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  1. #1
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    Fundkite's new MCA product, thoughts?

    My rep Egor Gagarin got me on a video call with Fundkite yesterday pitching their new product. Seems to be a game changer when it comes to an MCA with the current COVID 19 landscape. From my understanding it acts similar to a Processing Split which they would underwrite the file under the new program guidelines. If the businesses are impacted in any way they would align their holdback percentage based on the businesses current revenue to prevent smothering a business when their revenue drops because of unforeseen circumstances that would occur due to COVID. Even though it has some similarities to reconciliation clauses, there seems to be a proactive approach and benefits for both the ISO and the merchant. One being that the merchant has peace of mind that they are not stuck with prior payment commitments when they are forced to close or limit the amount of customers they can do business with and for ISO's you are protecting your customer which leads to renewals.

    I would like to know your thoughts, My company provides an array of working capital options, our MCA book has been over 1M+ a month even through COVID. It seems to me if you can get them qualified through Fundkite , this actually may be one of the better MCA choices for certain papers. What are your thoughts?

  2. #2
    Member Reputation points: 3624 Fundkite Egor's Avatar
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    Thank you for the vote of confidence Roger,

    If anyone has any questions about our new product or any pre-existing ones please feel free to shoot me an email or give me a call.

    Happy Friday everyone!
    Egor Gagarin
    ISO Relations Rep, FundKite
    Direct: 929-443-3300 | Email: egor.g@fundkite.com
    Web: fundkite.com

  3. #3
    How does the reconciliation/split component work?

    Is it a monthly or weekly "true up", similar to what Pearl was try to do? Or?

  4. #4
    Member Reputation points: 3624 Fundkite Egor's Avatar
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    Quote Originally Posted by BB_Cooper View Post
    How does the reconciliation/split component work?

    Is it a monthly or weekly "true up", similar to what Pearl was try to do? Or?
    The default reconciliation is monthly but the merchant will have the option for either weekly or daily.
    Egor Gagarin
    ISO Relations Rep, FundKite
    Direct: 929-443-3300 | Email: egor.g@fundkite.com
    Web: fundkite.com

  5. #5
    Would you consider the merchant as a "slow pay" or in "default" while adjusting down their remit %? And would this affect their chances at renewal with you?

  6. #6
    Member Reputation points: 3624 Fundkite Egor's Avatar
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    Quote Originally Posted by gmarti29 View Post
    Would you consider the merchant as a "slow pay" or in "default" while adjusting down their remit %? And would this affect their chances at renewal with you?
    If the merchant needs to adjust percentage AFTER funding, it is considered lowering payments.

    However if the merchant continues payments and closes their balance with us we will consider a renewal.
    Egor Gagarin
    ISO Relations Rep, FundKite
    Direct: 929-443-3300 | Email: egor.g@fundkite.com
    Web: fundkite.com

  7. #7
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    Quote Originally Posted by Fundkite Egor View Post
    If the merchant needs to adjust percentage AFTER funding, it is considered lowering payments.

    However if the merchant continues payments and closes their balance with us we will consider a renewal.
    So Egor, the percentage stays the same, but the amounts can vary? Similar in many ways to a credit card split?

  8. #8
    how would you be able to split this daily or weekly? it sounds like the merchant will have to give Fundkite account authorization and then Fundkite will have to service this daily or weekly or will the bank automatically do that.

    I am asking because of the comparison to a CC split, which most times requires cooperation from processing companies.

  9. #9
    Member Reputation points: 3624 Fundkite Egor's Avatar
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    That's exactly why we're calling this new program ACH Split, the amount we pull depends entirely on the merchants deposits and performance during the reconciliation that was agreed up, day, week, or month.

    If you have any deals in the pipeline that this may help with feel free to give me a call or shoot me an email.
    Egor Gagarin
    ISO Relations Rep, FundKite
    Direct: 929-443-3300 | Email: egor.g@fundkite.com
    Web: fundkite.com

  10. #10
    Quote Originally Posted by Fundkite Egor View Post
    That's exactly why we're calling this new program ACH Split, the amount we pull depends entirely on the merchants deposits and performance during the reconciliation that was agreed up, day, week, or month.

    If you have any deals in the pipeline that this may help with feel free to give me a call or shoot me an email.
    that doesn't answer any of my questions, will the merchants have to switch bank accounts to one of your choosing?

  11. #11
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    Quote Originally Posted by FlexibleCapitalSolutions View Post
    that doesn't answer any of my questions, will the merchants have to switch bank accounts to one of your choosing?
    I am under the assumption that it does not require a lockbox or a switch of accounts. My impression is that it acts like a Split where it is taking a percentage of revenue, but does not have all the headaches of switching accounts. For example if the MCA was underwritten based on the revenue of 100K a month and hold back was 18%, then company revenue drops to 50K they will adjust the payment of 18% holdback on 50K.

