Notes on Specialty Finance

A merchant cash advance is a purchase of future receivables, not a loan. Here is the order I underwrite in when I participate in a pool: duration, capacity, renewal history, deposit health.

Receivables duration risk compounds with every week outstanding. After twelve years in specialty finance, I favor paper of six months or less: exposure compresses, capital recycles, deterioration surfaces in days.

Merchant cash advance underwriting is mostly exclusion, not pricing. Here's how I read capacity off the tape, and why I say no early to protect the capital I deploy.

Most allocators who say they hold private credit hold direct lending. I work a different corner of the category. Short duration commercial receivables purchased under UCC Article 9 sits inside specialty finance and behaves nothing like a three to seven year corporate loan. Ali Barkhordar writes from Ultimate Business Capital in Sheridan Wyoming.

Every week I see the same assumption repeated: the business used cash flow financing because the bank said no. I have been in this market long enough to know that framing is wrong more often than it is correct. The bank did not decline them. The bank does not offer this product. Those are two different statements and the distinction matters at the level of the operative legal document.

A new data point on private credit caught my attention, and it's worth a closer look.

Most funders judge revenue-based funding by stack position. I don't. After years in this, what predicts performance is capacity — revenue, bank consistency, and real coverage of what's already owed. Here's why position is the lazy metric.

Most files on funding platforms look fine on paper. The ones that stop me are the renewals. After twenty years in specialty finance underwriting, here is the signal I trust above almost everything else.

I pulled the Q1 numbers this week. Five sectors are leading non-bank capital demand across the country, and they're the same five sitting on my desk most days. Here's what I see when I read these files.

I have been reviewing files for a long time. The use case for cash flow financing has changed. It used to be emergency capital for a slow month or a surprise expense. Now I open a file and the entire growth plan is built around it. New hires, new locations, inventory orders. This is the primary way most small businesses on Main Street are growing now. Not bank loans. Not SBA. Cash flow financing. When did this happen?