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  1. #1
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    Question For Funders

    Over the last few months, i'd estimate easily half of my new apps in from merchants who had previous advances, have had their payments lowered. A lot of these are very strong businesses that either were told by the funder they could lower the payments because of COVID (even though the bank statements show they didnt need to) or businesses that because of the shut down in April had to temporarily lower payements but that was months ago and their businesses have been back on track for a while already.

    My question is, why are funders treating these deals the same as deals froma year ago that had payments lowered. Its not the same at all. Im having merchants that had great 12-18 month deals in the past, struggling to get anything besides the short term 100 day 1.49's. These businesses are more or less in the same financial situations they were a year ago, but because they lowered payments during the shutdowns, they cant get approved for anything normal. Why are funders not adjusting their guidelines for these situations? When i explain to the merchants why they arent getting the approvals they've come to expect most are dumbfounded.

    I'd love to hear from some funders the thought process over here.

  2. #2
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    I can see a decline or short term offer if the merchant had lowered payments for awhile or are currently still on lowered but not if they lowered in April but have been on normal payments since

  3. #3
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    Quote Originally Posted by pcfunder View Post
    I can see a decline or short term offer if the merchant had lowered payments for awhile or are currently still on lowered but not if they lowered in April but have been on normal payments since
    I hear that, but a lot of them never bothered to get it raised backvbecause why would they unless they have to. These advances are expensive enough as it is. If youre told your payments can be cut in half, no one would vollunteer to have ir raised back.

  4. #4
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    Quote Originally Posted by MCN View Post
    I hear that, but a lot of them never bothered to get it raised backvbecause why would they unless they have to. These advances are expensive enough as it is. If youre told your payments can be cut in half, no one would vollunteer to have ir raised back.
    If they don't take paying back debt serious why should we give them more debt?

  5. #5
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    huge difference if they followed contract and used the specified percentage clause or had volume double and half payments because why not .
    first case should not even be a question, they followed contract. the second case is where i can understand both sides

  6. #6
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    Quote Originally Posted by pcfunder View Post
    If they don't take paying back debt serious why should we give them more debt?
    Because they do take paying it off seriously and have never missed payments. They also would gladly have the payments go back to normal if the Funder asks.Most dont even think of it cause why should they.

    Listen im not talking about garbage paper over here, im talking about genuine A paper, people that have great businesses that pay their debts.

  7. #7
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    Do funders even have the guts to ask the merchants to re-up?

  8. #8
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    I mean a TON of businesses had no revenue for a month so they had to have payments lowered. If you want to blame them for not calling back the funder and having them make the payments go back to normal by all means blame them. But dont kid yourself and view these merchants the same as ones from a year ago that lowered payments. Theres a major distinction over here.

  9. #9
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    what funding companies are leaving merchants on lowered payments indefinitely?

  10. #10
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    Quote Originally Posted by pcfunder View Post
    what funding companies are leaving merchants on lowered payments indefinitely?
    pcfunder, have you ever heard about a company requesting a true-up after lowering payments?
    If it's left to the merchant, they'd think that the lowering of payments was a given, and will continue until paid off.
    Remember Winning? He got his PayPal extended to 10 years, and looks at it like the best thing since sliced bread. It might be, but who here told him that "you shouldn't do that"?
    Do traditional banks that restructure loans even request that?
    I'm sorry, but to blame the merchant is unfair.

  11. #11
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    Quote Originally Posted by abfunders View Post
    pcfunder, have you ever heard about a company requesting a true-up after lowering payments?
    If it's left to the merchant, they'd think that the lowering of payments was a given, and will continue until paid off.
    Remember Winning? He got his PayPal extended to 10 years, and looks at it like the best thing since sliced bread. It might be, but who here told him that "you shouldn't do that"?
    Do traditional banks that restructure loans even request that?
    I'm sorry, but to blame the merchant is unfair.
    I agree with all of that but if you want to continue to stay on a restructured deal, your going to have to deal with the consequences. One of those consequences just happens to be that it will be hard to get another position. I'm not blaming a merchant for wanting to stay on lowered payments but I don't understand why I should give them more money while they are on a restructured deal? The whole point of a 2nd position is based on being in good standing with the 1st position. If a merchant has a 1st position funding company calling them asking when they can get back on normal payments and all they are doing is lying about how they can't afford to be on normal payments and then they ask a 2nd position company to ADD another daily payment, it just makes no sense.

