[helpinghand]

Hi all, we received a strange email last Friday from Everest at 515pm, firing us as an ISO:

This email is your notice that Everest Business Funding is terminating its ISO Agreement effective immediately.

The rate of default is significantly higher than the average of all other ISO Partners we cannot continue to fund deals for your company.

Please understand that is a business decision and not a reflection of any animosity between our companies. I wish you the best with your business in the future.

We will not be accepting phone calls regarding this issue.

Regards,

---

We have attempted to reach out to no avail. We are not aware of any defaults from what we sent them. We sent them 25 deals since Q3 last year.

Any ideas, what gives? Only thing I can think of is they are in serious trouble cutting us off outta the blue like that.

[helpinghand]

By the way, last I checked funders take default risk. Amirite or amirite

[ADiamond]

Everest more than most funders has an extremely high default rate. For years its been heard that they continue to throw good money after bad, trying to "fund themselves out of" their default rate.

You can only do that for so long and I think it's finally catching up to them.

-----

Helpinghand - sure funders take risk, but if they see a pattern with certain ISO partners pertaining to heavy default, stacking, etc - they have every right to terminate the agreement, in fact they should have done it sooner. There are a ton of ISO's out there that resort to very shady business practices in order to close a deal. What do they care? Once it funds they get paid and it's out of their hands.

I had a deal the other day it was a beautiful deal - the guy had been paying On Deck and New logic since before 2011. The merchant was double funded by an ISO last year and told " make 20 payments and we will fund a monthly-payment term loan at 8% interest over 4 years which will pay off the mca balances" on the 23rd business day when it got to the point that the ISO was avoiding him so much that they actually disconnected their phone number - the merchant felt played, like he got the shaft - and didn't even know to contact the funders directly because the ISO came off as the funder and in control of everything. To get someones attention he felt he had to stop payment... when the funders' collections depts. reached out - payments went back on within 2 days - but not before one of the funders had filed the COJ and started to seize receivables.

It's this exact type of stuff that happens daily - not only in our industry, I'm sure - but for some reason our industry is a fertile breeding ground of uneducated, unethical, unregulated scum! Very rarely do sales managers have oversight into what their reps are actually telling clients. All they care about is putting numbers on the board, am I right?

Now before anyone has a conniption - not every sales office is like this, some (few) are managed well enough but still turn a blind eye in certain scenarios.

Listen, I get it. You need to prosper, live and survive. But ask yourself to who's and what expense are you thriving? If this thing was even ever so slightly regulated on the sales end - reps must be certified, offices must be licensed... ****.... all this **** that some sales guys get away with - lying to clients, selling them "loans" and promising secondary financial product like traditional business loan for consolidation if they just take an MCA first... electronically transferring client's financial information, files.... stealing from their employers... forging signatures applications and pulling a client's credit 20 times...

We are talking serious felonies. WIRE FRAUD, FORGERY, EMBEZZLEMENT, GRAND LARCENY.. this **** happens every day.

Regulate the brokers and sales offices - just like they do to mortgage brokers, real estate brokers, equities brokers, certified financial planners & advisers.... all licensed and held accountable.

I guaranty you this industry would consolidate, cost of customer acquisition would fall off a cliff, default rates would subside,... the companies that actually hold a good chunk of market share would succeed and all of the bottom feeding pond scum will go on to other endeavors like selling crypto-backed securities or some ****.

I am not talking crap about ISOs please don't think that I rely on them for business, but let's be real Most problems in this industry begin and end with the bad ISOs.

Just require them to get an annual certification, and their firm to be licensed. JUST LIKE most-any-other financial industries.

[WestCoastFunding]

What Anthony said.

[Nunya]

Everest more than most funders has an extremely high default rate. For years its been heard that they continue to throw good money after bad, trying to "fund themselves out of" their default rate.

You can only do that for so long and I think it's finally catching up to them.

-----

Helpinghand - sure funders take risk, but if they see a pattern with certain ISO partners pertaining to heavy default, stacking, etc - they have every right to terminate the agreement, in fact they should have done it sooner. There are a ton of ISO's out there that resort to very shady business practices in order to close a deal. What do they care? Once it funds they get paid and it's out of their hands.

