[isaacdstern]

http://www.ft.com/intl/cms/s/0/fa3a3...#axzz330S5GuPr

[isaacdstern]

http://nypost.com/2014/05/28/dorsey-...hant-advances/

http://www.nydailynews.com/new-york/...icle-1.1807434

[JayBallentine]

techcrunch.com/2014/05/28/square-begins-offering-data-driven-cash-advances-to-small-businesses/

[MCAVeteran]

San Francisco has been busy- lending club, funding circle , square and investors from silicon-

http://www.latimes.com/business/la-f...ry.html#page=1

[JayBallentine]

Silicon Alley (NYC) is becoming hyper active in this space as well. Lovin it.

[isaacdstern]

Square lost over $100MM in 2013...you need to do a ton of MCA's to make that loss up!!

[Sean Cash]

Square lost over $100MM in 2013...you need to do a ton of MCA's to make that loss up!!

they're targeting the highest risk segment. micro-merchants with mobile payment processing. Makes splitting pretty easy. Unplug one phone swiper and plug in another processor's swiper.

[JayBallentine]

Square lost over $100MM in 2013...you need to do a ton of MCA's to make that loss up!!

They likely intentionally operated at a net loss to acquire customers. Kinda like when brokers take $0 commission on initial deals so they can make money on the renewal.

Surely they have quantified the value of each "Square for Business" customer relative to how much they can make off them from MCA. For example; "We have 100 Square for business customers and we know that 5 will turn into deals, therefore we will break even at X point and be profitable at Y point.

Guys in this space are "cash right now guys" - guys on the tech side attitudes are "screw profits (for now) - get market share and monetize (e.g. get to a liquidity event) later."

[mfs01]

they're targeting the highest risk segment. micro-merchants with mobile payment processing. Makes splitting pretty easy. Unplug one phone swiper and plug in another processor's swiper.

This also makes defaulting pretty easy...

[JayBallentine]

This also makes defaulting pretty easy...

I would bet pretty strongly that this has been the subject of numerous meetings, fights, etc. amongst Jack and his team. They're not out to eat guys' lunch while leaving their asses bare.

[Chambo]

The expectation is that sellers will pay back Square within ten months, though there is no deadline. There is no application process either and the money is advanced as soon as the next business day.

The service comes at a cost: Merchants will pay a premium ranging from 10% to 14% on top of the advance. That means a a small business might pay $1,000 for a $10,000 advance.

Those are pretty good offers. When they say "qualified", they are most likely referring to top tier merchants. those merchant could easily go to On Deck or AMI for more money though for an ACH deal

[Sean Cash]

some of these headlines are funny. MCA is now 16 years old but so many in the mainstream media are hearing about it for the first time.

foundaway.jpg

[LoanShark714]

I dont understand how businesses got loans from Square to purchase other locations when square only likes to work with merchants that are doing doing less than 3k a month?

[Sean Cash]

I dont understand how businesses got loans from Square to purchase other locations when square only likes to work with merchants that are doing doing less than 3k a month?

wait, where does it say that their merchants use money to buy other locations?

[LoanShark714]

Great news though. I think this is some what of a ice breaker media wise allowing merchants to be open minded to quick cash at higher rates. Eventually Squares merchants will want demand higher loan amounts and then people like us will come and lead them to the right direction. They are sweeping the path to our success. Market Hard.

[Chambo]

Great news though. I think this is some what of a ice breaker media wise allowing merchants to be open minded to quick cash at higher rates. Eventually Squares merchants will want demand higher loan amounts and then people like us will come and lead them to the right direction. They are sweeping the path to our success. Market Hard.

The service comes at a cost: Merchants will pay a premium ranging from 10% to 14% on top of the advance Since when are you offering 1.10's to 1.14's?

[jbrown]

My guess is Square has no clue. How many remember the days when IPayment and other processors got into the MCA businesses thinking "I know my customers, I don't need special MCA underwriting and collections rules?" Even First Data has scaled back from their venture into MCA.

