Page 2 of 2 FirstFirst 12
Results 26 to 46 of 46
  1. #26
    Senior Member Reputation points: 4802
    Join Date
    Sep 2012
    Posts
    199

    Quote Originally Posted by cashman View Post
    Finance1, the previous industry you were in was mortgages?
    Not too hard to figure out huh? Lol

    I was a 50% partner in a small broker/banker company. We funded about $10M/mo on our warehouse line until we got the letter from Nat City Bank saying "effective immediately"...

    It was a disaster. Everybody was losing jobs and going out of business. Appraisers, title co's, realtors, home inspectors, mortgage guys, you name it. Never seen anything happen so fast. My ex partner is hanging on. Just a 2 man broker shop in a tiny office but he is making a living. I don't regret my decision to leave the industry at all. Not enough upside (if any).

    Did you enjoy the meltdown as well?

  2. #27
    Administrator Reputation points: 25863 admin's Avatar
    Join Date
    Jul 2012
    Posts
    484

    the posts in reference to SEO have been moved to a separate thread. http://dailyfunder.com/showthread.php/53-SEO-and-MCA

  3. #28
    Administrator Reputation points: 25863 admin's Avatar
    Join Date
    Jul 2012
    Posts
    484

    MCA industry is sizzling Up Fast between Amex, First Data, kabbage, Amazon, Paypal, Wells, Goldman etc.. we are going Mainstream...........

  4. #29
    Veteran Reputation points: 107311 Chambo's Avatar
    Join Date
    Sep 2012
    Location
    New York City
    Posts
    3,051

    The issue with going "mainstream" is that all the little guys who have been whacking folks for fees, or offering sub par offers (because up until now they could) will no longer be able to do it. The top tier paper will go to levels that none of the existing funds out there are willing to go (12 month 1.06's? 18 month 1.18's?).

    Almost as if we have been guinea pigs for the larger guys waiting a couple years to see if this was a flash in the pan or not. Now they are coming in with big guns and big money.

    Should make for some interesting times in the near future.

  5. #30
    pricing has changed across the board. you can no longer dictate to the market, the market dictates to you. we arent in a expansion economy either, so its all about cost of funds/cash flow to those who want to borrow and get in debt. Sure, some of the brokers out there funding alot of low-marginal credit paper may say "look how much we funded" but give them a few months and see what the payback projections really look like on those deals if any. Its all about funding the upmarket now- that requires lower rates, longer terms. those who can adapt to that, you have a shot at competing. those who can't- on to your next business venture. its a new world, and it isnt going back. anyone who thinks so, is in Denial- and that aint just a river in Egypt! Everyone will have to adjust. chasing commissions only=no business. its all about the customer and repeat business-

  6. #31
    Senior Member Reputation points: 4802
    Join Date
    Sep 2012
    Posts
    199

    Quote Originally Posted by Chambo View Post
    The issue with going "mainstream" is that all the little guys who have been whacking folks for fees, or offering sub par offers (because up until now they could) will no longer be able to do it. The top tier paper will go to levels that none of the existing funds out there are willing to go (12 month 1.06's? 18 month 1.18's?).

    Almost as if we have been guinea pigs for the larger guys waiting a couple years to see if this was a flash in the pan or not. Now they are coming in with big guns and big money.

    Should make for some interesting times in the near future.
    Good post. Sometimes I worry about institutions coming in and taking over and other times I don't even blink an eye. It's all about ROI. Coming in with sick low rates is simply asking for a negative ROI. It takes a couple of years (at least 18 months) to really understand what you are getting into. I know that from experience. The book needs to season before you know if your underwriting is up to par and most importantly if you are making the returns you expected. I doubt any cash company of any size entered the market and made the returns they expected going in.

    I say bring on Amex and Wells and others. It only makes the industry more credible. Something that the industry has been lacking since it's birth. Amex and Wells etc aren't going after the same clients that make up the majority of our book. I think that applies to most cash companies until you get into the top 10 like AMI, MCC, BFS, etc. They are very big and very thirsty. I would think they would stand the most to lose with larger institutions entering the market.

    At the very least, I'm not worried about my company. We're small and don't want a big slice of the pie. I think our desired client is always attainable. Plus we run very low overhead and our capital isn't leveraged. We don't have to pay for it like others. Hopefully that keeps us competitive long into the future.

    And I totally agree about interesting times coming up. Look at just the last 2 years and how much has changed. The trends are only getting stronger.

  7. #32
    Veteran Reputation points: 107311 Chambo's Avatar
    Join Date
    Sep 2012
    Location
    New York City
    Posts
    3,051

    Probably using the lending as a way to hold onto/secure merchants to sell their wares, use their banking, etc. Wells, Citi, Chase, B of A all do that with large merchants. They give them processign at interchage flat, or even interchange minus, to secure their banking business (where the real mony is).

