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  1. #1
    Senior Member Reputation points: 8612 helpinghand's Avatar
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    The Future of MCA

    I'm sure a lot of you have been contemplating my thoughts here...

    We're seeing lots of lenders come back online. Many have tightened their UW belt to the point they've gone up a notch on the A-D paper scale. This is going to leave so many high-risk businesses without the ability to get capital. Pretty sure we can all agree to that.

    Who is going to fill the void? New, aggressive funders?
    What regulations are coming down the pike that can hurt the industry?
    Can existing MCA firms compete in a zero interest rate environment? Money is so cheap.
    Square added 76,000 merchants to its portfolio via PPP origination. How do smaller firms compete for leads when the big firms have that stranglehold on the market?

    I'm a big fan of the concept of Variant Perception set forth by Michael Steinhardt. Variant perception, according to Steinhardt, is "holding a well-founded view that was meaningfully different than the market consensus."

    The consensus is that things will return to "normal" (i.e. pre-COVID), albeit adjusted, more stringent UW guidelines. I just can't see it. I'm anticipating consolidation across the board, lower prices, thinner commissions, way fewer brokers and a much higher cost of customer acquisition. Also a rise in new funding that is asset based. The market shakeout is underway. Only the nimble brokers will survive and the lean lenders who don't lose sight of their UW guidelines (assuming both can source leads at a reasonable cost). Am I way off?


    What are your thoughts? Next 12, 18, 36 months? Is this tomato rotten or just getting ripe on the vine? I literally can cut it either way and would like to hear industry professionals' thoughts
    Hanna Kassis, LendingBuilder.com
    MCA & Business Loan Leads
    • Pay only if you fund a deal.
    • 3% commission or 20% Rev Share (ISOs)
    • Must be large and well established, otherwise pay-as-you-go, or pay upfront.

    Please email us at info at lendingbuilder.com for more.

  2. #2
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    This is exactly right. We were always headed this way but COVID and the recession sped the process up.

  3. #3
    Senior Member Reputation points: 4932 HFS's Avatar
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    stoicism and dial

  4. #4
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    Hanna, many good questions here...

    YES - many businesses, including high risk funders, will go out of business / consolidate / sell off their portfolio's. It's a buyers market. Go after those buyers.
    YES - leads, is going to be an uphill battle. I said this at the start of the pandemic SBA/PPP situation: this is a lead grab for large players thinking long term. The solution? Find a way to mine then maintain lead relationships. Long term is the name of the game. The days of stacking, wham bam thank you maam, low hanging fruit and high commissions is over.

    MCA firms will DEFINITELY be able to compete with 0 / low interest loans backed the government... YES - the pool is smaller... but the need is still great. You're going to have to "Blue Ocean Strategy" that one for yourself but the general question is: who will your business serve?

    New types of businesses will pop up due to our new realities. Many people want to support local (or I read this morning, black owned businesses). They all will need financing. Again, think LONG term. No need to earn 15 points on one deal.

    The second part is keeping the relationship alive. Why would a business owner stick with you over the next funder? Super broker? ISO?

    You need to add value to their business.

    I have recently been working with a program that you can offer your clients that:
    - Will Save them Money EVERY month on their merchant processing WITHOUT having to change anything or anyone (easy).
    - Cost them nothing to see how much money they can save. (free money back in their pocket!)
    - Cost them nothing every month out of pocket if they do not save anything that month. (keeps them saving money every month)
    - Earns you a residual commission every month (for up to 5 years).

    It will help them save money every month (and a reason to talk to them and keep the relationship going strong)...
    It will earn you a little something every month for the entire 5 years they are saving money....
    You will keep them in your pocket because you are adding value EVERY month.

    I am introducing a few super brokers and funders to the company offering this program as they are seeking to add on another 1 or 2 volume accounts.

    But yes, things will bounce back. And get stronger than before. It's the time to plan and execute - if you have not already.

    I'm available to discuss!