I had a deal the other day it was a beautiful deal - the guy had been paying On Deck and New logic since before 2011. The merchant was double funded by an ISO last year and told " make 20 payments and we will fund a monthly-payment term loan at 8% interest over 4 years which will pay off the mca balances" on the 23rd business day when it got to the point that the ISO was avoiding him so much that they actually disconnected their phone number - the merchant felt played, like he got the shaft - and didn't even know to contact the funders directly because the ISO came off as the funder and in control of everything. To get someones attention he felt he had to stop payment... when the funders' collections depts. reached out - payments went back on within 2 days - but not before one of the funders had filed the COJ and started to seize receivables.

It's this exact type of stuff that happens daily - not only in our industry, I'm sure - but for some reason our industry is a fertile breeding ground of uneducated, unethical, unregulated scum! Very rarely do sales managers have oversight into what their reps are actually telling clients. All they care about is putting numbers on the board, am I right?

Now before anyone has a conniption - not every sales office is like this, some (few) are managed well enough but still turn a blind eye in certain scenarios.

Listen, I get it. You need to prosper, live and survive. But ask yourself to who's and what expense are you thriving? If this thing was even ever so slightly regulated on the sales end - reps must be certified, offices must be licensed... ****.... all this **** that some sales guys get away with - lying to clients, selling them "loans" and promising secondary financial product like traditional business loan for consolidation if they just take an MCA first... electronically transferring client's financial information, files.... stealing from their employers... forging signatures applications and pulling a client's credit 20 times...

We are talking serious felonies. WIRE FRAUD, FORGERY, EMBEZZLEMENT, GRAND LARCENY.. this **** happens every day.

Regulate the brokers and sales offices - just like they do to mortgage brokers, real estate brokers, equities brokers, certified financial planners & advisers.... all licensed and held accountable.

I guaranty you this industry would consolidate, cost of customer acquisition would fall off a cliff, default rates would subside,... the companies that actually hold a good chunk of market share would succeed and all of the bottom feeding pond scum will go on to other endeavors like selling crypto-backed securities or some ****.

I am not talking crap about ISOs please don't think that I rely on them for business, but let's be real Most problems in this industry begin and end with the bad ISOs.

Just require them to get an annual certification, and their firm to be licensed. JUST LIKE most-any-other financial industries.

Spot on. This guy is en fuego.

[fundingsmbs]

what do they expect? look at the market they go after through brokers? I don't get it, why don't they invest all those dollars into a direct sales force , hire a marketing manager, and, acquire the business themselves? Does it really pay off to payout 15 points for crap business? They put up an ad on site and every tom dick and harry calls them up with a **** deal. horrible business model.

[LYC]

They've tried to build a direct sales force numerous times, and failed miserably. They've had numerous marketing managers spending close to $100K a month in marketing, and well that didn't work out too well either. They then resorted to calling all the deals that ISOs submitted after they didn't fund with Everest. Clearly that isn't working either, so 15 pts for crap deals here we come

[HDF]

But what about all the training and support these funders provide ISOs? They protect their self interest and that of their investors/lines by helping brokers understand how to pre-underwrite a file and advise the client where to improve to qualify. Also develop alternatives that are more suitable. They offer web based training that literally costs peanuts. It saves them tons of money on their own underwriting costs and makes the whole industry better and their reputation better on the street. They also encourage a broker shop to build their own book of business that is portable and valuable to the broker rather than the funder packaging "books" as their own and peddling shadowy portfolios as their own.

Or maybe they don't do any of that at all. Any of them. Good post Anthony.

[fundingsmbs]

the ISO is a necessary evil. period. the companies are not in business to pay commissions. from everything that's written on these forums it's clear the play here is to get the applications (for free) from the brokers and fund them without paying, backdoor, or, pay the one's you must and cutoff when it get's ugly. as far as them hiring marketing managers and spending $100k monthly and not working, they hired the wrong people. Kabbage is able to do all this and more without paying any brokers. it can be done. talent cost money.

