[SuperFunds]

this guy
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[Finance1]

I've been off the board for a while and this thread got messy. It's an apples to oranges product comparison. The argument is silly. Like Nathan clearly articulated, it's a needs based world out there. There's a need for all products and square pegs / round holes don't makes sense on either side.

If I have a top tier client who qualifies for and is looking for a multi year term loan then that's where I'll go with it. But for the rest of the pool (95%) we'll do the best we can to fund a make sense deal or broker the best we can
find.

The problem I have with Ami's posts is they come off like we are "steering" clients into high cost deals unnecessarily when there is this easy street of long money available to them. That's just not reality. Not even close.

There are many good examples when a short term deal makes the most sense regardless of qualifications. We just funded a 4 month deal to a multi location pizza franchise with excellent everything. He's opening a 5th location and ran 25k short. He even had plenty of credit available on personal credit cards (which I pointed out). The reply was simple, "I want to keep it in the business and off my dti". We offered terms from 3 - 12 months and he took the 4 month option because it made the most financial sense and he knew he could afford it. Quick, fast and easy and the client was very grateful for everything. I'm sure every poster here has plenty of similar stories.

I get that term stuff is good and there is an appetite on both sides for it. But coming off like it should replace or cut heavily into the MCA/ACH space is naive.

[channin19]

The problem I have with Ami's posts is they come off like we are "steering" clients into high cost deals unnecessarily when there is this easy street of long money available to them. That's just not reality. Not even close.

Bingo.

Ami your line of argument used to be that there were no options to bridge from alternative to more traditional funding. I'd try to keep pushing that.

[JayBallentine]

Does anyone on this board challenge my position that IF a merchant qualifies for a 3 - 5 year loan w/out any prepayment penalty they are better off then with an MCA or daily debit product ? And it takes right about the same amount of time to get the money.

Are you making two arguments or one?

I saw two arguments in this thread:

1. 3-5 year term loans are the "death knell" for MCA.
2. Merchants who can qualify for 3-5 year term loans are better off suited taking those loans.

On the second argument I think everyone here pretty much agrees. I'd like to know your thoughts on how exactly 3-5 year term loans will decimate MCA (an assiduously growing market).

[nwarshaw]

I do not want to answer for Ami, but here is my take.

First, I do not think it will kill MCA, not by any means. I also do not think we are talking about MCA, rather I think we are talking about the DRP platform itself, MCA or a Loan.

The theory is all direct DRP funders have a portfolio. That portfolio has some blended acceptable risk for the company and its investors. For argument sake, lets call it 20% slow pay or non performing assets, with 7% written off.
That means that the portfolio is broken into a top third, middle third, and bottom third. (not exactly thirds, just making it easier).
The top third really make up for a lot of sins for the bottom third.

Now comes in a product 5-10 years, monthly payments, fast, friction-less, larger deal sizes, etc. Now today they started like everyone at a internal credit score that really does not compete. Over time for what ever reason as their portfolio grows, they can keep the same products and move slightly downstream. When they do that, they pick off X% of the top third of a portfolio, not the whole thing, just a small portion.
Even though it is a small portion, it changes the performance curve of that lender. That change may cause them to get a line pulled, may cause them profit margins, may cause them to tighten their belt and not do those bottom third deals, etc.

Do I think this will happen over night, no way, but I do think the worlds will collide and it will have an impact to the performance of a DRP Funders portfolio performance at some point.

That being said, I think the natural evolution would be for some current DRP Funders, to launch other products that create true full spectrum products and prices across the merchant need spectrum at one source, that will help the ISO world and the merchant world.

[funding pro]

Not to be combining themes from different threads here, but the truth of the matter is that technology and the million dollar word "disintermediation" is going to kill people like Ami way before 3-5 year loans kill the MCA/ACH industry.

[nwarshaw]

The 3,5,10 year loan using technology to get to the merchant and to underwrite in a fast and friction-less way is the disrupter that we are talking about.

What is happening is that DRP disrupted the bank, and now these guys are disrupting the DRP space with longer terms and lower prices and new technology

Where it goes - who knows - glad to be part of it

[amikassar]

Well this is what I know : With the introduction of new longer term lenders in the marketplace , our MCA and short term loan business has slowed to a trickle. So our "better borrowers" and going to the longer term lenders, and a year ago the only option for many of these "better borrowers" was MCA or short term loans. And if this is the beginning of a trend, it will change the P/L of MCA and short term lenders.

[cashguy]

Ami who are your top lender today that you broker too.