Just like sharks thrive on blood, small businesses thrive on start-up capital. The merchant cash advance industry is swamped with ISOs and small funders, but it was Val Pinkhasov and Jason Reddish of Total Merchant Resources (TMR), who took the risk and swam with the sharks. This past October, Pinkhasov and Reddish pitched their company on the ABC show, Shark Tank. According to Merchant Processing Resource, TMR made merchant cash advance history.
To get an expert opinion about the impacts of MCA on small business owners, Integrity Payment Systems reached out to Pinkhasov, co-founder of TMR. It was a privilege for Integrity to get an industry leader’s insight and predictions of MCA.
How and why did you get involved in merchant cash advance?
Previously, we were involved in the mortgage industry. Then we started to see the industry implode and saw the negative impact it had on the small businesses. The realization that we could offer serious help to the small business owner who are directly responsible for 65% of our economy, gave us the push to start Total Merchant Resources.
What are the pros and cons of Merchant Cash Advance for a small business?
- MCA providers have quick availability compared to a bank, whose long process may cause loss of the funding opportunity.
- Businesses don’t have to wait for a zero balance to receive more funds. They can receive more money when half of the balance is paid. This also allows businesses to build a track record during the payback process, to create cheaper and more flexible rates.
- Our payback is a true mark-up. No amortization and will add no revolving debt to the lender.
- The money isn’t cheap.
- Try to get money from the bank first.
- If you have the time and the patience to fill out all the paperwork a bank requires, the savings on the payback will be worth it.
Note: Merchants may not receive all of the money needed from the bank, but we can assist them in getting a MCA for the difference.
What are some current industry trends influencing merchant cash advance? And how is TMR reacting to these challenges or opportunities?
The industry is growing. In regards to payback options, they are starting to transition from just credit card processing to also using an ACH platform that extends the terms. At TMR, we are changing and adapting to the growing industry trends. We have seen other industry start-ups try to come in with unsuccessful efforts and offer cheaper money, but they fail to see that the money is priced at these rates for a reason. It takes time to be successful in this industry and quick money is rare. Even though the funding terms are shorter, profits will be seen over time.
The biggest attraction I have towards this business is the self-regulating component. We see trends trying to make this industry more complicated than it needs to be. That’s exactly where the mortgage industry failed with CDOs and CMOs derivatives resulting in more complex securitizations and regulations. This industry works because of its simplicity and TMR hopes it can remain that way. We expect to see more innovative products, but also hope the back-end remains free and easy.
How has your recent appearance on Shark Tank impacted TMR and the future of the MCA industry?
To say Shark Tank has impacted our business and our role in this industry is an understatement. Some of the tangible results we have seen from our appearance on Shark Tank include, more invites from ETA conferences and an increase in our organic SEO optimization. It still blows our minds just how many business owners really didn’t know this was a viable option until we aired. We would like to think we played a role in putting this industry on the map and Shark Tank was the perfect medium to accomplish that.