[TheChoice]

Everybody hates excessive stacking,yet i find little relief by lenders in helping alleviate a company with multiple positions despite low balances on advances.

I.E.

Auto repair:
30-50k month
Clean Ledgers
Three bureaus range from high 5s(Equifax) to low 700s(trans)

Who would be willing to buy out three positions totaling 13k? I know a few companies that would buy out two, but not three…any suggestions?

[J.Celifarco]

simple what would stop the merchant from stacking again. Banks believe if someone was willing to stack once they will do it again in the future. If they breached their contract why would they not do it again. what would the upside be to the bank?

[Zach]

WBL will buy them out if there is sufficient collateral. Send the deal to Cpepe@wbl.com

[KM_Superior]

Everybody hates excessive stacking,yet i find little relief by lenders in helping alleviate a company with multiple positions despite low balances on advances.

I.E.

Auto repair:
30-50k month
Clean Ledgers
Three bureaus range from high 5s(Equifax) to low 700s(trans)

Who would be willing to buy out three positions totaling 13k? I know a few companies that would buy out two, but not three…any suggestions?

Why wouldn't we pay off these small balances to take a first position? Is it a mismatch in expectations? What is the merchant looking to net?

[TheChoice]

I dont vouch for any of the clients, i don't know if it was an overzealous broker or client, however the excessive stacking is hurting his business, and by reducing the payments to one, netting some working capital and possibly lowering his daily it would be a better sound situation for the client.
as for my personal take on what will stop him from more money being taken…lol….an addendum just seeing if we can help out.

[jotucker1983]

The Choice,

I run into this on a consistent basis. So it typically goes like this:

- The merchant has 4 advances stacked on top of each other.

- The balances total about $65,000 and the merchant's gross annual sales are about $500,000. The four advances are all on short terms with total payments coming out at about $800 a day, so if he keeps going he will be done in about three and a half months.

- But do you know why he's having a hard time? The advances are taking over 40% of his monthly gross. He has vendors to pay, suppliers to pay, employees to pay, he has to pay himself, etc. So what happens? He starts bouncing checks, NSFs rack up, overdrafts rack up, negative balance days rack up, etc.

- So after sending me 3 months of statements with NSFs and Negative Days everywhere, $65k in total balances and only about $500k in gross annual sales if that much, the merchant says, "Hey John, can 1st Capital give me one loan to pay off all 4 of these advances so I can just make one payment? The payments are killing me John."

What do I tell the merchant? I tell him there's absolutely nothing we can do until he survives the mess that these companies have put him in. He's going to have to survive paying 40% plus of his gross sales to cash advance companies, survive a massive amount of NSFs and Overdrafts, and hopefully don't go out of business in the process. THEN, after we see that he paid off the advances, he's going to have to go a solid 60 days with little NSFs (under 5 - 10 a month) so we can see that his cashflow is back on track and that the business is back on track as well. Only THEN can we do something.

The moral of the story is, merchants and lenders need to stop going pass a 2nd position. A 2nd position, while we can still argue violates the contract on the 1st position, a lot of times a 1st position lender will not fund a merchant until they are 60% - 65% paid down, so doing a small 2nd position for a merchant that's at 40% paid down should be enough to get the merchant some side capital without causing cashflow issues.

Anything beyond that is excessive and needs to stop before the excessive advances put these merchants out of business, and Regulators come a calling.

[Fly]

I agree with everything jotucker just said. And if they can just get through the hard times and bad decisions they made by stacking 4 times, they will survive and will be able to get a more reasonable finance solution, instead of burying themselves in more debt on top of debt which is what these consolidation structures are anyway, let's not kid ourselves. Consolidation in the MCA industry is the worst thing they could do. Just another form of predatory lending. So let's do another high interest loan, wipe away your debt, not get any interest reduction on your current loans, and give you little to no money? Makes no sense for a small business struggling. The reality is the consolidators are just another stack disguised as something else.