[Don Dolla]

You shouldn't be mad at EBF, you should be mad at your sales reps, specifically the one or two guys who are pushing this crap in your office. a lot of sales agents will say anything to close deals and they can be very convincing, magical even. but when the proof hits and those dailys keep pulling and there are no approvals in sight, the merchants end up taking it out on the lenders by not paying and defaulting. i use to work with a guy who was an amazing closer, so i thought, but then there was always problems, clawbacks, angry merchants, backdoors, stacking, not paying commission... sales agents that will lie to close a deal to the customer, will also steal your data and not pay or share commissions. there is definitely a pattern. my renewal rate is very high and my default rate is very low. i'm not the flashiest or fastest sales guy but slow and steady wins the race ....and damn am i efficient with my calls, as these guys are actually calling me back after talking to the scumbags and thirst buckets out there... some sales guys appear to be magicians and the best thing ever to hit the phones in your office, closing big deal after big deal but at what cost? what are they saying to them and what is the end result? here it is, lost iso relationships, stolen data and sometimes they even try to fool the funders and conspire with merchants to default!

[Don Dolla]

any ways helping hand, if you need an ISO to submit to EBF for you now, send me your deals lol

[Zach]

I happen to personally know Hanna, and he usually gets his hands on high-quality deals. He probably had some bad luck with a few larger defaults, which may have unbalanced his portfolio with Everest. From Everest's perspective, his fundings may appear "unprofitable" due to this string of bad luck.

It's hard to blame Everest fully for this decision, as "Source Risk" is a real problem for lenders nowadays.

When Everest (or any funder) runs their analytics, they discern the inherent risk of each individual ISO's deals. Perhaps his portfolio with them performed with a 13% default frequency and a 39% default severity, whereas the "average" ISO of theirs performs with a 9.5% default frequency and a 31% severity (I'm not an underwriter, so take these numbers with a grain of salt). These numbers could have been skewed by a single large early default.

The reason for source risk is hard to determine, but it is usually a combination of lead source, sales approach, and flat-out dumb luck.

It may be indicative of a larger underlying problem with Everest's portfolio, or it may be (more likely) them trying to strengthen their portfolio's overall profitability.

It's almost inverse to the old adage of economics, "corner the market, then raise your prices", it just happens to be "build a large portfolio, then tighten your belt and milk the profits."

[Karen37a]

Everest more than most funders has an extremely high default rate. For years its been heard that they continue to throw good money after bad, trying to "fund themselves out of" their default rate.

You can only do that for so long and I think it's finally catching up to them.

-----

Helpinghand - sure funders take risk, but if they see a pattern with certain ISO partners pertaining to heavy default, stacking, etc - they have every right to terminate the agreement, in fact they should have done it sooner. There are a ton of ISO's out there that resort to very shady business practices in order to close a deal. What do they care? Once it funds they get paid and it's out of their hands.

I had a deal the other day it was a beautiful deal - the guy had been paying On Deck and New logic since before 2011. The merchant was double funded by an ISO last year and told " make 20 payments and we will fund a monthly-payment term loan at 8% interest over 4 years which will pay off the mca balances" on the 23rd business day when it got to the point that the ISO was avoiding him so much that they actually disconnected their phone number - the merchant felt played, like he got the shaft - and didn't even know to contact the funders directly because the ISO came off as the funder and in control of everything. To get someones attention he felt he had to stop payment... when the funders' collections depts. reached out - payments went back on within 2 days - but not before one of the funders had filed the COJ and started to seize receivables.

It's this exact type of stuff that happens daily - not only in our industry, I'm sure - but for some reason our industry is a fertile breeding ground of uneducated, unethical, unregulated scum! Very rarely do sales managers have oversight into what their reps are actually telling clients. All they care about is putting numbers on the board, am I right?

Now before anyone has a conniption - not every sales office is like this, some (few) are managed well enough but still turn a blind eye in certain scenarios.

Listen, I get it. You need to prosper, live and survive. But ask yourself to who's and what expense are you thriving? If this thing was even ever so slightly regulated on the sales end - reps must be certified, offices must be licensed... ****.... all this **** that some sales guys get away with - lying to clients, selling them "loans" and promising secondary financial product like traditional business loan for consolidation if they just take an MCA first... electronically transferring client's financial information, files.... stealing from their employers... forging signatures applications and pulling a client's credit 20 times...

We are talking serious felonies. WIRE FRAUD, FORGERY, EMBEZZLEMENT, GRAND LARCENY.. this **** happens every day.

Regulate the brokers and sales offices - just like they do to mortgage brokers, real estate brokers, equities brokers, certified financial planners & advisers.... all licensed and held accountable.

