MCA Brokers: Constructing Your Funder Network
July 18, 2015
Progressing forward into the 3rd Quarter of The Year Of The Broker, I wanted to continue our focus on the vital issue of inefficient training that new broker entrants are receiving within our space. In the previous article for AltFinanceDaily on 6/22/2015, I inquired about if you knew what you were selling in terms of the Merchant Cash Advance product? Within the article, I discussed value points and overcoming the product’s criticism. In this article, I wanted to add to this discussion by deliberating over how to create a quality Funder Network for the Merchant Cash Advance Product.
As a Broker, I believe your job is to be as Jeff Thull from Prime Resource Group explains, which is to be a valued source of business advantage for your prospective and current clientele. In terms of the Merchant Cash Advance Product, you should have access to knowledge, resources, networks, and underwriting criteria that your prospective and current clientele lacks access to, allowing them to see you as a “valued extension” of their organization in terms of the value of your expertise and network. However, too many Brokers are not taking the time to truly be this source of business advantage for their prospective and current clientele, which involves not just continued knowledge, analysis and study over the industry from a “Macro” perspective, but also rounding up the quality relationships to properly serve their clientele on a “Micro” level, such as the creation of a high quality Funder Network. In this article, I wanted to provide some information to assist new Brokers in creating a high quality Funder Network for the Merchant Cash Advance product.
Keeping Things In Perspective
In my first article for AltFinanceDaily from 5/10/2015, I discussed the importance of Selecting The Right Funders, if you haven’t already done so, please review this article to keep things in perspective going forward. After you have reviewed that article, now you should focus on carefully crafting your Funder Network so that you can fulfill your job as being a source of business advantage to your prospective and current clientele. This creation will be based on understanding industry paper grades, which represent the various situations of your clientele during the underwriting process that determine their approval, risk based pricing, terms and conditions.
Paper Grades
The Paper Grades across the board are pretty much the same, but your job is to make sure you have 1-2 reliable, credible and quality lenders for each of the Paper Grades so that you can properly serve your clientele with tailored pricing, terms and conditions based on their risk based profile.
- A Paper: These are merchants that usually have a 650 plus FICO score, clean bank statements with low NSFs/Overdrafts/Negative Days, healthy bank balances (ending and average), no tax liens, no judgment liens, no recent bankruptcies, and no landlord/mortgage issues. In terms of pricing, this merchant should qualify for premium pricing or what I define as Tier I Pricing.
- B Paper: These are merchants that usually have a 600 – 640 FICO, with a variety of potential profile weaknesses on top of the lower credit scoring. Some of those potential weaknesses include having somewhat clean bank statements, somewhat healthy bank balances, they might have a tax lien or judgment lien on a payment plan (and the judgment is not from a prior MCA Company or based on fraud), they might have had a dismissed/discharged bankruptcy, and/or they might have landlord issues but can be resolved at closing. Note that in terms of these weaknesses, this merchant should really have no more than two of these weaknesses, such as they might have somewhat clean bank statements along with a tax lien on a payment plan. In terms of pricing, this merchant should qualify for Tier II Pricing.
- C Paper: These are merchants that usually have a 540 – 580 FICO, with a variety of actual profile weaknesses that push them into this lower credit grade. Some of these weaknesses include having bank statements with 5 – 10 NSFs/Overdrafts/Negative Days, along with not so healthy bank balances. In addition, they might have a tax lien or judgment lien on a payment plan (and the judgment is not from a prior MCA Company or based on fraud), they might have had a dismissed/discharged bankruptcy, and/or they might have landlord issues but can be resolved at closing. Note that this merchant should really have no more than three of these weaknesses, such as they might have bank statements averaging 10 NSFs a month, a tax lien on a payment plan, and they might be one month behind with their landlord which can be made “whole” at closing. In terms of pricing, this merchant should qualify for Tier III Pricing.
