not unlike the businesses they fund. It’s a tumultuous economy and there is no guarantee that we’ll all still be standing in 2012. Remember those who have come before us(look at the bottom of this page). Much luck to all!]]> http://www.omnicapitalservices.com/pages/blog/index.php?entry=entry110823-144257 Leo Tue, 23 Aug 2011 18:42:57 GMT