[atag40]

Are you including business loan products for qualified businesses? If you meet an established business (or even a startup) with high personal/business credit score, what do you do with that lead?

Does anyone have a relationship with an actual lender which offers an ISO/agent agreement?

If you have a lender to refer business to, is it profitable?

If you don't, why not?

[MTY MSI]

I have a relationship with a lending network that offers conventional bank financing. It's not nearly as profitable as MCA, usually only pays around one point. Biggest problem with it is getting merchants to supply the requested documentation, they hardly ever do. To me it's more of a product to offer to show a prospective merchant you can obtain for them whatever type of financing they're qualified for especially the many that balk at the cost of MCA. I'm after the cc processing so I look at it as a value add to obtain the processing.

[Sean Cash]

I think in general small businesses are bad with bookkeeping. Lots of money comes in under the table, they show big losses to avoid the tax man, and they don't have time to be key entering every receipt into a software program. That already makes them ineligible for bank financing before we've even talked about what their FICO score is or how long they've been in business for.

[jbrown]

Sean that's a great point. It amazes me to this day, after seeing literally hundreds of financial statements and tax returns on businesses that are multi-million dollar revenue businesses and applying to us for financing over $100k, how poor their record keeping is. They don't make money, they have lousy bank statements, they have no equity in the business, and their bookkeeping is always months behind. And they wonder why the banks won't to them! That is one reason why I never worry about the banks entering our space and lending to our customer.

[funding pro]

This is the exact thing that comes to mind when I watch Bar Rescue or Restaurant Impossible. So many of these businesses are our merchants. Maybe not techincally, but categorically speaking. They actually have mentioned on some of those shows when discussing their debt having open MCAs. If only I was good looking I could have my own TV show at this point

[Sean Cash]

Word through the grapevine is that a pretty well-known low factor rate MCA shop is ceasing operations in the near future due to bad debt. I don't know if I'm allowed to mention who it is but if it happens, it'll be evidence that the low factor, long term model is too fragile to be sustainable.

Risk vs. reward. We're echoing each other's beliefs that small businesses have a difficult time putting their books together yet we're quick to offer them "premium pricing" because of last month's bank statement or strong credit history. Real banks wouldn't touch many of these "premium" deals so they are perhaps not as premium as we think.

[Capital Stack]

are they publicly traded?

Word through the grapevine is that a pretty well-known low factor rate MCA shop is ceasing operations in the near future due to bad debt. I don't know if I'm allowed to mention who it is but if it happens, it'll be evidence that the low factor, long term model is too fragile to be sustainable.

Risk vs. reward. We're echoing each other's beliefs that small businesses have a difficult time putting their books together yet we're quick to offer them "premium pricing" because of last month's bank statement or strong credit history. Real banks wouldn't touch many of these "premium" deals so they are perhaps not as premium as we think.

[CO1]

Thats funny how you mention Restaurant Impossible. One of my merchants was funded by me on that show. & Premium is how you catogarize it to be, since each funder has niche on which deals they like more to do than others. I have some restricted industry types get funded.

[CO1]

Hmmm. Are they a big name in the industry?

[Sean Cash]

No, it's not on deck capital CO1 =P

Let's wait and see if what I heard comes true. I don't want to spark rumors about someone and get them all upset :]

[CO1]

Oh man. haha. Thats a good question David.

[MCNetwork]

Hmm...the only well known low factor MCA shop I know is Forwardline...

[Finance1]

If it's a well known shop then it's probably a margin issue vs a portfolio red ink issue. Just speculation of course. Established cash co's with a big enough data pool shouldn't implode like some of the well known cases in the last 6 years.

I know first hand the only way to succeed in the low rate space is to keep overhead at a bare minimum. And I mean BARE minimum. It's also tough to borrow to lend either unless you are hooked up with bank or near bank line financing. Borrowing in the mid-high teens and having a 9+ month wam and 1.20 - 1.25 wac leaves very little to pay for everything else. Even with immediately turning inflow and double factoring renewals.

[CO1]

IOU, Forwardline, OnDeck, hmmm speculations. .

[Chambo]

Sean that's a great point. It amazes me to this day, after seeing literally hundreds of financial statements and tax returns on businesses that are multi-million dollar revenue businesses and applying to us for financing over $100k, how poor their record keeping is. They don't make money, they have lousy bank statements, they have no equity in the business, and their bookkeeping is always months behind. And they wonder why the banks won't to them! That is one reason why I never worry about the banks entering our space and lending to our customer.

Sounds like your typical MCA P&L and balance sheet

[Chambo]

This is the exact thing that comes to mind when I watch Bar Rescue or Restaurant Impossible. So many of these businesses are our merchants. Maybe not techincally, but categorically speaking. They actually have mentioned on some of those shows when discussing their debt having open MCAs. If only I was good looking I could have my own TV show at this point

I actually had one of my merchants on Bar rescue.....

[MCNetwork]

IOU, Forwardline, OnDeck, hmmm speculations. .

IOU and On Deck are ACH, not MCA

Only leaves Forward Line

[Sean Cash]

IOU and On Deck are ACH, not MCA

Only leaves Forward Line

I use the term "MCA" very broadly. In my book, On Deck Capital is absolutely MCA. Daily payments = MCA for me.

[CO1]

I do too, its all the same.

[MCNetwork]

I stand corrected. According to Wikipedia, merchant cash advance covers both credit card advances and loans under 18 months. I learn something new every day

[CO1]

Haha, Great Source. Didnt Sean write that? or has addings on it.

[MCNetwork]

Yep he probably did. Sean is the ultimate authority on MCA after all

[Capital Stack]

True That!

Yep he probably did. Sean is the ultimate authority on MCA after all

[Sean Cash]

lol. well um thanks guys for the compliments

[Chambo]

lol. well um thanks guys for the compliments

If it means anything, I hated you as an MCC UW...killing and restructuring my deals