    Steven Ruiz
    Presto Prestamo, LLC
    MoreBottomLine.Com
    786-712-4900
    steven@prestoprestamo.com

  5. #5
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    "normal" what was it, and, what will it be. that is a philosophical debate among many. many agree that what was, will no longer be moving forward. Covid changed many aspects of our lives moving forward. add in the civil unrest and racial issues going on and it further shows you that what we all thought was normal, may have just been a mirage. a presidential election also has many on edge as the dems and gops duke it out over the next several months. 2020 has become a year of uncertainty with no guarantees moving forward, but, I think post election, we will have a better path for 2021. as for lending money, it will always be around. each funder will adjust it's UW as needed, contract as needed, expand as needed.

  6. #6
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    Quote Originally Posted by Steven_O View Post
    Hanna, many good questions here...

    YES - many businesses, including high risk funders, will go out of business / consolidate / sell off their portfolio's. It's a buyers market. Go after those buyers.
    Y]
    Do we know of any that officially went out of business yet?Did everyone really get killed when you look at a year? I can tell you that i syndicate on deals and obviously got "killed" the last 3 months . but when i ran number for my fiscal year of july to july i made money on syndicating.
    I feel for all industries including ours that anyone who was struggling before covid is done for now and anyone who was doing really well will weather the storm.

  7. #7
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    Quote Originally Posted by Michael I View Post
    Do we know of any that officially went out of business yet?Did everyone really get killed when you look at a year? I can tell you that i syndicate on deals and obviously got "killed" the last 3 months . but when i ran number for my fiscal year of july to july i made money on syndicating.
    I feel for all industries including ours that anyone who was struggling before covid is done for now and anyone who was doing really well will weather the storm.
    Some big name funders have yet to come back online... I doubt they will say "we're done" until they recoup as much of their portfolio as they can. Anyone who's been around knows the rampage of portfolio information being sold when CAN took a break back in 16-17 or when 1st Global went under. People are waiting to pillage those leads.

    And yeah, you can make money in bear and bulls, so I believe you did make money on your syndications... but, I'm sure they were much cleaner type of deals!

  8. #8
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    Quote Originally Posted by Steven_O View Post
    Some big name funders have yet to come back online... I doubt they will say "we're done" until they recoup as much of their portfolio as they can. Anyone who's been around knows the rampage of portfolio information being sold when CAN took a break back in 16-17 or when 1st Global went under. People are waiting to pillage those leads.

    And yeah, you can make money in bear and bulls, so I believe you did make money on your syndications... but, I'm sure they were much cleaner type of deals!
    has nothing to do with cleaner or not (proof is on deck) if you were running a high risk shop with a 1.35 buy rate and having a 5% default rate flipping the money 3- 4 times a year . than you will still be profitable even if all the money you had out during covid does not return.(based on fees)
    If you were running a 15-20% default rate before covid you were making some money and scraping by but chances are now you way in the hole and either need to find a new sucker to invest their money or say bye bye

  9. #9
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    a lot of business got their PPP money recently so they will say they are good and don't need anything....fast forward 6-8 months from now when all those businesses get audited and some have to start paying that money back on top of all their other expenses they will need money. Even now most businesses will not/can not be at 100% capacity that alone will keep their revenue low and if they did get PPP money that money is gone within first month or two the most. They still need money. Business will still need money and banks are still not lending. They will always be a market for mca in one way or another might be a smaller pool of lenders to send business too but they will adjust and lend.

  10. #10
    Quote Originally Posted by Sachip24 View Post
    a lot of business got their PPP money recently so they will say they are good and don't need anything....fast forward 6-8 months from now when all those businesses get audited and some have to start paying that money back on top of all their other expenses they will need money. Even now most businesses will not/can not be at 100% capacity that alone will keep their revenue low and if they did get PPP money that money is gone within first month or two the most. They still need money. Business will still need money and banks are still not lending. They will always be a market for mca in one way or another might be a smaller pool of lenders to send business too but they will adjust and lend.
    That^^^

  11. #11
    Quote Originally Posted by Sachip24 View Post
    a lot of business got their PPP money recently so they will say they are good and don't need anything....fast forward 6-8 months from now when all those businesses get audited and some have to start paying that money back on top of all their other expenses they will need money. Even now most businesses will not/can not be at 100% capacity that alone will keep their revenue low and if they did get PPP money that money is gone within first month or two the most. They still need money. Business will still need money and banks are still not lending. They will always be a market for mca in one way or another might be a smaller pool of lenders to send business too but they will adjust and lend.
    Agree with this as well.

