To answer a posters*question about if he had a few million dollars to invest in the MCA space:


SYNDICATION

If investing silently, SYNDICATE first with another*lender, with no more than 5,000 - 10,000 Max per deal, and really recommend 500 to 2,000 per deal when first starting out. Syndication means you put up half or a portion*of the money that is lent or advanced to the merchant.

Start understanding why deals go bad, what your typical ROI is, and what industries*you're most comfortable with. It will be very helpful to understand the underwriting of these deals as well.



BROKERING
If actively creating a shop, BROKER deals first, before you become a FUNDER.



You need to understand how to bring in deals, and the costs associated with marketing for deals, as well as the different challenges brokers face to bring in and secure these deals.

You'll understand the different ranges of A paper to D paper, and what risk level you’re prepared to accept - they both are opposite ends and both have their own risks.*



COMPETITION and INTELLIGENCE

While you’re working with funders, you’re also understanding your future competition. Understanding where the areas of interest lie, strengths and weaknesses, and giving you an idea of where you might have an edge.


-Even selling a commodity that anyone can sell, there are still things brokers like to see: higher competitive commissions, fast responses, deal security, ability to compete with other offers, flexibility on offers to get the deal done, pleasant and/or professional work relationship



RISK

The MCA industry average for default rate is 13%

For financing in general:

Traditional loan 2.4%
SBA 472%

A Paper - 6-8%
B Paper -*7-10%
C Paper -*10 - 15%
D Paper - 25%+



PROFIT

The rates and terms aren't an apples to apples comparison however, as the lower ranked paper usually consists of shorter terms (20-60 days) and higher factor rates (1.45 - 1.49, plus up to 20 points in fees, making it a 1.69, and I've seen higher).

Meaning, the higher risk paper can be a lot more profitable. Not only are the rates higher, but you get the money back sooner because of the shorter terms, so you can re-deploy it again, meaning you can flip the same money multiple times in a year, for a healthy profit each time.


But obviously, you have to be able to sustain the high losses of capital you will experience, with potentially no recourse when the merchant goes out of business.


The average funding rate across the board is 1.38 for 6 months.*







www.UccRadar.com - Large sales volume merchants filling out your application.