1st Colonial was founded on the principals of helping the small business owner. Small business is the foundation of our country unfortunately, small business lending dried up during the financial crisis in 2008 and 2009 and the alternative lending industry took notice.
Alternative lenders or MCA companies began offering promises of fast turnaround no income verification;no credit check,no collateral loans to business owners and the investment community took notice. In fact, hedge funds quickly figured out that alternative lending was highly lucrative and banks quickly joined the party by offering warehouse lines to lenders to back these loans. If it reminds anyone of the mortgage crisis it should.
These loans quickly get repackaged, bundled together and securitized by fancy Wall Street bankers. They get sold to foreign investors and it’s a win, win strategy for everyone right? Not really because what I have eluded to mention thus far is that the merchant is taking out a short term lending instrument that is due within 120-180 days and the merchant is repaying in most cases 40% or more on the amount borrowed.
In the 1920’s and 1930’s these loans were very common by members of the organized crime and the repayment carried similar terms, although the consequences of default were probably a bit harsher. The loans are borderline loan sharking and violating usury laws except these advances aren’t written in the form of a loan, instead they are advances against future receivables or commonly known as “factoring”. That is until recently.