We’re midway through 2024 and—as usual—the MCA industry continued to buzz with much activity throughout the second quarter.
From exciting global growth forecasts to bold partnerships, and everything in between, in this article we dive into all the latest merchant cash advance trends and news.
Looking to catch up on past news shaping the merchant cash advance world? We have you covered on that, too:
- Check out the biggest stories of Q1 2024.
- Revisit our quarterly reviews from last year: Q1 2023, Q2 2023, Q3 2023, and Q4 2023.
- Get an annual retrospective on the top MCA industry stories of 2023 and 2022.
Now, let’s get to the top stories of Q2!
1. MCA Market Projected To Grow
In 2023, the merchant cash advance market hit almost $17.9 billion. Now, it’s on track to nearly double to $32.7 billion by 2032, growing at 7.2% annually!
So, what exactly is fueling this growth?
According to Allied Market Research, small enterprises (SMEs) continue to have a growing appetite for alternative financing solutions—showing a preference for flexible, quick-access funds driven by digital payments.
Here are a few other interesting insights and key lessons we can glean from the report:
- Embracing digital payment platforms can enhance services. Enterprises are increasingly using MCA split and automated clearing house (ACH) for repayments, reflecting a shift towards digitalization.
- Focusing on retail and e-commerce sectors remains vital. Given their consistent requirements for flexible funding, these two sectors are expected to remain the largest customer base for MCA providers. Meanwhile, the IT and telecom industries also show promising growth potential.
- Expanding into other regions offers significant growth opportunities. While North America currently dominates retail demand, the Asia-Pacific region is seeing rapid growth due to expanding SMEs and the increasing use of technology in the financial services industry.
Moreover, advances in technology like AI and machine learning are also playing a key role by improving underwriting and risk assessment processes—making MCAs an increasingly attractive and viable option for smaller enterprises.
2. Yabx and PayCliq Join Forces in Nigeria
In an exciting move to boost financial access for smaller enterprises across Nigeria, two fintech companies recently joined forces to launch a groundbreaking national merchant cash advance service.
Nigeria is home to 42 million micro, small, and medium enterprises (MSMEs)—comprising nearly half of the country’s GDP. Historically, many of these firms have struggled to secure loans due to issues like incomplete documentation or a lack of credit history.
Enter Yabx—a Netherlands-based fintech focused on simplifying financial access for MSMEs in emerging markets—and Lagos-based PayCliq, focused on building financial tools to support African entrepreneurs and enterprises.
PayCliq’s cloud-based lending platform will integrate Yabx’s AI and machine learning capabilities, essentially merging fintech innovation with a deep understanding of local business needs. This will help address Nigeria-specific credit and payment challenges by:
- Empowering enterprise owners to establish credit profiles.
- Analyzing local business performance to create personalized credit scores and set manageable limits.
- Allowing enterprises to more easily access credit and make repayments over flexible periods.
This partnership isn’t just about helping smaller enterprises get formal financial help—it will also support Nigeria’s move towards a cashless economy. Currently, Nigeria handles $19 trillion in cash transactions every year.
Yabx and PayCliq’s collaboration is a profound example of how MCA funders can work together to promote financial inclusion and drive economic change for the better.
As similar partnerships emerge globally and unlock financial opportunities for underserved businesses, they hold the potential to reshape economies, foster sustainable growth, and create more resilient business environments worldwide.
3. Shopify Capital and PayPal: Q1 Data Is In
In Q1, we saw a bit of a tidal shift for two of the industry’s biggest players.
Shopify Capital had a strong end to 2023, pumping out $816 million in loans and cash advances in Q4, with lots of repeat customers. But things seemed to slow down a bit in Q1 2024. Quarterly results show the company issued $587 million in advances—not bad, but definitely a significant chunk less than the previous quarter.
Meanwhile, PayPal’s been navigating its own challenges. While they used to be “the” go-to resource for small business loans, they saw fewer loans going out and more debts getting written off throughout 2023. By Q4, they’d tightened up on loans, focusing on managing risks better.
Come Q1 2024, PayPal appears to have bought even less in receivables—$419 million compared to $666 million the year before. Meanwhile, PayPal also seems to be carefully choosing their words. On their website, they describe PPWC (PayPal Working Capital) as similar to an MCA, without explicitly labeling it as such.
We can surmise that PayPal’s cautious approach stems from negative perceptions surrounding MCAs—and by sidestepping the MCA label, PayPal is aiming to differentiate PPWC and portray it more positively to their audience.