    Amazon is now going to be "lending money" to merchants (too proud to call it factoring?). Obviousy a way to lock in the sellers and also help increase the sales on their website (for which they collect commissions).

  8. #33
    I will tell you another area that is going to get interesting- RENEWALS. As funders have more and more competition driving price down, to retain their portfolio from leaving, rates on renewals are coming further and further down. This reduces revenue to both funder and ISO. The ISO is especially hit hard on this trend because if the schedule A is no longer being followed on renewals and its fight to survive mode for funders on renewals, projections of recurring revenue are out the window. I have seen rates go from 1.35's/6 to 50% of that on renewal. Even though ISO has a schedule A with a "x" payout, to just keep the deal, ISO had to eat a lot of commission. Rates are coming down down down....good for merchants, bad for resellers...

  9. #34
    Senior Member Reputation points: 4802
    Join Date
    Sep 2012
    Posts
    199

    Quote Originally Posted by MCAVeteran View Post
    I will tell you another area that is going to get interesting- RENEWALS. As funders have more and more competition driving price down, to retain their portfolio from leaving, rates on renewals are coming further and further down. This reduces revenue to both funder and ISO. The ISO is especially hit hard on this trend because if the schedule A is no longer being followed on renewals and its fight to survive mode for funders on renewals, projections of recurring revenue are out the window. I have seen rates go from 1.35's/6 to 50% of that on renewal. Even though ISO has a schedule A with a "x" payout, to just keep the deal, ISO had to eat a lot of commission. Rates are coming down down down....good for merchants, bad for resellers...
    Easy way to protect your book is just not double factor renewals. Any company paying you off is hitting the balance with the rate. If you just fund add-ons then merchants never leave you. Plus you can still charge full rate on the new funds. It's a better deal for the merchant.

    Whenever we get a payoff request for a merchant that has a good history we just call them up and show them the math. If they are a problem account we don't say a word. LOL

  10. #35
    Are there any companies that are actually funding with 100% of their own money?

  11. #36
    Veteran Reputation points: 107311 Chambo's Avatar
    Join Date
    Sep 2012
    Location
    New York City
    Posts
    3,051

    Quote Originally Posted by cashman View Post
    Are there any companies that are actually funding with 100% of their own money?
    There are several that make that claim, however, they then come back with "their partner parameters" on detrmining pricing...so once again more horse manure and sales pitch.

    Realistically I doubt that any "substantial funder" (doing $1 million + a month) is using solely their own money.

  12. #37
    there are a very few large funders these days with institutional money. Alot of the smaller funders comingle their funds under syndication. Several with Strategic I hear- If you want to only use funders who are large and self fund all deals, I think that limits it to a handful or so of funders. Ironically, the handful or so are also the longest standing funders in this business.

  13. #38
    Senior Member Reputation points: 4802
    Join Date
    Sep 2012
    Posts
    199

    There are a couple out there. I'm fairly certain GRP is one of them.

    We're 100% our own money be we are 99% direct channel and not looking to be big. Not at all. There's a big advantage to being 100% self funded. Strip out the cost of funds and you have a big price advantage. Same ROI at lower factors. Makes it easier to close deals too.

  14. #39
    Veteran Reputation points: 107311 Chambo's Avatar
    Join Date
    Sep 2012
    Location
    New York City
    Posts
    3,051

    Quote Originally Posted by Finance1 View Post
    There are a couple out there. I'm fairly certain GRP is one of them.

    We're 100% our own money be we are 99% direct channel and not looking to be big. Not at all. There's a big advantage to being 100% self funded. Strip out the cost of funds and you have a big price advantage. Same ROI at lower factors. Makes it easier to close deals too.
    Only if you put out competitive offers. If you are conservative with your offers BECAUSE it is your own money, kind of defeats the purpose, no? You will stay small and will forever live in fear of getting stomped out by the "more visible" MCA's

  15. #40
    Senior Member Reputation points: 4802
    Join Date
    Sep 2012
    Posts
    199

    Quote Originally Posted by Chambo View Post
    Only if you put out competitive offers. If you are conservative with your offers BECAUSE it is your own money, kind of defeats the purpose, no? You will stay small and will forever live in fear of getting stomped out by the "more visible" MCA's
    I guess it depends on the business model. If you have 3M and only need to run 250+/- active advances turning then it's not hard to keep the machine turning. 250 active advance is a drop in the ocean. Plus, the larger and more visible cash companies do a good job stamping themselves out. At least half of our book is ex MCC/AMI merchants. Once we get a merchant on our books you can keep them indefinitely by not double factoring on renewals. 1.20-25 on new money is a much better deal than the same factor on the whole balance.

