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07-01-2020, 03:38 PM #1
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What is the default rate for a high risk funder?
I'm curious what the default rates are for the very high risk funders like yellowstone, mantis, last chance, etc... and if it is high, are these companies ok with it because they have great collections systems?
Last edited by pcfunder; 07-02-2020 at 09:00 AM. Reason: typo
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07-01-2020, 03:54 PM #2
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07-01-2020, 04:00 PM #3
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As far as i understood it goes based on what they lose to define their default rate after collections ,they will all claim 8%. but i dont buy it
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07-01-2020, 04:02 PM #4
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07-01-2020, 04:04 PM #5
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07-01-2020, 04:24 PM #6
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Default % across the industry is mostly a joke metric since its hard to define what actually is a default. Is the merchant paying $1 a day, $1 a month, $1 whenever they feel like? Is a funder just suspending payments for extended periods of time because its not even worth it to hand over to legal? Tons of ways to keep a default off the books.
When I was with a high risk funding company my default % sat at around 12%. Default as in COJ filed/Handed over to collections.
The other underwriters I worked with all had 18-20~% default rates.
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High risk funding is mostly gambling money. If you are coming behind a factor or senior liens ahead your % of collection is going to be terrible. The profitable companies are the ones who also own their collection companies(so they collect their RTR + Legal fees ).
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07-01-2020, 04:30 PM #7
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07-01-2020, 08:09 PM #8
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If the default rate was PRE Collections than it would be an extremely high number. I believe the default rate is and should be calculated POST collections because that is the actual rate of deals that are fully tapped out and where the money is simply unsalvageable.
As I always tell people, when someone defaults on a deal, all I can do is call, text, and email. Collections has their ways of ensuring people payback (Via Freezes, UCC and Leins, etc). Once they are out of options than its really a default.EPIC ADVANCE
Mark@epic-advance.com
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07-01-2020, 08:13 PM #9
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I have definitely heard this trick before. I believe this is a way to trick investors into seeing that there are less defaulted deals and a lower default percentage. Some funders may claim that if the merchant is paying $1 a day or $1 a month than its not considered a default then that really boosts the look to investors.
But let's call a spade a spade, no funder wants to sit on a deal and get $1 a day or $1 a month. They are simply lying to themselves if they don't consider that a default.EPIC ADVANCE
Mark@epic-advance.com
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