- D/E Paper: These are merchants that are considered high risk and might not even get an approval completed. They usually would have as high as a 520 FICO score, but their FICO score could actually come in lower than 500. In addition, expect a variety of actual profile weaknesses that make their approval difficult, such as over 10 NSFs/Overdrafts/Negative Days a month on their bank statements, along with not so healthy bank balances. Furthermore, they might have a tax lien that’s not on a payment plan, or they could have a judgment lien that’s not on a payment plan or a judgment that included a prior MCA Company. Finally, they might have landlord issues that can’t be resolved at closing. Usually the weaknesses are severe to the point where an approval cannot be generated, however, if an approval is generated it’s usually a very high costing advance along the levels of what I define as Tier IV and Tier V Pricing. This level of pricing is very expensive and it might just be in the best interest of the client to not provide him any funding at the moment, opting to instead allow him time to improve his credit standing so he can at least qualify for C Paper status.
Final Word
Note that many industries are on generic restricted lists of Funders, and while they might be A Paper in terms of general credit standings and profile status, their restricted industry status might lead to an auto-decline or a decrease in their Paper Grade.
When you construct your Lender Network, your job is to get 1 – 2 lenders for each Paper Grade so that you can serve your clients efficiently based on their risk based profile. This process involves researching your prospective lenders, understanding their criteria, underwriting their pricing/terms, and testing out the relationship by sending a couple of deals to see how it goes from a first-hand basis.
Doing this level of work upfront gives you a higher probability of surviving in one of the most competitive landscapes in financial services. Not doing this level of work upfront makes your chances of survival, office profitability and career sustainability (as a broker) less probable.
Dear Brokers, Investors Love You Too
June 25, 2015Hedge funds, private equity, and family offices have been all hot and bothered by lending marketplaces and direct funders for a while now, but there’s a new sexy stud that everybody wants to take to the dance, the brokers that originate the deals. An entire segment of the industry still calls them ISOs (Independent Sales Organizations) and in 2015, nobody can seem to shut up about them.
One minute brokers are being fingered as the source of the industry’s moral decline and the next minute they’re the lifeblood of it all.
Ever since World Business Lenders began acquiring broker shops and converting them into franchisees, the institutional investors suddenly woke up.
They’re Buying Brokers? BUT WHY?!
Over the years, dozens of funders have opened for business and then realized they don’t know how to get deals or where to get them from.
It’s not a build-it-and-they-will-come industry anymore. As much as certain people try to berate brokers, it’s widely believed that they still control up to 50% of the industry’s deal flow. Institutional investors examining portfolios have taken notice that some funders are successful only because they have a loyal group of broker shops. So if the brokers make the funder, then why not court the brokers?
And so they’re doing just that…
If you’re brokering less than a million a month though, you’re not really investment material yet. There’s thresholds. The more volume you produce, the more options at your disposal.
At this size, you’re really just a couple of dudes (or dudettes) sitting in a room with phones. There’s not enough action to get anyone excited. There may be some potential to get an investor to co-syndicate with you, but that’s it.
$1 Million/month to $4 Million/month
Congratulations, you’re not just a bunch of dudes anymore. If you’re using decent software, hopefully you can print out the necessary reports to woo investors. At this level you’re eligible for co-syndication, an advance rate to fund your own deals, or to be rolled up as a franchisee. If you’ve got a criminal record or have been banned by the SEC, then forget it though.
$4 Million+
If you’re not already funding your own deals at this point, you’re going to be encouraged to by an investor. They’ll want to set you up on a platform that they trust and participate in the funding in some way. You can get a credit facility. You’re also acquisition material. Funders and investors have little interest in acquiring a couple of dudes sitting in a room because there’s no actual assets to value. At $4 million a month and more, there may potentially be something beyond just the dudes running the company and therefore something to consider. If you can’t pass a criminal background check though, then forget it. And if you’re running scrappy like a $200k/month shop, then they’re not really going to be able to help you. It doesn’t help if you’re stack-heavy either.
But just because you do the volume, that doesn’t mean you can just show an investor an Excel spreadsheet and hope that they’ll fork over millions of dollars in return. You have to run your shop like a professional, not a dude (or dudette of course). And if you think you meet that criteria, that’s great news, because investors want to talk to you really badly.
Last year, every banker I sat down with told me they were looking to invest in the next OnDeck or CAN Capital. And what happened was, you had 200 bankers competing for the same handful of deals. This year, the conversations are all about brokers.
