Research On Pricing Strategy Of Merchant Cash Advance Financing

Small and micro enterprises( SMEs) has played an important role in economic prosperity,promoting innovation,stimulating domestic demand,increasing employment and improving people’s livelihood. However,SMEs financing is restricted by its small-scale,low credit scores,financial statements irregularities,lack of suitable collateral and other issues,which affects their survival and development. Merchant Cash Advance financing is an innovative mode to break through the difficulties of SMEs financing which appeared in the United States in late 20 th century,and has been widely used in Western countries and Hong Kong. It is the most important elements of corporate financing that determining the financing pricing,whose core issue is how to reasonably determine the benefits of borrowers based on the business case,namely MCA financing pricing. An innovative financing pricing mode of lender with dual-core variables is explained by qualitative and quantitative description,and the optimal pricing strategy in different stages of borrower’s products is given by solving the model. In this study, the pricing strategy of non-loan financing model is enriched and developed,and effective means are provided to solves the financing pricing with dual-core variables,which is helpful to guide the rational allocation of profit margin between borrow and lender, and promotes the stable and healthy development of MCA ecosystem. The following three aspects of contents are included in this paper:1. The background environment,credit support,legal protection and main driving force of MCA financing formation mechanism is analyzed from the definition,characteristics,phasing and industry applicability of MCA financing,and suggestions is proposed to building policy environment,legal supervision,evaluation mechanisms of MCA financing. And the foundation to study pricing strategies is laied down by classified MCA financing according to whether recourse is attached.2. A Two-step model of MCA financing without recourse is established in connection with features of MCA financing operation mechanism by integrated using methods of discounted cash flow, simplified method for pricing, dynamic Stackelberg game. The borrower’s pricing strategies for the ratio of capital element and the proportion of sales division is developed in the first step of this model,then a multi-stage dynamic Stackelberg game model is established to study pricing strategies of borrower’s products at different stages.The validity of the pricing strategy is verified by solving numerical examples, while its significance of management is explained.3. A MCA financing pricing model with recourse for the MCA financing attaching recourse clause is proposed by introducing the concepts of recourse,interest-free period and penalty interest rate,while solving the model by three different cases. Finally,the differences of pricing result and solution equilibrium structure between the two models are analyzed from the perspective of qualitative and quantitative.