Bitter to Sweeten
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  1. #1

    Bitter to Sweeten

    Sometimes merchants take a long time to make a decision. And then, they take some more time.


    There need to be deadlines to keep merchants tight, maximize deal flow and drive the best results on a month to month basis.


    But sometimes, merchants will still go over deadlines.


    What then?


    R. Dawson tells a great ancient fable:


    There was once a very old couple who lived in a dilapidated thatched hut on a remote Pacific Island. One day, a hurricane blew through the village and demolished their home. Because they were much too old and poor to rebuild the hut, the couple moved in with their daughter and her husband.


    This arrangement precipitated an unpleasant domestic situation, as the daughter’s hut was barely big enough for herself, her husband, and their four children, let alone the in-laws.


    The daughter went to the wise man of the village, explained the problem and asked, “Whatever will we do?”


    The wise man puffed slowly on a pipe and then responded, “You have chickens, don’t you?”


    “Yes,” she replied, “we have 10 chickens.”


    “Then bring the chickens into the hut with you.”


    This seemed ludicrous to the daughter, but she followed the wise man’s advice. The move naturally exacerbated the problem, and the situation was soon unbearable, for feathers as well as well as hostile words flew around the hut. The daughter returned to the wise man, pleading again for advice.


    “You have pigs, do you not?”


    “Yes, we have three pigs.”


    “Then you must bring the pigs into your hut with you.”


    That seemed to be ridiculous advice, but to question the wise man was unthinkable, so she brought the pigs into the hut. Life was now truly inlivable, with eight people, 10 chickens, and three pigs sharing one tiny, noisy hut. Her husband complained that he couldn’t hear the radio over the racket.


    The next day the daughter, fearing for her family’s sanity, approached the wise man with a final desperation plea. “Please,” she cried, “we can’t live like this. Tell me what to do and I’ll do it, but please help us.”


    This time, the wise man’s response was puzzling, but easier to follow. “Remove the chickens and the pigs from your hut.” She quickly evicted the animals, and the entire family lived happily together for the rest of their days.


    The moral of the story is a deal always looks better after something has been added in to make it worse, and then thrown out.


    Buyers can get a little perspective and see how terms can get worse, if they don't make a decision and time drags on. Credit markets are never static and are always in flux. There is a valuable premium on your time.


    Maybe its the origination fee going up, or its pricing increasing if there has not been a rate lock. Maybe a higher payment gets the wheels turning. If the merchant is committed, the concession can always be made to restore the initial terms.


    What are the best ways you handle merchants going over pre-committed deadlines?



    -FundingStrategist
    https://fundingstrat.com

  2. #2
    Veteran Reputation points: 135672 Chambo's Avatar
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    so are you saying to raise the origination fee, or the factor, or both, with each week the merchant stalls?

    what do you do when Broker X calls them a week later with the original offer?
    Or when broker Y calls a couple days after with a lower factor (because they downsold)?

  3. #3
    This is a solid post. Thanks for sharing.

  4. #4
    Quote Originally Posted by Chambo View Post
    so are you saying to raise the origination fee, or the factor, or both, with each week the merchant stalls?

    what do you do when Broker X calls them a week later with the original offer?
    Or when broker Y calls a couple days after with a lower factor (because they downsold)?
    Great questions - every week, ouch!! Haha.

    Pricing/rates in the credit markets are always shifting, especially these days. It's great to show the merchant what the pricing or o-fee could be if the process goes into the next month or past a pre-committed date. On a case by case basis, it can be an effective tool to spur action when there's been some foot dragging.

    When broker X or Y calls with a better offer, its time to do what needs to be done to win the deal and Fund!


    -FundingStrategist
    https://fundingstrat.com

  5. #5
    Veteran Reputation points: 135672 Chambo's Avatar
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    Quote Originally Posted by FundingStrategist View Post
    Great questions - every week, ouch!! Haha.

    Pricing/rates in the credit markets are always shifting, especially these days. It's great to show the merchant what the pricing or o-fee could be if the process goes into the next month or past a pre-committed date. On a case by case basis, it can be an effective tool to spur action when there's been some foot dragging.

    When broker X or Y calls with a better offer, its time to do what needs to be done to win the deal and Fund!


    -FundingStrategist
    https://fundingstrat.com
    But you would then be lying to the merchant......

  6. #6
    Veteran Reputation points: 135672 Chambo's Avatar
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    Like the BS line reps use to justify addt'l fees "this is how I get paid"

    Or when they tell them to take this deal, and then they will get X plus on the renewal.

    If you want to develop long term trust and loyalty with merchants, who are getting bombarded with solicitations with every conceivable proposition on the planet....better keep it honest and forthright

  7. #7
    Veteran Reputation points: 159073 J.Celifarco's Avatar
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    Quote Originally Posted by Chambo View Post
    so are you saying to raise the origination fee, or the factor, or both, with each week the merchant stalls?

    what do you do when Broker X calls them a week later with the original offer?
    Or when broker Y calls a couple days after with a lower factor (because they downsold)?
    I have to agree with Chambo here. I think trying to pull moves like this and lying to merchants is just going to hurt you and the industry as a whole in the long run. Also it is not how to build up a loyal client base. Act like this on the first deal I highly doubt there will be a second deal
    John Celifarco
    Managing Partner
    Horizon Funding Group

    3423 Ave S
    Brooklyn, NY 11234
    T: (347) 773-3990 | F: (718) 795-1990
    Linkedin: Profile
    Email: john@horizonfundinggroup.com

  8. #8
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    The problem is that lying gets you SO far SO quickly, and before anyone can really pin you down and cancels one or two of your ISO agreements, you add a new LLC and your partner starts signing them and you have a fake name or two to use in the meantime.

  9. #9
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    I'll chime in.....

    First and foremost.... If lying to customers is in your strategy to sell in financials services, please leave the business now. There are too many liars and cheaters mucking up the waters in efforts to win a deal.

    Second thought on this: If a potential client does not try to negotiate a term sheet or comment on a term sheet within 24 hours, chances are....you will never close a deal with them.

    KH
    Kevin Henry
    VP-Business Development
    Seacoast Business Funding, a division of Seacoast Bank
    561-850-9346
    Kevin.Henry@SeacoastBF.com
    1880 N Congress Ave., Suite 404
    Boynton Beach, FL 33426

  10. #10
    Quote Originally Posted by Chambo View Post
    But you would then be lying to the merchant......
    Totally agree with you lying is not what we want to do, ethically its not right, plus honesty is just better for business long-term.

    If you have the room and the authorization to raise pricing, you could do so to adjust for your time value of money (TVM). The concession can always be made to restore initial pricing as the merchant re-engages/commits.

    Definitely not a tool necessary in every situation.

    Great points all around. :-)


    -FundingStrategist
    https://fundingstrat.com



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