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  1. #1
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    the problem with saying the word LOAN?

    I never understood the reason you cant use the word "LOAN" when working with a client any of the veterans on DF care to elaborate why

  2. #2
    Senior Member Reputation points: 66298 Olderguy's Avatar
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    Because MCA isn't a loan...it's an advance against receivables. Think Pawn Shop....when you pawn something, it's an advance against the asset which can be retrieved back when the advance is paid back. It isn't a loan that's paid back. it's an advance against value due.
    Last edited by Olderguy; 12-02-2021 at 09:24 AM.
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    @ 24 hour funding working capital loans
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  3. #3
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    Quote Originally Posted by Olderguy View Post
    because MCA isn't a loan...it's an advance against receivables.
    Yes that i understand


    i thought its illegal to use the word loan because if you categorize it as a loan any interest charged over a certain percentage would be illegal

    which leads me to my next question how does a company like on deck use the word loan? (no beef with ondeck great company)

  4. #4
    Senior Member Reputation points: 66298 Olderguy's Avatar
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    Quote Originally Posted by BROKER TIME View Post
    Yes that i understand


    i thought its illegal to use the word loan because if you categorize it as a loan any interest charged over a certain percentage would be illegal

    which leads me to my next question how does a company like on deck use the word loan? (no beef with ondeck great company)
    Because a term loan isn't an MCA advance.
    Steve Benjamin
    Professional Business Loans

    1012 Contessa
    Irvine, CA 92620
    steveprobiz@gmail.com
    https://probizloans.net/
    Broker, Underwriter, general business loan expert
    949.228.1050


    @ 24 hour funding working capital loans
    @ Term loans from 3 years to 10 years at 9.5% and up
    @ Equipment financing up to 7 years
    @ Property loans - Hard Money and traditional - Primary, Investment, commercial, land, fix and flip, construction.
    @ SBA loans - 7A and 504.
    @ Private money equity and debt for major investments
    @ Personal Loans up to gross income from personal tax return.

  5. #5
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    Quote Originally Posted by Olderguy View Post
    Because a term loan isn't an MCA advance.
    got ya so I guess I'm a bit confused by what defines it as it a term loan
    if you can shed some light that would be greatly appreciated

  6. #6
    A forum user Reputation points: 2147483647 Sean Cash's Avatar
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    Quote Originally Posted by BROKER TIME View Post
    Yes that i understand


    i thought its illegal to use the word loan because if you categorize it as a loan any interest charged over a certain percentage would be illegal

    which leads me to my next question how does a company like on deck use the word loan? (no beef with ondeck great company)
    The primary system that allows lenders to bypass state interest rate caps is to partner with a state or federally chartered bank. Banks are exempt from complying with the interest rate caps of states. Often times you will notice that it is not "the lender" as you know them making the loan itself, but rather the bank they are partnered with. Afterwards the bank can sell the loan to the lender or use the lender to fully service the loan on their behalf. Here's me talking about it: https://debanked.com/tv/?v=532324556

    It is okay to use the word on loan contracts. In fact, if it really is a loan, that is the term you should definitely use. You should read every contract you present to a merchant in full so that you know exactly what it is you are selling. And if it is a loan, you need to know what makes the company legally eligible to offer them. Some states require a lending license. If the lender demurs on explaining to you as the broker how they are legally able to make loans, do not work with them.

  7. #7
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    Quote Originally Posted by BROKER TIME View Post
    Yes that i understand


    i thought its illegal to use the word loan because if you categorize it as a loan any interest charged over a certain percentage would be illegal

    which leads me to my next question how does a company like on deck use the word loan? (no beef with ondeck great company)

    On Decks funding (loans) are bank originated - The average rate for term loans is 54.96% APR. Averages are based on loans originated in the quarter
    The alleged benefit is a longer term (2 years) vs. a MCA is generally a much shorter term (typically less than 6 months - 120 payments or less)

    https://www.ondeck.com/short-term-loans
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    Office: 727-233-1111
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  8. #8
    Senior Member Reputation points: 66298 Olderguy's Avatar
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    Quote Originally Posted by BROKER TIME View Post
    got ya so I guess I'm a bit confused by what defines it as it a term loan
    if you can shed some light that would be greatly appreciated
    Term loan is a specific interest rate and payment over a specific term.
    MCA loan can be drawn from credit card deposits as a percentage of revenue so the payment is variable depending on revenue for the day.
    Steve Benjamin
    Professional Business Loans

