Key Takeaways
- Oregon's state-run revenue-based financing program offers 2.0 factor rates, setting a public benchmark that private MCA funders will be measured against.
- When governments enter alternative lending, regulators and merchants gain a transparent comparison point that makes sloppy underwriting practices indefensible.
- Private funders who cannot demonstrate rigorous bank verification and cash flow analysis risk losing both merchant trust and regulatory standing.
- Async verification workflows give MCA lenders the audit trail depth needed to justify pricing and underwriting decisions in a market where the state is now a direct competitor.
- New York's parallel push to include revenue-based financing in broadband infrastructure spending signals this is a nationwide trend, not an isolated experiment.
Governments Are Now Competing With MCA Funders
MCA underwriting best practices have always evolved under pressure from regulators, institutional investors, and fraud risk. But a new source of pressure arrived in 2026 that few private funders anticipated: the government itself entering the revenue-based financing market. Oregon's Royalty Loan Program now offers small businesses up to $1 million in funding with a 2.0 factor rate, structured as a percentage of future sales. The state brands the cost as a "2X Royalty," and the program operates through the Oregon Business Development Department, giving it institutional credibility that no private funder can easily replicate.
This is not a pilot program or a policy white paper. Oregon is originating deals, collecting repayments based on revenue percentages, and setting terms that private MCA funders must now compete against. Meanwhile, New York's broadband infrastructure initiative has incorporated revenue-based financing into its capital deployment strategy, signaling that RBF is gaining recognition as a legitimate public financing tool. For private funders, the question is no longer whether their underwriting can satisfy investors. The question is whether their underwriting can withstand comparison to a state-run program with full public transparency.
Why a Public Pricing Benchmark Raises the Bar for Private Funders
The Transparency Problem With Factor Rates
Oregon's 2.0 factor rate is not just a pricing decision. It is a public declaration of what the state considers fair and sustainable for revenue-based repayment structures. When a merchant who has been offered a 1.4 factor rate from a private funder sees that the state charges 2.0, the immediate reaction is not relief at getting a better deal. The reaction is suspicion about what the private funder might be cutting corners on.
This dynamic flips the usual pricing conversation. Historically, MCA funders justified high factor rates by pointing to risk. The riskier the merchant, the higher the cost. But Oregon's program accepts applications from businesses that private funders would also consider, and does so at a standardized rate. If the state can underwrite at 2.0 with full due diligence, merchants and their advisors will start asking why a private funder charges 1.35 on a deal that appears similar. The answer, inevitably, comes down to underwriting depth. Funders who can demonstrate thorough bank verification, real cash flow analysis, and documented affordability checks have a defensible story. Those who cannot will face increasingly uncomfortable questions.
Documentation Becomes a Competitive Advantage
State-run programs generate documentation by default. Every decision, every disbursement, every repayment schedule exists in a public or semi-public record. Private funders operate under no such obligation in most jurisdictions, but that gap is narrowing. As we explored in our analysis of how New York's revenue-based financing push reshapes bank verification software for funders, the trend toward regulatory transparency is accelerating, not slowing down.
For MCA lenders, this means the audit trail is no longer a compliance checkbox. It is the primary artifact that separates credible funders from those operating on thin processes. An underwriter who reviews a screen recording of a merchant's live banking session, timestamps each verification step, and stores the evidence in encrypted cloud storage can point to that record when questioned. An underwriter who relies on a phone call and a PDF bank statement cannot. The difference matters when a regulator, an investor, or a merchant's attorney asks how a funding decision was made.
Cash Flow Verification Must Match Government-Level Rigor
Oregon's program collects repayment as a percentage of sales, which means the state must verify revenue streams with enough confidence to set repayment expectations. Private funders doing the same type of revenue-based deals need verification that is at least as thorough. Reviewing three months of bank statements in PDF format and eyeballing deposit patterns does not meet this standard.
What does meet it is a process where the merchant records their live banking portal, showing real-time balances, transaction histories, and deposit patterns across the required date range. This approach, which Exact Balance enables through browser-based async screen recordings, produces video evidence that cannot be replicated by editing a PDF. The AI-guided recording process walks the merchant through each required view, and the system's activity tracking logs every step for the underwriter's review. When a funder needs to demonstrate that their cash flow verification matches or exceeds what a state program would require, this type of evidence is what holds up.
New York's RBF Infrastructure Push Amplifies the Pressure
Oregon is not operating in isolation. The Revenue Based Finance Coalition recently highlighted New York's decision to incorporate revenue-based financing into a broadband infrastructure investment initiative. This is significant for two reasons. First, it positions RBF as a tool for economic development, not just a private lending product. Second, it attaches government credibility to the structure itself, which means regulators in other states will increasingly view RBF as a legitimate financial product deserving of clear rules and oversight.
