[Karen37a]

I do not know ricky dennis and that is why that part was not quoted. I will go through each one and we can discuss it out.
making sure merchants aren't being stacked to 40% of their gross in payments- How do you decide those guidelines, Facts if those numbers put everyone out of business than pearl and yellowstone will not be the power houses they are now .Banks will give a guy 100 times his "gross monthly". Merchants know what they can handle and what they can not . I have a nail salon that has been paying over 40% for years now.(his real gross with cash is way higher)
making sure brokers get paid- To every rule there is loopholes that the same funders who do not pay will figure out a legal way not to pay.
merchant having a fair pricing standard- All this will cause is getting rid of alternative lending where all the thousands of merchants i have helped would just close up . Do you think yellowstone can keep there doors open if they have to do 15% . do you think on deck or rapid will be in business if they needed to compete with the banks at 3%
John you are to straight forward thinking thinking if there will be rules they will weed out the ****. Those guys will put there wife , mother,friend,neighbor.
Someone came to my office door offering me $500 a month to use my address for amazon and that i might get a return here or there. To me this means he already got thrown off amazon from his address ,ten different family members another ten friends and now is going door to door which he will 100% get someone and continue to screw people over.

Here just in case you do not see the other thread

China Locks Down Financial District As P2P Lending Implodes

https://www.pymnts.com/news/internat...ending-losses/

Collapse of Chinese peer-to-peer lenders sparks investor flight ( all the negativity cause people to flee, ive said it 100 times, like shorting a stock or placing a rumor...which is illegal)

[jotucker1983]

I do not know ricky dennis and that is why that part was not quoted.

See this thread here.

making sure merchants aren't being stacked to 40% of their gross in payments------How do you decide those guidelines, Facts if those numbers put everyone out of business than pearl and yellowstone will not be the power houses they are now .Banks will give a guy 100 times his "gross monthly". Merchants know what they can handle and what they can not . I have a nail salon that has been paying over 40% for years now.(his real gross with cash is way higher)

There's far too many cases of merchants being put out of business or running into cash flow issues, when the 4 - 6 advance stacks that they have equate to 40% or more of their monthly gross sales going to payback cash advances.

A case-by-base 2nd position stack in and of itself can be questionable, but it can usually work depending upon all of the circumstances at play such as cashflow, sales, the fact that the 1st position funder didn't provide as high of an approval as they could have, etc.

But there's absolutely no reason why a merchant should have 4 - 7 advances stacked on top of one another. The only reason this is happening is because as I mentioned here, the industry is based on leveraged resources and the brokers fighting at the bottom are fighting for scraps to pay their monthly expenses. As a result, they just stack and stack merchants who otherwise have no CLUE what they are doing. The merchants are very unsophisticated.

making sure brokers get paid- To every rule there is loopholes that the same funders who do not pay will figure out a legal way not to pay.

And those funders will be banned going forward as a result. Right now as a broker, when you fund a deal, all you can do is pray to the powers that be that you get paid. You might get paid, you might not get paid. There's no centralized police nor regulation that is there to make sure you get paid. Thankfully, the vast majority of the time, we get paid....but it's the fact of the matter that if we don't get paid, there's really no good recourse for the smaller shop.

merchant having a fair pricing standard- All this will cause is getting rid of alternative lending where all the thousands of merchants i have helped would just close up . Do you think yellowstone can keep there doors open if they have to do 15% . do you think on deck or rapid will be in business if they needed to compete with the banks at 3%

We would have to get together to determine what "fair" pricing looks like for A, B, C, D, and E Paper. Either we can do it together as an industry, or you can have the U.S. Government do it, which one do you prefer?

On the flip side, I'm not sure how anyone can justify a merchant paying a 1.50 over a 5 month term with the broker getting 10 points on the deal, then adding another 10 points in a PSF fee. That's not "special sales ability", that's taking advantage of an unsophisticated merchant that's desperate for funding.

John you are to straight forward thinking thinking if there will be rules they will weed out the ****. Those guys will put there wife , mother,friend,neighbor. Someone came to my office door offering me $500 a month to use my address for amazon and that i might get a return here or there. To me this means he already got thrown off amazon from his address ,ten different family members another ten friends and now is going door to door which he will 100% get someone and continue to screw people over.

