Small businesses, including startups and those with histories of past struggles, need repeated infusions of working capital to survive and thrive. Cash flows can be uneven, and sudden needs arise. Traditional lenders are often unable or unwilling to satisfy the need for relatively small loans or tight schedules. The Small Business Administration is a trusted start point for startups and small operations. Alternative sources, such as merchant cash lenders can help.
The alternative lending industry is an important – and growing – ally to these enterprises. Between established funders, P2P (peer to peer) and online lending platforms, the space is exploding. For them, competition to reach these borrowers with options when they need funding is fierce. Alternative lenders understand it’s what you know and when you know it. Information must be both current and complete.
That’s where high quality data becomes a key element in any alternative funder’s MCA marketing plan. Perhaps the best starting place for merchant cash advance lenders to begin is monthly aggregations of UCC filings. Each state attorney general’s office keeps records of secured lending. These records are in the public domain.
UCC filing information includes:
- Company Name
- Mailing Address
- Phone #
- SIC Code & Description
- # of Employees
- Filing Day/Month/Year
- Estimated Sales Volume
- Secured Party (the filer) Name
- Secured Assets (equipment, future receipts, etc.)
It then requires effort and skill to quickly parse relevant specifics from the cascade of filings that are constantly being created. Especially when data for specific industries or SIC Codes is needed. In addition, funders need to know credit scores and any data missing from the filing, such as first and last name of principal borrower. Gold standard data resources such as Dun & Bradstreet are valuable assets in both gathering UCC data and augmenting it with the additional perspective of financial risk data.
These data appends are key in determining appropriate tiers for structuring loan terms. This is important to defending merchant cash advance borrowing relationships, as it minimizes the opportunity for competitors to undercut rates. It takes years of experience with the funding industry to meld UCC and credit risk data into mailing lists that perform.
As small business growth continues, and the need for working capital grows, alternative lenders have plenty of incentive to reach documented, qualified merchant cash borrowers. There are fewer regulations and higher commissions and returns. Plus, renewal rates in this segment are consistently high. Basically, if a small business or entrepreneurial enterprise has needed funding, it will need funding again. The challenge for merchant cash lenders and others is to reach them with the right products and terms when they do.