Key Takeaways
- A prominent factoring industry leader has publicly asked whether factoring is dying, signaling a structural shift in SMB financing toward revenue-based products like MCA.
- As factoring deal flow migrates to MCA funders, verification volume spikes create bottlenecks that manual processes cannot absorb.
- Bank verification software for funders is no longer a nice-to-have; it is the operational backbone required to underwrite safely when deal velocity accelerates.
- Asynchronous, AI-guided verification workflows allow funders to scale intake without proportionally scaling headcount or scheduling overhead.
- Funders who invest in verification infrastructure now will capture the displaced deal flow that slower competitors cannot process.
A Former IFA Board Member Asks the Question Nobody Wanted to Hear
When Greg Salomon, a former board member of the International Factoring Association, publishes an op-ed in the IFA's official magazine titled "Is Factoring Dying?," the industry pays attention. The piece, reported by deBanked in September 2026, captures a growing anxiety among factoring professionals: their product is losing ground to faster, more flexible alternatives. For MCA funders and revenue-based lenders, the implications are immediate. The businesses that once turned to factoring for working capital are now looking at merchant cash advances, and that means a wave of new applications landing on underwriting desks that may not be equipped to handle the volume.
The challenge is not simply more deals. It is more deals from merchants who have never been through an MCA verification process, arriving at a pace that exposes every weakness in manual workflows. If your team still schedules live verification calls to walk applicants through their banking portals, the math stops working when application volume doubles in a quarter. Bank verification software for funders is the infrastructure layer that determines which teams capture this migrating deal flow and which ones drown in scheduling backlogs.
Why Factoring Is Losing Ground to Revenue-Based Products
The Structural Shift in SMB Financing
Factoring has always required something specific: invoices. The factoring company purchases receivables at a discount, advancing cash against future payments from the merchant's customers. This model works well for B2B businesses with predictable invoice cycles, but it struggles with the growing share of small businesses that operate on direct-to-consumer revenue, platform-based sales, or irregular cash flows. The rise of e-commerce, gig-economy adjacent services, and digital-first businesses has created a merchant population that simply does not generate the kind of receivables factoring companies need.
MCA products, by contrast, attach to daily revenue regardless of its source. A restaurant, a Shopify store, a mobile services company: none of these fit neatly into a factoring model, but all of them can be underwritten based on cash flow patterns visible in their bank accounts. The structural advantage is clear, and it explains why MCA adoption continues to climb even as broader SMB lending signals remain mixed. As we covered in our analysis of mid-year SMB financing signals reshaping bank verification software for funders, the macro picture in 2026 is one of consolidation around products that move faster and require less documentation from the merchant.
Volume Migration Creates a Verification Bottleneck
The merchants migrating from factoring to MCA are not necessarily more risky. Many are established businesses with healthy revenue. But they are unfamiliar with MCA verification processes, and they arrive in bulk. A funder that previously processed 150 verifications per month might suddenly face 250 or 300, with no additional underwriting staff and no way to schedule that many live calls in a reasonable timeframe.
This is where the bottleneck becomes dangerous. When verification queues back up, one of two things happens: either deals sit unverified for days, causing merchants to shop elsewhere, or underwriters start cutting corners to keep pace. Both outcomes cost money. Lost deals are obvious. Poorly verified deals are worse, because the losses show up weeks later when ACH debits start bouncing.
Factoring Merchants Bring Different Verification Needs
Merchants coming from factoring backgrounds often have more complex banking structures than the typical MCA applicant. They may have multiple accounts, one for receivables and another for operating expenses. They may show large periodic deposits from factoring advances that look unusual to an underwriter unfamiliar with the pattern. Their transaction histories require more careful review, not less.
This complexity makes automated document analysis tools useful but insufficient on their own. API-based bank connections can pull transaction data, but they cannot show you what the merchant's banking portal actually looks like. They cannot reveal whether the account summary matches the transaction detail, or whether the merchant is showing you a secondary account while hiding the primary one. Video-based verification of the live banking session fills this gap in a way that static data extraction cannot.
How Async Verification Scales With Surging Deal Flow
Eliminating the Scheduling Constraint
The fundamental limitation of live verification calls is that they require two people to be available at the same time. When deal volume is low, this is manageable. When volume surges, scheduling becomes the binding constraint on how fast your team can underwrite. Time zone differences between underwriters and applicants make it worse, particularly for Canadian funders processing deals from merchants across multiple provinces.
Asynchronous verification removes this constraint entirely. The applicant receives a secure link, records their banking portal at their convenience, and submits the recording. The underwriter reviews it on their own schedule. No coordination required. A single underwriter can review three or four recordings in the time it would take to conduct one live call, because they can skip the small talk, the connection troubleshooting, and the repeated instructions that consume so much time on live calls.
AI-Guided Recording Ensures Consistent Quality
One concern funders raise about async verification is quality control. If the applicant records on their own, what prevents them from showing incomplete information or skipping critical screens? Exact Balance addresses this with an AI-guided recording experience. A floating coach walks the applicant through each required step, confirming that they have shown account summaries, specific date ranges, and transaction details before marking the recording as complete.
