Cash Advance Providers Need Lending Software Automation
If a business needs quick access to cash, it can easily obtain it through a merchant cash advance (MCA), provided it receives approval. Luckily, 84% of MCA applications were approved in 2020, as per the US Federal Reserve. Borrowers repay fixed portions of their daily sales in MCAs, a credit product.
In essence, MCAs fall under the umbrella of “alternative lenders,” or perhaps more aptly termed “alternative financiers.” A recent study suggests that by the end of 2021, the global transaction volume for these financiers will reach approximately $341 billion, with an average transaction size well below $6,000. Despite active efforts, a 30% higher demand for alternative financing than available supply creates a notable gap, especially for businesses.
It’s essential to note that MCAs are not traditional loans, a distinction upheld in legal battles. In 2016, a New York Supreme Court justice rejected a usury claim against an MCA provider, highlighting that a future sales cash advance doesn’t qualify as a loan. This perspective was reaffirmed in a 2018 decision, solidifying the non-loan status of MCAs.
The Federal Reserve acknowledges the importance of MCAs in the business-to-business (B2B) funding landscape. These instruments are vital in boosting the economy by offering small-dollar credit to small businesses. MCAs are a vital alternative for small businesses to secure capital, recognized by the Fed due to the shortfall in meeting credit needs.
As for the terminology, some argue that terms like “funding” or “financing” make more sense than “lending.” Regardless of the semantics, the technology behind these processes remains the same. Vergent LMS, a financing software maker, asserts that the technical distinction between funding and financing is practically irrelevant.
In the realm of MCAs, Vergent LMS underscores the importance of a state-of-the-art financing platform. This platform offers a customizable MCA finance application with diverse scoring, flexible rates, and seamless integrations. The solution enables deep customization without requiring source code editing, offering a user-friendly experience for both clients and employees.
In conclusion, small businesses seek MCA financing, exchanging a percentage of sales for a modest lump-sum cash advance. Vergent LMS stands ready to assist MCA providers and others in navigating these challenges and finding success in various industries. For those interested, the Merchant Cash Advance Solution by Vergent LMS offers automation and efficiency to streamline the lending process.
Contact Vergent today for answers to your questions or to schedule a demo and experience firsthand how Vergent can elevate your lending operations.
Frequently Asked Questions
Which lending processes benefit most from automation?
Payment posting, delinquency tracking, regulatory notice generation, loan statement production, and collection queue management deliver the highest ROI from automation. These are high-volume, rules-based tasks where manual processing creates errors and delays.
By the numbers: The ACH Network processed $93 trillion in 2025, with B2B ACH growing 9.9% to 8.08 billion transactions worth $63 trillion, per Nacha. 70.5% of banked U.S. households now transact primarily through digital channels, per the FDIC — scale that is only achievable through end-to-end lending automation.
How does lending automation reduce operational costs?
Automation reduces cost per loan by eliminating manual touchpoints. Lenders with highly automated servicing operations typically process 3–5x more loans per employee than those relying on manual workflows — directly improving profitability per origination.
What’s the difference between rules-based and AI-powered automation in lending?
Rules-based automation executes predefined logic — for example, sending a payment reminder 3 days before due date. AI-powered automation adapts based on patterns — for example, adjusting reminder timing based on which approach historically drives repayment for each borrower segment.
How do lenders get started with lending process automation?
Most lenders start by automating payment posting and delinquency notifications — high-volume processes with clear rules and immediate ROI. From there, they layer in compliance notice automation and collection workflow management. The key is choosing an LMS that supports all these capabilities natively.
Related Reading
- What Is an API in Lending? — How open APIs power modern lending integrations and automation.
- Loan Origination Best Practices for Lenders — Actionable best practices for faster approvals and lower risk.
- What Makes Great Loan Management Software? — The 12-feature checklist every lender should use to evaluate platforms.
