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New Novo MCA Product Offers Key Differentiators

Novo Funding

Fintech company Novo, known for its business bank accounts, has launched an MCA

product with some interesting features. With my initial review of this product, it seems Novo has set up a product that differentiates itself in the market. I'll discuss those and some other notes from the Press Release.

Novo MCA product

The press release states that Novo secured a $125 million facility from Victory Park Capital (VPC) to provide working capital through this new offering. Novo Funding aims to offer small businesses a quick and flexible way to access working capital.

Nothing new there, however, it's noticeable that Novo does not mention the phrases 'merchant cash advance' or 'revenue-based financing' in the press release, instead choosing to use 'working capital'. On their website, they do use merchant cash advances.

What does this mean?

To me, it meant they thought there is enough of a negative connotation to the phrase merchant cash advance that it would be better to use different terminology. However, if the cost of capital is low enough, no business owner is going to care what you call it.

Novo Funding
Novo Funding

Something that new entrants continue to say, as Novos' CEO did, is that for small businesses there are 'limited options for access working capital'.

I don't agree with that notion any longer as there are hundreds of MCA funders alone, not to mention the other great alternative-to-bank business financing options.

The more pressing issues today for merchants are finding a trustworthy funder or broker that has a cost of capital that meets their needs if they qualify for it.

Other Key points:

  • Novo says their 'monthly rates' (factor rate) are as low as 1.5%, which when compared to other well-capitalized MCA funders in today's economy is a good rate.

  • Novo claims, as many do, that their application process is streamlined, with a review completed within 24 hours and instant access to up to $75,000 of working capital once approved. That relatively low maximum tells you that their target audience is truly small businesses and since most MCAs are less than $75,000 anyways, this maximum shouldn't hurt their ability to meet the market's needs.

  • A key differentiator for Novo Funding is that they offer monthly payments, which is rare.

  • Even rarer and another differentiator, Novo Funding offers revolving access to the approved funding amount and lets the business owner draw on the MCA partially if they want to which is similar to a Line of Credit (LOC). The business owner would get 6-month repayment options with each draw. So it's really a hybrid MCA/LOC product!

  • Novo will give businesses full discretion over the use of the funds and only pay for the funds accessed.

  • Novo Funding is available to small businesses that have been operational for at least six months, have at least six months of business checking account transaction history, and currently require you to maintain an open Novo business checking account.

  • There is no mention of a Referral Partner channel in the press release or on Novo's website. Right now it seems it's all direct to the merchant.

So if you're a business owner, I would get signed up with a Novo Business Bank account first just so you have financing options down the line. It's the same reason for having your processing setup with a company like Stripe which offers MCA-type loans.

I actually went through the process of getting a bank account to write this article.

It was absolutely seamless, took about 5 minutes to fill out the application, and got approved in less than 30 seconds.

All I needed was some basic information, my EIN, Legal business name, and a photo of my DL. There was no credit check.

Business owners can use this account as a backup, worst-case, so it's worth it to me given all of the new services Novo offers.

To get started with Novo click the button below.



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