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Top Merchant Cash Advance Stories: Q1 2024

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The start of 2024 has been nothing short of action-packed.

We’ve seen legal action over who should regulate merchant cash advances, fresh disclosure laws, booming business figures, and much more.

But let’s not get ahead of ourselves—we’ll get into all these stories in today’s article.

First, if you need to catch up on the major merchant cash advance trends from the last two years, check out the top stories of 2023 and 2022 for a quick refresher.

And you can also revisit our quarterly reviews from last year:

On to this quarter’s top merchant cash advance stories.


Amidst the bustle of the end-of-year holidays, some major industry news slipped through the cracks over the last few days of 2023—namely, a lawsuit filed in late December by the Revenue Based Finance Coalition (RBFC) against the Consumer Financial Protection Bureau (CFPB).

The complaint concerns the “Final Rule,” tucked away in Section 1071 of the Dodd-Frank Act.

Put simply, this rule mandates data collection and reporting from small business lenders—including those offering sales-based financing (i.e., revenue-based financing products like merchant cash advances).

According to the RBFC, the CFPB:

  • Should not categorize sales-based financing as “credit” under this rule, arguing that—unlike credit—revenue-based financial (RBF) products like MCAs operate around upfront payments without deferred obligations or debt.
  • Is overstepping its bounds by trying to regulate sales-based financing under this rule.
  • Did not do its due diligence in properly weighing the costs and benefits before enacting the rule.

Meanwhile, similar challenges are brewing in Kentucky and Texas, where preliminary injunctions have pumped the brakes on CFPB’s rule enforcement until the Supreme Court weighs in.

As we wait to see how this plays out, it reminds us that there is a constant disconnection between how regulators interpret what the RBF industry offers merchants and what alternative funders actually offer.

It also shows the need for clearer and fairer rules that accurately reflect the industry’s financing methods.

As this legal battle could revolutionize compliance rules and potentially disrupt the norm for MCA providers, we’ll keep our ear to the ground on the issue.

2. Business Still Booming for Industry Whales

Many major players in the alternative lending world—including some of the largest online lenders and merchant cash advance providers in the U.S.—are opting to keep their funding activities more private.

Despite this trend, we can still uncover valuable insights from the latest quarterly earnings reported by some of the biggest names. As a whole, this gives us a good idea of the state of alternative lending in the current market landscape.

Shopify Capital

According to Shopify Capital’s latest numbers, the company continues to crush it in small business lending.

While they didn’t spill the beans on the exact dollar amount they’re dishing out, they did drop a juicy detail: the cash they’re owed from loans and cash advances skyrocketed from a cool $580 million as of December 31, 2022, to a whopping $816 million by December 31, 2023.

Meanwhile, according to its CEO, Shopify’s funding service is like a magnet for renewals, with a staggering 70% of customers returning for more cash.

Square Loans

Similarly, Square Loans facilitated 137,000 loans last quarter, raking $1.4 billion in originations in Q4 alone. This represents a significant 22% increase compared to Q4 in 2022.

Even better for the company: across all of 2023, Square Loans flexed its lending muscles to the tune of a staggering $4.78 billion. That’s an 18% jump from last year’s $4.06 billion.

As for Square Loans’ closest competition? Enova trailed behind with a still impressive—but significantly lesser—$1.5 billion lent out in 2023.

3. PayPal Continues to Tighten Originations

In case you missed it, we covered PayPal’s 2023 Q3 earnings call a few months ago, when the company announced a significant downturn in merchant cash advance and SME loan originations throughout 2023.

At that time, PayPal also mentioned a rise in charge-offs and a more cautious strategy for handing out business loans.

Fast forward to their more recent Q4 earnings announcement, when PayPal’s CFO doubled down on their pledge to uphold strict financial standards. They emphasized a proactive stance in managing credit risk and tightening the reins on loan issuance within their portfolio, which has since resulted in a reduction of credit receivables.

Once upon a time, PayPal was the undisputed champion of unsecured SME lending. But with this recent tightening of the purse strings, PayPal has lost its spot at the top to Square Loans and Enova. Meanwhile, PayPal’s latest communications are a stark contrast to the success stories of its industry peers.

Questions are now circulating.

Is PayPal’s cautious response simply a company-specific strategy; a counter-response to lending too freely? Or could the company’s actions possibly reflect broader industry challenges?

It’s clear that there still remains a hefty demand for alternative lending options—especially when they’re part of larger ecosystems, where funders are better equipped to meet the needs of merchants.

All this said, when it comes to funding companies, no two are exactly alike—even if they’re playing in the same sandbox. It’s possible that companies armed with extensive merchant operations and sales data may hold a competitive edge.

4. More States Propose (and Reintroduce) Commercial Financing Bills

As of early 2024, we now have many states with Commercial Finance Disclosure Laws (CFDLs) passed, and several more with new laws proposed.

As such, we recently updated the Onyx IQ interactive MCA Disclosure Laws Map to reflect the latest developments in state-level regulatory commercial financing bills, including:

  • How North Carolina’s Small Business Truth in Financing Act (NC H662) mirrors similar laws in other states, but introduces a requirement for lenders to register and undergo examination by the Commissioner of Banks. The bill passed the first reading in the NC House last April, and is currently under review by the Banking Committee.
  • Pennsylvania’s proposed amendment to the 1974 Loan Interest and Protection Law (LIPL), known as the Commercial Finance Disclosure Law (CFDL) or House Bill 1792. This amendment mandates lender disclosures to small businesses, while potentially removing the interest cap on loans under $50,000 and allowing borrowers to sue lenders for inadequate disclosures if merged with LIPL.
  • Updates from California, involving the ongoing disclosure legal battles between the Department of Financial Protection and Innovation (DFPI) and the Small Business Finance Association (SBFA).
  • The possibility of state registration being required under New York’s CFDL, if Senate Bill S1061B passes.

We also added updates on proposed laws in Illinois, Kansas, Missouri, and New Jersey as they progress through decision-makers.

5. New York AG Sues Yellowstone Capital for $1.4 Billion

In an ironic twist of events, a cash advance provider previously on the winning side of a fraud-related lawsuit is now facing legal action for—you guessed it—fraud.

In early March, New York Attorney General Letitia James filed a lawsuit against Yellowstone Capital (now known as Delta Bridge Funding or Cloudfund) for $1.4 billion.

The lawsuit alleges that Yellowstone engaged in predatory lending practices, charging extremely high interest rates on fraudulent loans—as high as 820%—which forced several merchant businesses to shut down operations entirely.

Now, the lawsuit seeks to recoup illegal interest and fees, impose fines for fraud, and ban Yellowstone’s co-founder, David Glass, from the industry. Already, five individual defendants settled for over $3 million and accepted industry bans.

This is yet another example of how engaging in unsavory funding practices can lead to severe legal consequences including hefty fines, industry bans, and reputational damage. It’s also a stark reminder for funders to conduct their operations ethically and within the bounds of the law.

Stay Ahead of Industry Shifts With Onyx IQ

At Onyx IQ, we’re working hard to stay ahead of industry trends. 

We provide MCA providers with a state-of-the-art funding platform, empowering them to confidently navigate change. Additionally, we regularly update our platform to ensure compliance with the latest state-level regulations.

With Onyx IQ, you can automate processes, leverage data-driven decision-making, and seamlessly adapt to regulatory changes. Enhance your decision-making capabilities with our platform—designed by MCA funders, for MCA funders.

If you’re ready to build a successful funding business in the ever-evolving merchant cash advance landscape, Onyx IQ is ready to be your ally.

Schedule a demo today and discover how Onyx IQ can revolutionize your MCA operations.

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