Year in Review and What Next Year May Bring: By: Jeremy Brown

By: Jeremy Brown, CEO of RapidAdvance
Exclusively for the CEO Corner of DailyFunder.com

As a CEO of an MCA/Small Business Loan company (let's call us a "Merchant Finance Company", or "MFC") I get asked frequently by banks, investors, ISO's and others what I think next year and the long-term future holds for our industry.

I count a number of the CEO's of other MFC's as my good friends. We do talk frequently about the general business climate and if things are "good or bad" but generally we don't share much in the way of specific information, such as our monthly funding and loss rates. Through NAMAA we do collect and gather that information on an anonymous basis so that we can see industry trends and comparative data across the group of 17 member companies.

There is also a fair amount of press that we all see. CAN and Kabbage are fairly prolific with various announcements about their successes, new financings, and other information about their business activities. And we have new entrants in selected mini-segments such as Amazon and Google, offering what I would term as "floor planning," providing financing in support of sales of their products or products sold on their platform, and AMEX looking to lock in their high dollar merchants with short term financing.

Taking all this information together, combined with our internal data and trends gives me a decent insight into what 2013 may bring for the MFC industry.

Broadly speaking, I think we will see more awareness of our products, more merchants funded, more product innovation, more entrants into the market, more capital flowing to MFC companies, and more use of technology - more of everything that we have been seeing the last 6 months. Those of us that have been in this business for 5 years or more - Rapid started in 2005 - are excited at the positive press we get today vs. several years ago and how we are becoming embraced and accepted as a mainstream product. More PE firms, banks, and others want to invest in or lend to the industry. Those groups have always been intrigued by the returns in this industry but the conversations are different today. And name brand VC firms and individuals such as Steve Mandis, a former Goldman Executive, are making investments in our industry.

One thing I think will be different next year are fewer deals offered over 12 months in payback period. When you look at the data over an extended period of time, 18 month term loans don't make sense for the merchants that are funded. It's not the most efficient use of funds, limits the ability for the merchant to renew and the longer term deals are far riskier.

For the ISO, I think there will be consolidation of submissions to fewer MFC companies and to the more established MFC companies. The ISO's have been through a few cycles now and know that stability and consistency in the market are more important than the latest entrant with big promises of more approvals and higher commissions. The smart, established ISO's diversify their submissions already and know who to trust in the market. The good news for ISO's is that the established MFC companies are financially healthy and there are a number of good companies to choose to submit your deals. Given the market demand I think 2013 will be a great time to expand your marketing and you will find good merchants to fund and earn commissions.

Here's to a happy and healthy 2013 - may we all make a lot of money!

https://www.rapidadvance.com/