[GTM]

I had a merchant who had multiple positions with a/b and c lenders. $100k rev, 550 credit, and taking bad deals. His latest approval was $20k 75d.

I started working with a private lender who does loans/LOC with invoices or contracts as collateral. This merchant had 3 signed contracts totaling $700k. All the contracts were b2b (replacing the roof of a hotel, pizza store, etc.)

It took about two weeks since the lender was in vegas for a convention, but we got him set up with a $500k LOC. No payments until contracts were completed. The rate is 0.0012% daily with an upfront 5% fee and my fee of 2%. He can keep pulling from the LOC as long as he submits contracts.

I make half the origination fee + my fee + recurring 1% on every pull.

Downsides:
Hard credit pull (unless you can pull the credit yourself and supply it)
UCC filed
The origination fee has to be paid at the time of funding; it doesn't come out of the loan amount. (Lender is 100% ok with funding the merchant with an MCA to pay for the fee)
Less commission than MCA
Invoices/contracts MUST be b2b or business to the government, so they are collectible. The only exception is solar, as the project is guaranteed by the solar loan company.

Upside:
Can use funds for anything (think paying off MCA’s to help get account in order.)
Much bigger funding amounts
No clawback
No payments.
PSF fees are allowed as long as they are approved (see above, my 2% fee)
You can fund MCA’s behind/with this product.
Great for construction which is hard to fund these days.
Great for b2b suppliers that need to get money to fill orders


If you have merchants that fit this box and want access to it, shoot me an email. This funded faster and paid more than any other non-MCA factoring I've tried. I can get pretty creative with these guys and can structure the deal to make it fit each merchant.

Btw, not claiming to be a lender. We are a broker shop in Hollywood. But I work with other brokers and have plenty that can vouch for me regarding paying out commissions for deals ppl send me to close, kickbacks, etc.

[Olderguy]

PFS should be against the law.

[abfunders]

PFS should be against the law.

Steve, are you advocating all fee agreements to be against the law? Why can't business owners make their own decisions? Does Big Brother have to look after every transaction? Whenever I finance a deal that the bank doesn't pay me, I have to get a fee agreement in place, otherwise it's not worth my time. Yes, the SBA outlaws it, so I don't do it there. However, my skill, which translates into value, as a broker is to know how to do these complicated things, why should I be able to get paid? Just because the lender also pays?

[BR-Nightmare]

Steve, are you advocating all fee agreements to be against the law? Why can't business owners make their own decisions? Does Big Brother have to look after every transaction? Whenever I finance a deal that the bank doesn't pay me, I have to get a fee agreement in place, otherwise it's not worth my time. Yes, the SBA outlaws it, so I don't do it there. However, my skill, which translates into value, as a broker is to know how to do these complicated things, why should I be able to get paid? Just because the lender also pays?

Micah,

I would agree to a point here. However, in the event a broker pitches this fee as something the funder is charging is where I draw the line.

I've seen them go as far as adding it to a contract or saying it's a page "they forgot" to include.

In the event I catch this I with no shame contact the broker and will call him out.

9 times out if 10, they will return the fee. that 1 douche that doesn't gets terminated.

[Oxforddan]

I use a PSF on most deals. Usually between 350-500$ depending on the deal size. For one every lender I work with knows this. It is an amazing selling tool when renewals come around since it is a "fee" that is in our control to waive as a way to incentivize the merchant and make them feel like they are winning. It is a major help in the b paper space when a decent amount of time the funder isn't making a better offer on the renewal.

[GTM]

I send the fee page for this product before the loan docs are even signed. The fee states that we can pull a specified percentage of what we fund them. Additionally, it's done with full permission from the funder. It's made very clear this is a separate transaction from the actual fees on the loan docs. The merchant can negotiate it with us if they want to. I look at it similarly to the fee page business owners were signing when they hired companies to get them ERC. That being said, if you have clients that got approved for ERC, we can also provide bridge funding until they actually receive the money.

[mistamca]

Steve, are you advocating all fee agreements to be against the law? Why can't business owners make their own decisions? Does Big Brother have to look after every transaction? Whenever I finance a deal that the bank doesn't pay me, I have to get a fee agreement in place, otherwise it's not worth my time. Yes, the SBA outlaws it, so I don't do it there. However, my skill, which translates into value, as a broker is to know how to do these complicated things, why should I be able to get paid? Just because the lender also pays?

