• Collective POS, one of our processing partners recently sold a majority interest to Heartland Payment Systems. Best of luck to all and Heartland, welcome to Canada.

• Canadian Restaurant and Food Services Association recently held their annual trade show in Toronto. Synergy Merchant Services was there on our behalf and had some excellent inquiries and met many interested restaurant owners. Thanks for stopping by the booth!

• Amerimerchant, Canafunding’s parent company, wrote a recent blog entry about Advanceme losing funds on a large restaurant group deal. I have mentioned that one of the key ways to grow the business is by having more competition and players in the Merchant Cash Advance space, awareness is maybe our biggest hurdle to overcome. So, in my opinion, I thought it was “un peu déclasser” the way this was framed, Advanceme Takes a $565,000 Hit , especially after the recent Green Sheet Article that discussed creating industry best practices. Calling out competitor losses is not the way to create industry unity.

• The annual Electronic Transactions Association Trade Show is coming up soon in Las Vegas. This year it will be held from April 15^th -17^th at Mandalay Bay.

There is a short interesting article in the Globe and Mail this morning that has significant impact on small businesses looking for Merchant Cash Advances. It is about what the average Canadian spends their money on in a given year. The dollar breakdowns are available directly from the article, and I have provided percentages here. The average Canadian spends approximately $49,000 on goods and services. I am sure everyone is overjoyed that 20% of our money goes to taxes.

Let’s look at a few items on this chart. Merchant funding is going to have no impact on personal taxes nor on personal shelters (merchant cash advances are not mortgages). Merchant Funding will have minimal impact on transportation, as we are aware of some businesses that will use future credit and debit card receivables to finance cars and trucks for their business (and potential personal use). Personal insurance and pension, health care, education and gambling are all difficult to link to merchant cash advances. However that means 40% of Canadian household spending is done with businesses that can grow, target, invest, build up inventory, renovate and expand by using merchant cash advances.

As I wrote in the merchant cash advance blog last week, we have a lot of exciting things going on at the office. Unfortunately that has left me less time to write my blog due to my reduced time to read articles where I get ideas and inspirations from. However, I have been doing a lot of reading about credit risk and risk modeling lately. Here are some of the better stuff (web sites, articles) and such that I have tackled. A lot of this applies to underwriting Merchant Cash Advances and financing small businesses.

The Black Swan by Nicholas Taleb (I've mentioned him before, but Taleb is one smart cookie who has a unique way of looking at the market)

This is an article written in Condé Nast Portfolio Magazine by one of my favorite authors, Michael Lewis (Liar’s Poker, Moneyball, The Blind Side). It talks about Taleb’s view of risk versus the Black-Scholes Model for Pricing Risk, and the short-comings of the model.

Default Risk is a great website with links to academic papers and practical ideas with respect to credit risk and underwriting.

Portfolio Magazine has 2 excellent blogs, updated many times throughout the day, an Economics Blog as well as a Finance Blog

Sorry for the lack of updates as of late, I have been traveling and the business has been quite busy. We have a lot of exciting stuff going on in the office, which I will be able to share shortly.

A few quick notes:

The Canadian Restaurant and Food Service Association Trade Show is coming up soon. It will be held in Toronto March 2-4. We will not have a booth there but some of our partners, including Synergy Merchant Services will be represented. If you are at the show please stop by their booth for Merchant Cash Advance information.

Encouraging U.S economic news this morning as January retail sales increased

Canafunding’s U.S Parent Company, Amerimerchant, has a post on their Merchant Cash Advance blog about the merchant funding market size in the U.S. estimates have it as large as $1B USD. His entry was based on this Green Sheet article. So, if we use the traditional 1/10 rule to define the Canadian marketplace Canada represents a $100M market size, though personally, I believe it to be larger, due to significant differences in the 2 countries (I’ll write about this in a future post).

I recently wrote about the success business owners have had using Merchant Cash Advances to fund the 1-time and special events that come to their city, town or region. I, shamefully, omitted one of the biggest celebrations in Canada this year; Quebec City’s 400^th Anniversary.

February is traditionally the slowest month of the year for retail and restaurants. However, if you operate a business that depends on Valentine’s Day sales this is a very busy time of year. Most businesses that will use merchant cash advances for funding their Valentine’s Day business will have already done so, specifically, florists, chocolatiers and restaurants. However, first of all, its not too late to finance a quick order. Second, a lot of these same types of businesses will get another bump for Mother’s Day. So, the merchant funding they would receive now could help bridge their business between the 2 “Hallmark Holidays”.

