In the rapidly evolving world of non-bank commercial finance, the Revenue-Based Finance Coalition (RBFC) is emerging as a critical ally for funders, MCA brokers, and small and medium-sized enterprises (SMEs) alike.
The RBFC plays a dual yet synergistic role.
Firstly, it educates SMEs about the myriad of financing options available beyond the conventional banking system, empowering them with the knowledge to navigate the evolving financial landscape. This is crucial in an era where access to capital through traditional means is becoming progressively challenging.
Secondly, the Coalition advocates tirelessly for the merchant cash advance and revenue-based financing (RBF) industry. Understanding that legislators often misunderstand how these non-bank financing transactions are structured differently when compared to traditional banking products, the RBFC works to illuminate these distinctions, championing regulatory and legislative standards that recognize and support the unique characteristics of the MCA/RBF sector.
For funders and MCA brokers, the importance of the RBFC’s work cannot be overstated.
By fostering a deeper understanding among SMEs and advocating for informed legislative recognition, the RBFC not only enhances the operating environment for alternative financers but also ensures that SMEs continue to have access to the essential capital they need to thrive.
In today’s article, we take a look at the RBFC’s integral role within the MCA/RBF industry,
What Is the Revenue-Based Finance Coalition (RBFC)?
Made up of responsible finance companies, brokers, and select vendors, the RBFC focuses on providing (and advocating for) innovative, non-traditional financing solutions to small businesses.
Member companies specialize in revenue-based finance products like MCAs, offering financing ranging between $10,000 to $500,000.
To ensure the industry continues to operate in sound and fair legal and regulatory environments, the RBFC advocates for the interests of non-bank commercial finance stakeholders in the face of expanding regulatory authority.
They assert that a fundamental aspect behind their endeavors is education, including:
- SME education, to help business owners learn about RBF products.
- Legislator education, to help lawmakers understand exactly how RBF products may be appropriately regulated.
- Industry education, to help RBF stakeholders build their businesses and unite in a common cause.
At the heart of RBFC’s work are two guiding principles:
- They beat the drum that RBF transactions differ from typical loans or credit products.
- They staunchly defend second-position finance products—financial lifelines that provide essential liquidity for businesses facing seasonal swings or unexpected bumps in the road.
With these two guiding principles, the RBFC champions fair financing for SMEs while resisting regulatory encroachment by state and federal legislatures.
Why Should Funders Care?
Because MCA funders play a crucial role in shaping the commercial financing landscape, joining and supporting a trade association like the RBFC can have a far-reaching impact on the growth of the industry.
After all, the RBFC represents a vital force for promoting revenue-based financing industry growth by:
- Setting industry standards: establishing and promoting industry-wide standards and best practices ensures consistency and transparency across RBF sectors.
- Dispelling misconceptions: policymakers often lack a nuanced understanding of revenue-based financing (RBF), and mistakenly associate it with short-term, unsecured consumer loans. RBFC bridges the gap between legislators and commercial financing experts to correct such misunderstandings.
- Preventing “patchwork” legislation: RBFC advocates for cohesive regulatory structures at state and federal levels. This helps prevent inconsistent and cumbersome piecemeal regulations, which could stifle industry growth and innovation.
- Increasing engagement with women: recognizing women’s crucial role in business and the greater economy, RBFC is committed to elevating the visibility of women in the industry and fostering greater engagement through various initiatives.
Ultimately, funders should value the Revenue-Based Finance Coalition for its pivotal role in promoting responsible funding practices, advocating for favorable regulations, and tackling sector challenges.
RBFC Advocacy in Action
When it comes to advocacy, the RBFC boasts an extensive lobbying team that consists of about a dozen firms skilled in both offensive and defensive tactics.
Here are just two recent examples of their work:
Consumer Financial Protection Bureau Lawsuit
In late December last year, the RBFC launched a lawsuit against the Consumer Financial Protection Bureau (CFPB) over a contentious piece of legislation called the Dodd-Frank Act’s Section 1071 “Final Rule.”
What’s all the fuss about?
Well, this rule mandates data collection from small enterprise funders—including those in the revenue-based financing realm, such as merchant cash advance providers.
