[bdshaw]

• What is factoring?-the purchase of commercial accounts receivable that provides a revolving credit line to be used from time to time as needed. A MCA is a term loan with one initial advance and then periodic payments.
• Does factoring compete with MCA deals? Rarely, the marketplace is different and they are completely different loan products
• Don’t I make more money selling a MCA product? It’s not unusual to make up to 12.5% over term of the factoring relationship. To put it another way that’s like comparing selling houses to condominiums. They look alike but are really two totally different items. Would you pass up selling a house because you would get a higher commission rate on a condominium?
• Wouldn't all borrowers rather use an MCA than factoring? The last numbers available for 2010 is that the MCA industry was about $500 million while the factoring industry was about $2.8 Trillion.
• Am I passing up money by not knowing enough about factoring? YES. A borrower looking for a line of credit in many cases will not accept a term loan (MCA.)
• Does my industry have many naysayers? Yes, especially those that can’t tell the difference between a house and condominium

[Ryan Shiroky]

• What is factoring?-the purchase of commercial accounts receivable that provides a revolving credit line to be used from time to time as needed. A MCA is a term loan with one initial advance and then periodic payments.
• Does factoring compete with MCA deals? Rarely, the marketplace is different and they are completely different loan products
• Don’t I make more money selling a MCA product? It’s not unusual to make up to 12.5% over term of the factoring relationship. To put it another way that’s like comparing selling houses to condominiums. They look alike but are really two totally different items. Would you pass up selling a house because you would get a higher commission rate on a condominium?
• Wouldn't all borrowers rather use an MCA than factoring? The last numbers available for 2010 is that the MCA industry was about $500 million while the factoring industry was about $2.8 Trillion.
• Am I passing up money by not knowing enough about factoring? YES. A borrower looking for a line of credit in many cases will not accept a term loan (MCA.)
• Does my industry have many naysayers? Yes, especially those that can’t tell the difference between a house and condominium

an MCA is not a term loan...

[bdshaw]

Hi Ryan- the courts might disagree.
There have been cases where factors who use a standard Purchase and Sale Agreement clearly stating that the transaction is the sale of invoices and not a loan have had a court take the position that regardless of the documentation the facts of the transaction made it a secured loan. Further the P&S agreemdnt was nothing more then a security agreement.
The key criteria was, and still poses a problem, if the factor is taking a lien on effectively all the business assets and the owner guarantees payment of the business obligation then how can you say you have purchased an invoice instead of making a loan against it.
Happily this has been only effected state courts so far.
I invite any questions about factoring.
Thanks, Bob

[Ryan Shiroky]

my co doesnt have a personal guarantee in the contracts and we dont file ucc unless they default... our MCA, is not a loan... also, a California licensed lender for our loan product (which is a loan)...

it depends on what lender your talking about i guess...

[gc543]

Hey.. What's the best way to hook up with new ISO's ?

[bdshaw]

I think you are right.

[bdshaw]

Feel free to contact me at rshaw@advancecredit.com or call 734-929-3800
Thanks, Bob

[ERS]

With that MCA logic Invoice Factoring could be considered Asset Based Lending where the Accounts Receivable or Invoice is the Asset. While I realize that line of thinking would be incorrect, I also realize that MCAs arent Loans...which the Courts in many States have already supported. Thats why they have been legal for most of the last couple of decades. Then again...when I gave money to a friend to bail him out of a tough spot...he insisted it was a loan! Just goes to show...its often a matter of perception! lol

[karlkrueger]

Let me first clarify that contrary to popular belief, an MCA is not a term loan. Please do not make the mistake of confusing it with that. Factoring can never compete with MCA as they both are completely different loan instruments. If you are in the credit business, please note that you will definitely make more money if you sell a MCA. Encourage your clients to go for MCA instead of factoring, to get the maximum benefits.

[bruce@bdfunding.com]

From what I have seen since working on factoring deals for clients, it is far cheaper than an MCA and provides for increased cash flow. Of course, the merchant must do B2B invoicing or get reimbursed from insurance claims (i.e.: medical industry). You won't make the same kind of money up front as on an MCA, but you will get 10-15% of what the lender makes on every invoice and these relationships can continue on for years,

[karlkrueger]

MCA and Factoring are two totally different terms. Obviously, factoring won’t compete with an MCA deal.

[jason]

MCA and Factoring are two totally different terms. Obviously, factoring won’t compete with an MCA deal.

Compete in what sense? Because there are certainly many companies out there taking MCA/daily debit loans in order to solve (in my opinion, poorly) an underlying working capital need caused by having their cash tied up in receivables--exactly the problem factoring is designed to address.

[Alleon Healthcare]

That is correct Bruce. My company is a direct medical funder and we provide both factoring and cash advances. I always recommend factoring to my clients. The only time where cash advances are preferred is when the client needs funding within 2-3 days. If the client can wait for the factoring facility to get set up, its always preferred. The rates are cheaper and the payments dont get taken out daily, they come out only when the insurance carriers pay the claims.