[Sean Cash]

I do find it a little disturbing that there are some direct funders on here in this thread that claim to do soft pulls when in fact they do not

I agree. There are a good amount of funding companies out there who do not even know how to read a credit report, let alone know what kind of inquiry they're making.

Bank statements are king right now. Everybody's obsessed with deposits and NSFs, not that there's anything wrong with that. It's popular to say "credit doesn't matter" but FICO makes some pretty alarming predictions.

In this business we say 600-649 FICO score is good, yet statistics state that 31% of borrowers in this score range will become delinquent on a debt by 90 days or more in the next 2 years.

500-549 FICO, 71% of borrowers will become delinquent by 90 days or more in the next 2 years.

Under 500 FICO. 87% will become delinquent by 90 days or more.

This industry tries to beat the odds by:
1. Automatically collecting payments rather than giving the borrower the responsibility of submitting payments on their own.
2. Collecting every day or week.
3. Looking at historical cash flow, something that FICO doesn't do.
4. Lending or funding a business, not a consumer. FICO calculates consumer risk. But I have seen data to suggest that MCA deal performance correlates with owner FICO scores.
5. Structuring short term deals.

I'd say the sophistication of underwriting in this industry as a whole when it comes to credit reports is pretty low. The companies that have been around for a long time are good with them but for the newer companies, it's all about the bank statements.

[Eric S]

I agree. There are a good amount of funding companies out there who do not even know how to read a credit report, let alone know what kind of inquiry they're making.

Bank statements are king right now. Everybody's obsessed with deposits and NSFs, not that there's anything wrong with that. It's popular to say "credit doesn't matter" but FICO makes some pretty alarming predictions.

In this business we say 600-649 FICO score is good, yet statistics state that 31% of borrowers in this score range will become delinquent on a debt by 90 days or more in the next 2 years.

500-549 FICO, 71% of borrowers will become delinquent by 90 days or more in the next 2 years.

Under 500 FICO. 87% will become delinquent by 90 days or more.

This industry tries to beat the odds by:
1. Automatically collecting payments rather than giving the borrower the responsibility of submitting payments on their own.
2. Collecting every day or week.
3. Looking at historical cash flow, something that FICO doesn't do.
4. Lending or funding a business, not a consumer. FICO calculates consumer risk. But I have seen data to suggest that MCA deal performance correlates with owner FICO scores.
5. Structuring short term deals.

I'd say the sophistication of underwriting in this industry as a whole when it comes to credit reports is pretty low. The companies that have been around for a long time are good with them but for the newer companies, it's all about the bank statements.

Very good info. I find it interesting that lenders don't give a rats behind how much money the merchant is requesting and what they are using it for during pre-qual/approval or better yet, what their tolerable monthly budget is.