    I believe as e-com business continue to thrive, and the economy vibrates, the mom and pop shops will need MORE capital to stay afloat, and this is our "Mr. Merchant". Once their 'credit lines' are maxed and their credit is going under, Bank's aren't going to touch that. So yea, you'll have square, amex, paypal and these guys with the A paper and the mca space with B/C/D but they'll have more regulation such as TILA disclosures, lending licensing, things like that.

    All in all there will ALWAYS be a sub-prime capital market but my firm belief is as people become more distant from human relationships, the MCA fintechs will heavily capitalize and the brokers will be dealing more within the 50k box with less upsell percentages.

    But big tech can't have 'em all and can't pivot as quickly. A nice percentage of the market will still need human underwriting, human tuned fraud detection and that fingertip feel that algorithms can't touch.
    Last edited by fundjax; 06-24-2020 at 12:10 PM. Reason: edit

  12. #12
    Senior Member Reputation points: 8612 helpinghand's Avatar
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    Quote Originally Posted by Sachip24 View Post
    a lot of business got their PPP money recently so they will say they are good and don't need anything....fast forward 6-8 months from now when all those businesses get audited and some have to start paying that money back on top of all their other expenses they will need money. Even now most businesses will not/can not be at 100% capacity that alone will keep their revenue low and if they did get PPP money that money is gone within first month or two the most. They still need money. Business will still need money and banks are still not lending. They will always be a market for mca in one way or another might be a smaller pool of lenders to send business too but they will adjust and lend.
    great point!
    Hanna Kassis, LendingBuilder.com
    MCA & Business Loan Leads
    • Pay only if you fund a deal.
    • 3% commission or 20% Rev Share (ISOs)
    • Must be large and well established, otherwise pay-as-you-go, or pay upfront.

    Please email us at info at lendingbuilder.com for more.

  13. #13
    Senior Member Reputation points: 8612 helpinghand's Avatar
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    Quote Originally Posted by Steven_O View Post
    Hanna, many good questions here...

    YES - many businesses, including high risk funders, will go out of business / consolidate / sell off their portfolio's. It's a buyers market. Go after those buyers.
    YES - leads, is going to be an uphill battle. I said this at the start of the pandemic SBA/PPP situation: this is a lead grab for large players thinking long term. The solution? Find a way to mine then maintain lead relationships. Long term is the name of the game. The days of stacking, wham bam thank you maam, low hanging fruit and high commissions is over.

    MCA firms will DEFINITELY be able to compete with 0 / low interest loans backed the government... YES - the pool is smaller... but the need is still great. You're going to have to "Blue Ocean Strategy" that one for yourself but the general question is: who will your business serve?

    New types of businesses will pop up due to our new realities. Many people want to support local (or I read this morning, black owned businesses). They all will need financing. Again, think LONG term. No need to earn 15 points on one deal.

    The second part is keeping the relationship alive. Why would a business owner stick with you over the next funder? Super broker? ISO?

    You need to add value to their business.
    Insightful, thank you
    Hanna Kassis, LendingBuilder.com
    MCA & Business Loan Leads
    • Pay only if you fund a deal.
    • 3% commission or 20% Rev Share (ISOs)
    • Must be large and well established, otherwise pay-as-you-go, or pay upfront.

    Please email us at info at lendingbuilder.com for more.

  14. #14
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    The need for capital will always be there,however You need to be able to adapt quickly to what ever the market is saying.Some went on vacation for 3 months and some made more money than ever on the ppp program.Add in the ppp loan i got and it was by far our best 3 months.

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