[jfeinberg]

I wanted to bring up this topic as over the past quarter we have seen a huge increase in applications from ISO's that the use of funds is Equipment. Now I understand that there are certain circumstances where the cash advance is the only option due to credit, collateral, or time in business. However 70% of these applications could be approved through our Equipment Leasing & Financing program. With that said, we as an industry need to start placing these merchants into programs that fit business needs. With our Equipment Leasing & Financing program the terms are 12-60 months with monthly payments, and rates are far more aggressive than cash advances. This program will have less strain on the customers cash flow, in turn still leaving the option for taking capital down the road open. As we all know businesses have other needs for an advances (marketing, payroll, inventory, Etc.) I wanted to bring this to light and get others opinions on this?


Josh Feinberg
President/CEO
(D) 603 379 1890
(T) 888 777 8144 x 100
(F) 603 262 3764
Everlasting Capital Corporation
18 North Main St
Rochester, NH, 03867
Everlastingcapital.com

[CreditGuy]

There should always be a credit risk desire to match sources and uses; however, if a merchant has the capacity to retire the debt used to purchase an asset before the end of said assets useful life, and wishes to do so, that isn't necessarily a bad thing. From a total payback perspective a short term advance/loan over 6-12 isn't going to be too far off from a bank equipment loan amortized over 48 months. ($25k over 6 @ 1.20 pays back $30k. A $25k loan @ 6% over 48 months pays back $28,200) Further, once opportunity costs, speed, and documentary requirements are taken into account, an MCA or short term loan can be more desirable. Beyond these benefits, there are also no equipment valuation/appraisal requirements, serialized UCC filings (if any UCC filings at all), and generally MCA providers have no down payment requirements.

My examples are just that, and there are very aggressive rates and terms available in the equipment and leasing space; however, MCAs serve a lower credit quality market and must price accordingly, and those for which an MCA is the only product they qualify for aren't going to get the low rate/long term loan/lease products.

[Fund_It]

But why not give them the option for 36-60 month terms instead of suffocating their cash flow daily, and giving the tax benefits incorporated with the Leasing & Financing. I agree with Feinberg, Iso's should be putting the customer's needs in the right programs

[MCNetwork]

Most of the merchants that say they are using the funds for marketing or to purchase equipment are really just trying to catch up on bills. No one wants to put the truth on the application.

[Fund_It]

Most of the merchants that say they are using the funds for marketing or to purchase equipment are really just trying to catch up on bills. No one wants to put the truth on the application.

I guess that depends on the type of merchants you're talking too or the type of relationship that is being built with the customer. For myself I try to build that value and relationship and really dig in to the needs of the merchant

[Vfunding]

All good points. We like to give our clients all options that they might qualify for. My sales reps are trained to be able to discuss equipment leasing, factoring, PO Funding, and all MCA related products. Keep in mind that "equipment financing" is a very broad term. My clients are the first to tell me that a straight lease deal can require a hefty down payment upfront, tricky appraisal/underwriting process, and can ultimately carry a total cost of 30%-40% more than the sales price of the equipment when all is said and done after 2-5 years. In addition often the merchant needs to make a hefty buy-out payment in order to actually own the equipment at the end of the term. Some of our clients have told us that they would rather pay the equipment down with an MCA product over 6-12 months and then have an ASSET on their books rather than a LIABILITY for 2-5 years. Alternatively, equip financing products have nice low monthly payments which is always a cash flow benefit. If you explain all the pros and cons to your clients they have no need to ever go anywhere else for their financing needs!

[michaelh]

The customers need to need made aware of the different options. You have a very good SBA Program that allows Merchants with credit over 680 to get between 50 and 150k at 6 percent interest. In addition - you have sale leaseback options for merchants who own equipment that can give merchants money on assets they already own. Third customers with poor credit can get multi year financing for new equipment purchase with additional collateral.

[jotucker1983]

I wanted to bring up this topic as over the past quarter we have seen a huge increase in applications from ISO's that the use of funds is Equipment. Now I understand that there are certain circumstances where the cash advance is the only option due to credit, collateral, or time in business. However 70% of these applications could be approved through our Equipment Leasing & Financing program. With that said, we as an industry need to start placing these merchants into programs that fit business needs. With our Equipment Leasing & Financing program the terms are 12-60 months with monthly payments, and rates are far more aggressive than cash advances. This program will have less strain on the customers cash flow, in turn still leaving the option for taking capital down the road open. As we all know businesses have other needs for an advances (marketing, payroll, inventory, Etc.) I wanted to bring this to light and get others opinions on this?


Josh Feinberg
President/CEO
(D) 603 379 1890
(T) 888 777 8144 x 100
(F) 603 262 3764
Everlasting Capital Corporation
18 North Main St
Rochester, NH, 03867
Everlastingcapital.com

In my opinion it just depends on the deal, the planned obsolescence of the equipment, the life of the equipment, what the returns are on the equipment, if the merchant has capital to pay 1st and last lease payments upfront and if the merchant wants to own it eventually.

There should be the option there to Purchase Outright, Finance or Lease the equipment. If they are going to Finance it, you can present your options for the MCA or other Traditional Forms of financing you might have. But it comes down to the answers above in terms of what the merchant's situation is.

[jfeinberg]

All good points. We like to give our clients all options that they might qualify for. My sales reps are trained to be able to discuss equipment leasing, factoring, PO Funding, and all MCA related products. Keep in mind that "equipment financing" is a very broad term. My clients are the first to tell me that a straight lease deal can require a hefty down payment upfront, tricky appraisal/underwriting process, and can ultimately carry a total cost of 30%-40% more than the sales price of the equipment when all is said and done after 2-5 years. In addition often the merchant needs to make a hefty buy-out payment in order to actually own the equipment at the end of the term. Some of our clients have told us that they would rather pay the equipment down with an MCA product over 6-12 months and then have an ASSET on their books rather than a LIABILITY for 2-5 years. Alternatively, equip financing products have nice low monthly payments which is always a cash flow benefit. If you explain all the pros and cons to your clients they have no need to ever go anywhere else for their financing needs!

All very true. However with our "straight lease" which is classified as a Fair Market Value lease is the program they want to go with to take advantage of the off balance sheet product. The equipment will not be looked at as a asset or a liability, in turn will be looked at as an expense. This can be truly beneficial for instance if there are certain restrictions with their bank, or they do not want to show any more liability's. Also they are able to write off every payment. As far as down payment, most of the time we only require 2 upfront payments. They are not required to purchase the piece at the end, and can lease or finance a newer model.