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  1. #1
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    "Funding Companies" that sell your deal to another funding company

    I spoke to one of my ISOs yesterday and he told me that over the past few months he had several deals submitted with a few particular funding companies. These deals were in "underwriting review" for a month or so. Finally the "funding companies" declined the deals. This ISO later found out that the deals were funded by another larger funding company.

    Has anyone else run into this issue?

    Are all funding companies actually a funding company?

    Is all of your work done just so that another broker who is posing as a funding company can take YOUR commissions?

    isosupport@mfsglobal.com

  2. #2
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    How can it take a month to underwrite a deal?? It shouldn't take more than 48 hours max.

  3. #3
    Veteran Reputation points: 134971 Chambo's Avatar
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    Most funding companies have their own in house sales staff as well as accept ISO bbusiness

  4. #4
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    MCNetwork,

    I agree, MFS Global, Inc gives approvals back the SAME DAY!

  5. #5
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    Chambo,

    Having their own sales staff is fine, but stealing deals????

    That's just very bad business practice.

  6. #6
    some funding companies utilize other funding companies for their loans or advances on syndication or 100% broker business. as long as you get paid, understand this upfront, it shouldnt be a shock.

  7. #7
    Veteran Reputation points: 134971 Chambo's Avatar
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    Quote Originally Posted by mfs01 View Post
    Chambo,

    Having their own sales staff is fine, but stealing deals????

    That's just very bad business practice.
    No offense to you or your ISO, but....

    You are a small company, tight on cash as it is. What are you going to do? Sue them? With what capital? you only submit 10 deals or less a month, so if you threaten to leave, so what?

    Now if you are FUNDING 20-25 deals a month with them or doing $1 mill a month as an ISO, then you are on a different level

  8. #8
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    I understand that some funding companies may not have the capital to fund all deals that are submitted and may have to look elsewhere for the funds, but what my ISO was referring to was the fact that these funding companies were actually stealing his deals and keeping the commissions to themselves.

  9. #9
    Veteran Reputation points: 134971 Chambo's Avatar
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    Quote Originally Posted by mfs01 View Post
    I understand that some funding companies may not have the capital to fund all deals that are submitted and may have to look elsewhere for the funds, but what my ISO was referring to was the fact that these funding companies were actually stealing his deals and keeping the commissions to themselves.
    I understood and answered accordingly.

  10. #10
    Mfs01- if you have proof of this than you should confront them with breach of contract and decide how much revenue loss occurred and if you need to litigate for loss of revenue and misrepresentation- you could always contact the actual funder who funded the deals and explain what happened as well. If its a one off deal lawyering up won't be cost beneficial more than likely -

  11. #11
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    MCAVeteran - This didn't happen to me. I work for a funding company, MFS Global, Inc. I was just relaying something I heard from one of my ISOs and wanted to know if anyone else had experienced this.

    Thank you. I will relay that to my ISO.
    Last edited by mfs01; 09-20-2013 at 10:53 AM.

  12. #12
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    Quote Originally Posted by Chambo View Post
    No offense to you or your ISO, but....

    You are a small company, tight on cash as it is. What are you going to do? Sue them? With what capital? you only submit 10 deals or less a month, so if you threaten to leave, so what?

    Now if you are FUNDING 20-25 deals a month with them or doing $1 mill a month as an ISO, then you are on a different level

    That is a pretty short sided view. All ISO/agents count no matter their submission level or their size. They all add up to the greater picture.

    Direct Funders are popping up all over the place now and reputation is going to be coming into play a whole lot more as ISO's have more resources to go to. I know I sure would not want someone posting on a forum about how we shopped out his deal or stole his commission from him. His one post is seen by many and then those many talk to a lot and soon the whole industry knows. The market we cater to may be big but we operate in a small world and word gets around.

  13. #13
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    Quote Originally Posted by HeatherF View Post
    That is a pretty short sided view. All ISO/agents count no matter their submission level or their size. They all add up to the greater picture.

    Direct Funders are popping up all over the place now and reputation is going to be coming into play a whole lot more as ISO's have more resources to go to. I know I sure would not want someone posting on a forum about how we shopped out his deal or stole his commission from him. His one post is seen by many and then those many talk to a lot and soon the whole industry knows. The market we cater to may be big but we operate in a small world and word gets around.

    Chambo works for Yellowstone. everyone knows they are the bootm feeders. is he saying he will screw over isos unless they have the money to sue?

  14. #14
    A forum user Reputation points: 2147483647 Sean Cash's Avatar
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    Quote Originally Posted by staten View Post
    Chambo works for Yellowstone. everyone knows they are the bootm feeders. is he saying he will screw over isos unless they have the money to sue?
    I don't think he was making a direct reference to the company he works for. He is just pointing out the inconvenient truth that people don't always want to hear in this industry or in any industry. A big company can use its leverage to bully really small companies. Sometimes it's complete BS but normally the small company complaining about getting screwed did not read their contract. That's almost always how it happens. ISO signs a contract that basically surrenders control of the deal and commissions. Everything goes well in the beginning until the bigger company decides to enforce the fine print in the agreement. The small company then stomps its feet.

    Now if you were not so small, the bigger company may be willing to hold off on its right to take possession of the deals because of how much business is being transacted. Even On Deck Capital has clauses that give them the right to take your deal for themselves if they so choose if a certain amount of time passes or something happens. Maybe they'll enforce it. Maybe they won't. Don't like the contract? Don't sign it. Don't have an attorney reviewing your contracts? Then you probably will get screwed at some point down the road.

    if you can't afford to hire a lawyer for just a couple hours to read, reword, or negotiate an agreement for you, then you're probably not going to survive in this industry. If you can't afford to sue someone or hire a lawyer when or if you get sued, then you probably won't survive in this industry. This business is extremely litigious and yet there are still so many battles that never make it to the courtroom. There are 989,830,588,340 ways to get sued or accused of something in financial services regardless of whether or not the allegations are true. If your contracts aren't iron-clad, then you're basically not building anything.

