Here’s an actual example of a real client situation we recently funded using this approach. MCAs can also be used to provide a lump sum injection to cover interim cash needs on a short-term basis, while factoring is being put in place. The predictable cash-flow from factoring advances is what the merchant can rely on to cover their continuing and on-going business expenses, i.e. Factoring provides predictable cash flow because advances are based on predictable billings to their customers, whether it be monthly, weekly, or even daily. Here’s how I see it: when structured properly, factoring and MCAs can often complement each other and work well together. In other words, no payments! The term I use to describe this is called Self-Liquidating. So the advance essentially pays itself off, working much like a revolving Line of Credit (LOC).
Once the invoice is paid, the funder deducts the advance, along with their fee, and wires the balance to the merchant. Here’s how it works: The factoring funder provides an advance against approved invoices, typically 70% to 90%. So while an MCA provides immediate relief, factoring solves the timing problem. More specifically, the “wound” that needs to be healed is the un-predictable timing of customer payments on outstanding invoices.
So, what does that tell us? In most cases, while an MCA may help stop the bleeding, it’s not designed to heal the wound. And the FASTER they grow, the BIGGER the problem! Sound familiar? After all that, while the last advance may have solved their immediate problem, they will ALWAYS have a continuing and on-going need for cash because they’re ALWAYS waiting to get paid. But here’s the problem: Next month they come back again, and then again, and then sometimes they get wise, secure another position somewhere else, and before long, well, we all know the story. Many of these are the SAME merchants who come to YOU for an advance to help cash-flow due to delayed invoice payments, so you provide an MCA, right? Right! That’s what we do. For any of you who haven’t added Factoring to your financing product mix, that’s EXACTLY what you’re doing RIGHT NOW! And get this, you’re doing it with some of the SAME merchants you’re doing deals with RIGHT NOW! Here’s why A percentage of your merchants sell Business-To Business (B2B), and get paid in 30 to 45 days, and in some cases, even longer. I’ll make a lot more money on that big MCA deal I’m heading into the office to work on, so I’ll just leave it on the sidewalk.” Really?! Or would you say, “I’m in a hurry and it’s ONLY $100. Let me ask you a question If you were walking down the street and saw a $100 bill on the sidewalk, would you stop and pick it up? Of course you would, unless you didn’t see it.
0 kommentar(er)