The RBFC is taking a stand against the CFPB’s Final Rule, arguing that revenue-based financing does not fall under Congress’s definition under the Equal Credit Opportunity Act, under which the Final Rule was supposedly enacted, and therefore the CFPB lacks the legal authority to enact the rule. Additionally, the RBFC also argued that the Final Rule should be struck down because the CFPB’s funding mechanism violates the U.S. Constitution’s Appropriation Clause.
This lawsuit follows similar challenges to the CFPB’s funding mechanism in Kentucky and Texas, which resulted in injunctions that are currently on appeal to the U.S. Supreme Court, which is expected to hand down a decision this Spring.
The RBFC’s efforts, specifically on behalf of stakeholders in the RBF industry, are expected to succeed in preventing the Final Rule’s burdensome regulatory requirements from going into effect this year, demonstrating the importance of the Coalition’s work for the industry’s future.
Campaigning for the Removal of APR Disclosure Requirements
Over the years, the Revenue-Based Finance Coalition has played a pivotal role in shaping commercial financing disclosure laws—notably, regarding disclosure of the Annual Percentage Rate (APR) in required disclosure forms to be provided by funders to SMEs to clarify the terms of the deal.
Essentially, disclosing the details of APR can confuse merchants, which doesn’t make for a positive or informed merchant experience. The RBFC has advocated for states to ditch the need to disclose APR in their forms (since that is not a true measure of the price of financing for an SME) and instead disclose the “Total Cost of Capital.”
For example, Florida removed APR disclosure requirements from its disclosure statute, with the goal of presenting payment structures and setting expectations in a way that is easier for individual merchants to understand and enables them to compare offers from different funders more accurately.
As a result of the RBFC’s advocacy work, various states, including Florida, Connecticut, Virginia, Utah, and Georgia, have embraced the “Total Cost of Capital” disclosure model for commercial financing, recognizing its suitability for the industry and merchants alike.
Now, the RBFC is pushing for a similar approach in Maryland, signaling a broader movement towards more transparent and beneficial disclosure practices in commercial financing regulation.
Why Join the RBFC?
If you’re in the business of revenue-based financing, whether a broker or a funder, you may qualify to become an RBFC member.
Here’s why jumping on board with the RBFC could be a smart business move:
- Unlock exclusive resources: gain access to industry-leading lobbyists and legal experts who can keep you ahead of the curve, provide valuable insights tailored to your business, and represent your voice in industry advocacy.
- Connect with key influencers: engage with decision-makers who help push the industry forward—including members of Congress, regulators, and capital providers—at events like the RBFC-sponsored annual Funders Forum + Brokers Expo.
- Stay in the know: get timely updates on industry news, research, and alerts, providing insights on how you can approach your own business strategies more effectively.
- Expand your network: forge connections and create valuable business relationships with industry leaders, customers, and potential partners by attending RBFC events and activities, such as its first annual golf tournament in Miami Beach (which Onyx IQ was proud to sponsor).
- Build trust and your brand: joining the RBFC showcases a commitment to responsible financing and advocacy, which can enhance your MCA operation’s brand reputation and legitimacy—both essential to foster trust among merchant clientele who value ethical business practices.
Moreover, by joining the RBFC, you’re not just gaining access to a network—you’re becoming part of a movement that champions trust and stability in the revenue-based finance industry.
Creating a Brighter Future for Commercial Lending
Supporting the Revenue-Based Finance Coalition isn’t just about throwing your voice behind a cause. It’s about actively contributing to the creation of a resilient, sustainable commercial financing ecosystem.
Indeed, by championing legislative proposals, fine-tuning regulations, and advocating for greater awareness of revenue-based financing products like MCAs, the RBFC is driving tangible change in the industry.
Here at Onyx IQ, we’re proud supporters of the RBFC’s mission.
Like them, we’re committed to making positive strides in the merchant cash advance landscape. Whether it’s by sharing the latest industry news or providing funders with our cutting-edge lending platform—designed by B2B lenders for B2B lenders—we’re dedicated to driving innovation and progress.
Curious about how Onyx IQ can revolutionize your MCA funding?
Don’t hesitate to book a demo with us. Together, let’s pave the way for a brighter, bolder future in commercial financing.
