Merchant cash advances (MCA) can be an invaluable resource for small businesses looking for fast capital. This is especially true given that today’s economic uncertainty can bring about unexpected expenses.
The lynchpin of the MCA industry is the broker. This role acts as an intermediary, connecting cash-strapped businesses with MCA funders. If you’re in the MCA lending business, or if you’ve obtained funding via one, chances are you work with a network of MCA brokers.
Today, we’ll go over what makes a successful MCA broker. This article will help you if you are a broker looking to up your game, or if you are a small business looking to work with one.
First Things First: What Exactly Is an MCA Broker?
Put simply, an MCA broker is a sales broker who specializes in merchant cash advances. They connect MCA funders with businesses that need capital, bringing opportunities to both parties of the operation.
They help business owners throughout the MCA application process, from submitting the necessary paperwork, to communicating with the funders and business representatives until the deal is complete.
Most alternative lenders who offer MCAs rely on brokers to help them find clients. For their role in facilitating the funding process, MCA brokers receive an average commission of 10%—the best brokers get as much as 15%.
Being a great MCA broker requires a specific set of skills. Let’s look at what it takes.
5 Best Practices for MCA brokers
Whether you’re an MCA lender looking for clients, or you’re a small business owner and want to secure funding, your best bet is to work with an MCA broker.
But what makes a good broker?
Becoming a reliable and knowledgeable MCA broker goes far beyond a simple certification course. For many brokers, it’s a personal and professional development journey that will last their entire career.
Here are five broker best practices that are essential for MCA success—be sure to implement them if you’re an MCA broker, or look for these signs when connecting with one.
1. Communicate Clearly and Transparently
Effective communication is the core competency MCA brokers must master. It can make or break a career.
A successful MCA broker is one that can simplify the complex concepts and terms of the merchant cash advance industry to anyone who may need guidance in the field. Crucial here is a strong foundation of trust.
Remember, a broker is a relationship builder. Effective relationship building requires being upfront and transparent. This means clearly communicating all terms and conditions, and fully disclosing contract fees.
When a broker is open and able to simplify complicated financial topics, the road is paved for a positive and lasting relationship.
This is closely linked to providing a great SME lending client experience.
2. Ensure Full Compliance
Only by acquiring a strong industry knowledge base and keeping up with the latest developments can an MCA broker offer the best options to a client and negotiate the best terms for them.
A big part of an MCA broker’s expertise is understanding all applicable laws and ensuring full compliance throughout the deal for both parties.
MCA brokers must stay up to speed with the disclosure requirements of funders, not only to keep within legal boundaries, but also to help clients clearly understand what they’re getting into.
By staying compliant, MCA brokers avoid legal issues and ensure that their clients are protected. A broker that runs afoul of the law is a broker with no future in the industry.
3. Leverage Technology
Smart MCA brokers leverage technology to automate processes and make things easier for themselves and their clients.
The use of technology can mean anything from a quick Google search (to verify a business and obtain basic information), to utilizing a lending platform and lead management tool to quickly progress leads and communicate with interested parties.
When it comes to due diligence on a merchant, MCA brokers can leverage a combination of free, publicly available data sources (such as Secretary of State websites) as well as pay-per-pull data sources (like soft credit pulls).
A great broker does the necessary research in the initial stages to ensure they effectively match potential borrowers with the appropriate funders. Successful pairings mean repeat business and a stellar reputation.
Credit pulls and background checks used to be up to funders, but brokers are increasingly invested in doing more due diligence upfront. This ensures a merchant receives the right terms from the right funder.
The right due diligence, coupled with the right SaaS technology, means brokers can take subjectivity out of the process. A good platform allows brokers to pull data in, package and send deals out, and effectively communicate with stakeholders.
4. Build Your Brand
Brand building is a crucial element of effective lead gen/nurturing in the financial services sector, and this includes MCA brokers.
The goal is to create a public image that highlights your qualities as an MCA broker.
Typical brand building activities for MCA brokers include networking with other industry professionals and potential clients, using social media to connect with potential clients, and building positive relationships with existing clients.
Funders should be excited to receive deals from an MCA broker, because their name in the industry precedes them, and they have a firm idea of how well they will work together. Remember, the better your reputation, the higher your chance of getting hired.
5. Focus on Professional Development
A great MCA broker is an educated MCA broker: it’s crucial to develop skills and knowledge through continuous professional development.
As long as the alternative lending industry keeps evolving, the learning never stops, no matter what career stage you’re in!
Although there are no official license requirements to become an MCA broker, licenses do inspire an additional level of confidence in merchants and funders.
Licenses help MCA brokers earn their clients’ trust, stamp their authority in the industry, and at the same time, provide brokers with a valuable education that will help them better serve their clients.
The Certified Payment Professional (CPP) license and the Financial Industry Regulatory Authority (FINRA) qualification exams are two examples.
In addition to certification, brokers should consider industry conferences as a source of knowledge and further professional development.
In general, conferences give brokers an opportunity to learn about changes in the industry, hear about trends from the experts, try new technology, and make connections with funders they hope to work with.
Onyx IQ attends, sponsors, and even speaks at a number of industry events—we highly recommend anything hosted by deBanked and the National Alliance of Commercial Loan Brokers (NACLB).
Here are some events to consider in 2023:
- Broker Fair: May 8, 2023
- Connect San Diego: Date TBD
- NACLB Conference and Expo: September 26, 2023 – September 28, 2023
Help Your MCA Brokers Stay Organized With Onyx IQ
As an alternative lender, finding a great broker is only the first step towards closing more deals.
To help an MCA broker help you, you must have the right tools to succeed. With Onyx IQ, you can automate your lending workflows, and have more data, more accessible to your broker.
We would love to show you how the platform works—click here to sign up for a demo!