For MCA funders, particularly those operating across state lines, this creates a compliance patchwork that demands better documentation at every stage. A funder originating deals in New York, Oregon, Connecticut, and Vermont now operates in an environment where each jurisdiction has distinct disclosure rules, and at least two of those jurisdictions have government programs that use similar financial structures. The underwriting file for each deal needs to tell a complete story: who the merchant is, what their cash flow looks like, how the verification was conducted, and why the terms are appropriate.
We have previously examined how Connecticut's disclosure rules are changing MCA underwriting best practices, and Oregon's entry into RBF adds another layer to that same trend. The common thread is that funders can no longer treat underwriting as an internal process invisible to outside scrutiny. Every deal must be defensible, and defensibility starts with verification.
What Private MCA Funders Should Do Now
The practical response is not to panic about government competition. Oregon's program has eligibility constraints and funding limits that keep it from dominating the market. The response is to treat this as the signal it is: the floor for underwriting quality is rising, and funders who are still above it need to prove they are.
Start by auditing your current bank verification process. If your team still schedules live calls to walk merchants through their banking portal, you are spending time on scheduling coordination that produces no audit trail. Switching to an async model, where the merchant receives a secure link, records their banking session at their convenience, and your team reviews the recording on demand, eliminates the scheduling bottleneck while creating a timestamped, stored verification record.
Next, examine whether your verification captures enough depth. A recording that shows account balances but skips transaction detail for the relevant date range is incomplete. Custom instructions sent to the merchant before recording should specify exactly which views, date ranges, and account types need to appear. Exact Balance's platform allows underwriters to define these requirements per request, so each recording captures the precise evidence needed for that deal.
Finally, consider how your verification records integrate with your broader compliance documentation. As more states adopt disclosure requirements and RBF-style regulation, your ability to pull a complete audit trail for any deal on short notice becomes a competitive and regulatory necessity. Screen recordings stored with encrypted cloud infrastructure and accessible through a centralized dashboard satisfy both investor due diligence and regulatory inquiry requirements. This is the same infrastructure approach we discussed in our coverage of how MCA audit season exposes bank verification documentation gaps.
Frequently Asked Questions
What is Oregon's Royalty Loan Program and how does it affect MCA lenders?
Oregon's Royalty Loan Program is a state-run revenue-based financing program that offers small businesses up to $1 million with a 2.0 factor rate, repaid as a percentage of future sales. For MCA lenders, it creates a public pricing and underwriting benchmark. Merchants and regulators can now compare private funder terms against a government-backed program, which means funders need robust verification processes and clear documentation to justify their own terms and factor rates.
How do state-run RBF programs change MCA underwriting best practices?
State-run RBF programs raise the documentation and verification floor for the entire industry. Because government programs operate with inherent transparency and accountability, private funders face pressure to demonstrate equivalent rigor. This means deeper cash flow verification, full audit trails for every deal, and underwriting documentation that can withstand external review from regulators, investors, or legal challenges.
Why is async bank verification important for MCA compliance in multi-state markets?
Async bank verification produces timestamped screen recordings of live banking sessions, creating verifiable evidence that a phone call or PDF review cannot match. In a multi-state environment where Oregon, New York, Connecticut, and Vermont each impose different compliance standards, having a stored, reviewable recording for every verification provides consistent documentation regardless of which jurisdiction's rules apply. This consistency simplifies audits and regulatory responses.
Can private MCA funders compete with government revenue-based financing programs?
Yes. Government programs like Oregon's have eligibility constraints, geographic limitations, and funding caps that prevent them from serving the entire market. Private funders compete by offering speed, flexibility, and broader access. However, the competitive advantage only holds if funders can demonstrate underwriting quality that matches or exceeds government standards. Robust bank verification, transparent pricing documentation, and complete audit trails are the tools that make this possible.
Conclusion
Oregon's entry into revenue-based financing is not a curiosity. It is a market signal. When the state sets a 2.0 factor rate and operates with full public accountability, every private MCA funder's underwriting process comes under implicit comparison. The funders who thrive in this environment will be those who can demonstrate verification depth, documentation completeness, and decision-making transparency that stands up to any level of scrutiny.
Exact Balance gives MCA lenders the async bank verification infrastructure to meet this rising standard. Browser-based screen recordings, AI-guided merchant instructions, encrypted storage, and a centralized underwriter dashboard create the audit trail that separates defensible underwriting from vulnerable underwriting. Visit exactbalance.ca to see how async verification fits into your workflow.