So I have no intentions of being a jerk when I state this lol, but I feel that those who are fighting so hard against these "basic/common sense" forms of policing, are the ones that these "basic/common sense" forms of policing would begin to police.

You made the statement of: "Well John, you only want regulation because that would make it easier for you to generate business," and the statement alone is revealing because it's almost like you are saying that by doing RIGHT by the client, a broker can't generate business? It's almost like you are saying that business can only be generated when:

- A broker has a recent criminal history

- A broker adds 10 points in a PSF on the side, most of the time without the merchant really understanding what they are paying

- A broker stacks the living hell out of a merchant and nearly drives him out of business

- A broker rips off a co-broker that sent me a deal by not paying him his share of commission

- A broker rips off a funder by getting them to fund a merchant he already knew was shady

Surely this industry can still exist and make money without these practices taking place, right?

[Karen37a]

jibberish

Commission are negotiated thru employment contracts, each individual person has the right to negotiate more favourable terms for themselves based on their ability, just like someone is an entry-level employee for min wage vs a cfo making 250k a year with stock options.

Most states consider people "at will" and depending on the circumstances you will be owed commission after termination, most likely you will not.

Renewals are not due or owing to the isos or brokers as you relinquish your rights to the Funder once you turn over the sale and have non compete agreements and tortious interference agreements in place.

No one has to sign on or do business with anyone they do not want to, that would be like trying to force Microsoft to hire you as a salesperson.

Brokers became very spoiled in this industry and they thought and think because they create an LLC they are entitled to something. You are not.

If the Funders are so bad ...sign on to the ONE Funder that you love and only send them business or get hired internally.

The only way you can negotiate more favourable contracts is to come to the table with more skill and ability and that is PRODUCTION based. Not Time served.

These rules and contacts have always been the same in regulated environments ...stocks, insurance, loans etc or just non regulated sales

Ps This is why you do not let non sales people get bigger than their britches you create a nightmare ...only solution would be to knock them down to almost no commission ..not the top producers

[WestCoastFunding]

See this thread here.

“A case-by-base 2nd position stack in and of itself can be questionable, but it can usually work depending upon all of the circumstances at play such as cashflow, sales, the fact that the 1st position funder didn't provide as high of an approval as they could have, etc.

But there's absolutely no reason why a merchant should have 4 - 7 advances stacked on top of one another.

Somewhere in the financing food chain is a senior debt lender (a bank) that feels that every single merchant advance (even 1st position A paper) is questionable and will no doubt hurt cash flow. To them, there is absolutely no good reason the business should resort to a cash advance, as it puts its own lending facility at risk.

So why the arbitrary line at 1-2 advances? And why at a percentage of revenue (as each company’s margins are different)?

[Karen37a]

Somewhere in the financing food chain is a senior debt lender (a bank) that feels that every single merchant advance (even 1st position A paper) is questionable and will no doubt hurt cash flow. To them, there is absolutely no good reason the business should resort to a cash advance, as it puts its own lending facility at risk.

So why the arbitrary line at 1-2 advances? And why at a percentage of revenue (as each company’s margins are different)?

And credit cards etc ( and people get 1st 2nd position home loans...commercial properties...seconds and credit lines)

__

And the reality is regulators would pay more money to get laws passed that we are worth...also the regulatory costs to oversee us. I can't see them footing the bill we are too small

And if you regulate us you are regulating Factoring as well? And Equipment loans?


This is like regulating plastic straws

I am tired of the desperate attempt

[jotucker1983]

Somewhere in the financing food chain is a senior debt lender (a bank) that feels that every single merchant advance (even 1st position A paper) is questionable and will no doubt hurt cash flow. To them, there is absolutely no good reason the business should resort to a cash advance, as it puts its own lending facility at risk.

So why the arbitrary line at 1-2 advances? And why at a percentage of revenue (as each company’s margins are different)?

I would argue that the bank is correct in feeling how they feel. This industry used to be based on purchasing future credit card receivables without a fixed payment associated with the payback period. We morphed into a fixed payment arrangement, which is fine, but that fixed payment arrangement should be structured in a way that allows a merchant enough "breathing room" to not potentially negatively effect him in paying other due expenses of his business.