    too many games, too much risk especially with a pandemic going on, and I think the most important cause of a decline would be that the merchant is starting to learn how to swindle a funding company without having a default put against them. They can easily call me 2 weeks after I fund and say "hey man coronavirus just killed me again can I lower payments?" and then my 100 day deal that you mentioned above ends up turning into a 200 day deal. I'd rather not have my 200 day deal turn into a 300 day deal once they restructure with me.

  12. #12
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    Quote Originally Posted by pcfunder View Post
    I agree with all of that but if you want to continue to stay on a restructured deal, your going to have to deal with the consequences. One of those consequences just happens to be that it will be hard to get another position. I'm not blaming a merchant for wanting to stay on lowered payments but I don't understand why I should give them more money while they are on a restructured deal? The whole point of a 2nd position is based on being in good standing with the 1st position. If a merchant has a 1st position funding company calling them asking when they can get back on normal payments and all they are doing is lying about how they can't afford to be on normal payments and then they ask a 2nd position company to ADD another daily payment, it just makes no sense.

    too many games, too much risk especially with a pandemic going on, and I think the most important cause of a decline would be that the merchant is starting to learn how to swindle a funding company without having a default put against them. They can easily call me 2 weeks after I fund and say "hey man coronavirus just killed me again can I lower payments?" and then my 100 day deal that you mentioned above ends up turning into a 200 day deal. I'd rather not have my 200 day deal turn into a 300 day deal once they restructure with me.
    Agree 100%

  13. #13
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    Quote Originally Posted by pcfunder View Post
    If they don't take paying back debt serious why should we give them more debt?
    Possibly because its NOT DEBT!

  14. #14
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    Quote Originally Posted by pcfunder View Post
    I can see a decline or short term offer if the merchant had lowered payments for awhile or are currently still on lowered but not if they lowered in April but have been on normal payments since
    Agreed

  15. #15
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    So there isn’t really a black and white answer for this one, it would depend on many many factors.

    Seeing a file with lowered payments nowadays (mid/post Covid) would warrant many questions a funder needs to look at.

    When were the payments lowered?
    How much were they lowered?
    Who initiated the lowered payments?
    Are they still on lowered?
    Did they already take new positions while they were on lowered?

    Another important thing to look at is whom they lowered payments with, some shops potentially would push to lower payments for their merchants (meaning they'd call the merchant and offer lower payments) while some other shops would do everything they can to not lower payments, another thing to keep in mind is did the merchant actually need lower payments? (Based on rev and balances)

    In other words, every funder needs to look at this on a case by case basis, depending on the file.

    That said, most funders mid/post Covid would fund merchants that have been on lowered due to Covid, a lot would fund files that are still on lowered.
    Last edited by ClearFund; 10-15-2020 at 10:10 AM.
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  16. #16
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    Quote Originally Posted by MCN View Post
    Over the last few months, i'd estimate easily half of my new apps in from merchants who had previous advances, have had their payments lowered. A lot of these are very strong businesses that either were told by the funder they could lower the payments because of COVID (even though the bank statements show they didnt need to) or businesses that because of the shut down in April had to temporarily lower payements but that was months ago and their businesses have been back on track for a while already.

    My question is, why are funders treating these deals the same as deals froma year ago that had payments lowered. Its not the same at all. Im having merchants that had great 12-18 month deals in the past, struggling to get anything besides the short term 100 day 1.49's. These businesses are more or less in the same financial situations they were a year ago, but because they lowered payments during the shutdowns, they cant get approved for anything normal. Why are funders not adjusting their guidelines for these situations? When i explain to the merchants why they arent getting the approvals they've come to expect most are dumbfounded.

