[golf2014]

Brokers will always be around..

[Zach]

...and now On Deck goes public.

I have only worked a few deals in the past month that had no competition. Anyone else noticing competition on more of their deals? Despite which lead source, I'm finding more of an awareness among potential merchants.

Time to separate the chaff from the wheat, boys...

[Zach]

Bumping this post due to current relevance. Simultaneously rising acquisition costs and reduced average commissions are spreading to most of my ISO's, if not all of them.

Lenders are hemorrhaging their capital while providing longer terms, lower rates, and less underwriting. On Deck is taking $18MM losses in a single quarter and their cash reserves are dwindling ($117MM is hardly a small number, but I digress).

Penny for your thoughts, anyone?

[HDF]

My ISO friends report that business owners are getting more and more wise to the lending environment and are shopping around with a distinct edge over new brokers. Seems to be a bit of a shift toward higher standards and needing an elevated pitch and broader range of solutions per broker.

[MonthlyFunder]

yeah WBL is next for going out of business.. They are a Fake lender. they get their money from mill bank.

they have no sales team. the worst management.

reference this post in 1 year when they are done.

[WestCoastFunding]

Yeah, I can see WBL going under soon. Don't they broker-out deals to BFS? Nothing like sending a deal to WBL only to have them send your deal to BFS, and then only offer 25% of the BFS commission. How generous. WBL guys have to be the worst when it comes to getting a straight answer. The whole place seems highly-disorganized. And then the daily spam from different WBL offices looking to establish a relationship is pretty annoying.

[Zach]

Monthlyfunder, it is important for us all to have an opinion, and I'm glad you've chosen to share yours. Our portfolio is probably the strongest one in the space, and we have over 300 employees. We also have over 15 branches nationwide. We recently hired another 100 retail salespeople at our New Jersey headquarters.

If that's a small sales team to you, that's wonderful. Just so you're aware, in this industry we are one of the largest companies currently, with no intention of slowing down. Despite our rapid growth, we are profitable; a key performance indicator that many other lenders cannot truthfully say.

In case you are feeling the pain of rising acquisition costs and decreasing commissions (as most ISOs are), I am open to having a discussion about becoming a WBL branch with you. We aren't disappearing anytime soon, and neither are our branches.

[WestCoastFunding]

Lets be honest, WBL has enormous employee turnover. That's generally not a good sign.

[Michael I]

zach you know i have tremendous respect for you as well as chris pepe from nyc . but you guys do need to do more research before acquisition of certain branches that are now giving the whole wbl a bad name .
i also guarantee you that those scum bag shops are also backdooring wbl and funding under the door from wbl with the backdoor of other people files .

[matt.estes]

Agree with Zach on general marketplace dynamics at work. OnDeck was at an average 55% APR 3 years ago, and is now at an average APR in the lower 30s...with no shift in the quality of credit bands in their portfolio. They are simply competing on price.

Although - I don't believe the top funders are hemorrhaging capital. The tier 1 consolidated / A-paper guys are still profitable. They are simply seeing shrinking, contracting margins.

I addressed the shrinking lifetime value vs. rising acquisition cost problem in a blog post back in August, that seems particularly relevant now. If you aren't building a business around utilization-based products & renewals, you're probably feeling the squeeze right now. Competitive, fragmented markets with no barriers to entry and limited-to-no product differentiation (...the cash advance / installment loan space...) always see decreasing price and rising acquisition cost as the markets mature. It's basic economic theory.

https://www.linkedin.com/pulse/3-way...?trk=prof-post

[Zach]

Matt,

That is an extremely well thought out article. Kudos!

[MCAVeteran]

Yeah, I can see WBL going under soon. Don't they broker-out deals to BFS? Nothing like sending a deal to WBL only to have them send your deal to BFS, and then only offer 25% of the BFS commission. How generous. WBL guys have to be the worst when it comes to getting a straight answer. The whole place seems highly-disorganized. And then the daily spam from different WBL offices looking to establish a relationship is pretty annoying.

Doesnt bfs have a retail division now with the acquisition of entrust that sends deals to other funders as well?

[TStein]

Doesnt bfs have a retail division now with the acquisition of entrust that sends deals to other funders as well?

One of my buddies over at BFS said that the Entrust division is a **** show.

[MonthlyFunder]

Zach you seem like nice young kid... seriously. But your lack of knowledge of business is offensive.