Let's break this down:

- Merchant is doing $1 million a year in gross sales ($83,000 a month in sales) with a risk profile that puts them at A or B Paper

- Merchant is approved for $75,000 on a 15 month term with a cost factor of 1.30. Fixed payment comes out to 315 business day payments of $310 over the 15 months.

- This represents $6,510 per month in payments coming out that's going towards paying back the program, or about 8% of the $83,000 monthly gross sales.

- To the bank's point, this merchant can still default with this, but a majority chunk of merchants in this situation should have enough breathing room to where the program can be managed and paid back on time (in reasonable fashion).

- Now, when you stack the following advances below, things change:

* 2nd Position: $25,000 at 1.35 over 5 months, which is 105 business day payments of $321 ($6,741 per month in payments)

* 3rd Position: $20,000 at 1.45 over 5 months, which is 105 business day payments of $276 ($5,796 per month in payments)

* 4th Position: $15,000 at 1.45 over 4 months, which is 84 business day payments of $259 ($5,439 per month in payments)

The additional stacks have now added $17,976 in monthly payments, which combined with the 1st position of $6,510 this merchant is now paying about $24,500 per month in advance payments, which represents 30% of his monthly gross sales.

So 30% of his monthly gross sales are going to pay advances. That's not a lot of breathing room and this merchant is dangerously close to getting into bankruptcy territory.

This merchant clearly was unsophisticated both personally and business wise, but instead of our industry stopping this merchant in his tracks (telling him NO, no more funding, you can't afford it), we instead continued to feed him more "drugs" at his long term disposal and at our short term benefit.

[Karen37a]

West coast

this seriously is horrible never ending

[WestCoastFunding]

I would argue that the bank is correct in feeling how they feel. This industry used to be based on purchasing future credit card receivables without a fixed payment associated with the payback period. We morphed into a fixed payment arrangement, which is fine, but that fixed payment arrangement should be structured in a way that allows a merchant enough "breathing room" to not potentially negatively effect him in paying other due expenses of his business.

Let's break this down:

- Merchant is doing $1 million a year in gross sales ($83,000 a month in sales) with a risk profile that puts them at A or B Paper

- Merchant is approved for $75,000 on a 15 month term with a cost factor of 1.30. Fixed payment comes out to 315 business day payments of $310 over the 15 months.

- This represents $6,510 per month in payments coming out that's going towards paying back the program, or about 8% of the $83,000 monthly gross sales.

- To the bank's point, this merchant can still default with this, but a majority chunk of merchants in this situation should have enough breathing room to where the program can be managed and paid back on time (in reasonable fashion).

- Now, when you stack the following advances below, things change:

* 2nd Position: $25,000 at 1.35 over 5 months, which is 105 business day payments of $321 ($6,741 per month in payments)

* 3rd Position: $20,000 at 1.45 over 5 months, which is 105 business day payments of $276 ($5,796 per month in payments)

* 4th Position: $15,000 at 1.45 over 4 months, which is 84 business day payments of $259 ($5,439 per month in payments)

The additional stacks have now added $17,976 in monthly payments, which combined with the 1st position of $6,510 this merchant is now paying about $24,500 per month in advance payments, which represents 30% of his monthly gross sales.

So 30% of his monthly gross sales are going to pay advances. That's not a lot of breathing room and this merchant is dangerously close to getting into bankruptcy territory.

This merchant clearly was unsophisticated both personally and business wise, but instead of our industry stopping this merchant in his tracks (telling him NO, no more funding, you can't afford it), we instead continued to feed him more "drugs" at his long term disposal and at our short term benefit.

Literally none of this matters if we don’t know their margins. Either there’s enough there to debt service or there isn’t. Not to mention the margins for a consulting company is going to be much different than a restaurant?

So again I’m asking, what percentage of gross sales are you saying is too much? Provide a number. 10%? 20%? 40%?

Then, how do you write that into law?

[jotucker1983]

Literally none of this matters if we don’t know their margins. Either there’s enough there to debt service or there isn’t. Not to mention the margins for a consulting company is going to be much different than a restaurant?

