[adroc]

Somewhat new to the industry and was hoping someone could shed light on getting my merchants additional funds. I understand the mechanics of refi's and add-ons. Just wanted to know who does add ons in the industry and why i would ever place my merchants in a refi since they'd be paying the FR on the balance (if i am looking long term and not trying to max each commission)?

[businessgrowthcapital]

I sent you a pm

[freddy]

Business Credit and Capital has this in place already for each deal - plus we have a line of credit program which can add to the funds without changing the terms of the deal.
Plus we compensate the ISO for every dollar that is funded.
contact me for more information
Freddy@bccfund.com

[funding pro]

Some places will do just one, others will do both. There are understandable reasons for both. Typically the shops that do both will net out a larger advance to the merchant for the refi than the add on.

[Chambo]

Some places will do just one, others will do both. There are understandable reasons for both. Typically the shops that do both will net out a larger advance to the merchant for the refi than the add on.

but the net to the merchant will be the same after paying off old balance

[MCNetwork]

Most merchants don't know the difference between a refi and an add-on so funders tend to push the refi. It means more money for both the funder and the ISO. Add-ons aren't really done on a cash advance because then it appears to be more like a line of credit as opposed to a straight purchase of future receivables. Funders will make an exception and do an add-on only if it's a valued merchant that they're in danger of losing or if the merchant complains loudly enough. The only time I really see add-ons is on a loan product and only if they're adding a small amount (compared to the initial loan amount) since the merchant's existing balance is still too high for a refi.

Saying that you're a funder that does add-ons instead of refi's is good for the sales pitch but not that relevant from a competitive standpoint. Most merchants simply don't care. The interest on interest that they pay on a refinanced balance is insignificant compared to the other costs associated with a cash advance (i.e., underwriting fees, origination fees, payback amount, etc.).

Merchants only care about how much money they can get, how much it costs and whether they can afford to pay it back.

[Chambo]

Add ons are better for the merchant, worse for the reps

[mfs01]

Add ons are better for the merchant, worse for the reps

I agree. Paying off a large first balance with a new one is not very beneficial to the merchant or the lender that's providing the new advance. If the ISO is not worried about renewals and is just looking for the one-time commission payout, then sure.. it's great for the ISO...

[funding pro]

but the net to the merchant will be the same after paying off old balance

Not always. Some funders will intentionally make the net out larger on the refi to incentivize behavior. Also there are some funders that will only pay commission on the net to the merchant, not the full refi. Make sure you are being paid on the full refi ::COUGH:: ODC ::COUGH::

[Chambo]

Not always. Some funders will intentionally make the net out larger on the refi to incentivize behavior. Also there are some funders that will only pay commission on the net to the merchant, not the full refi. Make sure you are being paid on the full refi ::COUGH:: ODC ::COUGH::

They aren't the only ones who have tried that....

[mfs01]

Not always. Some funders will intentionally make the net out larger on the refi to incentivize behavior. Also there are some funders that will only pay commission on the net to the merchant, not the full refi. Make sure you are being paid on the full refi ::COUGH:: ODC ::COUGH::

If they are making their money based on the full amount of the advance, then why shouldn't you????

[Chambo]

If they are making their money based on the full amount of the advance, then why shouldn't you????

That, my dear friend, is one of the many mysteries of MCA logic

[MCNetwork]

I think the funder's logic is that renewal commission should be lower because it takes much less effort to sell a renewal than a new deal.

[JSL23]

If they are making their money based on the full amount of the advance, then why shouldn't you????

I agree. We were going to sign an ISO Agreement with a fairly large, well known and respected Lender. The issue was they were willing to pay up to 6 points (only half of the original commission) of the NET AMOUNT funded on a Refi! So, if a Merchant had a $4000 balance and wanted a $25,000 Refi, all we would get is 6% of $21,000! Same thing with a renewal. I can understand (although not agree with) 80% of the original commission, but cutting it in half, get the f$$k out of here!!

Underhanded agreements like that one are a major contributing factor of stacking and/or lack of loyalty. I told the Account Manager straight up if they didn't change that and we did sign, we would have no issue with second positions or, once the Merchant was 75-80% paid, just sending them to another Lender for a Refi we can actually get paid the full amount on. It just doesn't make sense for an ISO to not try to maximize their profit on their book of business. What makes less sense is this practice....... I really don't get the logic.

[funding pro]

That's a bunch of crap. You can't say stacking is prominent because brokers are signing and agreeing to the terms of the contracts, later regretting their decision and deciding to use that as a reason behind stacking a deal. If that's the catalyst, the issue is on those brokers, not those funders.

Now, that doesn't mean I don't agree with your position on those agreements being one-sided. With all of the reputable funders out there that do pay full commission on renewals and on the full contracted amount of a refi, I don't understand why a business owner would agree to sign one of these contracts saying that they would take a reduced commission. Its the same argument people make that small business owners should be intelligent enough to make those decisions when signing a cash advance contract.

[JSL23]

That's a bunch of crap. You can't say stacking is prominent because brokers are signing and agreeing to the terms of the contracts, later regretting their decision and deciding to use that as a reason behind stacking a deal. If that's the catalyst, the issue is on those brokers, not those funders.

Now, that doesn't mean I don't agree with your position on those agreements being one-sided. With all of the reputable funders out there that do pay full commission on renewals and on the full contracted amount of a refi, I don't understand why a business owner would agree to sign one of these contracts saying that they would take a reduced commission. Its the same argument people make that small business owners should be intelligent enough to make those decisions when signing a cash advance contract.

I'm not saying it is the sole reason of stacking (greed is still the prominent one) but it adds to it. Calling it a catalyst isn't off the mark. Now I'd never regret signing an agreement like that, because I wouldn't do it in the first place. With that said, if there was an agreement in place already with my office and the Lender and I funded someone through them, I would have ZERO problem with sending them elsewhere come time for a REFI or a 2nd if the Merchant needed some extra capital. It just does not inspire loyalty at all, just the opposite. It is just bush league and sets up a borderline adversarial relationship.