[amikassar]

Nathan - your case of the client who can get the new furniture is a great example of someone with a legitimate need for "quick cash" and there is a strong business case that he will make the money back and then some. A year ago, we would have referred this client straight to an MCA or daily debit product. Today, we would encourage the client to go to a longer term alternative lender with no pre-payment penalties. If things work out as planned for the client, his finance costs will be a 1/3 to a 1/2 and his effort will be just about the same. He will also get the money quickly. Based on this, is there any reason in the world (other then lower commission) that anyone in good faith wouldn't recommend our path to the client.

That's not to say that if they aren't eligible for the longer term product, we wouldn't recommend an MCA or a daily debit as a Plan B in this situation. But our first choice would be the longer amm.

[CASHCASH]

He will also get the money quickly.

Realistically how quickly, from start of application to funded? If it is quickly compared to an SBA, that is much different than the speed allowed by short term funding. As with Nathan's example, said merchant would need that money in a few days. This is something a short term advance could accomplish easily, whereas even if the longer term product takes 10 days it may be too long. By nature the underwriting process has to take a little more due diligence since they need to be a more qualified client to get these longer terms, so it seems as if the advantage would still go to the short term advance in this case. Am I wrong in this?

[amikassar]

We can get a 3 - 5 year alternative loan almost just as quickly as a cash advance loan (maybe one extra day) - NO problem. SBA's are a different story. But that's not what I am talking about here.

[channin19]

I guess the real question is how much are you charging for your services?

[funding pro]

I guess the real question is how much are you charging for your services?

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[amikassar]

we average 1.5 percent commission on all of our transactions.

[amikassar]

We can get a 3 - 5 year alternative loan almost just as quickly as a cash advance loan (maybe one extra day) - NO problem. SBA's are a different story. But that's not what I am talking about here.

[amikassar]

@narwhaw - i like your thoughtful posts. Glad to see someone is thinking on these boards.

[funding pro]

I guess this is becoming my thing to call bull**** when I see it, but Ami you are so full of **** you cannot even acknowledge when people call you out for it. Comparing a $50,000 SBA loan to an MCA is so far from reality you either have your head so far up your ass you don't know up from down or you are just leveraging your articles to drive business and know it will get you clicks. I am not saying there is anything wrong with latter, but if that is the case, OWN IT. Don't come on this forum pretending like there is some over abundance of SBA banks with lending criteria that match up with MCA/ACH deals. I am willing to bet I have worked with far more people in the traditional lending space than you have in the alternative and can tell you the number of banks willing to even look at a $50,000 SBA loan are far smaller than the number of alternative lenders willing to offer a $100,000 MCA/ACH. All while that product requires no collateral, no personal guarantee (in most cases), with low docs and available in a couple of days. Again, I'm not hating on your strategy, but your trolling and its sad.

[MCNetwork]

Nathan - your case of the client who can get the new furniture is a great example of someone with a legitimate need for "quick cash" and there is a strong business case that he will make the money back and then some. A year ago, we would have referred this client straight to an MCA or daily debit product. Today, we would encourage the client to go to a longer term alternative lender with no pre-payment penalties. If things work out as planned for the client, his finance costs will be a 1/3 to a 1/2 and his effort will be just about the same. He will also get the money quickly. Based on this, is there any reason in the world (other then lower commission) that anyone in good faith wouldn't recommend our path to the client.

That's not to say that if they aren't eligible for the longer term product, we wouldn't recommend an MCA or a daily debit as a Plan B in this situation. But our first choice would be the longer amm.

Why would you use a long term lender to buy some furniture?? You would only use long term lenders for the high priced fixed cost expenditures. There's no need to carry a 3 year note on furniture purchases when you can have it paid in 6 months with an MCA. Based on your thinking, a business owner would accumulate several long term notes whenever he had relatively small purchases that needed to be financed. And then when he needed to finance a bigger project, he'd be overextended by the small loans that should have been taken cared of sooner rather than later and he wouldn't qualify for the bigger loan. Doesn't make sense to me. MCAs are meant to be used as short term band aids, not long term crutches. When deployed properly, they can work well in conjunction with bank loans. In order to decide between short term and long term money, you have to look at the amount required and calculate the ROI.

[nwarshaw]

Great point and a tale of two worlds. world one is the broker and industry and world two is the merchant.

World one - it will be a commission issue and only a commission issue because their cost to acquire is to high because they are to manual. With deal size at play, some of this will be washed away upfront, but create a gap with less renewals.

World two - 80% of the time, the other 20% will have concerns with reporting to bureaus and the effect on debt to income and liquid credit scores.

I am a big fan of for better scoring merchants getting the acquisition cost low and extending turns and lowering cost. That being said, there will still be reasons even in the good credit world for the short term product as well.

I like the discussion, because I think the only way to solve it may be through innovation with ways to cut the cost of acquisition for even a basic singleton IC. I think this innovation is what is needed, I also think that the industry from bottom to top should not have its head in the sand about the innovation that they are starting to see from San Jose to San Fran. But I keep hearing oh less then 5% would get approved, yet I am seeing 30%. Acquisition cost rather it is long or short money through direct marketing or an ISO is about 8% give or take, and I am seeing it under 2%, to go that long and that cheap defaults will kill, but it is not, no way you can approve a deal that big for that price at that turn and do it that fast, yet it is being done.
As these guys scale what happens? Who knows, but for me it is not about planning 2014 and 15 - but beyond to 5 and 10 years and where do the current products, funders, ISOs, etc. fit in and how do you make sure you can last the long term.

Understanding how to blend the products with the various needs and the various acquisition cost across various distribution channels will be key. Even for ISOs.

One trick sales entities will get hurt or die, and consultative multi-product companies across the need spectrum I think survive - my 2cents