Tuesday, February 21, 2012

The Most Merciful Thing in the World

January 9, 2009
How Merchant Cash Advances Work

Small-business owners who need quick access to capital have a burgeoning industry eager to fund them: merchant cash advance providers. The decade-old industry has grown significantly in the past two years, to more than 50 providers, observers say, and the tight credit environment is fueling demand. As interest in their business grows, providers—who charge premiums of 30% or more on the money they advance—are trying to promote industry standards to avoid scrutiny from regulators.

February 15, 2012
Poll: Small-business owners fear economic situation

Almost one in four small-business owners who are currently not expanding their workforce, 24 percent, said they are holding back from hiring because they are worried about no longer being in business in 12 months.

“The most merciful thing in the world, I think, is the inability of the human mind to correlate all its contents. We live on a placid island of ignorance in the midst of black seas of the infinity, and it was not meant that we should voyage far.” - H. P. Lovecraft

9 comments:

Who Struck John said...

I see we've achieved the next innovation in the field of payday lenders: payday lending for small businesses. Because, you know, that's critically important as we move to a bring-your-own-job economy.

Stagflationary Mark said...

Who Struck John,

Without commenting on Amato's situation specifically, RapidAdvance President Jeremy Brown says responsible merchant cash advance companies are careful not to retrieve so much money from a customer that the business won't be able to survive.

It's no doubt a complex financially innovative tapeworm model designed by PhDs in Economics.

fried said...

"are careful not to retrieve so much money from a customer that the business won't be able to survive."

Didn't the mob perfect his biz model in the 50s? And they had tight regulation, with Fat-fingered Louie and No-neck Paulie to see that it was enforced. This preceded the bust-out model of the later mob, adopted by private equity firms like Bain.
The Appalachian Conference...more important for our financial future than anyone realized.

Stagflationary Mark said...

fried,

I bet to differ! *sarcasm*

From the link:

Tony Boulton, owner of the three-person kitchen supply store Design & Grace in Grapevine, Tex., got $20,000 from AdvanceMe in 2007, which cost him $27,000 in credit-card sales.

$7,000 / $20,000 = 35%

From The Godfather (1972):

So, I am to receive thirty percent for finance, for legal protection and political influence. Is that what you're telling me? - Don Corleone

See? Not even remotely the same. 35% only gets you the finance part these days. You are on your own when it comes to legal protection and political influence.

Stagflationary Mark said...

I bet to differ? Freudian slip.

fried said...

You know, I really wasn't being sarcastic. I fail to see the difference between the mob's bust-out biz model and that of private equity guys like Bain. As for these vultures called merchant cash advance providers...how does that differ from the mob "putting money on the street"?

Stagflationary Mark said...

fried,

I was the one being sarcastic when I said (or meant to say), "I beg to differ!"

I can't actually see the difference either, other than the idea that Don Corleone only wanted 30% instead of 35%.

Who Struck John said...

Don Corleone was also probably more understanding about negotiating an extension.

Stagflationary Mark said...

Who Struck John,

...responsible merchant cash advance companies are careful not to retrieve so much money from a customer that the business won't be able to survive.

Army Protection Racket

You've got a nice army base here Colonel. We wouldn't want anything to happen to it.