Tillflow Capital — оборотный капитал на основе выручки для мерчантских клиентов американского банка

Comparables: Square Loans (fixed fee 10–16% of the loan, ~nine-month payback, loss rate under 4% on the core flex-loan product), Shopify Capital, PayPal Working Capital, Amex Business Blueprint and Stripe Capital on the embedded side; OnDeck, Credibly and broker-driven merchant cash advance funders on the open market. The bank's edge is the same as Square's: it sees the merchant's sales before it lends.

Who pays

Restaurants, salons, retailers and service businesses with $20K–150K of monthly card volume, most of them already processing with the bank. A "sale" is a merchant whose first advance is funded; activation is 100% because funding is the sale. A merchant is active in any month in which an advance is outstanding — renewals keep the customer active, a merchant who repays and does not renew drops out of the curve.

How it makes money

Average advance $15,000 at a fixed fee of 14% ($2,100) earned over roughly nine months, about $233 a month while the advance runs. Because principal amortizes and renewals reset it, the average outstanding balance per active merchant is about $8,000, so the fee is modeled as 2.92% a month of outstanding balance. There is no subscription and no origination fee — the fee is the business. Against it sit cost of funds (4.5% a year FTP), expected credit losses (4.5% of originations ≈ 0.94% a month of outstanding) and a capital charge (10% equity at a 12% cost of equity).

Key assumptions

• Pricing and repayment follow Square's public disclosures: fixed fee 10–16% of the loan, average payoff about nine months, repayment as a fixed percentage of every card transaction; we price at 14% because the bank lends larger tickets ($15,000 vs Square's historical ~$6,000) to slightly riskier, non-native merchants.
• Credit losses 4.5% of originations — above Square's "less than 4%" on its core product and far below open-market MCA write-offs of 8–20%, because the bank only lends to merchants whose processing it controls (no stacking, holdback taken at settlement).
• Cost of funds: the advance book (about $8,000 per active merchant) is funded by the bank's deposit base at a 4.5% FTP rate, charged monthly at 0.375% of outstanding. Principal is a balance-sheet item and is not in the cash flow; initialCash covers opex, losses and acquisition only. Capital charge: 10% CET1 against the book at a 12% cost of equity = 0.1% a month.
• Acquisition at median conversions: pre-qualified offers to the bank's own merchants (portal banners, statements, outbound calls) — 4% click, 15% apply, 35% funded; ISO and broker partners paid the industry-median 7% of the funded amount ($1,050); paid search on "small business funding" at about $45 a click, 6% apply, 25% funded ($3,000 per funded merchant, used sparingly); CPA-style referrals from accountants and POS resellers at $400.
• Unit costs: underwriting data, bureau pulls and KYB checks $45 per funded merchant; servicing, ACH and collections tooling $8 a month per active; model risk validation (SR 11-7), CFPB Section 1071 small-business data collection and fair-lending testing $4,000 a month. As a depository institution the bank is exempt from the California (SB 1235) and New York commercial-financing disclosure laws that bind non-bank MCA funders.
• Retention: 97% of funded merchants still have a balance after month one, 80% after month eight; at payoff about 70% of good payers renew, so 59% of a cohort is still active in month 12 and 47% in month 18, then 2.5% a month.
• US salaries (monthly, gross): head of product line $18,000, senior engineer $14,000, data scientist $15,000, underwriter $7,500, collections specialist $5,000; benefits and employer payroll taxes 28%.
• Horizon 60 months: a credit product has to fund a full repayment cycle and early losses before renewals compound. The in-house channel is capped by market saturation at about 8,000 funded merchants: the bank processes for roughly 50,000 merchants, and only about one in six qualifies and wants an advance over five years. Treasury, merchant processing and core banking are shared bank functions outside this P&L.
• Paid search was tested in the model and dropped: at about $45 a click, 6% applying and 25% funded it costs $3,000 per funded merchant — above lifetime value — which is why bank-led merchant lenders lean on their own processing base.

Risks

• Credit cycle: a recession doubles losses quickly — at 9% of originations the product loses money; the holdback mechanism slows collections exactly when merchants struggle.
• Regulation: the bank itself is exempt from state disclosure laws (California SB 1235, New York), but its ISO partners are not, and CFPB Section 1071 data collection adds cost; if federal rules ever require APR-style disclosure, a 14% fee over nine months shows as ~35% APR and take-up falls.
• Merchant attrition from processing: if the merchant switches processors mid-advance, the holdback stops — the bank needs ACH fallback and contract enforcement.
• Broker dependence: ISO channels bring riskier merchants and push for stacking; keep their share low and claw back commissions on early defaults.

How to adapt this model

• Outside the US (UK, EU, Australia): replace the fee with local pricing (UK merchant cash advances 1.1–1.4 factor), FTP with local funding costs, and add VAT only on fees that are not exempt financial services.
• For a fintech without a balance sheet: replace cost of funds with a forward-flow sale to investors and keep a servicing fee (Square sold most loans this way) — revenue drops, capital needs vanish.
• Stress-test risk by raising "Expected credit losses" from 0.94% to 1.9% a month of outstanding and watch net present value — that is the first question any credit committee will ask.
• If your merchants are smaller, reduce the outstanding balance per active and shift acquisition toward the in-house offer channel; brokers do not pay for $5,000 tickets.

Sources

• Fundbox guide to Square Capital: factor rates 1.10–1.16 = fixed fee 10–16% of the loan; loans $500–100,000 — https://fundbox.com/blog/square-capital-loans/
• Square, Inc. 10-K FY2019: repayment as a fixed percentage of card transactions; average loss rate under 4% on the core flex loan product — https://www.sec.gov/Archives/edgar/data/1512673/000162828020002303/sq-20191231.htm
• Square, Inc. 10-K FY2016: sellers repay within an average of nine months — https://www.sec.gov/Archives/edgar/data/0001512673/000162828017001754/a10-kfilingsquareinc2016.htm
• Fortune 2016: Square Capital average loan ~$6,000 — https://fortune.com/2016/11/07/square-capital-1-billion
• Green Sheet survey: median ISO commission 7% of funded amount (up to 10%), renewals under 2%
• Fox News: MCA write-offs roughly 8–20% of portfolio — https://www.foxnews.com/us/why-do-merchant-cash-advances-cost-so-much
• Consumer Finance Monitor: depository institutions are exempt from California SB 1235 — https://www.consumerfinancemonitor.com/2022/06/15/california-dfpi-issues-final-regulations-implementing-2018-law-requiring-consumer-like-disclosures-for-commercial-financing/