This. There is a time and place for everything. Also, the SBA does allow fees but you need to really follow the letter of the law. I have charged north of 5K worth of fees on a SBA deal but you better believe that every dime is documented & has an audit trail. (Standard doc prep fee, bookkeeping fee, in-depth doc prep, training, etc)

[Olderguy]

If you need third party fees maybe you should re evaluate your business model. Last time I checked SBA doesn't allow third party fee agreement. But all fees can be documented....just not third party outside of the funding. Their fees are spelled out in their contract and paid at closing. Neither do real estate transactions. Fees paid in Escrow but now outside. Brokers call me every day who charge people up front without any guarantee of performance and separate from fees they get from the lender. All I hear from brokers is how many points and can I charge extra fees. Personally I think it's just stiffing the client for more money and if you have the right programs and business operations you shouldn't need to do it.

[goatFunding]

I agree with Micah and Also BR Nightmare...

Some brokershops I know would not be profitable with out them (they spend crazy money on marketing)..

I am always clear with the merchant exactly what our fee is and what the funder fee is... How much they will net etc.. If you are upfront and honest about fees they are not looked at so negatively.

All Broker/funder/merchant problems boil down to dishonesty... When you are honest you don't need to keep changing entities and making up fake aliases all day.

[BR-Nightmare]

I agree with Micah and Also BR Nightmare...

Some brokershops I know would not be profitable with out them (they spend crazy money on marketing)..

I am always clear with the merchant exactly what our fee is and what the funder fee is... How much they will net etc.. If you are upfront and honest about fees they are not looked at so negatively.

All Broker/funder/merchant problems boil down to dishonesty... When you are honest you don't need to keep changing entities and making up fake aliases all day.

I guarantee they are not doing this to Virginia Merchants now...

[abfunders]

I'll make it clear: I HATE it when there's a bait and switch. PSFs are done that way often, yes, and the funders should be preventing it for sure. I just saw a deal where the merchant netted $31,900 via Webbank and then the next day Tiger Capital pulled a $6000 PSF (yes, on the pull on the statement, it says "PSF"). I imagine the merchant may be able to figure out a way to call it back.... unless they can't.

The challenge is that it costs money to sue these guys, and the brokers are hard to find sometimes.

Maybe funders should start to ask the merchants on the funding call about the outside fees and threaten the broker that they'll kill the deal if they charge it, etc.

[GTM]

haha 9 out of 10 threads turn into an argument about fees. Not gonna get into it on MCA's, but on the deal type that I posted about above, It's all on the straight and narrow. Not hidden, funders approved, client approved, not taking advantage (2%).

[BR-Nightmare]

I'll make it clear: I HATE it when there's a bait and switch. PSFs are done that way often, yes, and the funders should be preventing it for sure. I just saw a deal where the merchant netted $31,900 via Webbank and then the next day Tiger Capital pulled a $6000 PSF (yes, on the pull on the statement, it says "PSF"). I imagine the merchant may be able to figure out a way to call it back.... unless they can't.

The challenge is that it costs money to sue these guys, and the brokers are hard to find sometimes.

Maybe funders should start to ask the merchants on the funding call about the outside fees and threaten the broker that they'll kill the deal if they charge it, etc.

More than half the time they disclose it after funding to not lose the deal.

[Olderguy]

Micah...that's kind of my point...I have several real estate deals right now - one where the broker charged up front fees and another where splitting my fee with him is not enough for him. Getting 10 points + on a MCA plus lender charging 10% plus third party fee is pretty extreme. Sooner or later I think the government, the lenders and maybe the market will outlaw this.

[mistamca]

If you need third party fees maybe you should re evaluate your business model. Last time I checked SBA doesn't allow third party fee agreement. But all fees can be documented....just not third party outside of the funding. Their fees are spelled out in their contract and paid at closing. Neither do real estate transactions. Fees paid in Escrow but now outside. Brokers call me every day who charge people up front without any guarantee of performance and separate from fees they get from the lender. All I hear from brokers is how many points and can I charge extra fees. Personally I think it's just stiffing the client for more money and if you have the right programs and business operations you shouldn't need to do it.

You can 100% take fees prior to funding on a SBA 7(a) AND 504. You better be doing work in relation to those fees but if you are doing work, then you are allowed to be compensated.

It seems like you are used to hearing requests about junk fees but I can tell you that PSFs are a bit of a necessity when scaling out an MCA shop. There is a right way and wrong way to do it.