In relation to margins, a couple of points:

- The majority of MCA related fundings do not require the submission of financial statements, nor tax returns, nor a current debt schedule. Those are usually required when the funding gets over $100,000 to $250,000 or if you are submitting to a A+ Paper Funder/Lender.

- Based on this, isn't it reasonable to assume that right now, we really don't know much about the margins of the majority of merchants being funded?

- In addition, there's a reason why the standard 1st position approval is usually no more than 10% to 15% of the annual sales volume. It's baking in the ability of the merchant to reasonably payback the MCA related product and service their other liabilites. If the merchant's other liabilities were never taken into play, why not just approve a merchant for 50% to 75% of their annual gross sales? So a business doing $1 million a year in funding gets $500,000 to $750,000?

So again I’m asking, what percentage of gross sales are you saying is too much? Provide a number. 10%? 20%? 40%?

Then, how do you write that into law?

- If it were based solely up to me, I would put the absolute max at 20% across the board.

- When a merchant takes out one of these programs, there would be a required filing (other than a UCC) that takes place within a centralized database that is only accessible by regulators and licensed lenders/funders.

- This database would be checked upon application submission and if a licensed lender/funder is caught exceeding the limit, they can be fined or have their licensed revoked.

At the end of the day, the "alternative" nature of this industry is rapidly consolidating with the "conventional" side of lending. We are going to get higher forms of regulation anyway, the best thing to do is acknowledge this and try to help write the policy.

[Karen37a]

If this person wanted to go find merchants who could fit his "20%" mold he could make an attempt to do so but he cant, so this is all sour grapes.

I think I have a merchant with one funder on these boards 1st position 10%...other is 15%

another funder on these boards 12 % 15 and 22



another 20% and renewed at 20 % larger dollar amount on renewal and they are coming up again for renewal and doubled rev again


suck it up...no excuses...it will be 1-2 million rolling over in renewals

I had people over 30%...someone took a shot on them to SAVE them( and I had to put my tap shoes on to get it done)....they all survived and are doing well. If they never got the money who knows what would have happened... those people are now at 10-12

[MCNetwork]

Percentage of gross sales is only one part of the equation. Average daily balance is a more useful indicator in determining a merchant's ability to afford an advance. What good is giving an advance where monthly debt service is 15% of gross sales if he only shows an average daily balance of $100 and has 1 or 2 NSFs per month? He clearly can't afford the advance. Conversely, I've seen merchants easily handle payments that eat up 30% of monthly gross because his average daily balances are very high. Each merchant's situation is different. Some merchants are financially astute and responsible. Some are one bad month away from insolvency. Therefore, there are no cookie cutter, one size fits all underwriting rules.

Good underwriters take a holistic approach and look at the whole picture when deciding the maximum approval amount. The 15% rule is only a guideline based on historical performance of similar merchants in a funder's portfolio, not a hard and fast rule. It is also a rule that helps impose discipline on the underwriting process and mitigate the funder's default risk. The broker's job is to ask the right questions, learn the actual profit margins, find out if the merchant can really afford the advance and then guide him to the best solution for his situation.

[Karen37a]

Percentage of gross sales is only one part of the equation. Average daily balance is a more useful indicator in determining a merchant's ability to afford an advance. What good is giving an advance where monthly debt service is 15% of gross sales if he only shows an average daily balance of $100 and has 1 or 2 NSFs per month? He clearly can't afford the advance. Conversely, I've seen merchants easily handle payments that eat up 30% of monthly gross because his average daily balances are very high. Each merchant's situation is different. Some merchants are financially astute and responsible. Some are one bad month away from insolvency. Therefore, there are no cookie cutter, one size fits all underwriting rules.

Good underwriters take a holistic approach and look at the whole picture when deciding the maximum approval amount. The 15% rule is only a guideline based on historical performance of similar merchants in a funder's portfolio, not a hard and fast rule. The broker's job is to ask the right questions, learn the actual profit margins and find out if the merchant can really afford the advance.

Are you going to lobby for this? Turn this into a law?


