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  1. #1
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    Smart Box Contracts

    Some funders use the smart box contracts that breakdown APR. Has anyone lost any deals using these contracts?

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    Yes I can稚 stand them, but they池e is a benefit. Sometime those contracts have a clause where it states the interest will be forgiven if they refinance once half way through. I usually sell the merchant on that point. Hope that helps

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    Quote Originally Posted by fundingsmbs View Post
    Some funders use the smart box contracts that breakdown APR. Has anyone lost any deals using these contracts?
    How is that legal? There is NOT an APR on an MCA. Can't have it both ways. Either you've structured it as a loan or you've structured it as an advance of future receivables. If you don't make it contractually clear that its an advance, then you risk being sued and it being ruled as a loan. If there's an APR, that is a loan quality.

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    Quote Originally Posted by SFC View Post
    How is that legal? There is NOT an APR on an MCA. Can't have it both ways. Either you've structured it as a loan or you've structured it as an advance of future receivables. If you don't make it contractually clear that its an advance, then you risk being sued and it being ruled as a loan. If there's an APR, that is a loan quality.
    Great point. I believe as long as you池e disclosing the APR to the merchant they can稚 really sue. I知 not a lawyer just my thoughts.

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    APR just means annual percentage rate
    While a merchant might view it as a loan rate, it's just a mathematical equation. It's used also for annual rate for earned for investments as well.
    https://www.breakoutfinance.com/apr-calculator/
    (Okay, so Breakout offers loans, but whatever)

    On a 30-year mortgage, you can present the factor rate in as well. For a $60,000 mortgage at 4.9% APR, you're paying a factor rate of a 1.91 factor!! Outrageous! And at 3.8% APR, that's a factor of 1.67!!
    https://www.mortgagecalculator.org/

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    Quote Originally Posted by abfunders View Post
    APR just means annual percentage rate
    While a merchant might view it as a loan rate, it's just a mathematical equation. It's used also for annual rate for earned for investments as well.
    https://www.breakoutfinance.com/apr-calculator/
    (Okay, so Breakout offers loans, but whatever)

    On a 30-year mortgage, you can present the factor rate in as well. For a $60,000 mortgage at 4.9% APR, you're paying a factor rate of a 1.91 factor!! Outrageous! And at 3.8% APR, that's a factor of 1.67!!
    https://www.mortgagecalculator.org/
    APR is Annualized Percentage rate (of interest). But an MCA has NO INTEREST. Regardless of annualized or monthly or daily, there is no interest. You cannot manufacture interest on a non interest product.

    Take a CC split MCA for example. If the split assumed the factor would be paid up in 6 months, and the merchants business went through the roof and they paid off the advance in 2 months, the APR would shoot through the roof as well. But in this case the merchant would LOVE a massive APR then.

    So APR makes no sense, it's interest, for a loan. Which an MCA is not.

  7. #7
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    Quote Originally Posted by abfunders View Post
    APR just means annual percentage rate
    While a merchant might view it as a loan rate, it's just a mathematical equation. It's used also for annual rate for earned for investments as well.
    https://www.breakoutfinance.com/apr-calculator/
    (Okay, so Breakout offers loans, but whatever)

    On a 30-year mortgage, you can present the factor rate in as well. For a $60,000 mortgage at 4.9% APR, you're paying a factor rate of a 1.91 factor!! Outrageous! And at 3.8% APR, that's a factor of 1.67!!
    https://www.mortgagecalculator.org/
    What math you do to get a 1.91 from a 4.9% apr?? 4.9%apr=1.049 factor... now do a 12 month MCA at 1.40 over 30 years and tell me total factor??

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    Quote Originally Posted by cmarks View Post
    What math you do to get a 1.91 from a 4.9% apr?? 4.9%apr=1.049 factor... now do a 12 month MCA at 1.40 over 30 years and tell me total factor??
    Look at the amount of interest paid over 30 years on a 4.9% APR mortgage.

    https://www.calculatestuff.com/finan...off=80#results

    Total interest for a $60,000 loan is $54,634.99. Total amount paid is $114,634.99. $114,634.99 / $60,0000 = 1.91
    At 3.8% APR total repayment is $100,648.04 which means that's $100,648.04 / 60,000 = 1.67

    BTW, a mortgage is also amortized, so when you come to refinancing, you're paying off the first, taking whatever PPP exists, and but you have to refinance the principle, which can take quite a long time.

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    An APR of 4.9% is not a 1.049 factor. A factor rate is essentially a cost of capital. A 30 year mortgage with a 1.049 "factor rate" would be borrowing $100k and paying back $104,900 over 30 years.

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    Quote Originally Posted by cmarks View Post
    What math you do to get a 1.91 from a 4.9% apr?? 4.9%apr=1.049 factor... now do a 12 month MCA at 1.40 over 30 years and tell me total factor??
    Oh, and there's no such thing as a "12 month 1.40 over 30 years." 12 months is not 30 years. A 1.40 over 12 months times thirty is still a 1.40 factor rate.

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    Quote Originally Posted by Big Mack View Post
    An APR of 4.9% is not a 1.049 factor. A factor rate is essentially a cost of capital. A 30 year mortgage with a 1.049 "factor rate" would be borrowing $100k and paying back $104,900 over 30 years.
    I wasn't saying they are equal on anything besides 12 months for Simple Interest loan compared to mca, since an apr in the first year is essentially the same thing https://www.calculatestuff.com/finan...nly-calculator

    And abfunders i know there are no 30 yr factor deals but you were comparing the two, so unless you compound a factor deal annually there isnt much of a comparison on a 30 yr mtg

  12. #12
    There are funders using SmartBox? I've only seen them on true loan products.

  13. #13
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    some funders are setup as a loan vs mca. anyone using a charter bank are doing loans not mcas

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    Veteran Reputation points: 134971 Chambo's Avatar
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    Quote Originally Posted by Mynameisbob View Post
    Great point. I believe as long as you’re disclosing the APR to the merchant they can’t really sue. I’m not a lawyer just my thoughts.
    If you are disclosing APR, then you are categorized as a loan and can get sued for usury.

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    Quote Originally Posted by Chambo View Post
    If you are disclosing APR, then you are categorized as a loan and can get sued for usury.
    Thank you! That's my point, either its a LOAN or an MCA! You CANNOT have it both ways.

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    Why the name Smart Box ? just seems like the name is a marketing Gimick and for certain things in life branding and gimmicks dont have a place.
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  17. #17
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    these are structured as loans not mcas they have PG's and are actually funded by the charter banks. the lender is the bank, so, it doesn't have the same usury guidelines to follow as just being a licensed lender

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