empirical Evidence. Veto SB 1235
Many have argued that regulation will be a benefit to the Merchant Cash Advance industry but there is little to no empirical evidence of this.No studies have been done and even if it was true what would be the economic cost of this? Hastily vetted regulation causes a chain reaction of unintended consequences that most people cannot foresee in the future. Fair Regulation, Conquering financial Bubbles, sound investment strategies, and economies have been something that people have seeking out for generations. As such people believe that regulation is a cure to all of these things but it is the exact opposite of the truth.
Regulation caused a stranglehold on the free market. Unintended consequences will arise. increased costs and insurmountable debt caused by fewer profits( lower rate) and increased litigation( increased costs). If anyone was to analyze the profit models of some of the top companies you can see that after all operating costs are factored in people have negative equity or negative to the low-level profit model. Some companies in the past have gone as far as to hide their actual losses. They hanged the risk grade of paper to not expose this failing business model. ( lending clubs ex CEO was forced to resign over this). The banking industry collapsed over this thru tranches and CDOs
Adding additional Regulation costs with the addition of a cap on rates, with the current default ratios will make it impossible for investors to allow their money to go into a losing proposition.
While the regulation attempts have been made with the consumer and business owner in mind. A certain portion of business owners will go under bankrupt with or without a cash advance. People choose to close there business for something as simple as them not wanting to have the responsibility of operations anymore. Or they sell it for a profit or loss. Anyone can check the Small business associations studies or any other valid organization. What some call "predatory lending" to disadvantage borrowers with low-grade profiles and low ability to repay ( with or without interest or costs). Is hope and opportunity to me.
Companies are giving money to people who have a very high chance of default. Regulation will cut out the possibility for the people in these categories to receive funding for their business.
There is a reason the banks turn them down for loans.
The # 1 reason why Loans and cash advance should not be automated thru black box underwriting, computer-generated algorithms is they are basing the data on the past performance of the business. Credit score, bank statements etc
Past performance is not indicative of future results.
People are taking cash advances because of Cash flow issues that may or may not be solved with a loan or cash advance. Just because the algorithms are suitable at this moment to get a cash advance or loan. You do not know what that business has in store for them in the future and you most certainly do not know what the merchants intent is ( to sell it, close it, change the menu, fire the chef, go to Vegas, get divorced from the wife who cheated , take on a mistress, a road or overpass is planned in construction so the exit to the restaurant or gas station will be passed by..no more traffic etc etc etc etc )
There is a difference between unsecured loans/ advances/bank loans/ venture capital/ hedge funds etc. People seem to never understand unless their personal money is involved.
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Before they are celebrating SB 1235 it still needs to be signed by the Governor. They have until the end of the month. Below is a template, an email postcard, phone numbers etc to say no to it.
Stand up and do something, ask to Veto it, send it to calif merchants clients, business that you know other isos. Merchant Cash Advance brokers are some of the strongest sales people I have ever met
You Bled with Wallace, Now Bleed with me
https://www.youtube.com/watch?v=eclbaC3q94k
