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7 Quick Thoughts from the Amazon-Parafin MCA deal


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1) The press release from Amazon about the new Merchant Cash Advance program they will be offering in partnership with Parafin mentions a fixed capital fee but it doesn't use the phrasing of 'buying future receivables at a discount', which is the common legal definition from previous court cases. This fee structure is similar to how companies like Stripe explain their similar product.


2) Amazon gives an enormous amount of publicity and credibility to the merchant cash advance product. There are other big names who offer MCAs or products that work the same, like PayPal or the aforementioned Stripe for example, but Amazon is in a class of its own really so they have provided a new level of market awareness and legitimacy.


3) Other eCommerce funders need to adjust if much of their business was coming from Amazon sellers.


4) While Parafin was an unfamiliar name to me in the market not long ago, they must be doing a lot of things right with their technology and credit risk model to gain this partnership. They have a 10 million max advance!


5) Amazon now has a portfolio of term loans, interest-only loans, and lines of credit in conjunction with its third-party financing partners. I would imagine that if all goes well with the new MCA product they will expand these offerings beyond sellers on their platform.


6) Looking forward to seeing how the Q1 2023 numbers compare to the other big fintechs.


7) MCAs are here to stay! With some regulation of course. But too many big players are involved for the MCA product to be destroyed somehow, and that's a good thing for the industry.


 
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