    Now I know nothing about mfsglobal's case, but this whole "pretending to be a direct funder" thing is not a new trend. There are probably more than a hundred companies that operate as such. They're direct for deals they love and they farm out deals they don't. Whether or not you get paid depends on your contract. Whether or not they were transparent about this depends on your contract. Block out whatever they tell you and just refer to the contract.

    What's important?
    The contract
    The contract
    The contract
    The contract
    The contract
    The contract
    The contract

    And if your contract was iron clad and it was definitely breached, sue. No one should be in financial services, especially this realm of it if they can't afford a lawyer.

  15. #15
    sean bash- well put. most do not read the iso agreements, and, just buy into what the business development manager or account manager tells them. what the iso or agent needs to know is, its the contract that ultimately tells the story when things go sour. sure it costs money to have an attorney read the fine print, but, if you plan on spending alot of your marketing dollars acquiring business and trying to build a portfolio for long term revenue, wouldn't a few hours today save you thousands of dollars of headaches tomorrow? Dont ever sign something you dont understand or read. Its that simple. Personnel comes and goes, and, you cant go on what somebody told you on the phone. read the schedule A, renewals, who owns the account policy, assignment clauses, etc, etc. maybe your red line request will get shot down, and, if you cant live with that, move on to the next company...its that simple. the companys who create these contracts spent their money and attorneys to protect them, shouldnt you do the same? If both parties meet in the middle, the business relationship will be much healthier long term.

  16. #16
    Veteran Reputation points: 134971 Chambo's Avatar
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    Thank you Sean and Ed

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    Quote Originally Posted by staten View Post
    Chambo works for Yellowstone. everyone knows they are the bootm feeders. is he saying he will screw over isos unless they have the money to sue?
    I can't speak for Chambo , never worked with him never spoken to him. I can say that I have experienced this from Yellowstone. And this is why we do not do any business with Yellowstone. When our company opened 3 years ago, we would occasionally submit to Yellowstone. Not often, because commission was not good, but they would sometimes do deals no one else would touch. We had 2 deals which Yellowstone declined to us after several days in underwriting, and then Yellowstone went to the merchant directly and funded both of them less than week later.

    Another company that we have caught doing this is Advance Me. We had submitted them a $220,000 deal, they declined to us and gave it to one of their larger ISO's. Good thing we closed it through another funder

    In my opinion, not worth the time and effort to sue. Simply take note of it, and never use that funder again. There are plenty of other options, and plenty of good companies that value their ISO's.

  18. #18
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    Serious accusations there. I never had a problem with Advance Me and I don't work with Yellowstone so I wouldn't know about those kinds of shenanigans...

  19. #19
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    I agree with sean bash.

    But on that note, MFS Global does not farm their deals out. We've built our business around the motto of being "ISO focused". If we don't want the deal, we'll simply tell the ISO, giving them an opportunity to get the deal approved elsewhere.

  20. #20
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    Quote Originally Posted by mfs01 View Post
    I agree with sean bash.

    We've built our business around the motto of being "ISO focused".
    I was talking with a funder who felt that companies who are ISO focused will eventually fall by the way side. He mentioned this in passing - so I didn't get to fully grasp the "why" behind it. On it's face having brokers control paper limits some firms' abilities to profit from renewals... Was curious to know how you'd respond to this particular gentleman if he met you at a conference or something and said; "you don't have a shot if you're ISO focused!"

  21. #21
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    JayBallentine - ISOs bring the business in for us and we understand that ISOs do encounter issues with other funders in regards to turn around times, loss or reduction of renewal commissions, lack of support, etc...
    If the funding company isn't ISO focused, then I elieve that ISOs wil stop submitting to the funding company.

    Although most funding companies have their own inhouse sales team, MFS Global doesn't. Our model is based around that fact that all of the business coming through the door is from ISOs. The ISO is our client and ISOs should get all the support they need from the funding company.
    So my response would be that, "you will have a hard time staying in business if you AREN'T ISO focused".

    Albert
    isosupport@mfsglobal.com

  22. #22
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    To each his own.

    I would have a tough time sleeping at night knowing that the fate of my business rests squarely in the hands of some outside brokers.

  23. #23

    "Funding Companies" that sell your deal to another funding company

    Sean is saying that this is the way the business has been for a while and that is what you are failing to understand mfs01. Sometimes deals go thru multiple brokers before they finally make it to the direct funder who gets the deal funded. This is not new news. Why do you care who is funding your deal if it's getting funded for the commission you are promised. The fact of the matter is Yellowstone and other companies may broker your deal out sometimes but they get the deal FUNDED which you could not do without them in most cases and you get the commission that u were told you were going to get. Your coming off like your a direct funder but that doesn't seem to be the case if you are brokering ISOs deals to more companies..... There's absolutely nothing wrong with going thru an ISO to get your deal done if you can't do it yourself.

  24. #24

    "Funding Companies" that sell your deal to another funding company

    Bottom line boys and girls is we fund deals no one else does, in some cases we do broker the deals out....last month we funded 438 deals in house and brokered out another 400 or so...we fund some of the most high risk files out there and if we can't fund it ourselves we find a funding company that will!!!

  25. #25
    Senior Member Reputation points: 3217 CO1's Avatar
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    you tell them isaac!

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