Weekly Insights from Sol Berkoff
Principal at Charleston Capital, Inc.
How big is the market for small business finance?
We at CCM estimate the current market is around $225 billion. UBS estimates that market should be around $300 billion.
How do we get to $300 billion?
We expand electronic payment finance.
According to JP Morgan, in 2017 there were $7.8 TRILLION in electronic payments.
Source: JP Morgan
Loans are the main way small businesses access capital.
But advances in modern payments technology means there is another choice.
Using a merchant cash advance (MCA), finance companies can buy future electronic payments from a business at a discount. The advance gets paid back by a fixed percentage of the business’ daily electronic receipts. MCAs are a niche product today because they typically have high APRs. But we think that will change as finance companies get more experience with them and businesses are offered lower APRs.
At CCM we are excited by electronic payments and small business finance.
Because with modern technology, someday small business finance could be in the TRILLIONS.