Lightspeed Says Its MCA Book Is the Biggest Use of Cash It Has

Lightspeed's CFO told analysts the company has $160 million in merchant cash advances outstanding, default rates in the low single digits, and that growing the advance program is its largest planned use of cash outside share buybacks. She also said the quiet part: customers who take capital churn less.

Lightspeed Commerce reported first quarter fiscal 2027 results on July 30, $322.7 million in revenue, 17% organic growth, and a net loss narrowed to $2.4 million from $49.6 million.

The press release gives the funding business one bullet: Lightspeed Capital revenue of $14.5 million, up 56% organically and 39% as reported. That's the fastest-growing line the company disclosed. Total revenue grew 17%. Software grew 8%. The advance business grew 56%.

The earnings call gives it considerably more, and what CFO Asha Bakshani said there is the reason this matters to anyone funding small business.

Capital is the second-biggest thing they do with money

Asked about capital allocation, Bakshani said that aside from potential share buybacks, the company's largest use of cash will be the continued growth of the merchant cash advance program. She put the outstanding balance at $160 million at quarter end and said the company intends to keep expanding it.

Pressed later on priorities, she said: outside of buybacks, the merchant cash advance business is where Lightspeed is investing to deliver long-term shareholder value. Two priorities. One of them is funding merchants.

This is a company with $372 million of cash, no meaningful long-term debt, and a $400 million buyback authorization. It has chosen to point its balance sheet at small business advances.

The number that should make you think

Bakshani said customers who take Lightspeed Capital exhibit significantly lower churn and generate higher lifetime value, and that growing the offering is a key priority.

This is a retention rationale.

An independent funder makes money on one thing: the advance. The spread has to carry acquisition cost, underwriting cost, servicing, defaults, and profit, all of it, from the factor rate alone. A platform funder makes money on the advance and on the subscription revenue it just protected and on the payments volume it just kept from walking. Same merchant, three revenue lines, one credit decision.

A funder with three ways to get paid can underwrite to a lower return on the advance itself and still come out ahead. That is the structural competitive fact of embedded capital, and it has nothing to do with the cost of capital or technology. It's that the advance doesn't have to be profitable on its own for the platform to want it.

Low single digits

The other disclosure worth marking: Bakshani said the company remains disciplined in underwriting and that default rates have stayed consistent in the low single-digit range, which is what gives it confidence to keep expanding.

A public company putting a default figure on an MCA book is rare, and it gives the industry a benchmark it usually has to guess at. Hold it against your own portfolio, but hold it against the right comparison. This is a book underwritten on complete transaction history, with repayment captured at the settlement rail, on merchants the funder can see in real time and has a software relationship with. It should outperform a book built from four months of bank statements on a merchant nobody has a second hook into.