[MCAFunds]

yes but I think 5 on the low end you have 4 on you high end. Hey all we can say is time will tell and we will see how everything plays out

Is 20 payments really a determining factor on whether or not a fund will succeed or a merchant will payback? If 20 payments is the end all be all, then every funder and broker has a big problem....

[J.Celifarco]

Is 20 payments really a determining factor on whether or not a fund will succeed or a merchant will payback? If 20 payments is the end all be all, then every funder and broker has a big problem....

its more then 20 payments and I also think there is a place for the 10-12 month deals when its the right deal. Every deal is unique and to try to put all deals in 1 box doesn't work.

[MCAFunds]

its more then 20 payments and I also think there is a place for the 10-12 month deals when its the right deal. Every deal is unique and to try to put all deals in 1 box doesn't work.

Correct. There IS a place for 12 month deal, when its the RIGHT deal. But in order to turn profits monthly, weekly, daily, hell, even hourly, the percentage of RIGHT deals versus the percentage of 4 Month deals are lop sided. You're in this industry to either 1.) Commission 2.) Underwrite and get paid 3.) Fund and receive total payback or 4.) For ALL the wrong reasons.

Any business is operating to close business and profit. The profits are very clearly showing that a 12 month or longer deal i.e. CAN, Capify, MCC/BizFi, OD etc etc etc do not create PROFITS.

Who cares if the merchant pays the fund back in 12 months and causes time and money and wasted energy, the profits are NOT there. This is a trend and fact. No other way around it.

[Chambo]

isn't that why the big banks don't do loans under like $500,000 or so?

[MCAFunds]

isn't that why the big banks don't do loans under like $500,000 or so?

Big banks offer loans for all amounts. $500,000 is a $500 advance to any fund, let's be straight and realistic. Big banks do not have INTEREST in lending under $100,000, once again, from three things 1.) Data and repayment history from 50 years 2.) Wasted time, man hours, energy 3.) Lending anything under $100,000 even at 7% is just not worth their time, even with a 5 Million piece of waterfront property guarenteed on the loan. Same thing goes for this industry, as data and trends are being created. Lending past 3-4 months and anything less than 1.35 is just not worth the time and does not create PROFITS.

Everyone forgets one key factor. PROFITS. No one is in business to break even or lose money, it's all about the PROFITS.

[MCNetwork]

If a funder can incorporate 1.20-1.30s in their portfolio mix to broaden their customer base and increase market share while maintaining profitability then it makes sense to offer them. Keep in mind that the 1.20s are typically A+ paper and represent a small percentage (10-15%) of the client portfolio. These are your outlier clients unless you specialize in A+ paper. The remaining 85%+ should be the 1.35 and up, 6 to 8 month clients.

On an individual basis, a 1.20/12 month client might not make much sense but as long as the blended rate of your portfolio is healthy then these merchants will still count towards your firm's overall profits. The key is to keep expenses and client acquisition costs under control.

[MCAFunds]

If a funder can incorporate 1.20-1.30s in their portfolio mix to broaden their customer base and increase market share while maintaining profitability then it makes sense to offer them. Keep in mind that the 1.20s are typically A+ paper and represent a small percentage (10-15%) of the client portfolio. These are your outlier clients unless you specialize in A+ paper. The remaining 85%+ should be the 1.35 and up, 6 to 8 month clients.

On an individual basis, a 1.20/12 month client might not make much sense but as long as the blended rate of your portfolio is healthy then these merchants will still count towards your firm's overall profits. The key is to keep expenses and client acquisition costs under control.

If you can own any business and have 100 customers purchasing a product every day creating profits with guaranteed data to show and prove the trend. Why on Earth would you also sell a product that a customer will default and/or stack on. Once again, Profits vs. Risk. Take out the risk and follow the trends and data that creates PROFITS.

Agree to disagree. Have a great Friday!

[MCNetwork]

Because some people would rather make a smaller profit on a much bigger pie than a larger profit on a smaller pie. Depends on your objectives. To each his own.

[MCAFunds]

Because some people would rather make a smaller profit on a much bigger pie than a larger profit on a smaller pie. Depends on your objectives. To each his own.

Correct. But the trends are moving rapidly, and no pun intended by that word, the trends are moving rapidly away from that working long term.

