The Merchant Cash Advance Seeks Opportunity In Disruption
WESTBURY, NY / ACCESSWIRE / March 9, 2021 / FAVO Realty Inc. (OTC Pink:FAVO)
Business model flexibility became a lifeline for businesses of all kinds amid the pandemic. Whether it be manufacturers switching their product lines to create more PPE, or restaurants embracing carry-out only amid social distancing requirements, quickly adjusting to the new and sudden pressures of the market was an essential characteristic of the firms that were able to endure the volatility.
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But that market uncertainty can also create opportunity, according to FAVO Capital Founder and CEO Vincent Napolitano. FAVO Capital recently announced its completed rebrand from FAVO Realty, several months after Napolitano decided to adjust the firm's focus as a commercial real estate company (which it will continue under the FAVO Realty brand), to an alternative small business financier (under the FAVO Capital brand).
With both divisions now making up FAVO Capital, the initiative signaled a chance to step into the small business financing arena through merchant cash advances, invoice financing, and other types of short-term funding products. Speaking with PYMNTS, Napolitano discussed why the market is well-positioned to add another alternative lender to the scene, and why the merchant cash advance can be a valuable tool for small and medium-sized businesses (SMBs) gearing up for market recovery - despite the funding tool's often negative reputation.
A Gap In The Market
Similar to the financial crisis of 2008 and subsequent pullback among traditional lenders from the small business funding space, today's economy signals a familiar skepticism among banks when it comes to backing their SMB clients, according to Napolitano.
"Banks are just not lending like they used to," he said. "They won't lend, or if they do lend, it takes a long time for these merchants and small businesses around the country to get their money."
Today, there is a convergence of factors creating a promising opportunity for new market entrants, including banks' possible reluctance to finance small firms, as well as the growing number of businesses in search of capital to survive.
The Paycheck Protection Program (PPP) has similarly surfaced in an environment in which small businesses are desperate for working capital. In a sense, the PPP initiative has highlighted the value of alternative lenders and FinTechs, digital-focused companies that have been able to facilitate PPP applications and funds issuance, often with greater agility than the big banks.
At the same time, it's also lifted the veil on just how vast the appetite for working capital is among SMBs today. According to Napolitano, PPP loans aren't enough.
"It doesn't meet all of their capital requirements," he said. "It gives them a 'shot in the arm,' or a boost, short-term."
Intelligent Funding
PPP isn't a silver bullet for small businesses, emphasized Napolitano, who warned that even if a small business is able to access such aid, business owners still need to be smart about how they run their business to remain financially viable.
That's true when it comes to accessing any type of funding, especially the merchant cash advance - the financing product upon which FAVO Capital is focused, and one that has earned an often negative connotation in recent years thanks to issues like sky-high interest rates and hidden fees. The tool is now at the center of many regulatory discussions surrounding borrower protections, and led to a lawsuit filed last year filed by New York Attorney General Letitia James.
"Unfortunately," said Napolitano, "you'll find a lot of bad actors and bad seeds."
He said he'll be using his background as a Wall Street executive to keep compliance front and center as FAVO Capital finds its footing as an alternative lender. For small businesses, he said, it's important to offer a variety of financial products in addition to the MCA, allowing entrepreneurs to access short-term financing that can flex with them as they grow. It's about building a relationship with businesses to arm them with tools for long-term success, rather than merely transacting with small business customers, Napolitano said.
With the rebrand now finalized, FAVO Capital is now exploring collaborations with FinTechs to streamline a variety of workflows, including underwriting and loan monitoring to strengthen the small business customer experience. SMBs are in need of capital today, but Napolitano predicts demand will only continue to increase in the months ahead.
"We saw a lot of smaller funders went under, larger funders exited the space, or they pulled back the reins and weren't lending as much," he said. "We thought, more than ever, there could be a big opportunity to get into this space as the economy tries to get back on track in '21 and '22."
More About FAVO Capital Inc.:
FAVO CAPITAL is a Direct Funding Company, which provides customized, short-term funding to small and mid-sized businesses nationwide. FAVO Realty is a Real Estate Investment Company which invests in a diversified portfolio of quality commercial real estate properties throughout the United States. "FAVO" is "Honeycomb" in Latin - The Honeycomb (Hexagon) is the most efficient shape in the universe. FAVO Realty Inc. intends to be Efficient, Flexible & Durable. www.favocap.com
More About FAVO Group, LLC:
FAVO GROUP, LLC is the External Manager of FAVO Capital, Inc. (FAVO - OTC Markets). They were founded by a Group of Capital Market, Finance, Real Estate and Business professionals with over 100 years of collective experience and have transacted in over $6 billion of related transactions. www.favogrp.com
CONTACT:
Email: info@favocap.com
Tel: 833.328.6477
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SOURCE: FAVO Capital, Inc and FAVO Group, LLC
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