Why You Specifically Need An MCA Accountant for Your MCA Business

David Roitblat is the founder and CEO of Better Accounting Solutions, an accounting firm based in New York City, and a leading authority in specialized accounting for merchant cash advance companies.To connect with David or schedule a call about working with Better Accounting Solutions, email david@betteraccountingsolutions.com.

Doing the books for a merchant cash advance (MCA) business isn’t like doing the books for other types of businesses. That’s something that seems pretty intuitive for those of us in the industry to understand, but often I see many business owners still trying to handle finances themselves or hand it off to a general accountant who isn’t well-versed in the MCA world, which leads to unfortunate messes that require some costly cleanup work. The reality is that while any accountant can keep basic, or even complex financial records, managing the finances of an MCA business requires more than just a surface-level understanding.

Take a situation I encountered recently: a business owner decided to use their regular accountant to handle their books, deciding that the cost of an MCA industry-qualified accountant was too much for him at that point in time. The accountant he picked was a competent elderly gentleman who produced the financials regularly and on time, and things appeared to be going smoothly until his investors realized their syndication income had been reported incorrectly. The accountant, unfamiliar with MCA-specific accounting, treated the income like a standard loan repayment and the business owner hadn’t noticed the misreporting when he passed the report on to his financiers. The investors were confused and frustrated with the mistaken report, and felt like they weren’t getting a clear picture of the company’s financial health and cash flow situation. I was actually able to help him clear up the issue, but the whole mess and subsequent (thankfully temporary) mistrust could have been avoided entirely if the accountant was someone who understood the specifics of the MCA business.

Handling the finances of an MCA business isn’t just about tracking the cash coming in and out. There are particular rules around recognizing income, such as how to deal with syndication fees, manage different types of funding, and correctly categorize income like commissions and fees. It’s also critical to understand how to report income for tax purposes versus what’s required for investor reporting. For example, recognizing income too soon or too late can have a big impact on your cash flow, tax obligations, and even how your business is perceived by others.

I’ve seen businesses try to use standard accounting methods and find themselves with financial statements that don’t accurately reflect their operations. In one case, a company overstated its income because it applied a generic accounting approach. This not only increased their tax burden but also strained their cash flow. They needed someone who understood the nuances of the MCA world to correct these issues, adjust the income recognition methods, and align them with industry standards.

Another challenge everyday CPAs struggle with is keeping up with the constant changes in MCA deals – from advances in different repayment stages to syndication agreements with external investors. Without careful tracking, discrepancies can quickly arise, and they’re often not noticed until they’ve become significant problems. Even for businesses using cash basis reporting because their revenue is under $10 million annually, it’s crucial to handle things correctly. Deferring tax liabilities by timing income recognition can be a smart move, but only if done accurately. Otherwise, there’s a risk of audits or having to pay back taxes with penalties. I’ve helped businesses navigate these tricky waters after they ran into trouble because their previous accountant didn’t know when to use cash basis versus accrual basis reporting.

A good MCA accountant knows how to navigate the specifics of your business. They understand what to watch out for, how to manage the unique aspects of the industry, and how to avoid problems that could end up costing you time, money, or reputation. I’ve seen too many businesses suffer preventable setbacks by either doing it themselves or relying on someone who didn’t have the right knowledge. The cost of hiring an accountant who specializes in MCA is minimal compared to the potential financial losses from mishandled books or compliance errors.

At the end of the day, having an accountant who understands the MCA industry isn’t just a nice-to-have; it’s a necessity. The complexities of this business require a specific set of skills, and working with someone who gets that can help you keep your business running smoothly and avoid unnecessary headaches in the future. Make sure you have the right support in place to protect your business and keep things on the right track.

They Offered to Reduce My MCA Payments. I Played Along.

It started when I got a cold text that said my merchant cash advances could be reduced by 80%. I didn’t have any advances but was intrigued by the audacity of the offer. REDUCE THEM BY EIGHTY PERCENT!

“Ok,” I thought to myself, “I’ll bite to see where this goes.”

I replied and was assigned a rep via text who introduced himself by name, Mark.