“Who wants to become a funder?”
“Who needs money to syndicate?”
“Who is serious about growing their broker shop?”
Did someone say Year of the Broker?
It damn sure is. If you’re funding more than a million a month, don’t rely on stacking, don’t have a criminal record, have actual reporting systems (not Excel), and want to be a funder or participate in more deals, then there’s a group of investors that are ready and willing to swipe right.
You might not be the next OnDeck and that’s okay. If you’ve got the flow, you can get the dough. <3 😉
Brokers, Ferraris, Stacking and More
March 10, 2015
Not yet signed up to receive AltFinanceDaily’s print magazine? You can subscribe to receive it FREE here. This upcoming issue covers a lot of ground!
Some sneak peeks and commentary:
* I interviewed the president of a Ferrari-driving MCA brokerage who started off as a telemarketer that lived in his car.
* A CPA firm and Law firm submitted interesting takes on different industry practices.
* As much as I wanted to cool off on the topic of stacking for a while, those interviewed by our journalists couldn’t stop talking about it. It is apparently unavoidable and inescapable. Whether you stack or you don’t it’s one of the first nuggets to pop up in any conversation about short term business financing. Coincidentally, I had the privilege of being in the room with some industry leaders a few weeks ago and a discussion about stacking inevitably dominated the debate.
* There’s lot of new brokers in the space and not just human middlemen, but platforms that are really just technology-based brokers. We investigated what’s driving the new brokers and how to handle them. Separately, we interviewed a technology company that automates loan picks so that retail lenders don’t have to.
There’s more of course. You’ll just have to subscribe and wait for it to arrive in the mail. They’ll be sent out at the end of this month.
And if you plan on going to the LendIt Conference in NYC, use coupon code: AltFinanceDailyVIP to get 25% off the ticket price. All attendees will get a copy of the magazine in their swag bag. I hope to see you there.
Advice to New Loan Brokers, ISOs, and Funders
February 24, 2015
Some words of wisdom to avoid having a bad experience in this industry:
1. If you can’t afford a lawyer, don’t be a funder. This is a litigious business and despite the myth that commercial financing is unregulated, there are plenty of ancillary laws to adhere to. States, FTC, OCC, IRS, etc.
2. Have a lawyer review your contracts (merchant agreements, ISO agreements, syndication agreements, etc.) If you can’t afford one or don’t want to take the time to do it, this business might not be for you.
3. Don’t send your deal to someone with a free email address (yahoo, gmail, hotmail, etc.).
4. Don’t send your deal to some random company just because they posted something on a forum, LinkedIn, or somewhere else. Check them out on Google, ask other forum members to vouch for them. Be extremely smart and overly diligent about it.
5. This is not a get rich quick business or industry. You can lose money funding and syndicating. You can technically also lose money brokering on commission clawbacks for deals that go bad right away.
6. Leads are expensive. Do not launch an ISO with only 2 grand in the bank.
7. Learn to generate your own leads and you will save yourself a lot of stress down the road.
8. A wise man once told me it is better to build a book of business and a long lasting passive income than to grind it out for a quick buck month after month. What’s your strategy?
9. You will lose deals, commissions, arguments, and occasionally your mind. Accept your losses when they happen and focus on the next deal.
10. Use appropriate language. A company that buys future revenues is not a lender and their financial transactions are not loans. Loans have noticeable things like interest rates and fixed terms. Make sure you know which one you’re talking about at any given time.
Maxim Commercial Capital Delivered Creative Financing Solutions in Q3 2025
October 13, 2025LOS ANGELES, CALIF. (October 13, 2025) – Maxim Commercial Capital (“Maxim”) announced it countered industry trends during the third quarter of 2025 by delivering essential hard asset secured financing to small and mid-sized businesses across the nation. Maxim is a national provider of loans and leases from $10,000 to $3 million collateralized by class 6 and 8 trucks, trailers, construction and agricultural heavy equipment, and real estate. The company fuels entrepreneurship by offering attractive financing rates and terms for underserved market segments, including startups and borrowers with challenged credit.
