[MCNetwork]

So it takes weeks to issue a pre-approval on a file because you order title on every application that comes to your desk? That's not very efficient. Why don't you do what mortgage companies do? They issue the pre-approval and once contracts are signed, THEN they order title and conduct the full underwriting. If the tax lien shows up afterwards, then that's just part of the process and you issue the hard decline.

[Zach]

My branch issues pre-approvals in less than 24 hours.

[Jonathon]

I dont think its fair to bash WBL about the 3rd party fees they charge to cover BPO and Title. Do you expect them to cover the cost? They offer a unique loan and have approved deals no one else would ever touch. And if they dont think the deal is feasible they have always told me up front before the merchant is charged. At that point I let the merchant know the risk and let them decide if they want to move forward.

[Jstarr]

Jonathan, zach is a very reputable an upstanding guy, but wbl isn't the only lender that offers collateral base loans, their situation is unique but it's a last resort, I offer hard money loans against Real Estate at 10% wbl can't touch it, we also have quick.close times and monthly payments... in some cases there are deals that we just can't do and I might call Zack and see if it fits their box, but our deal is far better than a wbl deal for the borrower ,

[Jonathon]

Can you do a owner occupied residential property in California and the merchant has 8 negative daily ending balances on their recent bank statement?

[Zach]

Can you do a owner occupied residential property in California and the merchant has 8 negative daily ending balances on their recent bank statement?

Thank you Jonathon. We can also do 2nd, 3rd, or even 4th lien against primary residence, commercial property, industrial property... heck, even land. We are the only option for most of these deals.

If it's a clean deal with solid FICO against a commercial property and the borrower can wait 30 days for closing, I wouldn't recommend WBL.

[WestCoastFunding]

WestCoast, I know you are incorrect because we have a firm no-stacking policy with BFS. I understand we are all entitled to free speech, but please be moral and refrain from spreading false information.

In our ISO agreement there is a section where our brokers can opt in to allow us to co-broker their deals. They can just as easily opt out of this service; it is completely their prerogative. This is a section that needs to be signed, so there is no way to miss it.

Now, if you opted for us to broker the deal to BFS for you, and you signed an agreement for a 25% commission split, then whose fault is that?

Funny, because I have emails from the Orange office that offered just that: stack (or as the Orange office calls it: "Unsecured" loans. Other offices have told me specifically that WBL uses BFS for funding.

And no, I didn't let you fund it. The idea of paying ridiculous fees, awful rates - all while pledging personal property - just isn't very enticing for most healthy businesses. So please save the lectures about morality.

[MCAVeteran]

Does the iso agreement just say 25 percent to cobroker deals or specifically the funder you are sending it to? Most isos, unless they are new, have agreements with most of the common name companies out there. Diluting commissions to 25 perc of what you make wouldnt make sense for most isos. For your direct product you underwrite and loan, maybe, but not a 25 perc revenue share with other funders. What happens renewal time? 25 percent? Has to be newbies taking that deal or not reading fine print or understanding what happens to that file once it arrives. I assume most apps wont be a fit for real estate collateral

[WestCoastFunding]

Does the iso agreement just say 25 percent to cobroker deals or specifically the funder you are sending it to? Most isos, unless they are new, have agreements with most of the common name companies out there. Diluting commissions to 25 perc of what you make wouldnt make sense for most isos. l

Yeah, they are pretty much preying on newbies. Essentially, you can send them over a clearly unfundable deal, and they'll come back with a preapproval within hours. Then you have to have the client pay the upfront fees (appraisal, title search). Once they issue a decline (after the fees have been paid) they'll then say, "we can get the client unsecured financing." And the "unsecured" financing is just WBL brokering-out the deal to other cash advance companies. Something any broker can do on their own (at full commission).
Amazing company.

[Zach]

MCAVeteran, the co-broker section of our ISO package is indeed designed for either newer shops, referral partners, or shops who have deals they simply cannot get done and need help with. There is a section of the ISO agreement with no fine print where they must agree to this structure and sign off on it specifically. Since we facilitate SBA loans, hard money loans, equipment leasing, and factoring, often times brokers use us to access those types of facilities.

We aren't an institution who uses co-brokering as a significant part of our business model, but if an ISO signs up for that service we will display options besides our internal product line.

With my ISOs, I make it extremely clear that they have both options. If they have a vast network of lenders already it is probably best they only sign for that option if they intend on using us for a product they don't have access to, perhaps equipment leasing, factoring, or SBA.

[Zach]

If we collect an upfront fee from a client, it is because they have represented a certain value and debt to us. That value and debt meets our criteria for funding.

Now, if the final valuation comes back much lower than the client has represented, this will impact the offer. Before charging the borrower we will do a "presort" of the property, and put together the best estimate we can of what the property will likely be worth after final valuation. We disclose the fees on a recorded line with the borrower and explain the process. It couldn't be more transparent.