    Can you please clarify this Egor?

  12. #12
    Quote Originally Posted by WCC_NYC View Post
    I am under the assumption that it does not require a lockbox or a switch of accounts. My impression is that it acts like a Split where it is taking a percentage of revenue, but does not have all the headaches of switching accounts. For example if the MCA was underwritten based on the revenue of 100K a month and hold back was 18%, then company revenue drops to 50K they will adjust the payment of 18% holdback on 50K.

    Can you please clarify this Egor?
    that sounds nice but it's not possible unless Fundkite has some sort of authority over the account, which would only happen if the bank signs off and approves it prior to funding, and even then they would need to login everyday and adjust it accordingly (or have some sort of software doing it)

    The only way this makes sense to me is with some sort of lockbox, not that there is anything wrong with that idea, but it is something we need to know before considering for our clients.

  13. #13
    Member Reputation points: 3624 Fundkite Egor's Avatar
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    Quote Originally Posted by FlexibleCapitalSolutions View Post
    that sounds nice but it's not possible unless Fundkite has some sort of authority over the account, which would only happen if the bank signs off and approves it prior to funding, and even then they would need to login everyday and adjust it accordingly (or have some sort of software doing it)

    The only way this makes sense to me is with some sort of lockbox, not that there is anything wrong with that idea, but it is something we need to know before considering for our clients.
    I was replying to Micah with the previous post, Roger is correct.

    We're fully prepared to service merchants on monthly, weekly, or daily reconciliation without needing to switch accounts.

    If you'd like any further information please shoot me an email.
    Egor Gagarin
    ISO Relations Rep, FundKite
    Direct: 929-443-3300 | Email: egor.g@fundkite.com
    Web: fundkite.com

  14. #14
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    Quote Originally Posted by FlexibleCapitalSolutions View Post
    that sounds nice but it's not possible unless Fundkite has some sort of authority over the account, which would only happen if the bank signs off and approves it prior to funding, and even then they would need to login everyday and adjust it accordingly (or have some sort of software doing it)

    The only way this makes sense to me is with some sort of lockbox, not that there is anything wrong with that idea, but it is something we need to know before considering for our clients.
    For those that have been in the industry long enough, when all we had were CC splits in 2007 - 2008, then some ach products came out in 2009 - 2010, they were set up exactly like this. Merchant signs up via decision logic, or provides view only access to their bank account or any other type of access for the funder to see daily deposits, then funder debits the agreed upon % based off of the daily rev, just like a CC split but all rev is included.

    We tried this back in 2008, it was a lot of work (manually) at the time but I am sure there are algorithms and software available now that could make this a lot easier.

    This method also keeps it as a true MCA, as you are debiting based off of % of revenue and not a set daily payment which most look at like a loan rather than MCA.

    If Fundkite has the system to handle this, then good for them. I would think weekly and Monthly repayments would be much easier to handle but daily can be done.

  15. #15
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    Quote Originally Posted by MCA View Post
    For those that have been in the industry long enough, when all we had were CC splits in 2007 - 2008, then some ach products came out in 2009 - 2010, they were set up exactly like this. Merchant signs up via decision logic, or provides view only access to their bank account or any other type of access for the funder to see daily deposits, then funder debits the agreed upon % based off of the daily rev, just like a CC split but all rev is included.
    Decision Logic or Plaid
    There's not a dearth of solutions like that in the market today that just weren't there 13 years ago.
    Also, I imagine that investors liked having the set daily payback to know that 6 months means 6 months.

  16. #16
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    Quote Originally Posted by FlexibleCapitalSolutions View Post
    that sounds nice but it's not possible unless Fundkite has some sort of authority over the account, which would only happen if the bank signs off and approves it prior to funding, and even then they would need to login everyday and adjust it accordingly (or have some sort of software doing it)

    The only way this makes sense to me is with some sort of lockbox, not that there is anything wrong with that idea, but it is something we need to know before considering for our clients.
    Our company uses Decision Logic to create a better experience for our merchants when getting the month to date and other benefits we use regarding data and analytics. Decision Logic does allow a refresh daily of the account up to 90 days in some instances.

    We have seen Plaid being used by many of the Fintech companies because it provides a more in depth history. But these are the only two I know that truly work when having access to an account.

  17. #17
    Quote Originally Posted by MCA View Post
    For those that have been in the industry long enough, when all we had were CC splits in 2007 - 2008, then some ach products came out in 2009 - 2010, they were set up exactly like this. Merchant signs up via decision logic, or provides view only access to their bank account or any other type of access for the funder to see daily deposits, then funder debits the agreed upon % based off of the daily rev, just like a CC split but all rev is included.