They don't know how to make money on their core business...

"Today the Wall Street Journal–citing unnamed people in-the-know– reported that Square lost $100 million in 2013 and is quickly eating up its $340 million supply of venture cash. Because of the cash bleed–Square is seeking a suitor desperately." http://www.forbes.com/sites/stevenbe...do-it-quickly/

[Chambo]

My guess is Square has no clue. How many remember the days when IPayment and other processors got into the MCA businesses thinking "I know my customers, I don't need special MCA underwriting and collections rules?" Even First Data has scaled back from their venture into MCA.

They don't know how to make money on their core business...

"Today the Wall Street Journal–citing unnamed people in-the-know– reported that Square lost $100 million in 2013 and is quickly eating up its $340 million supply of venture cash. Because of the cash bleed–Square is seeking a suitor desperately." http://www.forbes.com/sites/stevenbe...do-it-quickly/

ODC started back in 2007 with 12 month 1.09's. then went to 1.12's, then cut them to 6 months. Then went to 1.18's

Now they are giving buy rate deals out at 6 month 1.28's

[LoanShark714]

They must be super confident. supplying and demanding . raising prices like net flix. might take a hit like net flix as well.

[Sean Cash]

ODC started back in 2007 with 12 month 1.09's. then went to 1.12's, then cut them to 6 months. Then went to 1.18's

Now they are giving buy rate deals out at 6 month 1.28's

I am wondering if funding circle and dealstruck will encounter similar results. Their terms are longer and rates a lot lower, but their payments are monthly. I think the profitability of their models have to be tested.

[LoanShark714]

1.28 6 months they better be throwing in 10,000 flyer miles with that pricing.

[JayBallentine]

My guess is Square has no clue. How many remember the days when IPayment and other processors got into the MCA businesses thinking "I know my customers, I don't need special MCA underwriting and collections rules?" Even First Data has scaled back from their venture into MCA.

They don't know how to make money on their core business...

"Today the Wall Street Journal–citing unnamed people in-the-know– reported that Square lost $100 million in 2013 and is quickly eating up its $340 million supply of venture cash. Because of the cash bleed–Square is seeking a suitor desperately." http://www.forbes.com/sites/stevenbe...do-it-quickly/

Good stuff. My play: buy Dwolla and dis-intermediate Visa/Master. Triple - quintuple revenue per transaction in the process.

The Dwolla guys have this 10 year vision that's downright scary.

[MCNetwork]

Every overvalued, unprofitable tech company likes to throw out the 10 year vision as a smokescreen lol.

[MCAVeteran]

Funding circle and others like them aren't carrying the balance sheets. They are simply connecting their accredited investors with merchants using their risk scoring system and aggregation methods and somewhere making a cut of the transaction. That model was profitable with the consumer side like lending club proved out but has yet to go through vintage cycles in our industry to see how it will fare for investors with longer durations and lower rates.

[Franklin]

I'm more impressed with companies/individuals who can generate money without any money (or a minimal amount). If a venture can be profitable with a large amount of capital, it can usually be somewhat profitable with a small amount. What you know after losing 100 million, you probably knew after losing the first million. 10 year vision is crap 1990's talk by tech people that spoke a language no one else understood in order to bring in a lot of VCap and we see what happened there. The companies that survived were (mostly) companies that were profitable early in their life cycle.

With technology today, it gets faster and faster to build a 100 million dollar company, not slower, and the barriers to entry are removed so that anyone with a laptop and a phone can build an income generating platform. When a 23 year old turns down a 3 billion dollar offer from facebook, and you look at how young and how fast new billionaires are being created, neither time nor money is the deciding factor anymore, it's knowledge (information). If your plan can't turn a profit in 6 -24 mths max, it's likely antiquated and filled with holes from the start.

Having worked with a large tech publisher just over 60 minutes from silicon valley, when we were doing R + D on new products, we gave 30 - 90 days for it to show merit or it was scrapped. Our spend was minimal during that point unless we saw a high likelihood of generating revenue.













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