[Gini Co]

Interesting the distinction everyone is making between "ACH deals" and "MCA deals" as though all MCA deals are on a split or lockbox and thus they are less risky. A large percentage of MCA (i.e credit card based) use ACH as the collection method (through reporting or other means of knowing their daily batching). So are we talking about a difference in risk due to collection method (ACH vs. Split/Lockbox), or a difference in Merchants who accept credit cards vs. those who do not? Again, we ACH credit card advances all the time and I don't see a difference in performance based on collection method.

[Sean Cash]

Interesting the distinction everyone is making between "ACH deals" and "MCA deals" as though all MCA deals are on a split or lockbox and thus they are less risky. A large percentage of MCA (i.e credit card based) use ACH as the collection method (through reporting or other means of knowing their daily batching). So are we talking about a difference in risk due to collection method (ACH vs. Split/Lockbox), or a difference in Merchants who accept credit cards vs. those who do not? Again, we ACH credit card advances all the time and I don't see a difference in performance based on collection method.

When compared broadly, there should be a material difference in performance between a split deal and an ACH deal. You can't have ACH rejects with a split deal. I'm not saying there aren't ways to circumvent split-processing (there definitely are), but the biggest problem with ACH deals is merchants not having any money in the bank when the ACH hits. That's why split-funding became so popular, because the risk of merchants not having cash in the bank when it comes time to make a payment is and was very high.

A 550 credit deal with no money in the bank can get approved for a split, but how do you think that will play out on ACH? The collection method matters.

I am shocked if you do not see a difference based on the collection method. Perhaps you are only funding prime deals with lots of cash in the bank on split? I wrote a bit about ACH vs. Split-funding on the ETA's website: http://www.electran.org/guest-analys...-processing-3/

[Gini Co]

I am shocked if you do not see a difference based on the collection method. Perhaps you are only funding prime deals with lots of cash in the bank on split? I wrote a bit about ACH vs. Split-funding on the ETA's website: http://www.electran.org/guest-analys...-processing-3/

It may seem counter intuitive that there is no a discernible difference in performance based on payment method (ACH v. Split), but here is my theory. A merchant 'defaults' on an MCA by either 1.)going out of business (not technically a default) or 2.) intentionally avoiding payment. A split does not prevent either of these scenarios. It reduces bouncing, but in my experience, severe bouncing is a symptom of one of the reasons stated above, not an honest rough patch in liquidity management. If you are draining too much cash from a business, it doesn't matter what the method is, you'll end up in the same place very quickly. Don't get me wrong, a split is still my preference because its the cleanest and easiest way to service an advance, but I see it offering any reduction in the probability of default.