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What is Global Lending Services?

A Comprehensive Look at the Merchant Cash Advance Industry

Merchant cash advances (MCAs) have become an increasingly popular financing option for small businesses – but what exactly is Global Lending Services, and how does it fit into this industry? Let’s take a deep dive.

The Rise of Alternative Lending

Traditional bank loans can be difficult for many small businesses to obtain. Stringent requirements around credit scores, collateral, and financial history often exclude younger companies or those with imperfect credit.

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This created an opportunity for alternative lenders like merchant cash advance providers to step in. MCAs offer more flexible underwriting and faster access to capital than banks – but at a higher cost.

How Merchant Cash Advances Work

With an MCA, a company receives an upfront sum of cash in exchange for a percentage of future credit card sales or revenues. Repayment is made through a fixed percentage of daily batches until the advance plus fees is paid back.

For example, a business might receive a $20,000 advance in exchange for 15% of credit card sales until $28,000 is repaid (the original amount plus fees). Repayment is automatic through splitting batches with the MCA provider.

The big advantages are:

  • No credit check required
  • Fast access to capital (approvals in 1-2 days)
  • No collateral needed
  • Fixed repayment amount (percentage of sales)

The big disadvantages are:

  • Extremely high annualized interest rates (70-350% APR equivalent)
  • Repayment through holding receivables (less cash flow)
  • Stacking risk if taking multiple advances

So while MCAs provide fast capital for struggling businesses, the costs can quickly spiral out of control if sales don’t increase as expected.

Examining Global Lending Services

Global Lending Services (GLS) is a large, multinational merchant cash advance provider based in Atlanta. They work with small businesses across numerous industries like retail, restaurants, healthcare, and more.

Some key facts about GLS:

  • Founded in 2012
  • Over $2 billion in fundings to date
  • Operate in the U.S., Canada, UK, Australia and New Zealand
  • Offer advances from $5,000 to $500,000
  • Approval rates around 50-60%

GLS utilizes the standard MCA model of providing upfront capital in exchange for a fixed percentage of future sales or revenues. Their underwriting process evaluates factors like:

  • Annual revenue and cash flow
  • Credit card processing statements
  • Time in business
  • Public records and liens

While they market themselves as a flexible alternative to bank loans, critics argue GLS (like many MCA companies) prioritizes deal flow over responsible lending practices.

Potential Issues with the MCA Model

The merchant cash advance industry has come under scrutiny for certain business practices, some of which Global Lending Services has been accused of:

Stacking and Overadvancing

Since MCAs don’t require personal guarantees or collateral, it’s easy for businesses to take out multiple advances from different lenders. This can quickly lead to a debt trap where most revenues go towards repayments.GLS has been accused of overadvancing to struggling businesses, worsening their financial situation.

Opaque Pricing and Terms

MCA contracts can be confusing, with fees quoted as factor rates instead of APRs. This makes it difficult for borrowers to understand the true costs. There have been allegations of hidden fees and terms from some MCA providers.

Aggressive Collections

Since MCAs are not loans, they are subject to different regulations. There have been reports of aggressive collections tactics like excessive debt reselling, freezing accounts, and intimidation from some firms.

Securitization Risks

To fund their lending, many MCA companies package and sell their future receivables to investors through securitization. This creates misaligned incentives to maximize deal volume over quality.

While Global Lending Services has not been directly implicated in all of these practices, the lack of industry regulation and transparency raises concerns.

Evaluating the Pros and Cons

Like any financing product, merchant cash advances have potential benefits and risks that businesses must carefully evaluate:

Pros of MCAs

  • Fast access to capital (1-2 day approvals)
  • No credit check or collateral required
  • Fixed repayment schedule based on sales
  • Flexible for businesses with poor credit

Cons of MCAs

  • Extremely high annualized borrowing costs (70-350% APR)
  • Repayment deducts from cash flow (% of receivables)
  • Stacking risk if taking multiple advances
  • Lack of consumer protections and regulations
  • Potential aggressive collections practices

For businesses truly in a short-term cash crunch, an MCA can provide a lifeline. But the high costs and risks of stacking make them unsuitable for long-term financing needs.

The Need for More Transparency

As the merchant cash advance industry continues growing, there are increasing calls for more oversight, transparency and consumer protections:

  • Clearer disclosure of fees as APR equivalents
  • Limits on stacking and compounding advances
  • Regulations around collections practices
  • More due diligence from lenders on ability to repay

Reputable MCA providers like Credibly have taken steps to self-regulate, capping fees and APRs while increasing transparency. But comprehensive federal regulations may ultimately be needed.

In the meantime, businesses must carefully evaluate their financing needs and ability to repay before taking an MCA. While convenient, the high costs can exacerbate financial troubles if not used responsibly.

The Future of Alternative Lending

The rise of alternative lenders like Global Lending Services reflects an unmet need for flexible capital among small businesses. But it also underscores the importance of responsible lending practices.

As the industry matures, there will likely be a shakeout – with more reputable players adopting transparent pricing and underwriting. Increased regulation may also help curb some of the more predatory practices.

But merchant cash advances (and other alt-lending products like revenue-based financing) are here to stay. For businesses unable to qualify for bank loans, they provide vital access to growth capital when used judiciously.

The key is finding a balance – giving small businesses the fast, flexible financing they need while protecting them from cycles of unsustainable debt. With more transparency and smart regulations, the alternative lending industry can be a positive force for economic growth.

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