“It was a noteworthy quarter for our team,” noted Michael Kianmahd, Maxim’s CEO. “Despite the industry-wide slowdown in originations, we stayed on course to structure and fund deals during trying economic and market conditions. We were thrilled to welcome Lyndon Elam as Chief Operating Officer and continued to develop and roll out performance enhancing technology tools.”
Maxim experienced a good flow of applications for over-the-road (OTR) used truck and trailer financing during the period. While strong demand held used truck prices steady, many lenders retracted, leaving vendors and buyers scrambling for reliable financing. Funded deals during the period included a $45K 2020 Kenworth T680 with 528K miles for 26% down for a subprime startup owner operator with a 621 FICO; a $48K 2020 Kenworth T680 with 501K miles for 25% down for an experienced subprime owner operator with a 581 FICO; and a $23K 2020 Utility Dry Van for an existing customer with challenged credit for 25% down.
In addition to OTR trucks and trailers, Maxim is a leader in financing vocational trucks, such as tow trucks and dump trucks, and helping borrowers consolidate expensive MCA debt by lending against owned heavy equipment and real estate. As equipment leasing rates became more expensive during the period, Maxim received applications from borrowers with strong contracts seeking to purchase equipment.
Creatively structured deals during the third quarter include 60% purchase financing for a newer, rapidly growing construction company to buy a $40K 2025 Equipter RB4000 to improve efficiency on construction sites. Traditional lenders had turned down the business owner due to her 681 FICO, newly opened $60K auto loan, and $25K in student loan debt. Another startup entrepreneur with a business plan to haul construction material and a committed driver got the $106K 2020 Mack GRANITE 104BR Dump Truck she wanted for 34% down, despite her 541 FICO and discharged bankruptcy from 2018.
“One reason I was attracted to join Maxim is their creative, flexible approach to working with equipment vendors, finance brokers, and borrowers,” said Elam. “Our team takes the time to optimize financing structures, such as by asking about excess equipment or real estate collateral to improve advance rates or helping a borrower understand true affordability based on cash flow. This results in high approval to submission rates which is a key goal for all lenders.”
About Maxim Commercial Capital
Maxim Commercial Capital helps small and mid-sized business owners nationwide by providing loans and leases (“financing”) from $10,000 to $3 million secured by trucks, trailers, heavy equipment, and real estate. It funds equipment purchase financings and leases, working capital, and debt consolidations. Maxim’s more creative financing structures leverage equity in real estate and owned heavy equipment to facilitate growth and preserve customers’ cash. As a leading provider of transportation equipment financing, Maxim supports startup and experienced owner-operators and non-CDL small fleet owners by funding loans and leases for class 8 and class 6 trucks, trailers, and reefers. Learn more at www.maximcc.com or by calling 877-776-2946.
###
Contact:
Michael Kianmahd, CEO
Maxim Commercial Capital
michael@maximcc.com
(213) 984-2727
How Kaaj is Accelerating Small Business Lending
October 8, 2025Utsav Shah first met Kristen Castell at AltFinanceDaily CONNECT MIAMI this past February. At the time, Shah and his partner Shivi Sharma were freshly promoting a new AI technology to simplify small business lending. It’s called Kaaj, described as a core intelligence layer that bolts into a lender or broker’s CRM and handles all of the early-stage application intake and underwriting work. Shah had been familiar with the fintech accelerator Castell directs, the Center for Advancing Financial Equity (CAFE), which she was speaking about at the conference, but he had never actually met her in person until then.
“That’s really when we learned deeply about what CAFE’s mission is and how it works with a lot of startups, a very unique mission and very unique approach to work with startups and bring the ecosystem together,” said Sharma. “So we loved it and decided to apply this Fall.”
They applied into the exclusive accelerator program and were one of six companies to be selected, an honor considering hundreds of companies apply for entry on a bi-annual basis. As previously noted on AltFinanceDaily, it’s an eight-week program, some of which takes place on location at the Fintech Innovation Hub on the University of Delaware campus. The rest is virtual but there are in-person field trips like a recent one to Washington DC, for example. AltFinanceDaily has sponsored the last three accelerator cohorts which in the most recent cohort includes headline names like JPMorgan, PNC, Discover, Barclays, Capital One, M&T Bank, WSFS BANK, BNY Mellon, Prudential, Fulton Bank, County Bank, Best Egg, United Way, NeighborGood Partners, and the Delaware Bankers Association.