    I'd love to hear from some funders the thought process over here.
    I havent come across anyone other than Paypal who actually lowered merchants payments without the merchant's request. Have you?
    Regarding how Funders are viewing these types of deals, I think PCFUNDER was spot on.

    At this time, RDM will consider the application if the merchant has been on a contracted payment for 4 weeks with all open positions, at which point we will underwrite the file as though they have not lowered at all. Feel free to reach out if you are not signed up.
    Ian Goldberg
    Chief Risk Officer
    FinTap
    777 Passaic Ave, Suite 375
    Clifton, NJ 07012
    Phone: 973-685-2927
    ian@fintap.com
    www.fintap.com

  17. #17
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    Quote Originally Posted by IanG View Post
    I havent come across anyone other than Paypal who actually lowered merchants payments without the merchant's request. Have you?
    Regarding how Funders are viewing these types of deals, I think PCFUNDER was spot on.

    At this time, RDM will consider the application if the merchant has been on a contracted payment for 4 weeks with all open positions, at which point we will underwrite the file as though they have not lowered at all. Feel free to reach out if you are not signed up.
    first off you must not see a lot of paper because tons of merchants got calls from funders letting them know they can use specefied percentage and lower payments.
    Curious how rdm gets around the legal aspect of interest rates if you consider specified percentage as a default?

  18. #18
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    Quote Originally Posted by Michael I View Post
    first off you must not see a lot of paper because tons of merchants got calls from funders letting them know they can use specefied percentage and lower payments.
    Curious how rdm gets around the legal aspect of interest rates if you consider specified percentage as a default?
    Hey Michael,

    RDM also sent out notice to its merchants regarding hardship, however I was referring to funders who literally just lowered the payment for all or part of their portfolio once Covid hit. Regarding your question, can you clarify? To my knowledge, there is nothing illegal about declining to fund a file for any reason. But I don't fully understand what your asking.
    Ian Goldberg
    Chief Risk Officer
    FinTap
    777 Passaic Ave, Suite 375
    Clifton, NJ 07012
    Phone: 973-685-2927
    ian@fintap.com
    www.fintap.com

  19. #19
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    I got busy and missed this thread.. But the things you all speak of, I did think about when trying to understand why Paypal would offer me such as extended term and how it could negatively effect me in the event I need more capital later. But that could be part of Paypal's long term plan as well... To give me what amounts to a Scarlet Letter.

    Below originally posted at https://dailyfunder.com/showthread.p...l=1#post145571

    Quote Originally Posted by Winning View Post
    So I really hate not being able to understand how a business is able to do what they are doing. And the deal I have reworked with Paypal, I can't wrap my head around how they are able to afford to do such things.... Maybe they are looking at this 10 year deal as a loss leader, with the hopes of making more profitable future deals with me...???

    In essence, they have embedded in me, a 10 year long homing beacon... anchor... hook..., or what ever you want to call it, for 1st position..

    Perhaps, they are hoping that in the future, when business revenue pickups to pre covid levels, I will need more capital. At which point I will reach back out to Paypal 1st since they have their "hooks" (1st Position) in me for at least 10 years.. At that point they will then request new banking info, to then present me new deals that gives me additional capital, and at that time readdresses the 10 year deal.. Maybe they wrap the 1st 10 year deal into some sort of new package.. Or perhaps they leave the 10 year deal alone, but create some 2nd package with a more profitable return... Where as they become a 2nd position to them self.. Hmmmmm...

    Perhaps the monthly Paypal transaction that will show up on my statements for the next 10 years, could also be looked at as a Scarlet letter to other MCA companies. How would you all here handle getting a merchant that is looking for a 2nd position then seeing that they have a monthly Loanbuilders draft. You ask the merchant about it, and they explain this 10 year deal with Paypal. Will you be able to absorb that 10 year 1st position with out costing the merchant a huge amount of money? Or do you just settle for being a 2nd position? If you do decide to come in as a 2nd, most likely the numbers you are going to present to the merchant are so far out of line with what the merchant has gotten use to when dealing with Paypal, the merchant will probably call up Paypal and find out if they can give more money as well and what would be their cost. That then opens the door for Paypal to come in and secure a new more profitable deal for them, but way cheaper than the deal the other MCA was presenting... Looks like all roads lead back to Paypal... for at least 10 years....