As a one-man band, I can imagine that additional fees don't make sense but when you have overhead & the market turns away from your projections, you need to make up the income somehow.

Also as Oxforddan pointed out, this is a pretty common & smart strategy in the B space. There is nothing wrong with it. Its a free market. If you point out the fee & they go with someone else, then fine. If nothing else, it is just a negotiation tactic to make a merchant feel like they are winning even more. (I'm guilty of this. I need to see a discount. Even if it is a BS discount, I need one to buy something)

[HighRisk Funder]

PFS should be against the law.

We charge minimal fees on each deal which allows our ISO partners to pull PSFs without hurting their merchants

[goldenhippo80]

Micah...that's kind of my point...I have several real estate deals right now - one where the broker charged up front fees and another where splitting my fee with him is not enough for him. Getting 10 points + on a MCA plus lender charging 10% plus third party fee is pretty extreme. Sooner or later I think the government, the lenders and maybe the market will outlaw this.

Yes, I knew a shop that would get 15 points from a deal and after the funder funded the file they would say oh wait you forgot to sign this 10% PSF and the money won't be released until it's signed. I've seen them do it on 100k+ deals. It's not right, I agree with you on this one Steve.

[abfunders]

Guys, I'm not defending the practice. The question is when do the FUNDERS and LENDERS get back at the brokers? Why does it necessitate it to be "illegal" for the practice to stop? "I'm from the government and I'm here to help."

[Michael I]

funders should not be allowed to charge fees , in reality all they doing is masking 1.66 as a 1.49

[BR-Nightmare]

funders should not be allowed to charge fees , in reality all they doing is masking 1.66 as a 1.49

Not necessarily. Some costs have to be offset immediately. Brokers should technically not charge their "personal services fee" if all they are doing is submitting the file, selling 13 or more points, and making it seem as if they are not making a dime on the deal.

[Sachip24]

so you got a client invoice factoring. Why would a broker go through another broker to get their client invoice factoring if they can just sign up with a factor and go direct. Factors pay 10-15% on fees collected every month. if you are only getting 1% you are getting shafted.

[Olderguy]

so you got a client invoice factoring. Why would a broker go through another broker to get their client invoice factoring if they can just sign up with a factor and go direct. Factors pay 10-15% on fees collected every month. if you are only getting 1% you are getting shafted.

Split the fee or go direct - it isn't that hard to find factoring companies.
Tight margin stuff I do all day long and split the fee.
I handle all the work and the brokers love it so they can spend their time on MCA business.

[GTM]

From my understanding, most factoring deals need decent credit. They also have higher rates than the deal we did. This client had credit in the mid 500's. Also, it's not technically a factoring deal. It's a revolving LOC based on collateral (the contract). No, prepay penalties and no set payment. He can keep "drawing" money as long as he keeps providing new contracts. I've never done any other factoring deal, so I'm not sure what standards, but with this deal, there are no payments until the contract is completed. Regarding getting paid 10-15% monthly on the fees, with this deal, there are no monthly fees.

If you can do it yourself, go for it. I had a few people reach out, so it's obvs attractive to some people.

[freeprocessing]

PFS should be against the law.

Correct me if i'm wrong but arent you the same person that posted a sample email that you sent to the merchant that clearl described you offering the merchant to double fund 2 deals?

[Sachip24]

From my understanding, most factoring deals need decent credit. They also have higher rates than the deal we did. This client had credit in the mid 500's. Also, it's not technically a factoring deal. It's a revolving LOC based on collateral (the contract). No, prepay penalties and no set payment. He can keep "drawing" money as long as he keeps providing new contracts. I've never done any other factoring deal, so I'm not sure what standards, but with this deal, there are no payments until the contract is completed. Regarding getting paid 10-15% monthly on the fees, with this deal, there are no monthly fees.

If you can do it yourself, go for it. I had a few people reach out, so it's obvs attractive to some people.

I do do it myself. I am a factor. Invoice factoring or an ABL both collect fees monthly and the factor pays out to the referral agent 10-15% of fees collected monthly as a residual to them. Invoice factoring and/or ABL don't necessarily go by the actual clients credit they care more about the business credit of who the client is doing business with since they are the ones paying the invoice not the merchant. with an ABL the merchant keeps drawing by submitting a banking certificate with new contracts to increase availability of the line. Invoice factoring is transactional it goes per invoice where as an ABL is revolver against the whole AR report as you mentioned.