FAQ

Banana Exchange’s funding model is not a loan. It is a factoring transaction, between Banana Exchange and a Merchant Cash Advance Funder (MCA), where Banana Exchange purchases some of the MCA’s RTR, and provides an advance of 25% of the purchased RTR amount. The MCA then repays this advance plus Banana Exchange’s fee, in 12 equal payments over 12 months.

For example:

• On $4M in RTR
• Banana Exchange will advance you $1M (25%) in funding
• Assuming a 15% fee, you will need to repay the $1M advance plus a $150K fee over 12 months – $95,833 each month
• You continue the collection of the $4M RTR normally as you did before. You may be required to sell Banana Exchange  additional RTR to replace some of this collected amount, if the ratio between your outstanding balance and the remaining RTR is over 50% (the “Collection Ratio”).
• For example, after 6 months, your balance will be $565K. If we assume you’ve collected $2.9M out of the $4M RTR during this time, Banana Exchange is left with only $1.1M RTR. This creates a Collection Ratio of 51% and you will be required to sell Banana Exchange additional RTR to reduce the Collection Ratio below 50%.

Banana Exchange will only purchase RTR that meets its eligibility criteria:

1. The RTR must be spread out among merchants in different states and industries. If there is more than 25% state or industry concentration, some RTR in that state or industry may not be eligible.
2. The RTR must be collected via ACH and the merchant must demonstrate consistent payments more or less.
3. The current RTR from any one merchant at time of purchase must be lower than $70K. If it is above $70K, only the first $70K will be recognized and counted. If several merchants have the same owner, they will all be limited together to $70K.

If some of your RTR is not eligible you will have to send us more to replace the ineligible RTR or settle for a smaller advance from us. For example, if you provided us with $4M in RTR, expecting a $1M advance, and $500K turned out to be ineligible, you can either provide us an additional $500K to replace it, or settle for a smaller advance of $875K for the $3.5M eligible RTR. In any case, you will probably be able to draw more funding two weeks later with any new RTR you generated using this $875K.

Every time you draw funds from us, that funding round will have a Collection Ratio. It equals the balance of that funding round divided by the amount of eligible RTR we’ve purchased. This starts off at around 28-29%. For instance, if you receive $1M in funding with a 15% fee, and provide us with $4M in RTR, your initial Collection Ratio will be $1M * 1.15 / $4M = 28.75%

Your Collection Ratio goes down, every time you make a repayment and reduce your balance.

Your Collection Ratio goes up, every time you collect some of the RTR we’ve purchased, or one of the merchants defaults and their RTR becomes ineligible.

Overall, the Collection Ratio usually goes up, because you repay your balance in 12 months, while you probably collect the RTR we’ve purchased quicker.

For instance, let’s say you received $1M in funding with a 15% fee (starting balance $1.15M), and provided us with $4M in RTR (28.75% initial Collection Ratio). If you collect $500K of the $4M every month, then after 6 months only $1M of RTR will remain. In the meantime, you will have also made 6 out of the 12 repayments to Banana Exchange, thereby reducing your balance to $575K. You Collection Ratio will thus be $575K / $1M = 57.5%

You can login to our portal and track the Collection Ratios for each of your draws. We will also notify you when your Collection Ratio approaches the 50% mark. At that point, you will be required to reduce it below the 50% mark by either:

1. Providing new RTR in place of the RTR that you’ve collected. In the above example, $250K of new RTR will suffice to reduce the Collection Ratio to around 45%. This should not be difficult – by that point you would already have collected $3M of RTR, and would certainly have plenty of new RTR generated from it that you could provide us.
2. Repaying part of the balance due. In the above example, a repayment of $125K out of the $575K due, will reduce the Collection Ratio to around 45%.

If you default, we will collect the remaining balance due out of the RTR. Since we don’t control your bank accounts or ACH transactions, we sign a tri-party agreement with you and your ACH Provider, giving us the right to divert your ACH collections to our bank account in case of default. We will collect your remaining balance, along with any fees, and divert any additional ACH collections back to you.

We won’t sell your merchant information. This is unethical behavior that we are strongly against and will never take part in.

Our business is funding MCAs and we strive to build long-term and trustful relationships with our MCA clients. Our ability to on-board new clients lies in our reliability. If we sell your data to other MCAs or ISOs, we may be able to make a quick buck, but we will lose you (and probably a few other MCAs) in the process. We can gain much more by having you as a client in the long term.

We take high measures to ensure your information is stored safely and securely. We’ve created a safe and secure private cloud environment. Once it reaches us, only a handful of top management have access to your data.

We know your merchant information is the most valuable part of your business, and if stolen or if it reaches the wrong hands, can have a very negative effect on your business. We don’t want to lose you as a client so we are very mindful of your data’s security.

We will be happy to refer you to a few of our clients to hear what they have to say about us in this regard.

As we are purchasing your RTR in exchange for our funding, the RTR acts as our assurance in case you default. For this reason, we need to make sure this RTR is not in default. We do this by connecting to your ACH Provider and reviewing the collection history of each merchant you wish to sell us. We also continue monitoring your RTR after we fund. If we notice a merchant has stopped paying after a while, we will disqualify them, thus reducing the amount of your eligible RTR, and raising your Collection Ratio.

We require an API connection to your ACH Provider as our system will be monitoring the ACH transactions automatically. This connection can be read-only – we never touch any of the transactions you set up. You will need to request a read-only API key for us from your ACH Provider’s support.

In addition, we require a read-only user to login to your ACH Provider’s portal. We use this to make manual checks during the on-boarding process and from time to time afterwards. You may be able to directly create this user via the portal for us or request this as well from the ACH Provider’s support.

No, we never create, delete, change or interfere with any of your transactions or ACH setups. We only monitor the transactions and therefore only require read-only access to your ACH.

We don’t mind that syndicates participate in RTR you wish to sell us, however it will be your responsibility to notify them about your agreement with Banana Exchange and get their approval. One of our prerequisites for funding is that we place a UCC-1 lien on your receivables. This means that if you default, we will have first right to collect any outstanding balances from your RTR, before the syndicates.

Yes, you may repay your balances at any point, though our fee is non-refundable.

Our fees are not APR as we fund via Factoring, not lending. However, if you wish to compare our funding to a loan, the APR equivalent to our 15% fee is 26.6%.

Yes, you can draw funds from us any time you generate new RTR. You may draw up to twice a month – on the 1st and 15th of each month. We will purchase this new RTR and provide you with another advance. This can create a positive growth cycle for your MCA.

The RTR for this merchant will become ineligible if we don’t see consistent ACH payments.

We require that you have at least some RTR generated from your own funds. This doesn’t have to be much, but it does show us that you’ve set up shop and invested some of your own funds in the business.

In certain cases – yes. We will work with you to understand your situation and try to work around it if we can.

We won’t purchase RTR coming from deals that don’t collect via ACH. In addition, if we purchased a deal that was later switched to other collection methods, its RTR will become ineligible, thereby increasing your Collection Ratio.