I guaranty you this industry would consolidate, cost of customer acquisition would fall off a cliff, default rates would subside,... the companies that actually hold a good chunk of market share would succeed and all of the bottom feeding pond scum will go on to other endeavors like selling crypto-backed securities or some ****.

I am not talking crap about ISOs please don't think that I rely on them for business, but let's be real Most problems in this industry begin and end with the bad ISOs.

Just require them to get an annual certification, and their firm to be licensed. JUST LIKE most-any-other financial industries.

This is Great. Also the Funders must adhere to

minimum "net cap requirments" have rules set in place...not first to close ( so you hear the bs goodnight story about 10 isos submitted the deal)

Exclusivity and ultimatley the merchant gets to choose who they do business with.

Syndication minimims and white label rules

** I have more for both sides

[Karen37a]

If you regulate "funding allocations" must be disclosed also and applications stopped when its met. Brokering out deals also must be disclosed upfront.

Both sides need work so the real brokers and funders can continue to do what they do.

[LJH365]

Thats terrible.

[Nunya]

When Everest (or any funder) runs their analytics, they discern the inherent risk of each individual ISO's deals. Perhaps his portfolio with them performed with a 13% default frequency and a 39% default severity, whereas the "average" ISO of theirs performs with a 9.5% default frequency and a 31% severity (I'm not an underwriter, so take these numbers with a grain of salt). These numbers could have been skewed by a single large early default.

I would bet Everest's defaults and severities are significantly greater than this given the portion of the market they serve. Nonetheless your point is correct, he was terminated because his portfolio performed well above the norm (or acceptable range). It's source risk and the risk outweighed the rewards in this case.

[helpinghand]

Zach, that's what's so crazy. I only got notification about 1 default and the funded amount was $10k, payback $15k. Very small portion of our portfolio. Seems like just poor business decision after poor business decision

[Finance Guru]

If you are looking for a house for your deals, we would love to have you submit with us. Looking forward to funding your deals.

[helpinghand]

BTW everyone, a little update... we received an update from the client that Everest claimed defaulted. It was our biggest deal we sent them. The client fell on hard times so took our advice and called up Everest to renegotiate his payment. We told him to get out in front of it and to NOT miss any payments. We just saw his bank statements, he has never missed a payment, but now the deal term is extended obviously because of lower dailys. I know by definition of most MCA agreements this is a default, but at the end of the day the client has been told he is in Good Standing by Everest and is continuing to pay them back.

[WestCoastFunding]

BTW everyone, a little update... we received an update from the client that Everest claimed defaulted. It was our biggest deal we sent them. The client fell on hard times so took our advice and called up Everest to renegotiate his payment. We told him to get out in front of it and to NOT miss any payments. We just saw his bank statements, he has never missed a payment, but now the deal term is extended obviously because of lower dailys. I know by definition of most MCA agreements this is a default, but at the end of the day the client has been told he is in Good Standing by Everest and is continuing to pay them back.

Why should this be considered a default? Sounds like Everest is just honoring the true-up clause in the contract? Are they mad at you for informing the client about the trump-up clause?

[chadtrattner]

EBF works with thousands of ISOs, consistently evaluating them based upon performance. Unfortunately, when some ISO’s default rates are significantly higher than average, we have no choice but to stop funding their deals. This is a straightforward business decision and not a reflection on any other matter.

[fundingsmbs]

does EBF pay renewals once they terminate the ISO because of defaults or poor performance on the book that remains active? does customer service respond to ISO that still has balance questions? Curious, when ISO build a book, gets the email "we are terminating you" what happens to the book. Or, does the ISO just flip the co the bird and stack and flip like crazy

nobody truly works with 1000s of ISO's. 80% of them waste your time at least.

[ABC2016]

One you are terminated they won’t answer your calls or emails

[Don Dolla]

this story doesn't add up, first it was a small 10k deal, then it's the biggest deal ever who just modified his payments immediately... i'm glad poor performing iso's get cutoff... especially a CPA whose in the MCA space directly referring clients... shouldn't a CPA be referring these deals to me, a broker, and put a little buffer in-between yourself and your main source of income. You should be making more money as a CPA business owner than dealing with the in's and outs of cash advance applications... Mr. jack of all trades.. master of ?

[LYC]

If they're not answering your calls or emails, then I highly doubt they are paying renewal commission....