[jbrown]

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.

I wasn't aware of that about Thiel, but he clearly is brilliant and is a co-founder of PayPal and the first outside investor in Facebook, so he can spot a trend. Not to debate the point however.

Your point is fair about the risk perspective of a merchant netting only 40% on a new financing. It is a 3 month test and we are calculating that the previous payment history shows good character and will offset the risk of potential desperation and the willingness to pay "fee on fee." It is also better for the merchant in our opinion than the merchant who stacks and impacts their cash flow severely with multiple daily ACH's. Ask me at the end of the year if we are still doing it

[Capital Stack]

this is a great discussion.

[staten]

I wasn't aware of that about Thiel, but he clearly is brilliant and is a co-founder of PayPal and the first outside investor in Facebook, so he can spot a trend. Not to debate the point however.

Your point is fair about the risk perspective of a merchant netting only 40% on a new financing. It is a 3 month test and we are calculating that the previous payment history shows good character and will offset the risk of potential desperation and the willingness to pay "fee on fee." It is also better for the merchant in our opinion than the merchant who stacks and impacts their cash flow severely with multiple daily ACH's. Ask me at the end of the year if we are still doing it

Well-I do wish you the best of luck. But take a step back and realize that you are actually now reduced to comparing merchants you would like in your portfolio to merchants who stack with ach's. This is what the high acquisition costs have done to the standards of funders. Hopefully I am wrong and merchants who net 40% after a refi (probably closer to 30-35% with fees) will have a default rate less than 10%. But I am not a fan of those odds.