You are constantly up-selling your services and your firm. If you want to advertise, do what real companies do and pay for the add on the side bar -----insert add there--->

Just to clarify.

You guys have zero salesmen/women! You have hired employees from the NJ labor department who do not know what they are even selling.

Furthermore you get $1.7 mill a year from NJ to employee these lost souls. So don't brag about your bottom line. If i got 1.7 million a year i would to have a lot of employees!

Your in-house product is a waste of time 1.45 factor and someone has to sign over their house? no thanks!! not to mention you do not approve any deals, just charge the poor client $1200 for a denial!

Please do not response to this post, I will not read it. I am done on this. I just wanted to clarify the truth for those reading.

Up-sellers be warned!!

[happysales]

, Pawnee leasing starts windset capital...

This part doesn't spell doom-didn't Windset go under?

[happysales]

Doesnt bfs have a retail division now with the acquisition of entrust that sends deals to other funders as well?

Yes-I think Entrust was the first broker shop to be bought by a lender.

[happysales]

I think this field is following the trajectory of the mortgage business- before and after the real estate crash. Every stockbroker who lost his license and thousands of people with no sales ability and big dreams rushed to sell mortgages. Brokers were bringing on anyone with a pulse. Most people made a little money from clueless buyers.

Once the market corrected itself most of these people-both the owners of poorly run broker shops and the useless sales people took their greed, dishonesty and lack of ability or common sense and went on to dream of huge commissions in other fields (including this one)

But the smart, honorable, skilled brokers and sales people survived, changed with the times, adjusted to a buyers market, used hard work, innovative thinking, new technology to whatever degree they could afford to, and thrived. If they decided to get out they leveraged their experience and are doing well at something else-some in this business.

People can buy a house or get a cash advance or a loan without a broker and more people will-technology definitely makes it easier, but still not as easy as finding a knowledgeable broker who understands what you want, what you qualify for, helps you to make a realistic and educated decision and coaches you on what you need to do to qualify for what you want down the road if you aren't eligible now. I think the broker shops who can do this, hire carefully and train their staff to do this quickly and efficiently will probably survive.

[MCNetwork]

WBL charges $1200 for a decline? Let me guess. To cover underwriting expenses, property appraisals and all the work spent on the file. Brutal.

[WestCoastFunding]

WBL charges $1200 for a decline? Let me guess. To cover underwriting expenses, property appraisals and all the work spent on the file. Brutal.

Don't forget Title search. Sad part is, they will do this with deals that are obvious declines.

[MCNetwork]

The sad part is that you don't have to do a title search until AFTER you've been approved.

[WestCoastFunding]

Saddest part is when they tell you after approval of the ABL that they can give you additional funds through cash advance. But they get those funds by sending it to BFS. They then pay the broker 25% of the BFS commission. A whole 25%.

[Zach]

MCNetwork, in certain states you can order title later in the process and still obtain it quickly. Many states are "attorney states" where title searches need to be ordered well ahead of time in order to not delay closing.

[MCNetwork]

Yes but why would you order the title before approving the file for a loan? You first issue the approval and THEN order the title.

[Zach]

WestCoast, I know you are incorrect because we have a firm no-stacking policy with BFS. I understand we are all entitled to free speech, but please be moral and refrain from spreading false information.

In our ISO agreement there is a section where our brokers can opt in to allow us to co-broker their deals. They can just as easily opt out of this service; it is completely their prerogative. This is a section that needs to be signed, so there is no way to miss it.

Now, if you opted for us to broker the deal to BFS for you, and you signed an agreement for a 25% commission split, then whose fault is that? We follow our agreements carefully, and it is important to review anything you've signed. I can assure you our primary objective is to fund deals with the WBL product -- if you asked us to broker something for you, that is an ancillary service that we do not utilize often.

Long story short, I'm unsure why you would have an agreement with us indicating 25%, ask us to broker it, and then still complain afterwards.

[Zach]

MCNetwork because attorney states take up to a week or even two to obtain title. Why would we wait for our valuation to come back, underwrite the deal, THEN order title, and find out there is a $500K tax lien on the property? That would waste our underwriting team's time, the borrower has to wait longer to get funded, and since title is so cheap anyways it is basically a moot point. It's usually like 300 bucks, and our average loan size is in the $150K range.

To compare it to MCA, that would be the equivalent of underwriting a deal without seeing the most recent bank statement, for a $150K deal. It is a necessary piece of information for our type of lending.