Kaaj, based in San Francisco, was already getting noticed beforehand. The company won the Fintech Meetup Startup Pitch Competition in March and secured a $50,000 prize, for example. Their technology is especially suited for equipment financing companies, MCA providers, small business lenders, SBA lenders, factors, and more.
“So imagine that you’re a lender, and you get hundreds of applications in a day, and you don’t really know where you want to focus your time on,” Shah said to AltFinanceDaily. “‘What do these 100 deals mean for me, for my business? Are they even qualifying against my criteria, etc.’ So what Kaaj does, it provides very quick intelligence, within the first three minutes.”
Shah explained that as soon as someone submits a package with documents, they get analyzed from top to bottom, like KYC/KYB, the bank statements, and more. This helps lenders (and brokers) decide how to prioritize their time. Utsav’s background in technology has played a major role in building this out as he comes with a decade of AI experience and was building autonomous cars before building Kaaj.
“Time wins deals or time kills deals,” said Shah. “Either way that you want to look at it, if we can give that time back to them, if we can reduce that turnaround time on each individual deal and focus on those higher profitability deals for these companies or these lenders, then they can start really feeding the top line and the bottom line, because they’re not having to hire a bunch of folks.”
Sharma said that equipment finance is slightly more complex than MCA, for example, but that as a $1.4 trillion industry, it’s a market that’s ripe for innovation. Sharma used to work in commercial lending herself and has seen firsthand how manual processes and outdated technology slow things down and hurt not only the lenders but the borrowers in the process.
“I have worked on small business lending, commercial lending, payments fraud, onboarding fraud, a lot of that,” Sharma said. “I spotted a lot of challenges in that space and a clear lack of good technological solutions that really help these lenders scale efficiently.”
Shah, meanwhile, said that ultimately it’s about helping the end-user, the business borrower.
“We are very focused on solving for small businesses, because the final mission of the company is to get better access to capital for small businesses,” he said.
Only One Month Until B2B Finance Expo
September 27, 2025The B2B Finance Expo is October 28-29. Returning to Wynn Las Vegas after its incredible inaugural success in 2024, this groundbreaking event will once again bring together leaders from Small Business Lending, Equipment Finance, Real Estate Lending, Revenue Based Financing, and beyond. Over the course of this exclusive two-day event, brokers, lenders, funders, and service providers alike can expect networking opportunities, insight sessions, and much more.
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B2B Finance Expo is powered by AltFinanceDaily in collaboration with the Small Business Finance Association (SBFA).
The Great Concession, How the MCA Product Effectively Proved It Was Right All Along
September 26, 2025
There was no greater irony than the State of Texas banning ACH debits from sales-based financing providers at the same time that the State of Washington was celebrating the coming age of sales-based financing. In Texas, for example, the motivation for curbing sales-based financing was built on the premise that “this type of financing has raised significant concerns about predatory lending and that state attorneys general as well as the Federal Trade Commission have obtained high-profile judgments against such financing for predatory practices.” Meanwhile, in Washington, the motivation for the state holding the opposite opinion was that sales-based financing “increases access to capital for small businesses in Washington state, particularly those that have been historically underserved or underbanked.”
How did these states reach the opposite conclusion?
There’s no caveat to how the Washington State program works. The State’s Department of Commerce partnered with Grow America and the operation is backed by a federal grant (SSBCI-21031-0048) to roll out and administer a revenue-based financing program as part of Washington’s State Small Business Credit Initiative. It’s sales-based financing or in this case revenue-based financing (which is the more common phrase these days). Grow America’s revenue-based financing program utters a very familiar phrase in its marketing.
“The months you generate more revenue, you pay a higher amount, when business is slower you pay less,” the company advertises.
This was at one time the signature calling card of a merchant cash advance, but now such features have been repackaged and rebranded into something similar but different, and everybody is doing them.
