[MCAVeteran]

http://www.americanbanker.com/bankth...etter&st=email

[WhoisKingsley]

I completely agree with this. There needs to be best practices put in place for everyone in this industry including brokers and co-brokers.

Unfortunately there are a lot of companies that do not listen all they think about is a quick commission. There are certain structures that are being put in place by different companies that are not allowing these brokers to continue working the way that they are.

I believe one practice that should be put in place and I know a lot of you are going to get mad- a buy rate cap on a deal to deal basis that doesn't let the broker max commissions and tell their merchants that "it's the only offer- take or leave it" scheme.

This leaves the door open to stacking because they're paying back more than what they can handle over time. They now need more money to pay back the money that they received and that secondary or third funding that they receive gets put out a higher rate than what they could afford at all!!!

Then we have consolidations- which I hate to break it to everyone, doesn't really exist in the mca market. You can't consolidate "debt" that isn't there- and advance isn't considered a debt because it is an advance off of future business receivables. Finding someone to take out 3 advances of over leveraged funds is very high risk... Especially if that funder is paying back that extra rate that wasn't necessary that the merchant never received- aka your 10% commission.

It's going to take a lot for brokers to adhere to reseller "best practices".

[anonymous]

...but how do you really feel lol

[jotucker1983]

Well, this is what is going to happen when you have a low barrier to entry in a market that promotes high commissions. A lot of the players coming into the space aren't looking to make a career out of this or bring true market innovation, instead, they want to ride the wave and make as much money as possible, then split.

The solution is simple, increase the barrier to entry. Direct lenders have something to actually lose in these transactions because it's their money, their VC's money, and other pooled investors money on the line, as well as their career as those working for said direct lenders see this as a career. The wayward broker running in here to make a quick dollar can care less. He will say whatever the merchant wants to hear, tack on fees out of this world, do that to as many "suckers" he can do that to over a period of time, then you will never hear from him again.

The solution is to only recruit Brokers that treat this as a career for the long term and this is what should be done to increase the barrier the entry:

- All new entrants must go through a program administered by the SBFA that includes not just basic training but also testing that must be completed at the completion of said program. If the person passes the test, they become certified for XYZ period of time to resell merchant cash advances and ACH loans within our industry. The program would run about $250 - $500 and certification would last for about 24 - 36 months.

- Once they have passed and are certified, now they can reach out to Direct Lenders for recruitment into their "Registered Broker" Program pending they also have the following qualifications:

* You must have at least 3 yrs of B2B selling experience

* You must have at least a 4 year degree

* You must submit a written Business Plan structured for the next 2 - 3 years at minimum that includes how you plan to generate your own business, cover your expenses, etc.

These changes can be done right now and would solve a lot of these issues. Either we can look to make the changes now on our own, or we can keep getting bad press and have the Government come in here and mandate it. Which one do you want?

[J.Celifarco]

No matter how much I agree that there are things in this industry that need to be fixed, I dont see how any of them could be implemented. All the great ideas on how to fix the industry are doomed to fail right now. In order for any of these ideas to work it would require all the big lenders in this space to agree to adhere to them. This will not happen for a few reasons

1- Even the biggest lenders in this space are still trying to grow and are still trying to gain market share. If they want market share that requires iso's and everything you are saying will limit banks ability to grow.

2- Lenders would have to take each others word on the behavior of an iso. Different iso's behave differently when dealing with different banks. What one bank may consider a bad iso another bank might consider a great iso. So who gets the final say who is right who is wrong.

3 and last even if you got all the big lenders to agree to a best practices guidelines and they all followed them, there will still be all the smaller lenders who want to make money who will work with any iso's the big lenders refuse to work with.

I 100% agree something needs to be done I just dont see what it is that can be done to fix the problems that you are talking about with how the industry is setup right now

[mcaguru]

one of my largest ISO's just asked me if Brayden McCarthy (who wrote the article) has any idea of the cost to originate a business loan file?

I am a simple guy but regarding disclosure i just got a new cell-phone plan and after the company promising the bill wont be a penny over $119 a month guess what??!!! $173 last month..my point is they are robbing yes the big carriers from 100 million of us with tricky disclosures and they are getting away with it..no excuse but come-on my bank also keeps throwing in fees they never tell me about and i am sure its in the 9th thousand word on page 11 ..you get my drift.

[J.Celifarco]

one of my largest ISO's just asked me if Brayden McCarthy (who wrote the article) has any idea of the cost to originate a business loan file?

I am a simple guy but regarding disclosure i just got a new cell-phone plan and after the company promising the bill wont be a penny over $119 a month guess what??!!! $173 last month..my point is they are robbing yes the big carriers from 100 million of us with tricky disclosures and they are getting away with it..no excuse but come-on my bank also keeps throwing in fees they never tell me about and i am sure its in the 9th thousand word on page 11 ..you get my drift.

No I dont catch your drift.. I am actually very confused

[mcaguru]

No I dont catch your drift.. I am actually very confused

American Enterprise (as sad as it sounds!!) is based on tricky-disclosure of pricing, from cell phones companies to car leases to mortgages to life insurance fees to merchant processing fees even the largest real estate companies rent you by SQF that are not usable and charge for it.

[J.Celifarco]

American Enterprise (as sad as it sounds!!) is based on tricky-disclosure of pricing, from cell phones companies to car leases to mortgages to life insurance fees to merchant processing fees even the largest real estate companies rent you by SQF that are not usable and charge for it.

what does that have to do with a code of ethics or if it would be possible to enforce???

[mcaguru]

what does that have to do with a code of ethics or if it would be possible to enforce???

I was only talking about fee disclosures and how American enterprise handles them.

[MCAVeteran]

There was a good article on a on deck and lending club comparison on fees disclosures and how once fees were examined it wouldn't make sense for a merchant who qualified for both loans to take a higher cost apr ODC product.

And yes, I agree, lots of carrot and stick advertising goes on across many industry Segments