This is a great article. The conventional wisdom of the industry has been to keep the deals as short as possible to minimize the risk of default. This ignores the impact to the merchant over the long term. ARF uses a different theory. Even a starter business will get a 12 month term with most getting 18 months. There are 3 elements common to every deal. They are the advance amount, payment, and price. Of these, the payment is the one that will have the greatest impact on the business. By making the terms longer, there is a lower risk of hurting the business therefore making the default rate lower. The longer term also allows a greater advance amount. Therefore the impact of the loan has a much better chance of helping the merchant.
This is completely opposite of the underwriting guidelines of every company I know. Not every merchant can be approved but I do think the industry needs to be more accountable for the well being of the merchants we serve.www.advancerestaurantfinance.com/matt