Everyone's objectives are the EXACT same, Profits. But the Pioneers in our industry, you and I, OUR industry, tested that theory and look where it got them. Out of business, pulled facility LOC, funding cancelled, renewals cancelled, payoffs 20 Cents on the dollar, closed doors for good. If those Pioneers were profiting, then YES, I would 100% agree with you.

Right now, I 10% agree with you, based on three things 1.) Data 2.) Trends 3.) Knowing full well that there ARE businesses that can and will handle a 12 month advance correctly, but you and I both know, once they're funded there are about 823 New York City/Miami Dirtbags offering the same deal that should have been funded from the start....

Once again, have a great Friday!

[WestCoastFunding]

This is the high risk model for C/D paper. And the default rate is probably closer to 20%, not anywhere near 8-12%. There will always be a market for lower rate, longer term advances. They just need to be underwritten properly. Three month 1.45's hurt more merchants than they help which is why I don't peddle those deals.

Sadly, it's the three month 1.45s that hurt 1st position A paper funders.

[MCNetwork]

I believe that when all the dust settles, rates will normalize around 1.35 for a five to seven month advance. The super high risk funders will still be there but you won't see any more low factor, longer term players. Funders and ISOs will need to focus on client retention strategies to keep their merchants from stacking or leaving for greener pastures. The savvy players in this industry will always find a way to pivot and evolve.

[MCAFunds]

I believe that when all the dust settles, rates will normalize around 1.35 for a five to seven month advance. The super high risk funders will still be there but you won't see any more low factor, longer term players. Funders and ISOs will need to focus on client retention strategies to keep their merchants from stacking or leaving for greener pastures. The savvy players in this industry will always find a way to pivot and evolve.

And I believe what you just stated is very accurate, but, once again, 90% of what I stated from my first post.

4 month deals around 1.45

Enjoy the weekend everyone!

[MCNetwork]

Sadly, it's the three month 1.45s that hurt 1st position A paper funders.

When a merchant accepts that kind of deal, he's hurting everybody including himself.

[Han Solo]

Sadly, it's the three month 1.45s that hurt 1st position A paper funders.

most accurate thing I have read all day

[SBiz]

A 1.20 will never be profitable, a 1.20 can never break even. 1.30? Maybe, at best break even. Why does AMEX charge 27% to 55 Million businesses annually. Why do banks not lend to anyone with a heart beat, same reason why a 1.20 or even a 1.30 do not work. Put 100 Funded deals in a hat at a 1.20 and 1.45 and I will take the 1.45 all day. The ONLY way a 1.20 or 1.30 can work is IF and only IF, they have an exclusive no stacking etc etc etc clause.

So let's see here: A 1.2x over a 12 month term w a 2.5% origination fee - that's about a 43% APR? 16 pts higher than your AMEX example but at the same time is also lower than the industry A paper average through brokers.

It’s not just cost, it’s also about CTO, portfolio size, expense structure, and loss rates. Those are the things that drive profit for any lender whether at 1.45x, 1.2x, or anywhere in between. You can lose or make money at either rate, depending on your net profit margin per deal, portfolio size and expense ratio.

[MCAFunds]

So let's see here: A 1.2x over a 12 month term w a 2.5% origination fee - that's about a 43% APR? 16 pts higher than your AMEX example but at the same time is also lower than the industry A paper average through brokers.

It’s not just cost, it’s also about CTO, portfolio size, expense structure, and loss rates. Those are the things that drive profit for any lender whether at 1.45x, 1.2x, or anywhere in between. You can lose or make money at either rate, depending on your net profit margin per deal, portfolio size and expense ratio.

100% Agreed. My point is 1.) Overall Market Trends 2.) Overall Market Data 3.) Overall Performance. The overall market for Small Business Owners shows, that most businesses will not be in business the following year, hence, why the 4 month offers work. If what I was saying was false, than you and I both know this board will be lighting up like the Bohemian Grove that the world leaders attend.

My point is simple, small business owners live month to month, even the most sturdy and consistent businesses rarely make it past their 5th year in business.

If the industry pioneers like, CAN, Capify, MCC, OD and others were reporting and showing profits quarterly and annually, then I would not be stating this obvious trend and firm data. But as you know, 100%, that is not the case.

Good Friday to all!