[JayBallentine]

Lending club and others are going to create a major adverse selection for the MCA / daily debit lenders. When the cream of the crop borrowers head over there --- as they are already starting to --- what is going to happen to your loss rates and P/L ?

How often do you think the following scenario will occur:

1. Business owner gets a Lending Club loan in January 2015.
2. Business owner needs more money for continued expansion in June of 2015.
3. Business owner goes back to Lending Club for more money, and they say "sorry."
4. Business owner explores other options and discovers OnDeck for example.
5. OnDeck's approval doesn't quite meet his needs so he goes and takes a second position.

From what I can gather, cream of the crop business owners are GROWTH minded business owners. Continuous growth requires continuous investment. I've seen guys with 2 and 3 term loans, an equipment lease, and 1 or 2 daily (MCA) debits.

The only threat to the MCA industry is the MCA industry itself. Most guys' shops are flat out disasters with no efficiency. There is a correlation between efficiency and what you can charge a merchant...

Shops like Strategic for example will endure and perhaps may even find ways to work with Lending Club. They are the "Delmonico" of MCA whereas most guys are running "hot dog stands."

You have guys pumping millions of dollars into PPC and not even bothering to opt-in the folks who fill out their forms into permission based marketing. You have CEO's who run "reputable" companies stealing from lead aggregators and consultants... I can go on.

[jason]

How often do you think the following scenario will occur:

1. Business owner gets a Lending Club loan in January 2015.
2. Business owner needs more money for continued expansion in June of 2015.
3. Business owner goes back to Lending Club for more money, and they say "sorry."
4. Business owner explores other options and discovers OnDeck for example.
5. OnDeck's approval doesn't quite meet his needs so he goes and takes a second position.

This can and will happen all the time. To me it boils down to the use of funds for the business. If they're opening additional locations, purchasing equipments, tenant improvements, etc. and they have experience financing that with a Lending Clubish term loan they won't go back to the MCA well.

If they're using a Lending Clubish term loan to finance receivables, inventory, payroll (e.g. recurring short term stuff) they can and will take a second position to maintain growth. Likely, they would've been better off going with a working capital facility (factoring, ABL, PO financing, etc) to begin with.