    1012 Contessa
    Irvine, CA 92620
    steveprobiz@gmail.com
    https://probizloans.net/
    Broker, Underwriter, general business loan expert
    949.228.1050


    @ 24 hour funding working capital loans
    @ Term loans from 3 years to 10 years at 9.5% and up
    @ Equipment financing up to 7 years
    @ Property loans - Hard Money and traditional - Primary, Investment, commercial, land, fix and flip, construction.
    @ SBA loans - 7A and 504.
    @ Private money equity and debt for major investments
    @ Personal Loans up to gross income from personal tax return.

  9. #9
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    Quote Originally Posted by Olderguy View Post
    Term loan is a specific interest rate and payment over a specific term.
    MCA loan can be drawn from credit card deposits as a percentage of revenue so the payment is variable depending on revenue for the day.
    that makes no sense because based on your definition of term loan than a funder offering 50k @1.50 120 payments would be considered a term loan as it has a specific interest rate payment and term

  10. #10
    Senior Member Reputation points: 66298 Olderguy's Avatar
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    Quote Originally Posted by BROKER TIME View Post
    that makes no sense because based on your definition of term loan than a funder offering 50k @1.50 120 payments would be considered a term loan as it has a specific interest rate payment and term
    a MCA can take a percentage of credit card deposits and an easier way to differentiate A term loan doesn't and it is an easy way to compare the difference. Legal differentiation MCA based on receivables.
    Steve Benjamin
    Professional Business Loans

    1012 Contessa
    Irvine, CA 92620
    steveprobiz@gmail.com
    https://probizloans.net/
    Broker, Underwriter, general business loan expert
    949.228.1050


    @ 24 hour funding working capital loans
    @ Term loans from 3 years to 10 years at 9.5% and up
    @ Equipment financing up to 7 years
    @ Property loans - Hard Money and traditional - Primary, Investment, commercial, land, fix and flip, construction.
    @ SBA loans - 7A and 504.
    @ Private money equity and debt for major investments
    @ Personal Loans up to gross income from personal tax return.

  11. #11
    Quote Originally Posted by BROKER TIME View Post
    that makes no sense because based on your definition of term loan than a funder offering 50k @1.50 120 payments would be considered a term loan as it has a specific interest rate payment and term
    Ahhh but it doesn't. That 50k 1.5 deal still has a holdback % listed on the contract. Deep within the size 4 font of that contract there will be a clause stating how the merchant can adjust their payment to equal the proper hold back %. That ability to adjust means there is no set term, and thus it's not a loan.

  12. #12
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    Simple explanation: Factoring or advancing cash on future receivables is a purchase of the asset or a percentage of the asset. A funder or factor is not lending money vs. the asset, it is a purchase in whole or a percentage of the asset. Some factors structure their facilities whereby they are collecting only a discount rate on the face amount of the receivable. Some charge a lesser discount rate and interest on what funds are available when the invoice is purchased. The later is a better deal for the client if they are good at collections and cash management. ABL facilities are considered LOANS as you re borrowing vs. the value of the underlying asset.
    Hedley Lamarr......That's Hedley

  13. #13
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    the bank chartered term loans are really MCA's in disguise. Its a legal loophole for regulatory purposes. Finwise, Web Bank, First Electronic Bank, Utah is pouncing on this opportunity with it's favorable exportation laws from it's bank charters there.

  14. #14
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    The cost of an advance is set up front, and doesn't change.

    The cost of a loan adjusts as the balance reduces, as interest only accumulates on the remaining principle.

    A loan paid off early is cheaper than if it went to term.
    An advance costs the same whether you pay off early or not, as the fee is already determined upfront.

    (Sometimes a funder will provide a discount on the fee if it's paid early, but its not standard practice
    in a factoring agreement).











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