If the final debt against the property is higher than represented, that will also impact the offer. If a borrower lies and says their mortgage balance is $50K and our title search reveals it is $75K, that will impact our final loan size. Sometimes title search reveals surprising things, like a massive tax lien, undisclosed 2nd mortgage, or large judgment. This can kill deals in some cases.

We have no incentive to collect pass-through fees. We make nothing if the deal doesn't go through. In fact, it actually costs us time and money to perform these services.

[jotucker1983]

I just have never understood the high risk asset-based lending model.

The merchant is required to put up high priced, valuable, assets such as real estate, cars, jewelry, artwork, etc. They get an approval for let's say 50% LTV, but the cost/payback cycle they are provided with, is very similar to or worse than, a merchant cash advance.

So a guy is going to put his house on the line for a 6 month deal with a 1.35 - 1.45 factor? I just don't understand how that transaction makes any sense whatsoever.

The "argument" used for an MCA is that it's unsecured, thus, if the business fails the MCA firm takes the risk. This helps to "justify" the higher costs.

But what is the "argument" that you use to justify the costs, when the guy's house is on the line, and he's still paying a 6 month 1.35 - 1.45 factor?

[WestCoastFunding]

The merchant is required to put up high priced, valuable, assets such as real estate, cars, jewelry, artwork, etc. They get an approval for let's say 50% LTV, but the cost/payback cycle they are provided with, is very similar to or worse than, a merchant cash advance

Well, id say it's often worse. While WBL can go longer deals, a 1.70 on 18 months is still a 1.70.

[Funder Mark]

Well, id say it's often worse. While WBL can go longer deals, a 1.70 on 18 months is still a 1.70.

You are not understanding the appeal. First, they are offering seriously longer terms than most of the unsecured space. Secondly, they offer weekly and I am told sometimes monthly payments. Third, they will do deals NOBODY else will do.

[LoanFunder]

WBL definitely has their niche. Obviously you wouldn't send every deal there but where else would you send someone with 3 advances and negative days on the banks for a consolidation?

[WestCoastFunding]

You are not understanding the appeal. First, they are offering seriously longer terms than most of the unsecured space.

I get the appeal. They are the lender of last resort. That's how I view them.

[jotucker1983]

WBL definitely has their niche. Obviously you wouldn't send every deal there but where else would you send someone with 3 advances and negative days on the banks for a consolidation?

I would rather send them to my decline/on hold pile to be honest. They already stacked 3 times and it's causing their cashflow to be horrible now, so to solve their "problem", I'm going to put them into a product with let's say a 1.65 factor over 12 months, with the guy's house on the line if the business fails and he can't make payments?

I wouldn't do it. I obviously know that many in our industry indeed recommend these programs, but I wouldn't. I would tell the merchant to pay off the 3 advances, then wait about 1 - 2 months for the cashflow to get back stable (low NSFs), then I'll resubmit him for a full approval.

[Chambo]

and if they cannot wait that long?

[jotucker1983]

and if they cannot wait that long?

Then that's further confirmation (in my opinion) that they shouldn't take out any further alternative funding (for right now).

For example, he stacked 3 times, what was the reason for all of those stacks? Is the business going through some sort of difficulty? Is he going to stack on the 12 month 1.65 deal next, but only this time his house is on the line, so when he "falls behind again" I'm going to have to hear about how his family is being put out on the street?

Nope, I wouldn't do the deal.

[Zach]

Then that's further confirmation (in my opinion) that they shouldn't take out any further alternative funding (for right now).

For example, he stacked 3 times, what was the reason for all of those stacks? Is the business going through some sort of difficulty? Is he going to stack on the 12 month 1.65 deal next, but only this time his house is on the line, so when he "falls behind again" I'm going to have to hear about how his family is being put out on the street?

Nope, I wouldn't do the deal.

Here's an example of a deal I am working on:

- Borrower has 9 cash advances between the 4 companies they own.
- They use the advances to buy product at a heavy discount, resell in bulk at a significant markup, and recycle the funded capital back into more product.
- We have offered $750,000 to pay off 6 of their 9 cash advances, which will lower their payment by $300,000 per month.
- Our cost of capital is significantly lower than the 6 cash advances we are paying off.
- We are funding the deal with a 2nd position lien against their primary residence.

No one else can do this in the hard money OR the MCA space, and it will benefit the client massively. The broker is also making enough to buy a house in certain states. It is a viable product with huge utility. I understand some people do not understand our product VS On Deck, CAN, or BFS... and truly, they aren't our competitors. We are not fighting for that segment of the market.

John, you know I have respect for you. You are a knowledgeable individual in the space and understand a variety of products you can ethically guide your borrowers towards. Our product CAN be a useful armament in that endeavor. In many cases, I will FLAT OUT TELL my brokers... "Dude, just take this deal to On Deck. The borrower qualifies for their product and they will fund it faster."

[RichardGerard]

You're right Zach- there is nobody in the MCA space that can do what you described however there are several other Entities that are willing to deploy Capital with 100-200% Collateral Coverage. We have successfully placed files that WBL has passed on..