Sorry for the lack of entries lately, some of us were in Sunny FLA for a few days…please do not be spiteful…

So, it’s February in Canada so that must mean its RRSP season followed closely by tax season. A quick note on RRSPs, when I went to my bank recently to get some $USD, the teller asked me 3 times about my RRSP. I let her know she was doing an excellent selling job and that the shareholders should be pleased. But, let’s take a moment to discuss taxes and the only good part of the tax season, the refund.

I won’t spell it out but think about how you can tie Merchant Cash Advances and your tax refunds together to help your business with funding.

Back later in the week, when my desk clears up…

It is a good time to be a fan of the Montreal Canadiens, Ottawa Senators, Calgary Flames and Vancouver Canucks. Not as good a time for fans of the Edmonton Oilers or Toronto Maple Leafs. However, as all hockey fans know, the real season starts in April with the playoffs. Bar and restaurant owners are even bigger fans.

When we look at funding merchants in Canada the spike in bar sales and bar/restaurant sales in April and into May is very impressive. The biggest reason, even more than people wanting to get out of their homes after a long winter, for this spike is due to NHL playoffs.

So if you are a bar or restaurant owner who is looking to be able to fund the coming busy season a merchant cash advance, a leading form of alternative financing for Canadian food service establishments would be very beneficial. The restaurant or bar proprietor could use this up front cash to pay for signage and advertising, new giant screen HDTVs, new furnishings, tables and chairs or new placeware. Then while the playoffs are on (and hopefully the Habs are winning), the funding can be paid back from the incrase in sales.

I recently hurt my back playing hockey and have been going to physiotherapy. Earlier today as I was sitting in the waiting room (and mildly annoyed that they only took cash or check), I realized that medical practitioners are a very viable group for Merchant Cash Advances. Practitioners who practice in a hospital or under Medicare may not qualify due to the potential legal issues, high price ticket and bureaucracy in the system. Other specialists such as dentists, PT/OT, dieticians, chiropractors, orthopedic specialists, and others, however would and do grow their businesses with a merchant cash advance. We have seen these practitioners finance their equipment purchase or use merchant funding to develop marketing and advertising programs for their practices.

I have an old friend, Scott Friedmann, who is a principal at a consulting firm in Toronto called Idea Couture. As their website states they are focused on interaction-innovation-incubation or “where design school meets business school”. The CEO has a terrific blog as well. So I applied some innovative thinking, using the other side of my brain and asked myself the following question…

Peter, what would be an interesting line extension for Merchant Cash Advances, where we provide existing business’ with funding based on their future electronic payment cash flow.

Well, the first idea that came to mind would be a way to fulfill the many requests that Merchant Cash Advance providers receive from start-up business’. I will give you my own fictional example. Recently, Plattsburgh Airport has reopened and been offering flights to Fort Lauderdale and Orlando. Plattsburgh is 1 hour from Montreal and offers greatly reduced fairs to American destinations. Limousine and customs clearance services from Montreal would be a great service to offer. The package would certainly be paid by credit cards. The airport traffic has beaten every estimate, so the volume is there. The new venture will require advertising and auto financing.

So, instead of just providing financing to existing merchants, Merchant Cash Advance providers could provide both funding as well as incubation , innovation, and business know-how. Think of it as a different stream of venture capital and alternative investment.

Eeesshhhhh…to be a stockbroker today….

Most of you have probably heard the news that the U.S Federal Reserve Bank cut the Federal Funds Rate by 0.75%, the largest drop since 1991.

An old McGill professor of mine, Chris Ragan was on the radio this morning and I will paraphrase what he said.

Those of us with pension funds will see paper losses this morning and in the next short period. The same people with pension funds will have seen large gains over the last 3 years. So long as you weren’t too happy and cheering for the gains over the last 3 years, you shouldn’t be upset about the current losses. (Professor Ragan, as usual, said this better than I did)

One thing is for certain, as the U.S is in a recession (ok, I will say approaches because the official data is not in yet), financial institutions both in the U.S and Canada will be more hesitant to lend to historically risky businesses. This will allow Merchant Cash Advance providers and other alternative financing and merchant funding options to proliferate.

If you need a laugh today, click on the link for a very humorous take on How The Markets Work.