I told Mark I believed his offer to be a scam and sent him a link to an article (that was literally on AltFinanceDaily) in which someone making similar offers had been arrested by the FBI. I was 100% confident that he would disappear but he was undeterred.

“Those were shady companies,” Mark said, assuring me he had nothing to do with them. I wondered if Mark had caught on to who I was because he seemed eager to convince me he was legit. He told me that I’d still have to pay my advances in full but that he would just get the payments for them reduced. That seemed unusually tame compared to what I’d heard about these type of encounters with “debt relief” companies but Mark kept talking.

By signing up with them I’d be assigned a lawyer who would have “leverage” over my MCA provider due to them likely being in default on their own contract. He explained that they were always in breach for failing to reduce the daily payments (a likely reference to reconciliation clauses). Mark’s fee for helping me take advantage of this, the cost of which was not mentioned, would be included in my new regular payments they’d negotiate for me.

Just as I was beginning to realize that I’d be on the hook for paying them for their service on top of apparently still paying my advances, the messages over texts stopped, and he tried to only continue the conversation by phone, which I avoided.

From there robocalls hit my phone 4-5x per day as they attempted to reel me back in until they eventually tried texts again. When they did the offer had changed from them being able to reduce my payments by 80% to only 50%. Weird. Nevertheless, I wanted to get back to where we had left off, finding out the cost of this service, of which I now learned included legal representation by an attorney and a separate case manager. It sounded like it would be very expensive for me and I let him know my concerns. If Mark had known who he was actually speaking to before, the attempt to play it off now had been forgotten.

“Our program is not designed to cost you any additional money,” Mark said. “We go after unpaid fees and interest. You will never have to pay us out of pocket.”

And so that was the pitch, wordplay designed to make it appear the service was free and I would never have to pay them.

The website they referred me to included obviously fake testimonials with stock photos. They were “Trusted”, “Approved” and had been seen on various TV networks. It promises to stop withdrawals from funding companies and that their “in-house licensed attorneys” based in Florida and New York will take care of everything. The 7 month old website, which lists no business address, also claims the team has a decade of experience while the legal entity itself does not appear to exist, at least not in all the states I checked.

As I attempted to track down anything about this company I could find, a breakthrough led me to an address in Miami, which as fate would have it was home to another debt relief company targeting businesses with merchant cash advances. The website is similar. They are “Trusted”, “Approved” and seen on TV. They can also improve cash flow by up to 80%. What a coincidence. The owner of this one also has a colorful background with the law. Although I was not able to fully confirm that this company is the alter-ego of the other, I learn that this second company was just sued in April for allegedly absconding with a merchant’s funds it claimed was being used to pay off MCAs. In another instance the debt relief company is suing a merchant for the recovery of over $400,000, the sum of which it claims was its fee for trying to reduce a merchant’s MCA payments. It would seem that such work is not so free after all.

As my phone continues to ring and ring with offers to reduce my MCA payments, I decide to disengage.

“Sean, how many loans do you have?” Mark resumes. “Sean we will reduce your payments by at least 50%, let’s discuss.”

I ignore him. When he tries me again, he tells me he can reduce the payments by 80%. Then again later by 50%. He never tells me why it changes. His last message more than several months later is a return to the same script.

“Sean, Do you have MCAs hurting your cash flow?”

I’m pretty sure that he can’t be trusted. If your sales drop, you should call your funding company to discuss and stay away from shady pitches like this.

Velocity Capital Group Welcomes Jesse Guzman as New Chief Revenue Officer

Cedarhust, New York – 08/28/2024 – Velocity Capital Group is thrilled to announce the appointment of Jesse Guzman as its new Chief Revenue Officer (CRO). With a distinguished career in revenue leadership, Jesse brings a wealth of experience and a proven track record of driving growth and innovation in the financial services industry.

Jesse Guzman joins Velocity Capital Group after serving as Chief Revenue Officer at Nexi from 2020 to 2024, where he played a pivotal role in the company’s growth and successful rebranding. Before his tenure at Nexi, Jesse was the Director at Arcarius LLC from 2017 to 2020, where he honed his expertise in financial strategy and revenue optimization.