[JSL23]

I agree, in principle with everything you just said....however why pass up on the business if you can get a consolidation done!! I've taken the hard role before with Merchants and it has worked a couple of times, telling them they have to wait it out....while a couple of times it has not. I also have paid off 3 advances...Merchant was able to net 50%. Sometimes they learn their lesson, sometimes they go ahead and do it again.

My opinion is that we have to self regulate. The stackers won't go away....too much money at stake. Maybe, if everyone could somehow all agree and make it official that no more than a total of, say 15%(as an example) of the Merchant's yearly gross can be pulled it will allow "responsible stacking" (best expression i could think of). Example:

John Smith grosses $100,000/year...his remaining balance is $9,000....someone can do a $6000 2nd which would cap it at $15,000 total.

Obviously more stipulations would have to go into it to make that type of situation feasible, but this way everyone would walk away happy; the 1st position shops, the stacker and a consolidation would remain viable...

The Choice,

I run into this on a consistent basis. So it typically goes like this:

- The merchant has 4 advances stacked on top of each other.

- The balances total about $65,000 and the merchant's gross annual sales are about $500,000. The four advances are all on short terms with total payments coming out at about $800 a day, so if he keeps going he will be done in about three and a half months.

- But do you know why he's having a hard time? The advances are taking over 40% of his monthly gross. He has vendors to pay, suppliers to pay, employees to pay, he has to pay himself, etc. So what happens? He starts bouncing checks, NSFs rack up, overdrafts rack up, negative balance days rack up, etc.

- So after sending me 3 months of statements with NSFs and Negative Days everywhere, $65k in total balances and only about $500k in gross annual sales if that much, the merchant says, "Hey John, can 1st Capital give me one loan to pay off all 4 of these advances so I can just make one payment? The payments are killing me John."

What do I tell the merchant? I tell him there's absolutely nothing we can do until he survives the mess that these companies have put him in. He's going to have to survive paying 40% plus of his gross sales to cash advance companies, survive a massive amount of NSFs and Overdrafts, and hopefully don't go out of business in the process. THEN, after we see that he paid off the advances, he's going to have to go a solid 60 days with little NSFs (under 5 - 10 a month) so we can see that his cashflow is back on track and that the business is back on track as well. Only THEN can we do something.

The moral of the story is, merchants and lenders need to stop going pass a 2nd position. A 2nd position, while we can still argue violates the contract on the 1st position, a lot of times a 1st position lender will not fund a merchant until they are 60% - 65% paid down, so doing a small 2nd position for a merchant that's at 40% paid down should be enough to get the merchant some side capital without causing cashflow issues.

Anything beyond that is excessive and needs to stop before the excessive advances put these merchants out of business, and Regulators come a calling.

[Sean Cash]

Not to marginalize the arguments against stacking or the predicaments that some merchants are in, but since stacking is repeatedly mentioned as the likely conduit for regulation, I feel like it's necessary to comment on it.

An oft-repeated complaint by merchants to media, politicians, and their lawyers is not that they got too much funding, but that in the case of merchant cash advance is that they claim they thought they were loans. Maybe a lawyer reading the contract could see that plainly, but can the merchant? Maybe a brand new sales rep said the word loan in a phone conversation or an email and that sent a mixed message to the merchant. Then if something happens and they seek protection from creditors, they learn the MCA company is supposed to get paid no matter what because they're not a creditor. Or they do some math and come up with a perceived interest rate even though there is no interest rate in these purchases.

This is probably a bigger vulnerability than "I got too much funding and now I'm mad" in an environment where a bank won't even consider lending to them. I'm not saying stacking couldn't become a regulatory issue, just that let's not kid ourselves into thinking there aren't other things to improve.

Just as many funding companies conduct recorded funding calls or interview calls, always assume that the merchant is also recording every call with you. Why wouldn't they? These contracts are between two commercial companies entering into a commercial transaction.