You might be too young to remember school house rock ( again i memorize everything)


Singing...Well Im just a bill, yes Im only a bill and Im sitting here on capital hill , well now im stuck in the white house where i am waiting on line with all the other bills for the President to sign and if he signs me then ill be a Law oh yea I hope and I pray that he will but today I am only a Bill

https://www.youtube.com/watch?v=tyeJ55o3El0

[jotucker1983]

Percentage of gross sales is only one part of the equation. Average daily balance is a more useful indicator in determining a merchant's ability to afford an advance. What good is giving an advance where monthly debt service is 15% of gross sales if he only shows an average daily balance of $100 and has 1 or 2 NSFs per month? He clearly can't afford the advance. Conversely, I've seen merchants easily handle payments that eat up 30% of monthly gross because his average daily balances are very high. Each merchant's situation is different. Some merchants are financially astute and responsible. Some are one bad month away from insolvency. Therefore, there are no cookie cutter, one size fits all underwriting rules.

Good underwriters take a holistic approach and look at the whole picture when deciding the maximum approval amount. The 15% rule is only a guideline based on historical performance of similar merchants in a funder's portfolio, not a hard and fast rule. It is also a rule that helps impose discipline on the underwriting process and mitigate the funder's default risk. The broker's job is to ask the right questions, learn the actual profit margins, find out if the merchant can really afford the advance and then guide him to the best solution for his situation.

Excellent post, underwriting includes a variety of aspects such as credit scoring, bank balances, current liens, if the client is behind on their rent, etc., but I want to highlight something you said here:

The 15% rule is only a guideline based on historical performance of similar merchants in a funder's portfolio, not a hard and fast rule. It is also a rule that helps impose discipline on the underwriting process and mitigate the funder's default risk.

My argument is that default risk is why 10% to 15% of annual gross sales (and 15% is pushing it, it's usually 5% to 8%) is usually the amount approved. It factors in the ability of giving the merchant enough "room" to cover other required operational expenses, as the goal of the 1st position funder is not to just lend out....but get the money back that they lent out.

I just feel sorry for the 1st position funder that is stacked with up to 6 positions on top of its program, with the client having to make other arrangements to finish the payment cycle.

Stacking is how a lot of the broker shops today are staying alive, let's just be honest about that. But the reality is that you can't survive on that alone because despite what anybody thinks....more regulation is coming to this space based on the media attention provided along with the consolidation of the alternative players with the conventional platforms. The space is no longer competing with the banks, it's mainly working alongside them now.

[WestCoastFunding]

I just feel sorry for the 1st position funder that is stacked with up to 6 positions on top of its program, with the client having to make other arrangements to finish the payment cycle..

Don’t feel sorry for them. They’re most likely “stacking” on a bank, SBA lender or asset based lender. In fact, I believe they’d prefer to stack those guys at times.

[jotucker1983]

Don’t feel sorry for them. They’re most likely “stacking” on a bank, SBA lender or asset based lender. In fact, I believe they’d prefer to stack those guys at times.

Got it, but the only difference is that the conventional loans like the SBA programs are at conventional terms. We are talking less than 10% in interest with terms that are 5 years to 10 years. We are also talking about an approval amount that's of reasonable means and a payment schedule of very reasonable means.

So a 1st position A/B funder going in there with that SBA loan already in place for example, still gives the merchant a lot of breathing room, despite the fact that the payback cycle is 6 to 15 months give or take.

But when you throw 6 positions on top of that, with terms from 4 to 7 months each, that is where we start to potentially get into trouble here.

[Karen37a]

***rolling eyes ***

[Karen37a]

https://dailyfunder.com/showthread.p...ighlight=fruit

There will always be new people going into business and guess what, there will be a time when they are no longer new and they need a loan for whatever reason. Then they will die and their grand kids will need a loan for whatever reason, or the people their greedy grand-kids sold the business off too will need one.

And then their were Renewals.....

PS Yogi Berra also said .......This is like deja vu all over again

Thats from 2015 I think.These same convos have been going on for years. I am sure you can look up my "low hanging fruit" reponses to some.