In his new role at Velocity Capital Group, Jesse will leverage his extensive industry experience to lead the company’s revenue strategies, focusing on expanding funding options for merchants and enhancing support for Independent Sales Organizations (ISOs). His fresh ideas and innovative approach are expected to propel Velocity Capital Group to new heights, further solidifying its position as a leader in the alternative finance space.

“We are incredibly excited to welcome Jesse Guzman to the Velocity Capital Group team,” said Jay Avigdor, President & CEO of Velocity Capital Group. “Jesse’s deep understanding of the industry, combined with his visionary leadership, will be instrumental in helping us achieve our ambitious goals. We are confident that his expertise will enable us to provide even more funding to merchants and offer our ISOs the best service they’ve ever experienced.”

Jesse Guzman expressed his enthusiasm about joining the company, stating, “Velocity Capital Group has an outstanding reputation for innovation and excellence in the alternative finance industry. I am excited to bring my experience and fresh perspective to the team and to contribute to the company’s continued success. Together, we will explore new opportunities to better serve our clients and partners.”

About Velocity Capital Group

Velocity Capital Group is a leading provider of revenue-based financing solutions for small and medium-sized businesses. Leveraging advanced analytics and a deep understanding of the SMB sector, Velocity Capital Group offers tailored funding solutions that drive sustainable growth. With a commitment to innovation and customer service, the company partners with Independent Sales Organizations (ISOs) to deliver exceptional value to clients nationwide.

Media Contact:
Bogdan Klubuk
Marketing Director
Velocity Capital Group
Bogdan@velocitycg.com
www.Velocitycg.com

A Broker Diversifies With Suite of Value-Adds

Like many broker shops these days, Connecticut-based Sharpe Capital is offering more than just a revenue-based financing product. Owned by CEO Brendan Lynch who has been funding deals and boarding credit card processing accounts for more than 15 years, the company is now looking much deeper into business owners’ needs through a whole new set of diagnostic questions like whether or not they have a written will, access to a lawyer, possession of a firearm, or ownership in real estate.

The latter on that list, real estate, is becoming more familiar in the small business finance community. Sharpe Capital, for example, added mortgages to its product set about 18 months ago.

“When we talk to anybody on the phone and they start asking questions, ‘oh, what kind of programs do you have? What are the rates?’ now we’ll always say, ‘well, the cheapest way and the most affordable way to get money is, even though rates are higher on mortgages and that stuff right now than they were in the past few years, it’s still the cheapest way.'” Lynch said. “And then what we’ll try to do is explain that it’s going to take a while. ‘How much do you need to get through the next two months while we work this up for you,’ right? Try to get the long term funding going for them and the short term solution all in one.”

More recently, however, the company has added a bundle of services that include things like identity theft protection, legal consultations, will writing, and more. In one example, Lynch said that a merchant disclosed that an IRS audit had slowed down their ability to continue the application process with them and he realized they actually had a solution for that.

“One of the things [this partnered service] covers here is audit services,” Lynch said. “They’ll give you up to 25 hours and walk you through an audit from the IRS. So it was easy. I was like, ‘hey, yeah, let me help you out right now. We signed him up right away.'”

Lynch says that for now, since it’s all still new for them, these value-adds are typically being proposed after the customer onboards for funding but that he’s open to switching it around.

“We’re definitely trying to figure out a way to approach it as the frontend as well,” he said. “The way these leads are being bought and sold so fast and rapidly, you’re fighting with 50-60 different brokers on every deal, you know? … So, we’re really just trying to find something that separates us.”

Lynch argued that in a market where a lot of brokers are essentially offering the same thing, just being personally remembered later on when it comes time for funding again can make all the difference and that being the guy who helped them draft a will for sixty bucks will probably stay fresh in their mind.

“It definitely stands out,” Lynch said. “It definitely opens up conversations where you’re going to get a little more personal with them and build a closer relationship because you’re going to start asking, ‘Are you married?’ Yeah, I know maybe that’s part of people’s sales pitch, but a lot of times we’re just so focused on getting you an offer fast and getting you funded fast, you kind of don’t have time to get into all that, so that afterwards getting to really build the relationship seems to really be working.”