What the Election Means for The Merchant Cash Advance Business

Next week’s vote will decide more than the presidency. For merchant cash advance funders and brokers, it will set the backdrop for taxes, oversight, trade and the cost of bank credit through 2025. Only one of those variables is documented well enough to quantify. This piece works from the numbers that exist and treats the rest as scenarios to watch, not predictions.

The one documented variable

The corporate tax rate is 21 percent today, set by the 2017 tax reform. The Tax Foundation reports that former President Donald Trump has considered a 20 percent or a 15 percent rate, while Vice President Kamala Harris has proposed 28 percent, after earlier floating as high as 35 percent.

The same research notes two background facts. The individual provisions of the 2017 reform are scheduled to expire after 2025, and extending them in full would cost more than $4 trillion in revenue. On the Tax Foundation’s July 2024 model, a 15 percent corporate rate would lift GDP about 0.44 percent, and a 28 percent rate would lower it about 0.61 percent. Those are estimates of corporate-rate effects on the whole economy, not on small-business financing, so they bound the debate without answering the MCA question.

Scenario 1: taxes and merchant cash flow

Tax changes reach the product through merchant cash flow. A lower after-tax burden can leave merchants with more room, which could lower demand for short-term capital. Heavier burdens can have the opposite effect. Neither is a given.

What to watch: any extension or lapse of the individual provisions after 2025, and whether funders see renewal requests or new-advance applications change in the first quarters after a decision.

Scenario 2: oversight and compliance cost

If federal and state oversight of commercial financing tightens, funders face higher compliance costs and brokers face more conduct rules. If it loosens, those costs ease, though state-level activity can continue regardless of what Washington does. This analysis does not attribute specific regulatory positions to either candidate, because those positions were not sourced for this piece; readers should check platforms and agency statements directly.

What to watch: agency rulemaking agendas, personnel announcements at the agencies that supervise commercial financing, and state legislative calendars. Verify current law in each state before relying on any summary.

Scenario 3: trade policy and working capital

Trade policy can cut both ways for merchants. Disruption to supply chains can raise working-capital needs, which may raise appetite for short-term capital such as an advance. The same disruption can strain margins and make repayment harder, raising the risk that a funder takes on. Calmer trade conditions would reduce both effects.

What to watch: import-dependent sectors. Funders can track whether remittance patterns in those verticals shift after any change in trade policy.

Scenario 4: cost of bank credit and product choice

This is where the product comparison sits. When bank term credit becomes cheaper or easier to get, some merchants will prefer it to an MCA. When bank credit stays costly or hard to reach, an advance remains an option for merchants who prefer or need an alternative to bank credit. The effect is a shift at the margin, not a switch.

What to watch: bank lending conditions reported by regulators, and whether merchants in a funder’s pipeline are comparing the advance with term credit.

Timing and the limits of campaign positions

Campaign proposals are starting points. A corporate rate on paper still needs legislation, and the Tax Foundation’s own ranges, 20 or 15 percent on one side and 28 percent after an earlier 35 on the other, show how much the positions themselves have moved. Because the individual provisions expire after 2025, tax uncertainty runs into next year whoever wins. The vote starts the clock on that decision. It does not end it, and funders that wait for clarity before planning will be waiting a while.

What not to assume

Neither outcome is automatically good or bad for MCAs. A change that raises merchants’ costs can raise demand and default risk together. A change that eases regulation can lower compliance cost and still leave funders exposed to state rules. Treating the election as a verdict on the product’s future would claim more than the evidence supports, and any single quarter’s data after the vote will be too thin to settle the question.

A practical frame for funders and brokers

Funders should stress-test portfolios and pricing assumptions against more than one outcome, rather than pick a winner. Brokers should be ready for questions from merchants about whether to wait for clarity, and should answer with the facts that exist and not a forecast. Everyone in the channel should treat the first weeks after the vote as an information-gathering period and revisit these four scenarios once platforms turn into agency actions and bills.

This analysis is written before the vote and reflects only what was known on October 31.

Sources

• Tax Foundation, “The Corporate Tax Rate Tug-of-War,” Erica York, August 26, 2024. https://taxfoundation.org/blog/trump-harris-corporate-tax-proposals/