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  1. #1
    Senior Member Reputation points: 3217 CO1's Avatar
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    Angry Credit Score?

    WHEN THE HELL DID CREDIT SCORE BECOME SUCH A DECIDING FACTOR FOR FUNDING?! WERENT WE NOT FICO SCORE DRIVEN AND BUSINESS PROFORMANCE! I KEEP GETTING DECLINES DUE TO CREDIT! AN ITS SO ANNOYING ME! "This merchant does not qualify for an ACH deal. With a 540 credit score" "The deal was declined on 8/6 due to poor personal credit." its getting under my skin! We are not becoming the last result for businesses now!

  2. #2
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    how does the rest of the file look?

  3. #3
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    The guy deposites 600k ending balance of 100k and has 540 credit score, and than he had liens they all been cleared and never had an ACH only a accoutant recieveables fiancing, and a dismissed Chapter 13 a year ago, due to a divorce. Like But what i am getting heated about is not this only its that most of all the funders i work with all come back with FICO, FICO ahh so annoying!

  4. #4
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    I can provide my outlook and take on credit scores. When a funder is taking from the split and getting funds before the merchant even has time to mismanage... credit score is not as great of a factor, but when you are set up on ACH repayment and trying to take funds out of a bank account then a business owners repayment history becomes a factor. A person has a low credit score for a variety of reason but the main underlying issue is the business owner does not respect or adhere to guidelines of a contract or obligation they have held themselves to. yes there are those that have circumstances outside of their control and that is why i feel it is important to look not just at the score but at the last time they had a delinquent flag put against them. If the business owner is on the mend and trying to fix his issues and has not had any delinquent flags against him/her in the last year the credit score could be overlooked.

  5. #5
    I feel its more about whats in the credit and less about the actual score...some guy has been paying everyone forever and has a foreclosure on an investment property in Arizona and suddenly his score tanks to 450...should that guy be an auto decline?

  6. #6
    A forum user Reputation points: 2147483647 Sean Cash's Avatar
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    I think Zach would approve it. =p

  7. #7
    Veteran Reputation points: 134971 Chambo's Avatar
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    Quote Originally Posted by HeatherF View Post
    I can provide my outlook and take on credit scores. When a funder is taking from the split and getting funds before the merchant even has time to mismanage... credit score is not as great of a factor, but when you are set up on ACH repayment and trying to take funds out of a bank account then a business owners repayment history becomes a factor. A person has a low credit score for a variety of reason but the main underlying issue is the business owner does not respect or adhere to guidelines of a contract or obligation they have held themselves to. yes there are those that have circumstances outside of their control and that is why i feel it is important to look not just at the score but at the last time they had a delinquent flag put against them. If the business owner is on the mend and trying to fix his issues and has not had any delinquent flags against him/her in the last year the credit score could be overlooked.
    Doesn't sound like this guy is looking for a $10,000 starter deal

  8. #8
    Veteran Reputation points: 134971 Chambo's Avatar
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    Quote Originally Posted by CO1 View Post
    The guy deposites 600k ending balance of 100k and has 540 credit score, and than he had liens they all been cleared and never had an ACH only a accoutant recieveables fiancing, and a dismissed Chapter 13 a year ago, due to a divorce. Like But what i am getting heated about is not this only its that most of all the funders i work with all come back with FICO, FICO ahh so annoying!
    SFS I believe would do that, as would MAX (though offer will be less than average). What does merchant have on their credit that is spooking folks?

    BTW, I agree with you that many of these funds are getting a little big for their britches and forgetting whence they came.

    They want to charge 40% over six months....and take no risk.

  9. #9
    Veteran Reputation points: 134971 Chambo's Avatar
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    Quote Originally Posted by CO1 View Post
    WHEN THE HELL DID CREDIT SCORE BECOME SUCH A DECIDING FACTOR FOR FUNDING?! WERENT WE NOT FICO SCORE DRIVEN AND BUSINESS PROFORMANCE! I KEEP GETTING DECLINES DUE TO CREDIT! AN ITS SO ANNOYING ME! "This merchant does not qualify for an ACH deal. With a 540 credit score" "The deal was declined on 8/6 due to poor personal credit." its getting under my skin! We are not becoming the last result for businesses now!
    Another response to this might be, "if you believe in the deal so much, pony up some cash and syndicate."

  10. #10
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    Quote Originally Posted by Chambo View Post
    Another response to this might be, "if you believe in the deal so much, pony up some cash and syndicate."
    Lol exactly! Auto declines were implemented for a reason. Statistically, the low FICO deals suck and if you start becoming subjective about these deals, the underwriters will become undisciplined and the default rates will increase.

  11. #11
    Heather makes a very good point. That is the way we view FICO also. It is not about the score, it is what is behind the score. A business with the deposit level described is not looking for $10k, that is a $100k - $200k deal and most (probably not all) funders look carefully at character. We've all been burned too many times by borrowers on an ACH deal that cut us off and don't give a damn and make us litigate, garnish bank accounts etc before we get paid.