Assume every email you send them might also be sent to a politician if they later get upset. Those press 1 calls? Act as if the FTC is on the receiving end of them. They might actually be.

We can talk about stacking regulation to death, but there's many more things that need to be buttoned up. Does it say 99% approval rate on your website? It's probably not true. Better change it.

Regulation and enforcement could very well start with the basics. What is your product and how do you market it? If you fail that test, then a debate over a merchant selling receivables it arguably already sold will be moot.

[MCA]

Well said Sean.

[MCAVeteran]

Not to marginalize the arguments against stacking or the predicaments that some merchants are in, but since stacking is repeatedly mentioned as the likely conduit for regulation, I feel like it's necessary to comment on it.

An oft-repeated complaint by merchants to media, politicians, and their lawyers is not that they got too much funding, but that in the case of merchant cash advance is that they claim they thought they were loans. Maybe a lawyer reading the contract could see that plainly, but can the merchant? Maybe a brand new sales rep said the word loan in a phone conversation or an email and that sent a mixed message to the merchant. Then if something happens and they seek protection from creditors, they learn the MCA company is supposed to get paid no matter what because they're not a creditor. Or they do some math and come up with a perceived interest rate even though there is no interest rate in these purchases.

This is probably a bigger vulnerability than "I got too much funding and now I'm mad" in an environment where a bank won't even consider lending to them. I'm not saying stacking couldn't become a regulatory issue, just that let's not kid ourselves into thinking there aren't other things to improve.

Just as many funding companies conduct recorded funding calls or interview calls, always assume that the merchant is also recording every call with you. Why wouldn't they? These contracts are between two commercial companies entering into a commercial transaction.

Assume every email you send them might also be sent to a politician if they later get upset. Those press 1 calls? Act as if the FTC is on the receiving end of them. They might actually be.

We can talk about stacking regulation to death, but there's many more things that need to be buttoned up. Does it say 99% approval rate on your website? It's probably not true. Better change it.

Regulation and enforcement could very well start with the basics. What is your product and how do you market it? If you fail that test, then a debate over a merchant selling receivables it arguably already sold will be moot.

Whoever is recording, they better make sure they understand their state laws about two party or one party recording statutes. Each state has strict rules about recording wiretapping and eavesdropping-

[Sean Cash]

Whoever is recording, they better make sure they understand their state laws about two party or one party recording statutes. Each state has strict rules about recording wiretapping and eavesdropping-

good point. There was a pretty big lawsuit in our industry recently where the funding company was recording its calls without telling the merchant and got hit in a state where it's required to disclose recording. It's the fundamentals that matter most.

[Funder Mark]

I know a sales guy who start off his calls by saying he wants to make a great loan to the business. I have told him multiple times that he should say something else. If the merchant is recording his calls, this could be deadly. I believe that MCA CEO's have to get busy teaching the reps what to say, and what they cannot say, or else regulation will be the least of their worries.

[fundgorilla]

I agree with John....there's a tipping point where client resentment may result in regulatory scrutiny, and of course that would be bad for business. The only person to say much thus far is Rahm Emmanuel, and any thinking person would look at that guy and think he's looking for a donation from any MCA business organizations. Beyond that, our presidente is invested in maintaining the appearance that he does a great job at literally everything, so an admission of difficult circumstances for small business can actually be painted as HIS failure. Yes, this is my thinking on this - anything that involves the words 'regulatory' and 'finance' must also involve 'politics'. If you don't believe that, perhaps you should review the career of Jon S Corzine, which teaches us that no financial crime is actually punishable so long as you've made the appropriate political donations and are willing to give 0 a taste of the profits. Sad situation, but I don't see a breath of regulatory interest until we change administrations.

