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05-25-2021, 01:16 AM #1
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Newbie Underwriting
Hi all!
I'm currently in talks with a company that wants to hire me to run the underwriting department (eventually)
I am doing my own due diligence into exactly what it really takes to underwrite MCA deals.
Would greatly appreciate any tips or anything specific to be looking out for or in general anything from past experiences that can help me jump right into things.
TIA!
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05-25-2021, 10:35 AM #2
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05-25-2021, 10:41 AM #3
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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
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05-25-2021, 10:45 AM #4
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Steven Hunter! He's always helpful.
https://dailyfunder.com/showthread.p...A-Underwriting
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05-25-2021, 10:47 AM #5
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You've never done any underwriting and they want you to run their company? The underwriting department is the most important part of an MCA funder. Bad underwriters lose money and good underwriters make money, it's as simple as that. There are many scenarios where you make a mistake and a deal goes default right away, and the company loses many tens of thousands of dollars.
First step I would take if I were you would be to get some experience as a junior underwriter if possible. MCA underwriting is really a niche skill and there are not a lot of resources out there to educate oneself without digging into it file after file. Make sure you learn how to price deals, fraudulent scenarios to look out for, signs of a an impending default, final underwriting, etc etc.
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05-25-2021, 01:07 PM #6
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05-25-2021, 02:09 PM #7
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I have downtime, so here are some rambling thoughts:
1) Try to get an understanding of the entire company. Get to know the different brokers, ISO reps, collections department, accounting. You should know the whole picture. Understand the file from start to finish.
2) Stay on top of default accounts. Review every account that goes default and see if there was something you missed. If not, check to see if it is a pattern. For example, if all of a sudden a disproportionate amount of Subway restaurants go default, you can factor that into your initial underwriting. Your underwriting should constantly evolve and improve.
3)Use the give and take with brokers effectively. If a broker needs a little room on the deal to get it done, it's usually ok. You need to build a relationship with the brokers, or at least your ISO reps do. Either way learn the types of files each broker submits and underwrite accordingly. You need to get their best files and they need to be leveraging their relationship with the merchant to help you in collections.
4) Pricing an offer is important, however you'll find the best underwriters save defaults during final underwriting. Only deny a file in final underwriting if something changed. For example, they got additional funding, revenue is way down, account is negative all of a sudden. On the other hand, if you approved a deal with a lot of negative days (for example) and you deny it in final underwriting for having negative days, you're going to have a problem with the broker.
5) You can underwrite a file "perfectly" and it can still go default. This is why the collections department is so important. A significant percentage of profit is made on the back end from this continuous stream of income.
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05-25-2021, 03:29 PM #8
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05-25-2021, 03:31 PM #9
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05-26-2021, 12:17 PM #10
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If you can't find anything online about the business owner, price it way higher or DNF (do not fund).
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05-26-2021, 04:34 PM #11
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