[MCAdude]

https://debanked.com/2019/06/thats-a...-on-wednesday/

“The New York legislature has until Wednesday night to pass two bills that would prohibit the use of COJs, one on out-of-state debtors entirely and the other from being used as a condition in a financial contract. Either or both would effectively outlaw their use in the small business finance industry in New York State. If they do not pass a Floor vote by Wednesday night, the clock on the debate would reset until 2020 and the bills would have to be reintroduced in January.

Both bills have momentum. Both bills have a Democrat sponsor. The Democrats control the Assembly, the Senate, and the Office of the Governor. The bills have at least some support from Republicans. By all counts, at least one of these bills should pass this week.

Bill A07500 would prevent COJs being filed against Non-New York parties by requiring that they only be permissibly filed in a county in which the debtor party “resides.” This bill has already sailed through three committees, the most recent of which had unanimous bipartisan support. Its counterpart in the Senate is S06395.

A03636 is targeted specifically at small business lenders and merchant cash advance companies. “This bill will protect small businesses from predatory lenders that often offer loans and cash advances on the pre-condition that they sign a confession of judgment,” it says. The bill calls for this rule to go into effect 90 days after its passage.

It’s possible the bills could also be reworded at the last minute.

There is no doubt where the impetus for these bills stems from. A07500’s official memo, for example, cites the controversial Bloomberg story series authored by Zeke Faux and Zachary Mider in its footnotes.

If either or both bills pass by Wednesday night, they would still require the signature of the governor. That step, a technicality, would probably provide clarity on the official date of which the amended law would go into effect.”

[abfunders]

I have one big question: If it passes, what will that do to the deals in our pipelines that are more than 90 days in their term?

[Peak Solutions LLC]

What route are lenders planing on taking when its time to collect?

[Fetachini]

collections.jpg

[NoBigDeal]

It's a matter of time. At this point most funders have already stopped using a COJ and I'd imagine once this is passed, the rest will have to follow suit. Time for true UW (pricing without the comfort of COJ) to win deals, and bad UW will have their default numbers spike

[Michael I]

It's a matter of time. At this point most funders have already stopped using a COJ and I'd imagine once this is passed, the rest will have to follow suit. Time for true UW (pricing without the comfort of COJ) to win deals, and bad UW will have their default numbers spike

issue is most of them underwrite based on ability to collect . their whole model can crash.

[BB_Cooper]

It's a matter of time. At this point most funders have already stopped using a COJ and I'd imagine once this is passed, the rest will have to follow suit. Time for true UW (pricing without the comfort of COJ) to win deals, and bad UW will have their default numbers spike

Seems like a reasonable reset that will better align the interests of funders, brokers & their merchants-

[NoBigDeal]

issue is most of them underwrite based on ability to collect . their whole model can crash.

"Time for true UW to win deals." True meaning they can scout and fund based on viability of the business (from collection standpoint as well) as opposed to filing COJ the fastest

[WestCoastFunding]

When this passes, most of the 20-60 day payback guys are going to disappear.

[NoBigDeal]

Seems like a reasonable reset that will better align the interests of funders, brokers & their merchants-

It might "better align", but will never totally be in line

[NoBigDeal]

When this passes, most of the 20-60 day payback guys are going to disappear.

It also said it may take up to 90 days to go into effect. That gives those 20-60 day funders at least 2-3 renewals left to fund lol

[Michael I]

Some have their credit lines ( money) based on their process , i wonder if any will lose their lines (backers) once coj goes

[J.Celifarco]

When COJ's go obviously the industry will change. I can't see how companies will still be able to go out and do 4th, 5th 6th positions when they will have no recourse for collections. If all the positions in front of them file UCC's these companies will never be able to get their money. I think this is going to change the industry drastically and we will be moving back to what the industry was like pre COJ, 1st 2nds and some 3rds.

[mcaguru]

Its hard to believe funders would fund based on a coj!

[Nunya]

its hard to believe funders would fund based on a coj!

rip

[Michael I]

Its hard to believe funders would fund based on a coj!

better believe it , you can have 2 exact matching files with the only difference being one has a national bank and one with some local bank in Wyoming . The one with the national bank will get a way higher approval. You see even some companies that started to get rid of coj , it was only on the smaller deals.

[J.Celifarco]

Its hard to believe funders would fund based on a coj!

Its the only reason these companies were will to go out and 5th and 6th and ... positions. They knew if they filed their COJ first they could collect. Now that they cant the high risk lending in this space is going to change drastically. Anyone who thinks this isnt going to have a huge affect on the industry I think is bat **** crazy.

[cmarks]

While valid some funders will lose, others like OnDeck without COJ experiencing higher defaults https://www.pymnts.com/earnings/2019...ds-term-loans/

[abfunders]

Imagine a world where factors are stacked by MCAs and there's no recourse for the MCA to file with a COJ, since the AR has already been pledged to the factor. It would be hard-pressed to stand up in a court battle.

We have a "Collections Specialist" on the board somewhere. I'd be fascinated to know his take on this. There's a court battle that the COJ avoids, and then there's regular old debt collections services.

[WestCoastFunding]

Good riddance to most of these guys. Especially the guys doing the “installment advances”.

[NoBigDeal]

While valid some funders will lose, others like OnDeck without COJ experiencing higher defaults https://www.pymnts.com/earnings/2019...ds-term-loans/

I'd think defaults for OD will go down once COJ goes into effect. I wonder how many of those charge offs are due to the merchant getting stacked past 2nd or 3rd position?

[Atlas Financial]

Funny to see all the email blasts from funders saying no more COJs for deals under 75k. The companies that have been doing 150k-250k without them are going to reap the benefits in the short window that opens up as funders readjust their UW models. The COJ guaranteed payment, which then guarantees returns investors are seeking, or guaranteed that the funder could make interest payments on their line of credit. There are companies that definitely relied solely on the COJ model, let's not kid ourselves. UW is a crapshoot, let's be honest. Having four metrics like ADB/NSFs/Average Monthly Deposits/etc are not much to rely on.

[Atlas Financial]

The crux of UW is knowing what you can get back if the deal goes bad. This is why real estate want warm bodies that are putting up their balance sheet as recourse on a deal. UCC liens work, but an MCA is at the very end of the debtors list.

[J.Celifarco]

I see a lot of companies lines either being re-evaluated or possibly cutoff when they can no longer use COJ's

[FundingTap123]

Chrome Capital sweet spot will remain 3-6th position advances needing 100-600k same day up to 7.5 month terms. This will be with or without COJ. Most of Chrome collections is done by having close relationships and working out payment plans with merchants.

Chrome also offers an mca credit line whereas if we merchant doesn’t stack they will be eligible for additional funds every month like clockwork.

A lot of clients also get effective 1.19 rates after early pay discount is factored in.