[ADiamond]

WBL will buy them out if there is sufficient collateral. Send the deal to Cpepe@wbl.com

WBL takes 3 weeks to give an offer, let alone get them funded which may take close to a month. forget collateral, if the guy is an auto dealer he probably has a floor plan already.


fund my payroll is a new company in new york that'll consolidate and pay off. be aware that once you submit, they completely take over the deal from offer to funding.

I know about 2-3 other companies that will consolidate, and may consider and auto dealer if he has a solid pmt history. Private message me if you're interested

[WhoisKingsley]

The Choice,

I run into this on a consistent basis. So it typically goes like this:

- The merchant has 4 advances stacked on top of each other.

- The balances total about $65,000 and the merchant's gross annual sales are about $500,000. The four advances are all on short terms with total payments coming out at about $800 a day, so if he keeps going he will be done in about three and a half months.

- But do you know why he's having a hard time? The advances are taking over 40% of his monthly gross. He has vendors to pay, suppliers to pay, employees to pay, he has to pay himself, etc. So what happens? He starts bouncing checks, NSFs rack up, overdrafts rack up, negative balance days rack up, etc.

- So after sending me 3 months of statements with NSFs and Negative Days everywhere, $65k in total balances and only about $500k in gross annual sales if that much, the merchant says, "Hey John, can 1st Capital give me one loan to pay off all 4 of these advances so I can just make one payment? The payments are killing me John."

What do I tell the merchant? I tell him there's absolutely nothing we can do until he survives the mess that these companies have put him in. He's going to have to survive paying 40% plus of his gross sales to cash advance companies, survive a massive amount of NSFs and Overdrafts, and hopefully don't go out of business in the process. THEN, after we see that he paid off the advances, he's going to have to go a solid 60 days with little NSFs (under 5 - 10 a month) so we can see that his cashflow is back on track and that the business is back on track as well. Only THEN can we do something.

The moral of the story is, merchants and lenders need to stop going pass a 2nd position. A 2nd position, while we can still argue violates the contract on the 1st position, a lot of times a 1st position lender will not fund a merchant until they are 60% - 65% paid down, so doing a small 2nd position for a merchant that's at 40% paid down should be enough to get the merchant some side capital without causing cashflow issues.

Anything beyond that is excessive and needs to stop before the excessive advances put these merchants out of business, and Regulators come a calling.

Between this and Sean's post I agree. There is a bunch of shenanigans going on and then everyone wants to sell on consolidations. CONSOLIDATIONS ARE NOT EASY. I GET 20+ consultations a week and maybe 5 can get done within a weeks time MAYBE. It's like someone saying... "Hey, I borrowed $100 from Moe, Larry, and Curly in the past month and I can't pay them back... can you let me borrow $300 and an extra $300 so I can pay my light bill and I'll pay you back within a year?" How do I know you are going to pay ME back? There is no security there. Depending on the type of business, you can file bankruptcy in a week from now. There isn't a Magical Consolidations Wand that can be waived and "Brokers" can't get upset if a consultant or lender cannot help you with a file that seems too high risk because of CREDIT, INDUSTRY, or FINANCIALLY.

[Zach]

WBL takes 3 weeks to give an offer, let alone get them funded which may take close to a month. forget collateral, if the guy is an auto dealer he probably has a floor plan already.


fund my payroll is a new company in new york that'll consolidate and pay off. be aware that once you submit, they completely take over the deal from offer to funding.

I know about 2-3 other companies that will consolidate, and may consider and auto dealer if he has a solid pmt history. Private message me if you're interested

Anthony, from the deals I've put through the system it typically takes 2 weeks to fund -- we are talking about deals that no other lender would even look at, and we are getting them low rates over long terms with daily or weekly payments. The best part is that since there is collateral attached to the deal, we can fund deals that NO ONE else would... not too mention the commission is pretty aggressive ;-)

As long as you are experienced selling secured offers, it should be a walk in the park for you.

Payroll financing is also a great company! Stephen is great at what he does.

[jotucker1983]

To follow up on this discussion, a couple of additional points.