  12. #12
    Affordability is all I care about on an MCA deal. If the merchants credit is shot, but their cash flow in their business is steady and they can afford the holdback you throw at them, and they pay their rent, I'm funding them if it is on a split.

  13. #13
    Interesting the distinction everyone is making between "ACH deals" and "MCA deals" as though all MCA deals are on a split or lockbox and thus they are less risky. A large percentage of MCA (i.e credit card based) use ACH as the collection method (through reporting or other means of knowing their daily batching). So are we talking about a difference in risk due to collection method (ACH vs. Split/Lockbox), or a difference in Merchants who accept credit cards vs. those who do not? Again, we ACH credit card advances all the time and I don't see a difference in performance based on collection method.

  14. #14
    A forum user Reputation points: 2147483647 Sean Cash's Avatar
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    Quote Originally Posted by Gini Co View Post
    Interesting the distinction everyone is making between "ACH deals" and "MCA deals" as though all MCA deals are on a split or lockbox and thus they are less risky. A large percentage of MCA (i.e credit card based) use ACH as the collection method (through reporting or other means of knowing their daily batching). So are we talking about a difference in risk due to collection method (ACH vs. Split/Lockbox), or a difference in Merchants who accept credit cards vs. those who do not? Again, we ACH credit card advances all the time and I don't see a difference in performance based on collection method.
    When compared broadly, there should be a material difference in performance between a split deal and an ACH deal. You can't have ACH rejects with a split deal. I'm not saying there aren't ways to circumvent split-processing (there definitely are), but the biggest problem with ACH deals is merchants not having any money in the bank when the ACH hits. That's why split-funding became so popular, because the risk of merchants not having cash in the bank when it comes time to make a payment is and was very high.

    A 550 credit deal with no money in the bank can get approved for a split, but how do you think that will play out on ACH? The collection method matters.

    I am shocked if you do not see a difference based on the collection method. Perhaps you are only funding prime deals with lots of cash in the bank on split? I wrote a bit about ACH vs. Split-funding on the ETA's website: http://www.electran.org/guest-analys...-processing-3/

  15. #15
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    I think there is more difference in performance when you compare high FICO deals and low FICO deals regardless of collection method. I don't really see high FICO merchants with crappy bank statements. A high FICO merchant is typically more conscientious and responsible compared to the low FICO merchant.
    Last edited by MCNetwork; 08-09-2013 at 03:29 PM.

  16. #16
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    At the end of the day, most small business owner's credit score is a direct reflection of the health of their business. Yes there are going to be cases where the credit score and the business are not related, but overall a healthier business pays the owner more profits and in turn keeps down his debt or improves his lifestlye to extend larger credit lines.

    The fact of the matter is, with the traditional lending climate where it is today, there are more than enough high credit (for this industry) applicants that a funder can give an advance to in place of the low ones. This is why we are seeing rates coming down and extend over longer periods of time.

  17. #17
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    sounds right up our ally. whats he merchant looking for?

  18. #18
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    150k i just got an offer from yellow.

  19. #19
    There is a huge difference between split funding and ACH repayment. Especially now, with most funders out there willing to stack on top of an MCA split with an ACH. Split funding is the most reliable method of repayment right now. Lockbox is a terrible alternative to split funding. I've seen more defaults on lockbox deals then split processing deals, so even an LB is riskier.

  20. #20
    CO1...lets do some biz!!!!

  21. #21
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    We already do. I am a sells rep. for a company that works with you guys, if you look at the apps. from them you can see my name on the bottom of the app.

  22. #22
    well in that case..lets do MORE biz!!!

  23. #23
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    Well I do ISO Relations/Sales Rep.

  24. #24
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    I just p.m you who i am. haha An all i have to say is my ISO never could sell any deal i get them!

  25. #25
    Quote Originally Posted by sean bash View Post
    I am shocked if you do not see a difference based on the collection method. Perhaps you are only funding prime deals with lots of cash in the bank on split? I wrote a bit about ACH vs. Split-funding on the ETA's website: http://www.electran.org/guest-analys...-processing-3/
    It may seem counter intuitive that there is no a discernible difference in performance based on payment method (ACH v. Split), but here is my theory. A merchant 'defaults' on an MCA by either 1.)going out of business (not technically a default) or 2.) intentionally avoiding payment. A split does not prevent either of these scenarios. It reduces bouncing, but in my experience, severe bouncing is a symptom of one of the reasons stated above, not an honest rough patch in liquidity management. If you are draining too much cash from a business, it doesn't matter what the method is, you'll end up in the same place very quickly. Don't get me wrong, a split is still my preference because its the cleanest and easiest way to service an advance, but I see it offering any reduction in the probability of default.

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