[madisonwolf]

Cash Advance industry feels saturated with competition. Just think this is an interesting topic haha.

[Zach]

Unfortunately, the next big thing will be reduced commissions and increased competition.

[jotucker1983]

Cash Advance industry feels saturated with competition. Just think this is an interesting topic haha.

Now Madison if I knew this, why would I want to go and tell my "competition" to thus create another saturation problem ?

[FUNd]

Now Madison if I knew this, why would I want to go and tell my "competition" to thus create another saturation problem ?

John, you're the 12th person to type this same response today! Please take me off your list.

[jotucker1983]

John, you're the 12th person to type this same response today! Please take me off your list.

Ha! The typical UCC call lol.

[mcaguru]

OK..lets have some fun..Regarding supersaturated...I think the space in undeserved. lets say between all the MCA firms we got 1000 (maybe 2000) reps on the phones talking Cash Advance? that would be serving 17M business owners.

lets talk about the PUSH and PULL theory;

Very few people are waking up and deciding to call Herbalife for some tablets yet they do just shy of 4BILLION Annually that is all done by way of the PUSH MODEL. (BTW Avon does 10 Billion with the PUSH model).
Apples Revenues are the PULL MODEL

So I agree the MCA space is "highly overly saturated" on the PULL MODEL, as in the merchants seeking the capital, however the MCA industry is in the INFANCY STAGE when it comes to the PUSH MODEL.

to put it in perspective it would take a Month for our entire industry to work the phones just to present the MCA programs (listen closely) to the 42,941 American single liquor stores operators.

[FUNd]

OK..lets have some fun..Regarding supersaturated...I think the space in undeserved. lets say between all the MCA firms we got 1000 (maybe 2000) reps on the phones talking Cash Advance? that would be serving 17M business owners.

lets talk about the PUSH and PULL theory;

Very few people are waking up and deciding to call Herbalife for some tablets yet they do just shy of 4BILLION Annually that is all done by way of the PUSH MODEL. (BTW Avon does 10 Billion with the PUSH model).
Apples Revenues are the PULL MODEL

So I agree the MCA space is "highly overly saturated" on the PULL MODEL, as in the merchants seeking the capital, however the MCA industry is in the INFANCY STAGE when it comes to the PUSH MODEL.

to put it in perspective it would take a Month for our entire industry to work the phones just to present the MCA programs (listen closely) to the 42,941 American single liquor stores operators.

17 million is a very inflated number. If you look at the revenue statistics for small businesses, about 14 million of those "small businesses" are under 100K in gross annual revenue, effectively eliminating them from qualifying for an MCA product, or even traditional financing.

I disagree that this space is under served in what you refer to as the push model. People have said the opposite, but I've found that eligible businesses are fairly well marketed to.

Say you have 4 million businesses, and just 50 ISOs reaching out to 100,000 prospects a month, whether it be direct mail, email, robo-dialing, cold calling, or any combination thereof, this covers 5 million prospects, more than the eligible pool of applicants. How can you say this space is under served?

[MCNetwork]

Keep in mind that 90% of these ISOs are primarily calling UCC lists or have very limited resources to implement a decent marketing campaign. So only 10% of the ISOs are trying to cover 5 million prospects. In addition, a prospect who said no to a cash advance last month may say yes this month because this business is all about timing and calling repetition, which requires a significant marketing budget. Very few ISOs have the bandwidth and capital to do this job properly, so like the 80/20 rule illustrates, a handful of ISOs are the only "real" competition in this industry and generate the lion's share of business. Personally, I see tons of new deals in my pipeline who have never heard of a cash advance so I don't think market saturation is an issue. Most of today's johnny come lately ISOs and funders will be out of business within the next 12 months anyway. If anything, you'll start seeing a consolidation and acquisition of the high volume ISOs as the stronger funders ramp up their inside sales forces, leaving the smaller guys with crumbs to feed on.