1.) In terms of consolidation, when this term is thrown out there do you guys mean that you would find a funder that would do a full approval, pay off all of the remaining balances, and then the merchant nets the remains? If that's the situation, what if there's nothing for the merchant to net or what if the net is below 40%? Is that a good deal? Or, are you going to have the merchant net 0% - 40% but you are going to somehow provide a longer term which reduces his payment? Why wouldn't you be concerned that the merchant (who just took out 3-4 advances at one time) won't turn around and do the same thing again? I mean after all, you would now have him on a longer term which increases his time to renew with you, so why wouldn't that same merchant stack 3 or 4 times again?

2.) I also agree that Stacking isn't our only issue in this industry, I have touched on the low quality recruiting that is done that mirrors how it's done on the merchant services sales side of things. In terms of Self-Regulation, here's a good starting list of issues that we can tackle:

- Not stacking past a 2nd position

- Not taking more than a certain percentage of a merchant's monthly gross to payback the advance

- Properly disclosing what type of financial product you are offering, if it's an advance you would indicate the purchase of receivables, if it's a loan you would indicate the structure of said loan.

- Not recruiting people who have no prior sales experience, marketing experience, B2B experience, etc. to sell the product without properly training them on the product if they are W-2. If they are going to be 1099, then questions should be addressed on their business plan, prior experience in running their own business, their plan to finance their office, their legal resources, their accounting resources, their marketing resources, etc. This helps to reduce down the amount of people coming into the industry that are ill-prepared. Competition is good, but when your "competition" can't spell "merchant cash advance," and do nothing but flood a merchant's telephone line trying to sell a product they can't spell, all that does is stop the merchant from taking calls from anybody. This hurts the growth of the industry, hurts the growth of your office, and the person doing the sales call is wasting their time as they won't be making hardly anything. They would be MUCH better off working at Burger King to be quite honest with you.

- Making sure to be in compliance with Telemarketing Laws, Can-Spam Laws, Fax Marketing Laws, the TCPA Law, the regulations of your Partners, the regulations of your Vendors/Suppliers, etc.

- Promoting Ethics.

- Establishment of some sort of major Association that would help to promote these ideals, the NAMAA is "okay" but they apparently need either more funding or more people to become a major player in the space similar to how the ETA is for the bankcard side.

[TheChoice]

Thanks ADiamond, I recently reached out to you gentleman and ladies, however I believe we aren't working with collateral on this one.

I think a majority of callers/brokers state that consolidation is a possibility just to get docs in. However, I don't look to waste our investors and underwriters time, or our clients first and foremost. So unless its a financially feasible file, I'm not the one placing that 4 or 5th, unless your average is amazing and it makes complete financial sense (thats choppy water…very deep).

I understand that the risk is heightened by their stacking history, but what if makes economical sense? Fund My Payroll seems to have a unique approach to resolving an over stacked client.

What if the merchant qualifies for 100k, yet has 9k in balances by 5 companies, and 700 credit? (HYPOTHETICAL)

I dunno... Once again, I never vouch for clients, and why would i vouch for the broker who positioned the last deal for the client as well. Its so important for brokers to meet the goals and expectations of both our investors, underwriters and clients.

But the responsibility is in both the broker educating the client on the situation whether its detrimental if not utilized right, as well as the client, who is obligated to the money by signing the contract. Stacking is an issue in the business, i get it. However, it is still here and there definitely should be programs that deal specifically with it.

So…again if anybody knows a lender who doesn't mind amount of positions (3), but their financial ability to net + 40 to 50%, and sustain payment for such funding., I would appreciate the help with our placement of this client as I rather consolidate than think of placing another deal in the mix. Thank you all kindly for your responses.

The Choice
Simple Choice Capital
www.simplechoicecapital.com
"The Choice is Simple…"

[WhoisKingsley]

Thanks ADiamond, I recently reached out to you gentleman and ladies, however I believe we aren't working with collateral on this one.

