Access capital in 1-2 days with flexible repayment schedules strictly tied to sales.
Access 5-15% of your trailing 12 month sales in 1-3 days. In exchange, you pay back a specified percentage of your weekly or monthly sales, over 8-18 months.
Under the Uniform Commercial Code, Article 9, future “Accounts” is an asset which can be financed (or sold). By definition an Account includes receipts from a sale, or future receipts from a sale, whether earned, or unearned. This means funders take going concern risk (for the most part) when they are not funding against assets. Commercial financing companies have found a way to accelerate that repayment as a percentage of sales (known as the Specified Percentage). This is the remittance amount paid back to the funding partner in exchange for upfront capital today. This is a solid solution for companies that seek to finance the unadvanced portion of their receivables, inventory and purchase orders, or for those who simply don’t have any assets to finance (e-commerce, SaaS, retail, etc.)
While the merchant cash advance (MCA) is a very useful commercial financing tool, it must be used strategically, sparingly, and with trusted partner. It’s ideal for situations where a company does not have available assets to finance or needs quick capital. MCA is a very useful tool, yet we acknowledge shady brokers exist in this arena, and often do companies much harm. However, companies must not be quick to conflate the product itself with the bad actors. MCA has its time and place, and companies must be careful with cash flow after taking MCA capital. At the Capital Desk, we use MCAs for special situations, often times when refinancing one asset based financing company for another. Common use cases are exigent growth or a special situation the company finds itself in, unable to wait for a funding round, or late receivables.
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Structured very similar to a sales based financing transaction, these deals simply contain more loan covenants than a sales based deal. Depending on the situation of the borrower and where they are located, personal guarantees may be required, as well as absolute promises to pay – which are a hallmark of what makes financing a loan.
It’s important for companies to know that many MCA deals are disguised as loans, meaning, the funders do not take the risk the business slows down in sales or stops selling altogether.
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Since September, 2023, we’ve deployed $114M+ to clients across an array of industries.
Because sales based financing companies don’t need as many docs, they are able to fund in 1-3 days. All deals depend on complexity and client responsiveness. Companies that leverage sales based financing are taking advantage of certainty and speed to close.
Uniform Commercial Code, Article 9 (UCC-9) treats Accounts as an asset which can be financed, including present and future accounts, whether earned or unearned. This includes traditional receivables for work already delivered, purchase orders, and future receivables and sales for customers who have yet to walk in the door. Because there are numerous types of “Accounts” which can be financed under the UCC, Sales Based financing tends to fit in wherever you need it to on your capital stack – as senior, junior, or somewhere in the middle of debt and equity (which often times, is completely unsecured by assets).
1-2 days, depending on how responsive the cllient is. Sales based financing deals require less documents than traditional funding partners.
Generally, no. Most times a personal guarantee is replaced with a validity guarantee (the company guarantees that the information submitted in order to take financing is true, accurate etc.) as well as performance guarantees (the company guarantees to not deliberately violate any terms of the agreement), and bad boy guarantees (the company’s owner agrees not to do anything fraudulent, gross misrepresentation, etc.). If a validity, performance, or bad boy guarantee is violated, then the funding partner has recourse as if it was a personal guarantee. If the owner simply plays by the rules of the deal they signed up for, then they will be protected personally, even if the business has a dramatic slowdown in sales and cannot meet the funders required payment.
Sales based financing (SBF) transactions fund very fast and with a high degree of certainty. Therefore, companies pay for the expediency and certainty to get the capital they need, when they need it. As such, SBF is often used for exigent circumstances (growth opportunity cost), special situations the company finds itself in, or an existential situation (which is rare, but happens). When certainty to close is the most important, sales based financing is a viable solution.
Future Accounts under the UCC, merchant cash advance, and commercial cash flow or “merchant loans”. In the lower to middle market, these would be known as “junior”, “mezzanine”, or “subordinated” loans.
In many ways, yes. But it’s different in one key aspect. By definition, a funder that requires payment of principal no matter what is called a lender. A lender has a right to collect principal (and potentially more) no matter what the circumstance, i.e. an “absolute” right to collect. However, with a true SBF, that’s not always the case. Many SBF funders tie their repayment as as Specified Percentage of sales, i.e. a short-term, fixed royalty; unsecured by assets. And many of those types of funders have clauses that say going out of business because of a a decline in sales is not an event of default*. While commercial deals look and act the same in many ways, we are able to determine if it’s a loan, acts like a loan, or is a true SBF. Because it’s important companies know what the terms are that govern the commercial financing relationship.