The Grow America program applies a 20% holdback on adjusted monthly revenue and requires a minimum monthly payment of $1,000 if the 20% holdback does not generate at least $1,000 for the month. Merchants can get approved for anywhere from $50,000 to $1 million. The product is marketed as having a 1.24 factor rate and an estimated 14.27% APR with a 3-year term. As industry participants are aware, increasing sales would translate into increasing payments, which means a rapidly paid off loan could potentially result in a final outcome APR in the triple digits, far and away from the “estimate.”
The irony is that the notable benefits of a similar product, merchant cash advances, which have no minimum monthly payments, no fixed term, and are not absolutely repayable, are eliminated when restructured in this way and presented as “revenue-based financing loans.” Revenue-based financing loans take the underlying structure of MCAs (payments tied to sales) and then strip away the benefits. However, when structured as loans, the argument often goes that they are likely to be cheaper, which may be true on average, but is not always true.
Indeed, Grow America leads specifically with price as for why its product, similar to its privately owned competitors, are the better option:
“There are a lot of online lenders offering revenue-based loans that promise instant approvals, but their terms are intentionally confusing, and the fees are high,” Grow America advertises. “Our lenders aren’t like that. They’re mission driven.”
In Texas, the author of the bill that banned debits from such financing providers “informed the [legislative] committee that commercial sales-based financing has become a popular financing option for small businesses desperate for credit and that, unlike traditional loans, this type of financing is repaid as a percentage of future sales or revenue.”
Indeed, it is very popular. The largest providers or brokers of such financing today whether structured as a purchase or loan, are household names like Amazon, Walmart, Shopify, Intuit, Stripe, DoorDash, PayPal, Square, GoDaddy, Wix, Squarespace and more. Some structure them as a purchase and call it a merchant cash advance and some structure it as a loan and call it revenue-based financing. In either case, payments are tied to the percentage of future sales or revenue.
In egregious cases of wrongdoing one way or another, such incidents have historically been a result of deceptive marketing or payments from a merchant exceeding the contracted amount. In New York, when transactions are structured as a purchase, courts generally look to make sure that the agreements have a reconciliation provision in the agreement, whether the agreement has a finite term, and whether there is any recourse should the merchant declare bankruptcy. Legally speaking, the products have become pretty well defined and understood in the court system.
Like Washington State, GoDaddy, which recently announced its new merchant cash advance program, markets its product in an almost identical fashion.
“If your sales go up, the MCA will be paid sooner; if the sales are slow, it’ll take longer,” GoDaddy says.
Same message.
Washington State requires merchants to make a minimum payment every month and a balloon payment if not fully repaid within 3 years. GoDaddy, by contrast, advertises no minimum payment amount, no set payment schedule, no penalties, and no late fees. One’s a loan, one’s a purchase.
While the best course of action is best left to the merchants, there appears to be a near-universal concession that the underlying nature of how merchant cash advance agreements were contemplated, payments tied to sales, made strong logical business sense all along. Washington State emphasizes this fact.
“We know that your business has its own needs and loans with fixed payment amounts may not be the best option for you,” they advertise. “The revenue-based financing fund offers loans with flexible payback terms so you can grow your business immediately and pay back your loan based on your varying revenue.”
Recent studies also now highlight the benefits of cash-flow-based underwriting.
In Sharpening the Focus: Using Cash-Flow Data to Underwrite Financially Constrained Businesses, “The paper finds that adding cash-flow information substantially increases the predictive signal of models that rely primarily on the business owners’ personal credit scores and firm characteristics.”
There’s also Square, the largest revenue-based financing provider in the US, that has explained why this system just works better. Square says that they can fund more businesses and have higher payment success rates than if they were to follow more conventional methods of underwriting and repayment.
“Square Loans addresses [the credit] gap by using near real-time business data to assess creditworthiness, evaluating metrics such as transaction volume and revenue patterns to offer short-term loans — with repayment on average in 8 months,” Square wrote in a White Paper. “This allows for a more accurate and timely understanding of a business’s capacity to borrow and repay. And loan repayments are higher during periods when business is stronger and reduced when sales are lower.”
What’s the sentiment these days on payments tied to sales revenue? The market has spoken.