I think a majority of callers/brokers state that consolidation is a possibility just to get docs in. However, I don't look to waste our investors and underwriters time, or our clients first and foremost. So unless its a financially feasible file, I'm not the one placing that 4 or 5th, unless your average is amazing and it makes complete financial sense (thats choppy water…very deep).

I understand that the risk is heightened by their stacking history, but what if makes economical sense? Fund My Payroll seems to have a unique approach to resolving an over stacked client.

What if the merchant qualifies for 100k, yet has 9k in balances by 5 companies, and 700 credit? (HYPOTHETICAL)

I dunno... Once again, I never vouch for clients, and why would i vouch for the broker who positioned the last deal for the client as well. Its so important for brokers to meet the goals and expectations of both our investors, underwriters and clients.

But the responsibility is in both the broker educating the client on the situation whether its detrimental if not utilized right, as well as the client, who is obligated to the money by signing the contract. Stacking is an issue in the business, i get it. However, it is still here and there definitely should be programs that deal specifically with it.

So…again if anybody knows a lender who doesn't mind amount of positions (3), but their financial ability to net + 40 to 50%, and sustain payment for such funding., I would appreciate the help with our placement of this client as I rather consolidate than think of placing another deal in the mix. Thank you all kindly for your responses.

The Choice
Simple Choice Capital
www.simplechoicecapital.com
"The Choice is Simple…"

What if the merchant qualifies for 100k, yet has 9k in balances by 5 companies, and 700 credit? - walk in the park, but have you ever had a deal this simple Mr. Simple Choice?

[TheChoice]

Like everyday. lol.

[Chambo]

Not to marginalize the arguments against stacking or the predicaments that some merchants are in, but since stacking is repeatedly mentioned as the likely conduit for regulation, I feel like it's necessary to comment on it.

An oft-repeated complaint by merchants to media, politicians, and their lawyers is not that they got too much funding, but that in the case of merchant cash advance is that they claim they thought they were loans. Maybe a lawyer reading the contract could see that plainly, but can the merchant? Maybe a brand new sales rep said the word loan in a phone conversation or an email and that sent a mixed message to the merchant. Then if something happens and they seek protection from creditors, they learn the MCA company is supposed to get paid no matter what because they're not a creditor. Or they do some math and come up with a perceived interest rate even though there is no interest rate in these purchases.

This is probably a bigger vulnerability than "I got too much funding and now I'm mad" in an environment where a bank won't even consider lending to them. I'm not saying stacking couldn't become a regulatory issue, just that let's not kid ourselves into thinking there aren't other things to improve.

Just as many funding companies conduct recorded funding calls or interview calls, always assume that the merchant is also recording every call with you. Why wouldn't they? These contracts are between two commercial companies entering into a commercial transaction.

Assume every email you send them might also be sent to a politician if they later get upset. Those press 1 calls? Act as if the FTC is on the receiving end of them. They might actually be.

We can talk about stacking regulation to death, but there's many more things that need to be buttoned up. Does it say 99% approval rate on your website? It's probably not true. Better change it.

Regulation and enforcement could very well start with the basics. What is your product and how do you market it? If you fail that test, then a debate over a merchant selling receivables it arguably already sold will be moot.

You're sounding more and more like me everyday....

[Sean Cash]

You're sounding more and more like me everyday....

hahaha. Maybe you and I should share an office together and spend our days cursing the 22 year olds who are running around this industry like they own the place. You know you would secretly enjoy it.

[Chambo]

hahaha. Maybe you and I should share an office together and spend our days cursing the 22 year olds who are running around this industry like they own the place. You know you would secretly enjoy it.

I know I call folks kids way too often (most of them ARE next to me), but there are plenty of 30-35 morons in this industry, sucking the life out of merchants like a predatory vampire squid

[J.Celifarco]

predatory vampire squid... I have to say CHAMBO you do have a way with words