[J.Celifarco]

Keep in mind that 90% of these ISOs are primarily calling UCC lists or have very limited resources to implement a decent marketing campaign. So only 10% of the ISOs are trying to cover 5 million prospects. In addition, a prospect who said no to a cash advance last month may say yes this month because this business is all about timing and calling repetition, which requires deep marketing dollars. Very few ISOs have the bandwidth to do this job properly, so like the 80/20 rule illustrates, a handful of ISOs are the only "real" competition in this industry. Personally, I see tons of new deals in my pipeline who have never heard of a cash advance so I don't think market saturation is an issue. Most of today's johnny come lately ISOs and funders will be out of business within the next 12 months anyway. If anything, you'll start seeing a consolidation and acquisition of the high volume ISOs, leaving the smaller guys with crumbs to feed on.

completely agreed. the UCC driven ISO's and the ISO's with a serious marketing budget each have to be looked at separately because they are not competing against each other. There is a major difference between having an ISO that depends on UCC's and an ISO that if they use UCC's at all, they are a very small piece of the bigger marketing puzzel

[mcaguru]

Bottom line is the companies that are going to get approved for 100K-500K are not answering the phones themselves (or for that fact the majority of business owners) so the phone dialer campaigns don't work for receptionist or auto response pick ups at most larger companies, direct mail gets killed by the receptionist (I am sorry but ondeck and pizza hut post card carry same importance at a company with 30 employees). the fact is one of my best ISO's get the largest deal flow by calling and talking to the president of companies doing over 5M a year, his trick he calls and talks to the president of the firm like a banker in 1973. - that model is as wide open.

[jotucker1983]

I don't know, the industry appears to be over-saturated in my opinion because while there's over 20 million entrepreneurs in the country, only about 3 - 5 million of them qualify for what we offer in terms of a cash advance or alternative business loan.

But because our pricing is significantly higher than a traditional source, the vast majority of these merchants will never consider our product. You can market to them all day long, the significant price for our product will also be the main reason these merchants will not take the financing unless they are in a situation to actually use it.

A P2P type of product (Lending Club, FC, etc) where the pricing and terms are closer to conventional sources, are more in line to attract more attention, but then with those products you are looking at a more conservative underwriting model which will offer much fewer approvals. So we are back to the same problem.

At the end of the day, it appears to me (but I could be totally off here), that we in the MCA space are only competing over the business of 100,000 - 300,000 merchants at any given time.

[WhoisKingsley]

There are a lot of issues that have been outlined on this forum that go back to all of the same subjects. There are different sides to the issues we face. You can view this as a Funder, Underwriter, Broker, or Merchant, whoever- and we will all have different concerns; some we feel to be more important that what the other thinks. We can all agree on the following:

Too many entities in the MCA space - There is no classification to separate the entities and what they actually do/provide directly
Bad practices all around 3rd party fees blah blah blah

Biggest issue- ANYONE can be a broker or referral agent for any product. It all comes down to the consumer and what they understand and what they need and where to go to get it. John is right- What business owner's want (rates and terms) more than half of the time they do not qualify for- The broker on the phone though, is telling them whatever just to get the documents. The Business owner then went through all of the work to realize they can't get what they want/need/told they were going to get.

This then reflects on the direct funder because they are utilizing the broker to gain business. The way I see it, the ladder part of the industry are brokers aka RESELLERS... the voice and character of our industry is being portrayed by those who actually are doing the work. NOT the marketing, interviews, news reports- it is the broker who is getting to the business owner and making an impact on their experience as well.

So what is going to happen to broker's in the future you ask? A LOT. But it is going to take more than just ONE funder or ONE entity to make an positive impact and if everyone keeps worrying about who is going to take the crown- nothing will happen.

I think there will be some positive changes before the end of the year when it comes to relationships but at the end of the day- you can't force close a deal if a merchant doesn't want it.