All these recent developments suggest a couple of things:
- In the first few months of 2024, there appeared to be reduced demand for loans.
- It seems the market is becoming increasingly competitive, prompting even the biggest companies to adjust their strategies accordingly.
For MCA providers, these trends highlight the importance of staying ahead of the curve. Adaptability, efficiency, and creativity remain crucial as firms navigate the ever-changing dynamics within the lending industry.
4. California Launches “Small Business Loan Match” Tool
California is once again shaking up the small business lending scene—this time with its newly launched Small Business Loan Match platform.
Managed by IBank, this tool aims to cut through the headaches that entrepreneurs often experience while seeking funding—promising a single-source streamlined journey for finding trustworthy pre-approved lenders.
California isn’t the only state to have a platform like this. Similar efforts have also been launched by New York City and the Small Business Administration, with such platforms presenting both opportunities and challenges for MCA providers.
On one hand, every Loan Match lender must undergo a rigorous vetting process and be part of IBank’s trusted Loan Guarantee Program. This helps safeguard SMEs and raises the bar for transparency in a field plagued by predatory practices—which could ultimately pressure less reputable MCAs to improve their standards.
That said, state-backed platforms also mean more competition for MCA funders from traditional lenders, who now have easier access to borrowers. This shift could influence small businesses to lean towards traditional loans instead of MCAs.
Another notable issue with California’s platform is how it portrays MCAs. The platform criticizes both online lenders and merchant cash advances, often grouping them together and inaccurately labeling MCAs as loans, despite their distinct nature as non-loan financing options.
As Loan Match and similar tools gain traction, MCA providers looking to maintain their niche will need to take steps to clearly differentiate themselves and their products from competing funders serving SMEs.
5. State-Level Commercial Financing Law Roundup
As of mid-2024, we now have a couple more states with newly signed Commercial Finance Disclosure Laws (CFDLs), and two others with laws proposed.
- California’s approach to business financing is set to change with Senate Bill 1482, now heading to the Assembly for consideration. Starting January 2026, funders and brokers involved in commercial financing (including MCAs) will need to register with the California Department of Financial Protection and Innovation (DFPI). The bill also introduces new rules including banning certain legal agreements and limiting how much money can be taken from bank accounts.
- In mid-April, Governor Laura Kelly of Kansas signed SB 345, known as the Commercial Financing Disclosure Act. Starting July 1, 2024, it will ensure businesses getting loans or similar financing under $500,000 receive clear info from funders—including, but not limited to, total costs and payment details. Brokers are also prohibited from charging advance fees or misleading clients about their offerings. Rule-breakers could face $500 per offense, up to a total of $50,000.
- The Louisiana Senate also recently introduced SB 335 which, if passed, would likewise mandate clear disclosures for small business loans and MCAs. Brokers would also face similar requirements as per the Kansas bill mentioned above. If SB 335 becomes law, it will go into effect on January 1, 2025.
- Similarly, South Carolina is advancing a new commercial finance bill aimed at improving transparency and consumer protection. Inspired by legislation in Georgia and Florida, it will emphasize total cost of capital over APR disclosure. The bill now awaits further revisions and debates.
Once again, new laws are adding more rules and clearer requirements for MCA funders—with California’s latest move possibly setting a precedent for even stricter regulations nationwide.
As such, funders will need to adapt their operations to meet these standards, possibly leading to more paperwork and higher costs. While inconvenient, these changes should help make the industry more trustworthy and reliable in the long run.
(Interested in staying updated on state-level regulatory bills affecting commercial financing? Explore the Onyx IQ interactive MCA Disclosure Laws Map for all the details you need, in just one place.)
Simplify Future-Ready Funding with Onyx IQ
If Q2 and previous quarters have taught us anything, it’s that the MCA industry is in constant flux. With new merchant cash advance trends emerging all the time, it’s crucial for MCA providers to always remain adaptable.
Onyx IQ is the solution. We not only keep you informed on significant industry shifts, but also equip MCA providers with an advanced funding platform, ensuring you can navigate any and all changes with confidence, at all times.
Automate workflows, seamlessly adjust to regulatory changes, and enhance decision-making effortlessly. With Onyx IQ—built by funders, for funders—everything becomes possible.
To simplify your approach to future-ready funding, schedule a demo today and let Onyx IQ drive your MCA success through 2024—and well beyond.