Me telling them that they are getting bad clients because they cant sell...they can only get to the fruit they( and everyone else) can reach and that they need to improve their sales skills so they do not have this low grade stacked to death paper

[Karen37a]

The 2015 years ....lets all reminisce...same stories just another time and another place..new faces new names...some are still saying the same things

People who think negatively will never make sales. Was it Yogi Berra who said , baseball in 90% mental?? Its like stepping up to the plate thinking..im going to strike out, im going to strike out . I am not the motivational coach here but I know this if you think you can you can, if you think you cant you cant.

Some of you are like the Glengarry Glen ross movie...the leads are coming !! the leads are coming !!!

Now I am here yelling ...PUT THAT COFFEE DOWN COFFEE IS FOR CLOSERS!!!! ...karen

.And .for those that recall the bs yulia years, an oldie but a goodie....the fantastic leads that closed themselves

https://dailyfunder.com/showthread.p...ighlight=fruit

Pt Barnum allegedly said " Theres a sucker born every minute "

meaning ...people are fools and there always will be fools.

I have ex mortgage brokers/ex sleezy sales agents going out in a body bag weekly..cant handle the pressure of this industry.

I know for every 10 agents I hire..4 are going into the witness protection program , never to be heard from again..day one.Scared to pick up the phone.

Who said the sales people/brokers are going to be replaced?? They are going to automate the system???

I cant wait untill someone has a big warehourse in the desert and everyone gets online and takes a ticket, like in the bakery, to sign themselves up for a cash advance loan LOL

Anytime anyone says something like that to me or has far fetched ideas i know...this guy cant sell. Pfft


Sales people need to Pick up the phone

get those special UCC lists and dial lol

Im singing from the wizard of oz...If I only had a brain da da da da da da

karen

[jdlaw]

The full quote from Yogi is: "Baseball is ninety percent mental. The other half is physical." Math never was his strong suit.

[Karen37a]

The full quote from Yogi is: "Baseball is ninety percent mental. The other half is physical." Math never was his strong suit.

you are right but he also said

this is like deja vu all over again


So I think it was a very quick slick double entendre...i could be wrong

[Access2Capital]

I've kind of come across this issue and I can totally see how it can happen. We had an offer out, ISO called in and asked us to change the e-mail address on record and send him docusign. Docs come back and the merchant admantly says that he did not sign the contracts and that e-mail is not his. I mean, anyone can catch this with a simple merchant interview. But if funders / brokers want to be shady, they could easily create an e-mail address for the merchant, complete the docusign for the merchant and fund a deal without a merchant interview.

Gotta love this industry.

[patrickw]

Pablo Escobar

[Karen37a]

I've kind of come across this issue and I can totally see how it can happen. We had an offer out, ISO called in and asked us to change the e-mail address on record and send him docusign. Docs come back and the merchant admantly says that he did not sign the contracts and that e-mail is not his. I mean, anyone can catch this with a simple merchant interview. But if funders / brokers want to be shady, they could easily create an e-mail address for the merchant, complete the docusign for the merchant and fund a deal without a merchant interview.

Gotta love this industry.

thats why i do not use it...paper contract in my hand...back it goes

on the few companies that I trust...a few made me use it( i trust them 100% now)..i double chcked the emails so my brokers /iso cant pull a shifty move on me...one tried...that was a fun day at the office

[jotucker1983]

I've kind of come across this issue and I can totally see how it can happen. We had an offer out, ISO called in and asked us to change the e-mail address on record and send him docusign. Docs come back and the merchant admantly says that he did not sign the contracts and that e-mail is not his. I mean, anyone can catch this with a simple merchant interview. But if funders / brokers want to be shady, they could easily create an e-mail address for the merchant, complete the docusign for the merchant and fund a deal without a merchant interview.

Gotta love this industry.

It's a Wild Wild West lol. It's these sorts of things that basic and common sense regulation could help ward off. In addition, agents caught doing this right now can be prosecuted heavily. But of course when a large chunk of the industry refuses to do upfront background/character checks on the people they are recruiting.....crooks, criminals, thugs, liars, and cheaters easily slide in the door and the people that are harmed the most are the merchants we are supposed to be setup to serve.

[Karen37a]

in a ver very very small way I am glad people get to experience what some did to me for 3 years because they can't make sales.

and birds of a feather