Risk Management Blog

The Merchant Cash Advance market continues to rise and this week we take a closer look at it.

A merchant cash advance started as lump sum payments to businesses in exchange for a percentage of future credit card/debit card transactions. It’s a way for businesses to gain cash quickly while also structuring a relatively short-term payment plan. Businesses which perhaps met some difficulties accessing capital in the traditional avenues afforded businesses began flocking to this method as the events of 2008 and their aftermath unfolded to help fuel this development. One view of the industry’s advantages to businesses is explored here.

As the industry has evolved, the question of regulations to oversee the transactions has cropped up, and there are various opinions. One perspective on this, among other things, is shared here by Sean Murray, the founder of deBanked and a 9-year veteran of the merchant cash advance industry.

Also, some legal concerns have been brought up and are discussed here by Andrew Hayner, an attorney with Jaffe, Raitt, Heuer & Weiss, P.C. . Of the key concerns Mr. Hayner notes, the key ones revolve around the length of the contract the structuring of the deal to make sure it is done as a purchase and not a loan. As Mr. Hayner writes, “The most important legal concern for MCA businesses is structuring the transaction as a sale rather than a loan.”

What do you know about the rise of the Merchant Cash Advance industry? Please share your thoughts and insights below.