[J.Celifarco]

There are plenty of 100k+ deals that fund where I dial the phone and the owner picks up. Also if you are spending the marketing dollars correctly these people are calling you. I am not saying that the 1973 bank plan cant work I am just saying there are plenty of other ways also to get those deals

[J.Celifarco]

There are a lot of issues that have been outlined on this forum that go back to all of the same subjects. There are different sides to the issues we face. You can view this as a Funder, Underwriter, Broker, or Merchant, whoever- and we will all have different concerns; some we feel to be more important that what the other thinks. We can all agree on the following:

Too many entities in the MCA space - There is no classification to separate the entities and what they actually do/provide directly
Bad practices all around 3rd party fees blah blah blah

Biggest issue- ANYONE can be a broker or referral agent for any product. It all comes down to the consumer and what they understand and what they need and where to go to get it. John is right- What business owner's want (rates and terms) more than half of the time they do not qualify for- The broker on the phone though, is telling them whatever just to get the documents. The Business owner then went through all of the work to realize they can't get what they want/need/told they were going to get.

This then reflects on the direct funder because they are utilizing the broker to gain business. The way I see it, the ladder part of the industry are brokers aka RESELLERS... the voice and character of our industry is being portrayed by those who actually are doing the work. NOT the marketing, interviews, news reports- it is the broker who is getting to the business owner and making an impact on their experience as well.

So what is going to happen to broker's in the future you ask? A LOT. But it is going to take more than just ONE funder or ONE entity to make an positive impact and if everyone keeps worrying about who is going to take the crown- nothing will happen.

I think there will be some positive changes before the end of the year when it comes to relationships but at the end of the day- you can't force close a deal if a merchant doesn't want it.

100% agree with this, especially when you say the brokers are the face of the business. The best banks in the industry giving the lowest factor rate can be made to look terrible if the broker on the deals turns around and puts a 10% closing cost on the deal along with other fees. Before anyone jumps on me I am not saying you should not charge a closing cost, but like in all things it must be fair and reasonable... Its the fair and reasonable thing that I find is often missing from the industry

[jrhodes]

I don't think the space is over-saturated. I do think it can feel that way because there's a lack
of marketing diversity and creativity. Big broker shops will do big broker shop things. Smaller shops
need to be smarter. If everyone is calling the same UCC's (and they are) then you're operating in a highly
competitive space.

Working the UCC's is fine. We get business from that too. But try other things.

Build a referral base of b2b professionals and vendors. It takes time, but it pays off.
Hold small business owner workshops on cash flow management, building business credit and bank qualifying.
Remember at the end of the day you're a sales man, give your card to every business owner you meet,
network.

I get at least 1 to 2 personal deals a month from the business card/network model.
Our referral base is growing and adding to monthly production.

We are just getting ready to launch the workshops.

Again, millions of small businesses, the percentage of those on a UCC list is minute.

Just sayin'

[WhoisKingsley]

100% agree with this, especially when you say the brokers are the face of the business. The best banks in the industry giving the lowest factor rate can be made to look terrible if the broker on the deals turns around and puts a 10% closing cost on the deal along with other fees. Before anyone jumps on me I am not saying you should not charge a closing cost, but like in all things it must be fair and reasonable... Its the fair and reasonable thing that I find is often missing from the industry

YESSSS!

There are a lot of Funding Companies that I completely agree with and have really great reselling programs. They are all wanting more ISOs too and there are many complications with signing on so many but not getting deals closed annnnnnnd I am going to stop right there.

[Hedley Lamarr]

It reminds me of the wholesale trading days in the mid-90's. There were a lot of trading firms with lots of capital chasing order flow. There was major consolidation in the industry stemming from banks buying brokerage firms and wire houses buying wholesale trading platforms to grab customers. Competition was fierce! Then along came new regulations, technology and the customers got smarter. Pricing was compressed due to regulation, customer knowledge,technology and too many dollar chasing a few customers. In the end, the larger firms with cheap capital were able to compete in a low margin business forcing many out of the business. Others tied up masses about of capital chasing customers and eventually blew themselves up because they moved too quickly deploying capital without doing their homework. I see the same thing happening across the lending industry and private equity/venture capital industry.

[mcaguru]

Great topic!!

BTW i have an ISO that sits at night leaving voice messages on 100 machines and gets 1-3 call backs the next day. some times more/less. (and then of course he sends me the bcd paper to get 3 hour offers and double digit commissions)...
Claims he makes 5 Digits a month with that model.
bizdev@cresthillcapital.com

[Chambo]

I don't think the space is over-saturated. I do think it can feel that way because there's a lack
of marketing diversity and creativity. Big broker shops will do big broker shop things. Smaller shops
need to be smarter. If everyone is calling the same UCC's (and they are) then you're operating in a highly
competitive space.

Working the UCC's is fine. We get business from that too. But try other things.

Build a referral base of b2b professionals and vendors. It takes time, but it pays off.
Hold small business owner workshops on cash flow management, building business credit and bank qualifying.
Remember at the end of the day you're a sales man, give your card to every business owner you meet,
network.

I get at least 1 to 2 personal deals a month from the business card/network model.
Our referral base is growing and adding to monthly production.

We are just getting ready to launch the workshops.

Again, millions of small businesses, the percentage of those on a UCC list is minute.

Just sayin'

It's time consuming and could potentially be expensive up front, but trade shows and conventions can be a good start. the National Restaurant Convention, for example. You will meet business owners there who wouldn't take your call in a million years, or answer your mailer or whatever. Multi location shops, $5 million businesses, etc.

I also went to the Commercial Real Estate convention in Vegas a couple years ago. Speak to the landlords. If you can show them how you can help their tenants who might be behind on rent? At regional restaurant convention in PA, I got to speak to a 35 location restaurant owner. Now this guy would NEVER, EVER handle the marketing we send out. Another convention had one guy I spoke to back then referred a 5 location ROCKY MOUNTAIN CHOCOLATE FACTORY to me...kind of guy I would have NEVER gotten on the phone.

[mcg168]

It's time consuming and could potentially be expensive up front, but trade shows and conventions can be a good start. the National Restaurant Convention, for example. You will meet business owners there who wouldn't take your call in a million years, or answer your mailer or whatever. Multi location shops, $5 million businesses, etc.

I also went to the Commercial Real Estate convention in Vegas a couple years ago. Speak to the landlords. If you can show them how you can help their tenants who might be behind on rent? At regional restaurant convention in PA, I got to speak to a 35 location restaurant owner. Now this guy would NEVER, EVER handle the marketing we send out. Another convention had one guy I spoke to back then referred a 5 location ROCKY MOUNTAIN CHOCOLATE FACTORY to me...kind of guy I would have NEVER gotten on the phone.

Look at this....Chambo in a good mood today!!

[dpFund]

To throw my hat into the ring...I think that helping the clients who got hammered with too many MCA loans and now are in a panic is one the "next things" for our industry. I have been a direct lender since 2008 (even though I just joined this group recently) and I am seeing more and more clients that fit this profile. Some have painted themselves into a corner so badly there is no way out. But some are catching themselves in time and can be brought back from the edge.

I funded north of $1M in MCA consolidations last month and on track to do more than that this month, typically bringing their payments down to about a third of what they are paying today. Good for the MCA lenders because they get an early payout, optimizing their return on capital. Good for the client because their cash flow increases dramatically, in spite of the fact that they are paying interest on interest.

Feel free to pm if you would like to discuss.

Best - Dan Page
dan@fundingstrategypartners.com
303-938-8280

[tommy]

Another one looking for files and than can't consolidate. Clowns all over this industry

[FUNd]

Great topic!!

BTW i have an ISO that sits at night leaving voice messages on 100 machines and gets 1-3 call backs the next day. some times more/less. (and then of course he sends me the bcd paper to get 3 hour offers and double digit commissions)...
Claims he makes 5 Digits a month with that model.
bizdev@cresthillcapital.com

Love to get a hold of that script. 3 call backs from 100 voicemails? Those are amazing, mind-bending metrics.

[dpFund]

Another one looking for files and than can't consolidate. Clowns all over this industry

Be careful what you accuse others of if you don't know what you are talking about. I have my personal money on the street and have for many years. Do you? Or is it simply easier to sling %$@! at somebody else?

[bdshaw]

I agree Dan.
Too many people on this forum let their typing fingers do their thinking for them.