[Karen37a]

This is the Testimony By Kate Fisher from Hudson Cook at the Hearng.

https://debanked.com/2018/10/new-jer...s-and-brokers/

Senator Pou and committee members: Thank you for the opportunity to present testimony today regarding business loan disclosures.

My name is Kate Fisher and I am here today on behalf of the Commercial Finance Coalition, a group of responsible finance companies that provide capital to small and medium-sized businesses through innovative methods. I also am an attorney who helps providers of commercial financing comply with state and federal law.

The Commercial Finance Coalition supports efforts to make business financing more transparent.

The problem is the proposed amendment would define a merchant cash advance as a loan. A merchant cash advance is not a loan.

We all know how a loan works – the lender advances money and the borrower promises to pay it back.

A merchant cash advance is a factoring transaction, in which a business sells a percentage of its future receivables at a discount.

Take for example, a pizza shop. The pizza oven breaks and the owner needs cash to replace it.

In a loan, the pizza shop borrows the money and promises to pay the money back to the lender with interest.

In a merchant cash advance, the pizza shop sells its future receivables to a merchant cash advance company. In exchange for the money to buy that pizza oven, the merchant cash advance company will take 10% of each dollar the pizza shop makes.

If the pizza shop’s sales go down, it will pay less. If the pizza shop’s sales go up, it will pay more. And if the pizza shop is damaged by a hurricane and has to close for repairs, it will pay nothing until it can reopen its doors.

This uncertainty of repayment is why a merchant cash advance is not a loan – the pizza shop in our example, only pays if it sells pizza. Courts have overwhelmingly agreed that a merchant cash advance is not a loan. To quote a recent court decision:

“Receivables purchasing is an accepted form of business transaction, and is not a loan.”

Because a merchant cash advance is not a loan, and there is no fixed payment term, requiring an APR or annual interest rate disclosure would be misleading. For a small business looking for financing, these types of disclosures would only add confusion.

I’m very optimistic that New Jersey can lead the way in providing businesses with disclosures that are helpful – and not misleading.

Thank you.

Because a merchant cash advance is not a loan, and there is no fixed payment term, requiring an APR or annual interest rate disclosure would be misleading. For a small business looking for financing, these types of disclosures would only add confusion

There is no APR on cash advances it is misleading. If you take that argument away you will not have cash advance transactions and lose in court each and every time- Stare Decicis- Karen

You will be massively defaulted on by Shrewd lawyers and Debt Relief

https://www.law.cornell.edu/wex/stare_decisis