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Adding Merchant Cash Advances to Your Investment Portfolio

February 7, 2023

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The Advantages of Adding Merchant Cash Advances to Your Investment Portfolio

If you’re anything like us, you’re always on the lookout for the best investment opportunities to grow your wealth and achieve your financial goals. It won’t have escaped your notice that traditional investment options like stocks, bonds, and real estate are becoming increasingly crowded and giving faltering returns.

In an environment of recession and with a lot of uncertainty about the future, more and more investors are looking to alternative assets for the unique and highly valuable benefits they can bring.

Already know you want to invest in MCAs? Get set up here.

Two rows of fiat currency cash. Adding Merchant Cash Advances
Alternative assets can help to protect your ROI. Photo by Ibrahim Boran on Unsplash

Alternative assets can offer low correlation with the traditional markets (great news for you when we are in a downturn like this one), as well as critical diversification to hedge against losses and protect your overall portfolio return.

One such asset is merchant cash advances (MCAs). We have been in the MCA investing business for years and this is the type of alternative asset that we specialize in. Our team boasts decades of experience in the specific nuances and benefits that MCAs can bring, which is why we know that they are still pretty poorly understood by investors.

This, however, can be your secret advantage.

Whilst widespread knowledge about MCAs remains low, you can reap the rewards of this untapped arena of investing.

What actually is an MCA?

MCAs are a unique form of financing for small businesses that are in need of working capital. Instead of borrowing a fixed amount of money like with a traditional loan, businesses receive an advance on their future credit card sales.

The repayment of the advance is then automatically deducted as a small percentage of their daily credit card sales. Getting financing in this way is attractive to small businesses because it is quick, much easier to get than a bank loan, and has a flexible repayment structure.

MCAs are especially attractive to small businesses during economic downturns because so many businesses need operating capital TODAY. The drawn-out bureaucratic procedures that merchants have to go through when applying for loans from a bank can’t meet their immediate need for working capital, but MCAs can.

Investment screen showing strong ROI. Adding Merchant Cash Advances
MCAs bring crucial diversification. Photo by PiggyBank on Unsplash

This is why we can expect to see an uptick in the number of merchants accessing MCAs over the next 12 months, which, in turn, can mean a commensurate uplift in the diversity and profitability in MCA investments. Good news for you.

As well as being a lifeline for small business owners, MCAs offer a number of benefits to you as an investor.

  • Firstly, they offer the potential for higher returns compared to traditional fixed-income investments. The returns on MCAs typically range from 10-30% per year which we think is pretty impressive at any point in the market cycle, but is especially crucial in the context of our current bear market. You can check out the data in Forbes, Small Business Trends, and
  • Secondly, they are not subject to the same interest rate fluctuations as traditional fixed-income products. This makes them an attractive option for investors looking to diversify their portfolios and reduce the impact of interest rate volatility.
  • A third major advantage of MCAs is that, like all alternative assets, they tend to have a low correlation with traditional markets. This means that unlike stocks and bonds, which tend to move in tandem with the stock market, MCAs have a unique risk profile that makes them a potentially valuable addition to any investment portfolio. This low correlation means that MCAs can provide a hedge against market volatility, helping to smooth out the ups and downs of your overall portfolio.

Something that we think is really underrated is the fact that MCAs are also a relatively new asset class, which means that there is still a lot of untapped potential for growth. As more and more small businesses discover the benefits of this type of financing, the demand for MCAs is likely to increase.

Again, what this means for you is that the growing trend of small businesses accessing advances could translate into even higher returns for investors who are early to invest.

close up of gold leaf 100 dollar bill. Adding Merchant Cash Advances
MCAs remain a relatively untapped market. Photo by Giorgio Trovato on Unsplash

Finally, it is worth mentioning that MCAs can also offer a level of social impact. By financing small businesses, MCAs can help to support the local economy and create new job opportunities. This type of investment can align with the values of socially responsible investors who are looking to make a positive impact on the world while also generating financial returns.

To summarize, merchant cash advances are a unique and promising alternative asset that offers the potential for high returns, low correlation with traditional markets, and social impact. What’s not to love?

As more investors become aware of the benefits of this asset class, we expect to see more demand for MCAs and increased opportunities for investors to benefit from this innovative investment. If you are looking for an alternative investment that offers both financial and social returns, merchant cash advances may be a great option for you to consider.

We have recently launched a 24-month MCA note which aims for a 12% return. You can sign up here, or log in if you already invest with us to start taking advantage of this new hands-off mid-term note.

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