    So I guess the story continues...

    Perhaps in a year, or a few years when I cross that bridge I will know, and of course update you all here....

  20. #20
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    Quote Originally Posted by pcfunder View Post
    If they don't take paying back debt serious why should we give them more debt?
    Could you clarify this statement?

    When a merchant does a cash advance is it Debt that the merchant has taken on, or did the Merchant sell a future receivable that is not guaranteed to actually be received? Sort of like a partnership... If I make money, you (MCA Company) make money. If I don't make money, you (MCA Company) don't make money. Like we are all in this together, just one big happy family.. This is how Paypal has made me feel during this entire ordeal. Which in turn has me made me a Paypal Disciple (stock holder).
    Last edited by Winning; 12-22-2020 at 11:09 AM.

  21. #21
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    Quote Originally Posted by Winning View Post
    Could you clarify this statement?

    When a merchant does a cash advance is it Debt that the merchant has taken on, or did the Merchant sell a future receivable that is not guaranteed to actually be received? Sort of like a partnership... If I make money, you (MCA Company) make money. If I don't make money, you (MCA Company) don't make money. Like we are all in this together, just one big happy family.. This is how Paypal has made me feel during this entire ordeal. Which in turn has me made me a Paypal Disciple (stock holder).
    You are absolutely right. The problem is too many "funders" act like "Lenders". A cash advance is a partenership it is NOT a loan.

  22. #22
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    Quote Originally Posted by MCN View Post
    You are absolutely right. The problem is too many "funders" act like "Lenders". A cash advance is a partenership it is NOT a loan.
    Thanks, but I'm not trying to be right. Just want to make sure I have a clear understanding of what was explained to me when I created a thread about defaulting on a MCA's at
    https://dailyfunder.com/showthread.p...l=1#post139782

    Would love to understand PCfunders line of thinking when he posted the debt comment.
    Last edited by Winning; 12-22-2020 at 11:58 AM.

  23. #23
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    Quote Originally Posted by Winning View Post
    Thanks, but I'm not trying to be right. Just want to make sure I have a clear understanding of what was explained to me when I created a thread about defaulting on a MCA's at
    https://dailyfunder.com/showthread.p...l=1#post139782

    Would love to understand PCfunders line of thinking when he posted the debt comment.
    what did I say about debt? Maybe im going crazy but I can't find anything

  24. #24
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    Quote Originally Posted by pcfunder View Post
    what did I say about debt? Maybe im going crazy but I can't find anything
    Post #4 in this thread.
    https://dailyfunder.com/showthread.p...l=1#post146203

  25. #25
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    oohh

    MCN was saying that a lot of these merchants who lowered payments didn't have to they just did it because the funding company was offering lowered payments to all merchants. Or they lowered in April because they had to but their business went back to normal and they decided to stay on lowered payments because they were able to get away with it.

    I was saying that these merchants are asking to take on more cash advance debt by seeking a 2nd or 3rd position when it appears they aren't taking their current cash advance debt serious by getting back on normal payments when their business can handle it.

    In retrospect, I can understand why some merchants would want to stay on lowered payments as long as the funding company doesn't declare a default but coming from someone who has been working with direct funders for a few years now, funding companies deal with a lotttttttttttttttttttttttttttttttttttttttttttttttt ttttttttttttttttttttttttttttttttttttttttttttt of lies and games that both brokers and merchants play. After dealing with thousands of deals and plenty of defaults, its pretty clear as day that merchants will say anything to get a deal funded and brokers will do anything to get a deal funded. Take all of the "normal" risk that goes into a cash advance and add on top a merchant who lowered payments from a cash advance for 9 months even though their business is back to normal and they are seeking more money, its pretty clear that no one in their right mind should want anything to do with this deal. Save these type of deals for the funders who are desperate. You also have to take into consideration that the merchants cash flow is increased due to the payments being lowered, yet they are still seeking expensive capital.

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