[Chambo]

Is this statement correct?

[CO1]

Captap! 24 months! I wrote about this before!

[Chambo]

fixed or % deals?

[Chambo]

Can you repost the stips/stats on this?

[J.Celifarco]

I am Pretty Sure 15 months is as long as they go out

[Sean Cash]

24 months = a bad idea. Ask Jeremy Brown what he thinks about this.

[Scott Griest]

I agree with Jeremy! 24 months = funding company out of business soon!

[staten]

I agree with Jeremy! 24 months = funding company out of business soon!

Almost as ridiculous as rapid's new program of having merchant's net only 40%. Contrary to popular opinion on this board-smart PE is avoiding this sector. Customer acquisition costs are far too prohibitive (case in point is rapid's willingness to take on this crazy risk in order to acquire customers-did they not learn anything from the last time they almost went under?). Race to bottom-mca underwriting teams have no business and/or brain power to underwrite deals >$200k and longer than 6 months. Great time to be a broker and a fully secured lender to MCA -but the equity will blow up.

[jbrown]

Almost as ridiculous as rapid's new program of having merchant's net only 40%. Contrary to popular opinion on this board-smart PE is avoiding this sector. Customer acquisition costs are far too prohibitive (case in point is rapid's willingness to take on this crazy risk in order to acquire customers-did they not learn anything from the last time they almost went under?). Race to bottom-mca underwriting teams have no business and/or brain power to underwrite deals >$200k and longer than 6 months. Great time to be a broker and a fully secured lender to MCA -but the equity will blow up.

Accel Partners, Google Ventures, Peter Thiel and the like are certainly "smart-PE." Not sure I understand your point Noob. What side of the business are you on, funder or ISO? What exactly are you advocating for?

[staten]

Accel Partners, Google Ventures, Peter Thiel and the like are certainly "smart-PE." Not sure I understand your point Noob. What side of the business are you on, funder or ISO? What exactly are you advocating for?

Peter Thiel lost 80% of his fortune shorting the market-so i will beg to differ. Regardless-I'm not advocating anything-just stating the obvious that the economics of the business model simply do not work with the cost of acquisition. I am very interested in why you think it is prudent from a risk perspective for a merchant to net only 40% from a new financing.

[MCAVeteran]

The only funder I have seen go out to 24 months on occasion for premium or select business is new logic business loans. The next term closest to that is 18 months by a few funders like on deck and arf. Than you have some 15 mo terms at BFS. Most other companies are all under 12 mo terms or turns depend on product-

[Chambo]

The only funder I have seen go out to 24 months on occasion for premium or select business is new logic business loans. The next term closest to that is 18 months by a few funders like on deck and arf. Than you have some 15 mo terms at BFS. Most other companies are all under 12 mo terms or turns depend on product-

We received a 48 month option from ARF last month

[CO1]

We received a 48 month option from ARF last month

Can you give more details about this?

[Chambo]

Can you give more details about this?

What more is there to tell you? they sent us an offer sheet with a 12, 24,36,48 and a 60 month option.

Now whether or not it funds is a different story...but they made the offer

[Sean Cash]

Daily repayment for 2 years.... let's think about that for a minute. You should prepare yourself for ACH rejects if it's on ACH. Will the average daily ending balance for the last 6 months help you predict how much money will be in a merchant's bank account in August of 2015?! NOPE!

And be prepared for the request for additional funds in 4-6 months on these deals, which will either lead to a further extension of the deal or a stack when the original funder says no.

[MCNetwork]

And ARF will refinance an existing MCA even if the merchant is only 20% paid down. Yikes!

[MCAVeteran]

48 months and they are paying you an upfront commission? cmon now....Les isnt that crazy..is he?.....

[MCAVeteran]

its the daily remittance platform, and, risk models, along with the banks not needing to build an infrastructure to support lending to SMBs that works in our favor as an industry. On Deck states on their website, they have supported numerous banks with their risk scoring model to lend to SMB's. Big Banks are not setup to lend to mom/pops, however, they are providing credit facilities like Wells Fargo, for funders to lend to SMB's in our space. And yes, the loans do carry a PG. Have you read the language on the business loan agreements?

[Finance1]

I think the longer turns are simply part of a natural progression in the industry. And a really good one at that. I got in to this business 3.5 years ago. I've been in the origination and underwriting of mortgage and commercial loans field since 1999. Risk based pricing is deep rooted in both of the fields I've worked in. Why wouldn't it be in this space?

When I first came into this business I was really surprised that no premium price stuff existed. "750 score and $10k average dailies? That's awesome! Here's a 1.38/6. Have a nice day!" Before we started funding we worked the iso angle for a while. We generated plenty of high credit/high quality statement apps but there was no products to present. OnDeck had their big toe in it but they too only liked to go 1.20/6. They said they did 12 months but lets be honest, how many 1.30/12s actually got funded in 2010? heh.

There was simply too big of a gap between traditional and alternative lending with nothing in between. It was either bank financing or 1.20 - 1.38/6 deals. That's a massive spread and there was plenty of demand from quality business owners but no product to present. ARF probably had the closest thing but they we're pretty picky back then. Not sure how they are now.

18-24 months deals can be properly underwritten and funded with enough margin to make the machine run smoothly. Banged up businesses aren't getting those terms nor should they. However, the product is a nice fit and there is a big pool of quality businesses who are underserved. Banks are never going back to "the way it was" and even when they were pretty loose there was STILL plenty of demand for MCAs.

In the last 2 months we've brokered a handful of $100-200k deals in the 12-18 month range with terms that a good credit business owner could swallow. These folks are not stackers or desperate renewers. They had specific needs for the money. To them, it was viewed as a one off transaction and I doubt there will be performance problems unless something goes very wrong down the road. Unforeseen time bombs can't be underwritten anyways. It's just part of the game.

IMO- 12-24 month deals for the right applicants can be a very successful and well performing product and capture a market share that didn't exist a few years ago. That middle ground between bankable and 6 month deals in the 1.30's is a big slice of the pie but it's not something that should be done carelessly for obvious reasons.

[MCAVeteran]

The industry has changed/evolved and the only thing constant is change- none of this is bad. Everyone is funding more business. If your models were 6 months 1.38 and cherry picking, that train has gone bye bye. If you dictate to merchants to switch processors to fund, you will be out of bz as every processor has a funding outlet today. Ach repayment and loans are a bulk of the bz now. The longer terms were inevitable to shake up the market along with loan products. The lower credit deals will always find their way to the shorter term high rate doorsteps but the other segment who wasn't taking advances due to short terms high rates are seeking better deals daily and will find them. ARF did have something unique awhile back even before new logic or on deck arrived to the scene, but they were not looking to be the 800 lb funder- they have a nationwide footprint of w2 sales reps that produce for them as a core model and ISos were/are supplement bz only- they also can charge back defaults to their employees unlike broker bz-

[CO1]

48 months? Can someone explain this to me.

[CO1]

I get that part. But ARF stands for an what kind of deal was it? I don't want all the facts.

[Chambo]

Advanced Restaurant Finance. they do bank loans through Bank of The Internet. they used to use Venture Bank out of Florida

[CO1]

Thank You Sir.

[MCAVeteran]

http://www.missionvalleybank.com/pdf/mvb_ar09.pdf

Page 21- banks have to list all outstanding loan receivables- did they cutoff this bank to?