[Winning]

Also, what is very concerning to me, is how the article kept referencing Loans... MCA's don't give out Loans.

Here is what I thought I understood...

MCA's are not Loans (by law).
Since MCA's are not loans they can legally charge higher rates. Since they are not loans they a governed differently and are unregulated.

What the MCA did was purchase your future sales (not lend you money). The only thing the merchants business is liable for is providing them a percentage of those receivables. If in the future the merchant has zero receivables, the merchant owes the MCA company a percentage of zero.

When the MCA Companies buy 'FUTURE' receivables, they are speculating/gambling/banking on the merchant staying around long enough to see a return, and they price this risk into the advance, which is why it's so expensive, and why it's not a loan.


So is my understanding correct, or did I miss something?

[abfunders]

Also, what is very concerning to me, is how the article kept referencing Loans... MCA's don't give out Loans.

Here is what I thought I understood...

MCA's are not Loans (by law).
Since MCA's are not loans they can legally charge higher rates. Since they are not loans they a governed differently and are unregulated.

What the MCA did was purchase your future sales (not lend you money). The only thing the merchants business is liable for is providing them a percentage of those receivables. If in the future the merchant has zero receivables, the merchant owes the MCA company a percentage of zero.

When the MCA Companies buy 'FUTURE' receivables, they are speculating/gambling/banking on the merchant staying around long enough to see a return, and they price this risk into the advance, which is why it's so expensive, and why it's not a loan.


So is my understanding correct, or did I miss something?

Winning, yes, you're 100% right. You're missing that even though they're not structured as loans, and everyone uses them as a reason why to get around usury laws, they are effectively used as short-terms loans. The legal description melding with the "street" description is the problem of the article, and why MCAs get bad press. Not all of which is undeserved, but ......

Also, while technically they might not legally be loans, that could change. they could find a way to categorize them as loans (like California has been doing in some way) and make problems. If she's starting that "they're illegal", that's at least bad press, but nobody will sue her for liable, seeing as there is no union or organization sticking up for the MCA industry.

[Akanner]

Winning, yes, you're 100% right. You're missing that even though they're not structured as loans, and everyone uses them as a reason why to get around usury laws, they are effectively used as short-terms loans. The legal description melding with the "street" description is the problem of the article, and why MCAs get bad press. Not all of which is undeserved, but ......

Also, while technically they might not legally be loans, that could change. they could find a way to categorize them as loans (like California has been doing in some way) and make problems. If she's starting that "they're illegal", that's at least bad press, but nobody will sue her for liable, seeing as there is no union or organization sticking up for the MCA industry.

How can the AG make MCA loans illegal? The essence of MCA is that it is not a loan but rather the price a business owner would pay a company to risk buying future money off them. The way I look at it is: the high payback amount is the Fair valve/ market value of borrowing unsecured money. No different than any other transaction done in the free market.

If I were to sell a bike for a heavy profit in the free market (where there was no deception) It is perfectly allowed and acceptable. But in the MCA world, since we are comparing money to money, it gets a very negative connotation for making a profit (on a risky product)

[Big Mack]

How can the AG make MCA loans illegal? The essence of MCA is that it is not a loan but rather the price a business owner would pay a company to risk buying future money off them. The way I look at it is: the high payback amount is the Fair valve/ market value of borrowing unsecured money. No different than any other transaction done in the free market.

If I were to sell a bike for a heavy profit in the free market (where there was no deception) It is perfectly allowed and acceptable. But in the MCA world, since we are comparing money to money, it gets a very negative connotation for making a profit (on a risky product)

I believe that the AG was using Richmond's "non-compliant" terminology against them. From what I understand, they were marketing MCA's as "loans" on their website, via email & verbally.

[RBcapital]

I believe that the AG was using Richmond's "non-compliant" terminology against them. From what I understand, they were marketing MCA's as "loans" on their website, via email & verbally.

Marketing as loans but really giving MCAs? Like a bait and switch?

[Big Mack]

Marketing as loans but really giving MCAs? Like a bait and switch?

I've actually met with Jon Braun and spent time in his office a few years ago (he was wearing an ankle bracelet and tried to hide it by wearing gigantic cowboy boots). It didn't seem like a bait and switch as I overheard a bunch of his "closing calls" to merchants. Standard MCA call. I don't think that they sourced any of their deals by marketing to merchants.

[Akanner]

I've actually met with Jon Braun and spent time in his office a few years ago (he was wearing an ankle bracelet and tried to hide it by wearing gigantic cowboy boots). It didn't seem like a bait and switch as I overheard a bunch of his "closing calls" to merchants. Standard MCA call. I don't think that they sourced any of their deals by marketing to merchants.

How did they source them? Via the backdoor??

[WestCoastFunding]

I believe that the AG was using Richmond's "non-compliant" terminology against them. From what I understand, they were marketing MCA's as "loans" on their website, via email & verbally.

True. But there is a possibility that she’s trying to paint all MCAs as illegal loans. I think there is a better than 0% possibility she charges MCA companies with usury or something and let itself play out in the courts. That could cost MCA companies a ton in legal fees and I’m not quite sure where the courts will land on it. Plus if the banks should launch a campaign against the MCA industry that will be a huge opponent to have.

[Davidein68]

How can the AG make MCA loans illegal? The essence of MCA is that it is not a loan but rather the price a business owner would pay a company to risk buying future money off them. The way I look at it is: the high payback amount is the Fair valve/ market value of borrowing unsecured money. No different than any other transaction done in the free market.

If I were to sell a bike for a heavy profit in the free market (where there was no deception) It is perfectly allowed and acceptable. But in the MCA world, since we are comparing money to money, it gets a very negative connotation for making a profit (on a risky product)

And yet you call yourself a direct lender lol, I'm sure your boss will be thrilled

[abfunders]

How can the AG make MCA loans illegal? The essence of MCA is that it is not a loan but rather the price a business owner would pay a company to risk buying future money off them. The way I look at it is: the high payback amount is the Fair valve/ market value of borrowing unsecured money. No different than any other transaction done in the free market.

If I were to sell a bike for a heavy profit in the free market (where there was no deception) It is perfectly allowed and acceptable. But in the MCA world, since we are comparing money to money, it gets a very negative connotation for making a profit (on a risky product)

How could they make them illegal? They'll find a way. You can outlaw selling drugs, maybe you can outlaw selling future receivables (pre-work, to leave out factors from the mix) for more than the legal usury limits? You can force brokers to get licensed like in CA.

And IRS, direct "LENDER" (yeah, you should be careful there), there is such a thing as over-pricing a bike. They can make a law that it can't be charged more than "20% the average market range," or they could categorize selling of "future receivables" as a loan.....

[Davidein68]

How can the AG make MCA loans illegal? The essence of MCA is that it is not a loan but rather the price a business owner would pay a company to risk buying future money off them. The way I look at it is: the high payback amount is the Fair valve/ market value of borrowing unsecured money. No different than any other transaction done in the free market.

If I were to sell a bike for a heavy profit in the free market (where there was no deception) It is perfectly allowed and acceptable. But in the MCA world, since we are comparing money to money, it gets a very negative connotation for making a profit (on a risky product)

https://debanked.com/2020/06/if-you-...nder-part-two/