This guided approach produces recordings that are more consistent than live calls, where the quality depends entirely on which underwriter is running the session. Every recording follows the same structure, shows the same required information, and can be reviewed against the same checklist. The result is a verification artifact that serves as both an underwriting input and a compliance document.
Building an Audit Trail That Satisfies Investors
The migration of deal flow from factoring to MCA is happening alongside another trend: increasing institutional investment in MCA portfolios. As we explored in our coverage of OnDeck's $500M securitization proving bank verification software must scale, securitization vehicles and warehouse line investors are demanding more rigorous documentation of underwriting decisions. A timestamped video recording of a live banking session, stored securely in cloud infrastructure, provides evidence that no static bank statement PDF can match. It shows the verification was performed against a live, authenticated banking portal, not a document that could have been manipulated offline.
For funders positioning their portfolios for institutional capital, this audit trail is not optional. It is a prerequisite. The funders who build this infrastructure before the deal flow arrives will be the ones who attract the capital to fund it.
What a Factoring-to-MCA Migration Looks Like in Practice
Consider a scenario that many funders are already encountering. A landscaping company with $80,000 in monthly revenue previously factored its commercial contracts. The factoring company has tightened its advance rates, making the product less attractive. The landscaping company applies for an MCA through a broker.
The underwriter pulls bank statements and sees a pattern that looks unusual: large periodic deposits from the factoring company interspersed with smaller daily deposits from direct customers. Without context, this pattern could signal risk. Is the merchant double-dipping on financing? Are the factoring deposits going to stop, changing the cash flow picture dramatically?
A video recording of the merchant's live banking session answers these questions in minutes. The underwriter can see the account holder name matches, verify the source of each deposit type, and confirm that the factoring relationship is winding down rather than being stacked on top of the MCA. The recording captures this context in a way that a spreadsheet of transactions never could.
This is exactly the kind of nuanced verification that becomes critical when your applicant pool shifts. Merchants transitioning between financing products carry different risk signatures than first-time MCA applicants. Your verification process needs to be flexible enough to capture that nuance while remaining fast enough to close the deal before the merchant goes to a competitor. The Federal Reserve's small business lending research consistently shows that speed of funding is a primary factor in merchant decision-making, which means verification delays translate directly into lost revenue.
Frequently Asked Questions
How does the decline of factoring affect MCA funders?
The decline of factoring pushes small businesses toward alternative financing products like merchant cash advances, increasing application volume for MCA funders. This surge creates operational pressure on underwriting teams, particularly around bank verification, where manual processes cannot scale to match the incoming deal flow. Funders who have invested in scalable verification infrastructure are positioned to capture this migrating volume, while those relying on live calls and manual scheduling face growing backlogs and lost deals.
What is bank verification software for funders?
Bank verification software for funders is a category of tools that streamline the process of confirming a merchant's banking activity during underwriting. These tools range from API-based data aggregation to video-based verification platforms like Exact Balance, which allow applicants to record their live banking sessions asynchronously. The best solutions combine speed with fraud resistance, providing underwriters with verified evidence of account ownership, transaction history, and cash flow patterns without requiring scheduled calls or in-person meetings.
Can async bank verification prevent fraud as effectively as live calls?
Async bank verification with AI-guided recording can actually exceed the fraud detection capability of live calls. During a live call, an underwriter is processing information in real time with no ability to rewind or compare screens. In an async workflow, the underwriter can pause, rewind, zoom in on specific transactions, and compare details across multiple screens at their own pace. Exact Balance's AI-guided recording also ensures that applicants show all required information before the session is marked complete, eliminating the gaps that often occur when a live call is rushed or poorly structured.
What should MCA underwriters look for when evaluating former factoring clients?
Former factoring clients often show distinctive banking patterns, including large periodic deposits from the factoring company, potential UCC filings on receivables, and cash flow volatility as the factoring relationship winds down. Underwriters should verify that the factoring relationship is genuinely ending rather than being stacked alongside the MCA. Video-based bank verification is particularly valuable here because it allows the underwriter to see transaction labels, deposit sources, and account summaries in their original banking portal context rather than relying on stripped-down data feeds.
Conclusion
The factoring industry's contraction is not a theoretical trend. It is happening now, and the deal flow it displaces is arriving at MCA funders' doors. The funders who thrive will be those who can verify more merchants, faster, without sacrificing the rigor that protects their portfolios. Manual scheduling and live verification calls were never designed for this kind of volume, and they will not survive it.
Exact Balance gives your underwriting team the infrastructure to absorb surging deal flow without adding headcount or cutting corners. Asynchronous, AI-guided bank verification recordings let applicants record at their convenience while your team reviews on demand, with full audit trails that satisfy both internal risk standards and external investor requirements. Visit exactbalance.ca to see how async verification fits into your workflow.