[phunder]

10 day 1.899 deals, in my opinion, are downright criminal. Similarly, "flex" deals wherein merchants are funded in increments for a total factor approaching 2.0 are disgusting.

In your view, what term length/factor/deal structures are egregious enough to be unacceptable even in the realm of MCA?

[AlexPete]

You are going to open Pandora's box with this thread

Alex Peterson
ISO Relationship Manager, THORO CORP
E: alex@thorocorp.com
C: 305-502-9414

[Cash Advance Kid]

I'm not sure how a funder can conduct a reconciliation on a file under 30-35days.

If you can't reconcile, it's an illusory reconcilitation provision which the courts have decided time and time again will invalidate a merchant cash advance agreement.

[letsfund2023]

Anything above a 1.50 should be illegal,

[Olderguy]

I think that's the wrong question....There should be regulation on the whole industry....maybe legally only allow 1 or 2 MCA's with a guarantee that a professional financial trustee will handle finances outside the owner after the 2nd MCA.

They have ursury laws about mortgages in certain states and allow a maximum of 18% in interest rate, lender and broker fees....so if the loan is 12% interest, you can't charge more than 6% in lender and broker fees.

If you make it so that anything over 25% is illegal, then merchants will be forced to get expertise on running their business or close the business.

The mortgage crash in 2008 was due to negative amortization loans adjusting after their 1 or 2 year fixed period. Bad loans were bundled and sold.

No one should be allowed to take more than 2 MCA's. Maxed at 8% of total revenue. And a financial trustee needs to be in place if it reaches 10%.

[Incbiz440]

10 day 1.899 deals, in my opinion, are downright criminal. Similarly, "flex" deals wherein merchants are funded in increments for a total factor approaching 2.0 are disgusting.

In your view, what term length/factor/deal structures are egregious enough to be unacceptable even in the realm of MCA?

As someone who comes from the entire other end of the industry, I haven't even been able to bring myself to proactively pitch MCAs. I just accepted them as being something I need to have in my slate of options because if I don't clients that are set on it just go do it anyway and most of the time don't even really understand it. But I try to push them as far up the financing chain as they qualify.

[KeyLake]

Shouldn't be illegal, the merchants are signing the contracts... if you're a lender and you fund **** thats on you

[Olderguy]

Shouldn't be illegal, the merchants are signing the contracts... if you're a lender and you fund **** thats on you

The mafia could be saying the same thing...

So could the drug cartels....

[Yankeeman07]

Shouldn't be illegal, the merchants are signing the contracts... if you're a lender and you fund **** thats on you

I somewhat agree in the concept of "free enterprise" but, since my background is a bit different, their is a term called "fiduciary capacity" - It is not used in the MCA Market, but, should be taught. When a broker and a funder are stacking a merchant, 3 X, 4x, 5x, that merchant is going out of business. Not sure who is more at fault, the broker or the funder.

[ridextreme]

When a broker and a funder are stacking a merchant, 3 X, 4x, 5x, that merchant is going out of business.

It's usually the other way around. A business owner will stop his payments or switch accounts before being drained out of business, so in the end the 5x stackers are the ones getting hurt.

[Olderguy]

It's usually the other way around. A business owner will stop his payments or switch accounts before being drained out of business, so in the end the 5x stackers are the ones getting hurt.

So why do it....stop and try and fix the problem....they are just throwing gasoline on a fire.

[KeyLake]

So why do it....stop and try and fix the problem....they are just throwing gasoline on a fire.

That's up to the funder, not the AG... we need more **** lenders hit my line

[Yankeeman07]

I'll set off a firestorm with this comment - Technically, a 2nd position should never be funded. The 1st funder has claim to 100% of the
merchants future receivables until they are repaid. That is a clause in every MCA Contract that I have read.

If they have an existing Loan, that may or may not apply.

[abfunders]

A 2.0 factor rate isn't so bad if it's over 3-5 years..... A mortgage on your home is a 1.5 or more factor rate. Remember, it's a matter of perspective. Factor rate has nothing to do with "time", that's where APR and "annual interest rate" come into play. If you're talking bait & switch and/or carroting and/or the merchant didn't see it coming because of lack of transparency, or there are fees on top of fees... that's fraud, nothing to do with the rate. I personally do deals that sometimes approach a 2.76 factor rate over 5 years with monthly payments, and as long as the merchant knows what they're getting themselves into (a $4700/mo payment for each $100,000 they net), and we are very particular to make sure that they know, it beats the heck out of a reverse.