    We tried this back in 2008, it was a lot of work (manually) at the time but I am sure there are algorithms and software available now that could make this a lot easier.

    This method also keeps it as a true MCA, as you are debiting based off of % of revenue and not a set daily payment which most look at like a loan rather than MCA.

    If Fundkite has the system to handle this, then good for them. I would think weekly and Monthly repayments would be much easier to handle but daily can be done.
    I agree if they can handle this type of labor intensive task, good for them, sounds like a nightmare to me logistically speaking. but then again my name is not Alex Shvarts

  18. #18
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    Thank you for the vote of confidence. We have built an entire process, technology, and systems around this to ensure it is quite seamless for the merchant and our team.

  19. #19
    Quote Originally Posted by abfunders View Post
    Decision Logic or Plaid
    There's not a dearth of solutions like that in the market today that just weren't there 13 years ago.
    Also, I imagine that investors liked having the set daily payback to know that 6 months means 6 months.

    Good point Micah. Do MCA investors or many of the merchants want fluctuating daily draws?

  20. #20
    Member Reputation points: 3624 Fundkite Egor's Avatar
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    Quote Originally Posted by BB_Cooper View Post
    Good point Micah. Do MCA investors or many of the merchants want fluctuating daily draws?
    Speaking from personal experience as an ISO rep at Fundkite, majority of our merchants are happy to work with our reconciliation and believe its beneficial to their business cash flow. As opposed to a fixed payment in which the merchant may worry about making payments when business is down.

    Reconciliation allows merchants payments to be flexible according to their sales, so yes, a 6 month term could end up being 4 months or 8 and we're fully prepared for either scenario.
    Egor Gagarin
    ISO Relations Rep, FundKite
    Direct: 929-443-3300 | Email: egor.g@fundkite.com
    Web: fundkite.com

  21. #21
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    Quote Originally Posted by FlexibleCapitalSolutions View Post
    how would you be able to split this daily or weekly? it sounds like the merchant will have to give Fundkite account authorization and then Fundkite will have to service this daily or weekly or will the bank automatically do that.

    I am asking because of the comparison to a CC split, which most times requires cooperation from processing companies.
    A credit card split only requires a merchant Authorize a DDA Change - it may take a few days for the processor to make the change, which will slow down the
    initial funding to the merchant.
    Dave Lambert, Business Development
    dave@fcbankcard.com
    Merchant Services Consultant
    High Risk Merchant Payment Solutions
    SBA 7(a) Loans & Short-Term Funding
    T/VM: 727-291-7890
    Office: 727-233-1111
    Skype: fc-financial

  22. #22
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    IMO - This product will go a long ways to reducing-eliminating defaults
    Dave Lambert, Business Development
    dave@fcbankcard.com
    Merchant Services Consultant
    High Risk Merchant Payment Solutions
    SBA 7(a) Loans & Short-Term Funding
    T/VM: 727-291-7890
    Office: 727-233-1111
    Skype: fc-financial

  23. #23
    Member Reputation points: 3624 Fundkite Egor's Avatar
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    Quote Originally Posted by Yankeeman07 View Post
    A credit card split only requires a merchant Authorize a DDA Change - it may take a few days for the processor to make the change, which will slow down the
    initial funding to the merchant.
    Additionally, when comparing a CC split to our ACH split, we don't need to see months of credit card statements, no need to set up a lockbox, no need for the merchant to change their processor, and funding is same or next day.
    Egor Gagarin
    ISO Relations Rep, FundKite
    Direct: 929-443-3300 | Email: egor.g@fundkite.com
    Web: fundkite.com

  24. #24
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    My credit card split - we do not require any change to processor - our funding is the same day
    as soon as funding call is completed.

    A few differences between the products - as you stated in a previous post - you are returning to the roots of the MCA Business.
    It should be well accepted by merchants.
    Dave Lambert, Business Development
    dave@fcbankcard.com
    Merchant Services Consultant
    High Risk Merchant Payment Solutions
    SBA 7(a) Loans & Short-Term Funding
    T/VM: 727-291-7890
    Office: 727-233-1111
    Skype: fc-financial

  25. #25
    This seems like an absolute nightmare from a logistics standpoint. You would need countless staff to do a daily reconciliation and then you're getting banged out with even higher same-day ACH fees. On top of that, once a merchant realizes that they simply do not have to make a deposit in order to not pay or pay an extremely reduced payment, the abuse will run rampant.

    On days that they make large deposits, and you come in and take the specified % they're going to throw an absolute fit when it's multiples of what they thought they had to pay.

    I get the idea, and I'm sure merchants will when being sold, but logistically, it just doesn't make any sense IMO.

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