8fig provides supply chain financing to online merchants by purchasing the merchants’ future revenue at a discount. The financing is provided based on Growth Plans supplied by merchants which indicate what inventory the merchant wants to purchase, the cost of acquiring the inventory (including both purchase and shipping costs), when the inventory is expected to arrive, and how long it is expected to take to sell. Based on this information and its evaluation of the merchant’s business, 8fig will offer to purchase the future revenue for a specified price. 8fig will set an initial schedule on which the merchant will deliver (remit) the future revenue based on the initial sales projections. This type of financing is commonly referred to as a “merchant cash advance” (“MCA”).
From a regulatory standpoint, 8fig’s financing is a purchase and sale of future revenue, not a loan. Although a remittance schedule is set when the merchant agrees to sell future revenue to 8fig, that schedule may be subject to change based on when the revenue is actually generated through inventory sales.
This True Sale Compliance Policy (“Policy”) applies to the entire lifecycle of the MCA transaction, including marketing, underwriting, servicing, and collections. It exists to ensure that 8fig treats these financing transactions consistent with their structure as a purchase and sale, rather than a loan, and that there is no confusion regarding the nature of the transactions. To the extent that this Policy conflicts with any other 8fig policy, this Policy controls.
A failed remittance by itself is not an event of a default. It should not be described as an event of default in the contract, nor should it be treated as an event of default in practice.
If an ACH debit or other remittance is rejected or missed, 8fig will contact the merchant and otherwise investigate the reason for the rejected or missed remittance. For example, there are sometimes temporary issues with bank accounts that are easily corrected. If a remittance is rejected or missed because the assumptions in the Growth Plan have changed, the merchant should be instructed to submit an amended Growth Plan. If the remittance was rejected or missed because the merchant has gone out of business or declared bankruptcy, and this can be verified by 8fig, this is not an event of default and the merchant will not be obligated to make further remittances. If 8fig learns and is able to verify that a merchant has filed for bankruptcy or gone out of business, it must stop any and all collection activities immediately.
While the merchant has no absolute obligation to make all of the remittances set forth in the schedule, there are some “bad acts” that constitute events of default under the agreement between 8fig and the merchant.