    It all comes down to what you have and what you want to be. Run a good business model and properly manage risk and you can succeed alongside any of the big players. To be honest, our direct competition is companies like Swift. Their 1.1499/6 month is very real. Lost more than a few to them. Rarely lose to the top 5 unless it is a 75k+ deal and those are in the minority anyway. We syndicate on larger ones when they are solid.

    Merchants like the feeling of a relationship too. That is something TBB has done a really good job at. We do the same just on a smaller scale. If we relied on ISO business we would most likely fail. Can't compete in that space and we don't need to. Our cost to acquire is cheaper than paying commissions. And less labor intensive too. If we needed a book of 1,000+ active merchants we would have to have a strong ISO channel. There comes a breaking point for direct acquisition. I think Empire/Paramount has hit that ceiling. They are actively pursuing outside sources of biz to grow their portfolio. They are still 80%+ direct origination though.

  16. #41
    Senior Member Reputation points: 99338 MCNetwork's Avatar
    Join Date
    Sep 2012
    Location
    New York, NY
    Posts
    1,783

    If your program rates are in the 1.20-1.25, why would ISO business be detrimental for you? You certainly have enough room to tack commission on top of those buy rates and still be competitive. It's a win-win situation if you incorporate ISOs.

  17. #42
    This goes back to a thread about large funders and having to have deep pockets. If you want to be a national, large funder, with ISOs and a Direct Sales channel, you have to have large capital resources to make that model work. The array of small funders who have $1-3M to play with doesnt work for this model. You have to have capital to fund merchants and you have to have a seperate capital reserve to pay commissions each week/month/renewals. If you look at who the majority of large isos, leasing companies, agents use, its always the top 5 or so funders because they have the capital to sustain this model, fund alot of deals, and, are planning on staying in the business for a long time. Look how long AMI, BFS, Amerimerchant, MCC,GRP and others have been around? 5+ years minimum and all funding much more than $2-3M per year. Its ok to not work with ISO's if your just a small funder who has a direct model and limited capital. You will be fine if you underwrite deals and keep costs down. However, for ISOs and Brokers, they need the larger funders for new and recurring commissions-

  18. #43
    Senior Member Reputation points: 4802
    Join Date
    Sep 2012
    Posts
    199

    Quote Originally Posted by MCNetwork View Post
    If your program rates are in the 1.20-1.25, why would ISO business be detrimental for you? You certainly have enough room to tack commission on top of those buy rates and still be competitive. It's a win-win situation if you incorporate ISOs.
    We tested out the iso channel but it didn't work. ISOs found us through our ppc and liked what they saw so we let a couple send us some business. Even though we fully explained that our rates/programs were geared towards lower risk/rate sensitive clients we ended up getting a bunch of shopped around and beat up merchants. Exactly what we weren't looking for. Then when we did get what we were looking for we didn't pay 12 points so it wasn't good enough. ISO's want the lowest rates and highest commissions. Can't blame them but it doesn't work for us.

    On the other hand, we signed a couple processing agents who just wanted to have their clients well taken care of and getting them fair deals regardless of high commission checks. These relationships are working perfectly. We we're put off by the straight MCA iso's though. Too much of a shark attitude. Reputation is really important as a cash company. Especially smaller ones. We protect ours intensely. It would be counterproductive to take a reputation hit from the actions of an ISO. Another reason we decided the channel wasn't going to work.

    It all comes down to business model and ours doesn't need an outside channel. We can turn the marketing faucet off and on as necessary and keep an adequate pipeline going at all times. If we do decide to get bigger (or cost to acquire gets too large) then we will revisit.

  19. #44
    Senior Member Reputation points: 148 Capital Stack's Avatar
    Join Date
    Jul 2012
    Location
    Wall ST.
    Posts
    273

    Quote Originally Posted by John David Helmrich View Post
    Sean I hope you Facebooked, Tweeted and emailed this article directly to the journalist that wrote the original BusinessWeek article. It completely stumps me how no single finance journalist - mainstream - is accurately covering the beat on our industry. But great insight otherwise.
    John BTW if you log into the DailyFunder with your Facebook account you can post in in both places. Just an FYI!

  20. #45
    kayeodum- did you just step off of the short bus?

  21. #46
    Administrator Reputation points: 25863 admin's Avatar
    Join Date
    Jul 2012
    Posts
    484

    payday lenders could easily participate in our discussions, not that I'm implying they're in any way closely related. Unfortunately their spam bots don't even know what sites they're posting on.



Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •