[Ryan Shiroky]

What if, funders started giving merchants add-ons???


like, merchant takes $10K @1.35 over 8/mo $84.37/daily, 2 months later they take another $10K @ 1.37 for 6/mo bringing daily to $198.54??

just askin'

[Sean Cash]

What if, funders started giving merchants add-ons???


like, merchant takes $10K @1.35 over 8/mo $84.37/daily, 2 months later they take another $10K @ 1.37 for 6/mo bringing daily to $198.54??

just askin'

Back in the day add-ons didn't increase the holdback %. In your example, you increased the daily payment so this would be stacking on yourself.

[Finance1]

We're a direct funder and don't have an iso channel. Add-ons work great for us and it's our policy to only do add-ons and no double factor refi's. But this doesn't work well in the ISO channel. Most agents want big pay checks. Piddly add-ons aren't very appetizing.

When we approve an offer and a merchant takes less than our maximum approval, they have access to additional funds up to the max approved amount after the first 30 days. If someone takes the max offer we are willing to look at an add-on after 60 days. This type of model doesn't work well in the broker space though so while it sounds good, it won't be adopted by many. It's great for our retention.

One of the ways I've seen stacking "spun" (and it's actually mathematically correct in many cases) is that a 1.39/3 month deal is less expensive than renewing or refinancing into a double factor even with premium pricing on the senior deal.

Example:

High quality client did a 6 month 1.20 deal of $50k and payback $60k. They have their balance down to 30k after 3 months and want another 20k. So one option is a refi ($50k renewal / net $20k / $60k repayment). They just paid $10k cost for $20k funding. Or a 1.50 on new funds advanced.

What's worse, double factoring or stacking? They both suck.

[Chambo]

What if, funders started giving merchants add-ons???


like, merchant takes $10K @1.35 over 8/mo $84.37/daily, 2 months later they take another $10K @ 1.37 for 6/mo bringing daily to $198.54??

just askin'

MCC, TBB and BFS have been doing this for years.

Welcome aboard

[Ryan Shiroky]

lmao... then WTF are these guys thinking?!?!?!?!

[Ryan Shiroky]

Back in the day add-ons didn't increase the holdback %. In your example, you increased the daily payment so this would be stacking on yourself.

i increased the payment, because the original loan was 8/mo with only 6/mo remaining and the add-on was a 6/mo deal... doubling the risk within the next 6 months...

[funding pro]

Companies that do that will usually only do that if the merchant took less than they originally qualified for.

[Ryan Shiroky]

Companies that do that will usually only do that if the merchant took less than they originally qualified for.

i know about that, im saying, it would make sense to do something like this when your merchant calls up and says "i need money now!" instead of telling them "No, aint gonna happen bub" and then they stack...

[funding pro]

Most of the larger and established funding companies have their parameters and they stick to them. It would be naïve to think they should act in a way different from their core principals and funding criteria because a merchant needs money and someone else is willing to give it to them. I think most funding companies will listen, at the very least, and in some cases will provide exceptions if it makes sense, but the threat of a stacker should not make a company waiver from their underwriting guidelines. That train of thought should apply to the good merchants. As for the bad ones, there is obviously no point in throwing good money after bad.

[Chambo]

Most of the larger and established funding companies have their parameters and they stick to them. It would be naïve to think they should act in a way different from their core principals and funding criteria because a merchant needs money and someone else is willing to give it to them. I think most funding companies will listen, at the very least, and in some cases will provide exceptions if it makes sense, but the threat of a stacker should not make a company waiver from their underwriting guidelines. That train of thought should apply to the good merchants. As for the bad ones, there is obviously no point in throwing good money after bad.

SFS (in special cases), TBB, BFS and MCC all do this already, always have. Nothing new
Sean, how can you, as former head UW at MCC, not have chimed in?

[Ryan Shiroky]

I know some do this, but its really not common practice... and as Funding Pro said before, it is usually when they qualify for more than they took. What I am saying, is that the model would deter merchants from stacking in the long run... and to not consider it with an open mind, would be foolish... i mean, what are the statisics? what percentage of merchants that take this money are stackers? probably a lot more than any of us really think/realize... i would say over 50%... so, half your book has/is stacked... that sucks... we need to think of a way to stop them from WANTING to do it... the only way, is to be there to fill the coffers when they need it. if we say no, someone is going to say yes, bottom line...

[Sean Cash]

I know some do this, but its really not common practice... and as Funding Pro said before, it is usually when they qualify for more than they took. What I am saying, is that the model would deter merchants from stacking in the long run... and to not consider it with an open mind, would be foolish... i mean, what are the statisics? what percentage of merchants that take this money are stackers? probably a lot more than any of us really think/realize... i would say over 50%... so, half your book has/is stacked... that sucks... we need to think of a way to stop them from WANTING to do it... the only way, is to be there to fill the coffers when they need it. if we say no, someone is going to say yes, bottom line...

I think the notion that higher approvals would deter merchants from stacking is a false one. We all know how a lot of these phone calls with merchants start off:

They want $1 million, get some sense talked into them that they might only qualify for $25,000 based on their sales, and then the deal closes for $15,000. Then another guy comes in and offers him $10,000 on top. If only the first guy had approved him for $25,000 right? Except the merchant was dreaming about $1 million when the conversation first started.

People are never satisfied when it comes to money. Everybody always wants more, more, more. If every company doubled their approvals tomorrow, the rate at which stacking occurred would stay the same in my opinion. We refer to merchant's desires as working capital needs, but once those needs are satisfied, something else is awoken: greed, opportunity, ambition...

If you only needed a $100,000 line to start an ISO, but a bank offered you a million dollar line, would you take it?

[Ryan Shiroky]

i am not saying to double approvals, i am saying to consider add-ons after a portion of the advance is paid...

and, yes, of course I would... and $900K would go to deals

[funding pro]

Ryan, I think you are missing a lot of what some folks here are saying. I'm not trying to question your knowledge of the industry and our business in general, but a lot of your questions and comments do not come across as someone who is very experienced and working for a "major funding company"

[MCNetwork]

I've come across two general types of merchants in this industry. The first type of merchant has a specific need for the funds, i.e. to pay for equipment, upgrades, taxes, etc. and will only accept what he needs regardless of how high the funding approval is. These are usually the financially responsible, one and done, good quality merchants. The second type of merchant is in financial pain and he'll take the maximum amount to stop the bleeding. This category is the one that is ripe for stacking and these merchants tend to renew constantly to try and stay afloat. The advance is the only thing keeping them solvent.

[Ryan Shiroky]

Ryan, I think you are missing a lot of what some folks here are saying. I'm not trying to question your knowledge of the industry and our business in general, but a lot of your questions and comments do not come across as someone who is very experienced and working for a "major funding company"

im just trying to think of ways for a fund to deter their clients from layering, thats all... it would seem like a good idea that if your client calls up for money, to try and figure out a way to get them some more money, instead of risking them stacking on you... if you have ideas, please chime in...

[JayBallentine]

im just trying to think of ways for a fund to deter their clients from layering, thats all... it would seem like a good idea that if your client calls up for money, to try and figure out a way to get them some more money, instead of risking them stacking on you... if you have ideas, please chime in...

I'm chiming in here with a bunch of wild and ridiculously crazy ideas here... Here we go!!

1. Use a tool like this on here to help merchants contextualize the overall impact of their MCA. Perhaps go ahead and get yourself a real video, maybe 3 mins in length of a real merchant story maybe, and require they log-in to view video as a condition to the closing process. "You don't watch video (software tracks), we will not wire you."
2. Inform them of what they should expect going forward and how to deal with it. Tell them how to deal with the brokers who will aggressively sell the stack.
3. Set up a system which requires the merchant log-in to his / her account weekly via a portal connected to your site. The purpose of this weekly log-in is for you to get a view of activity. Large deposit + additional daily debit = stack. Then you have language in your contract that allows you to take the whole thing (or remainder) in service of the original advance. Failure to log-in = breach = collections style engagement.
4. Work together.

We've been kicking around the idea of somehow working on a shared database where we'd contribute info on who's in an MCA - faster than a UCC can be filed for the merchant. TONS of challenges with that... NAMAA may have some ideas.

[funding pro]

NAMAA already has this with other NAMAA members.

[Chambo]

I'm chiming in here with a bunch of wild and ridiculously crazy ideas here... Here we go!!

1. Use a tool like this on here to help merchants contextualize the overall impact of their MCA. Perhaps go ahead and get yourself a real video, maybe 3 mins in length of a real merchant story maybe, and require they log-in to view video as a condition to the closing process. "You don't watch video (software tracks), we will not wire you."
2. Inform them of what they should expect going forward and how to deal with it. Tell them how to deal with the brokers who will aggressively sell the stack.
3. Set up a system which requires the merchant log-in to his / her account weekly via a portal connected to your site. The purpose of this weekly log-in is for you to get a view of activity. Large deposit + additional daily debit = stack. Then you have language in your contract that allows you to take the whole thing (or remainder) in service of the original advance. Failure to log-in = breach = collections style engagement.
4. Work together.

We've been kicking around the idea of somehow working on a shared database where we'd contribute info on who's in an MCA - faster than a UCC can be filed for the merchant. TONS of challenges with that... NAMAA may have some ideas.

This sounds like pretty much every welcome/funding call by every major and mid tier MCA out there.

[Chambo]

I'm chiming in here with a bunch of wild and ridiculously crazy ideas here... Here we go!!

1. Use a tool like this on here to help merchants contextualize the overall impact of their MCA. Perhaps go ahead and get yourself a real video, maybe 3 mins in length of a real merchant story maybe, and require they log-in to view video as a condition to the closing process. "You don't watch video (software tracks), we will not wire you."
2. Inform them of what they should expect going forward and how to deal with it. Tell them how to deal with the brokers who will aggressively sell the stack.
3. Set up a system which requires the merchant log-in to his / her account weekly via a portal connected to your site. The purpose of this weekly log-in is for you to get a view of activity. Large deposit + additional daily debit = stack. Then you have language in your contract that allows you to take the whole thing (or remainder) in service of the original advance. Failure to log-in = breach = collections style engagement.
4. Work together.

We've been kicking around the idea of somehow working on a shared database where we'd contribute info on who's in an MCA - faster than a UCC can be filed for the merchant. TONS of challenges with that... NAMAA may have some ideas.

you forgot the point where they also ask the merchant they are being charged a fee, and reminding the merchant they their MCA has nothing to do with said fee

[JayBallentine]

This sounds like pretty much every welcome/funding call by every major and mid tier MCA out there.

Funders are:

1. Requiring merchants watch a video of a real merchant who stacked himself out?
2. Requiring a weekly login to view account every 5 business days?
3. Showing them what the initial MCA will have on their bottom line? Like our calc does?
4. Working together to reduce the reliance on brokers for deal flow?

???

If that's the case bring on the regulators!!!

[admin]

Jay,

You need to stop promoting your calculator and your business.

[JayBallentine]

Jay,

You need to stop promoting your calculator and your business.

I thought I was promoting discussion? The discussion was about how to stop stacking - showing merchants economics of stacking don't qualify as a valid discussion topic? How do we derive financial benefit from sharing our data with industry?

[admin]

What you think and what is happening are two different things. We are actually getting a lot of complaints about your posts here.

[JayBallentine]

I just thoroughly reviewed the thread. I don't have enough info to correct my actions without your help. Please PM a summary of all comments which have been found to be offensive. Once I know exactly what not to do, I can make necessary adjustments.

Respectfully yours,
Jay