[wally]

If people sign a guaranty or a COJ then why do lenders still want 1.5? I understand it is due to risk, but is there that much risk of not getting the money back? If someone defaults is it that difficult to collect? I had someone default recently and I'm wondering if it is really that hard to collect? Do most lenders get their money back? Or just give up and never try to get a judgement?

[mcaguru]

Before anyone gets excited about how much is made on funding a file, lets take a look at the inner works and costs for a direct lender making an Advance:

Overhead of Office space in multiple cities.

Cresthill Capital has a pre-underwriting and underwriting department that's entirely salaried based that scrub each and every file.

The costs of fee-based programs to run extensive backgrounds on every file (you can buy homes in many cities just for those annual fees).

Cost behind having Advanced Technology

IT Department

Daily Collections (salaried) department.

Legal Department.

Accounting Department

Cost of capital.

Additional Dozen+ salaried employees to manage the thousands of clients.

Cost of paying ISO's Double Digit Commissions. (love that expense!).

Uncle Sam

the expense list goes on and on ......

[J.Celifarco]

to answer your question with a COJ it is not hard to collect the money back.. 1.5 is crazy in my opinion with or without a COJ but with makes it double crazy..

[FUNd]

If people sign a guaranty or a COJ then why do lenders still want 1.5? I understand it is due to risk, but is there that much risk of not getting the money back? If someone defaults is it that difficult to collect? I had someone default recently and I'm wondering if it is really that hard to collect? Do most lenders get their money back? Or just give up and never try to get a judgement?

A COJ only guarantees a judgment. A judgment doesn't guarantee payment. I like my role as a broker, and I sympathize with lenders. In the beginning I thought a 1.459 was outrageous, now, after seeing the portfolio performance over a long period on these merchants, I understand why the rates are what they are.

[ADiamond]

If people sign a guaranty or a COJ then why do lenders still want 1.5? I understand it is due to risk, but is there that much risk of not getting the money back? If someone defaults is it that difficult to collect? I had someone default recently and I'm wondering if it is really that hard to collect? Do most lenders get their money back? Or just give up and never try to get a judgement?

A COJ offers an automatic judgment without any court proceedings. How it's used to collect is up to the lender's methods for collections. Some know how to use it, some don't. Some lenders get paid, some don't. To answer your question simply: at the end of the day, this is unsecured lending.

[MCNetwork]

Yes if someone defaults it's pretty difficult to collect. Merchants who accept 1.5 factor deals are in absolute desperation and the default rates for those deals are probably over 20%. After paying overhead and broker commissions, I wouldn't be surprised if the funder was essentially flat on this type of portfolio. I believe that the more money a funder puts out on the street, the more the return on the portfolio reverts to a mean of zero. The best way to be profitable on a portfolio is to be extremely selective on the deals you fund, not to try and fund everything under the sun. Your portfolio size may be very small, but profitability will be extremely high.

[ridextreme]

Yes is it that difficult to collect. And do you think a judgement means anything to someone with bad credit which most merchants have

[FUNd]

Yes is it that difficult to collect. And do you think a judgement means anything to someone with bad credit which most merchants have

Exactly. And the ones with the 540 FICO and 42 PAYDEX that pound their fist over the rates, unbelievable. So let's get this straight...you've victimized 10 personal lenders and half or your suppliers with your irresponsibility, and you deserve a "low" rate why?

[ridextreme]

Exactly. And the ones with the 540 FICO and 42 PAYDEX that pound their fist over the rates, unbelievable. So let's get this straight...you've victimized 10 personal lenders and half or your suppliers with your irresponsibility, and you deserve a "low" rate why?

"Ok let me see why they gave you such a high rate... Your credit score is 560, you have 5 charge-off's from credit cards you walked away from, your bank has 5 days negative per month with 12 NSF's... you know what? I really don't know how they got you approved, it looks like a mistake, can you hold on for a minute? What? Oh, you'll take it? ok docs are on the way!".

[jotucker1983]

"Ok let me see why they gave you such a high rate... Your credit score is 560, you have 5 charge-off's from credit cards you walked away from, your bank has 5 days negative per month with 12 NSF's... you know what? I really don't know how they got you approved, it looks like a mistake, can you hold on for a minute? What? Oh, you'll take it? ok docs are on the way!".

Lol, you bring up a good point that sometimes I (secretly) rant about on the sideline. Sometimes it amazes me on how a merchant can run a $1 million plus grossing business, but sometimes be extremely unorganized in terms of managing their credit, legal documents, tax documents, etc.

I totally understand the fact that for small businesses, obtaining bank financing is difficult, which creates a thriving alternative space. However, I don't see why "alternative" has to be code word for: bad credit, not paying taxes, not managing cashflow, not paying landlords on time, being extremely unorganized, etc.

- For example, you are closing up a file and your Funder needs a copy of their Driver's License, and they send you over an expired Driver's License copy lol. How is it that you can't update your Driver's License on time?

- Or you are needing three months of bank statements in an age of Online Banking where you should be able to just log in online somewhere, pull them off in PDF format, then email them right back over. But in the case of some merchants, they say that they never signed up for Online Banking and have to go "dig up" the statements. But the kicker here is that when they fax them over, the pages are out of place, most of the pages are missing, and you have to go back to them at least two - three times to refax over all of the pages.

I don't know, it's always something that I never understood, but God Bless the merchants though , who knows maybe they are just so busy running the shop that they lose time to keep their lives organized.

[ridextreme]

Lol, you bring up a good point that sometimes I (secretly) rant about on the sideline. Sometimes it amazes me on how a merchant can run a $1 million plus grossing business, but sometimes be extremely unorganized in terms of managing their credit, legal documents, tax documents, etc.

I totally understand the fact that for small businesses, obtaining bank financing is difficult, which creates a thriving alternative space. However, I don't see why "alternative" has to be code word for: bad credit, not paying taxes, not managing cashflow, not paying landlords on time, being extremely unorganized, etc.

- For example, you are closing up a file and your Funder needs a copy of their Driver's License, and they send you over an expired Driver's License copy lol. How is it that you can't update your Driver's License on time?

- Or you are needing three months of bank statements in an age of Online Banking where you should be able to just log in online somewhere, pull them off in PDF format, then email them right back over. But in the case of some merchants, they say that they never signed up for Online Banking and have to go "dig up" the statements. But the kicker here is that when they fax them over, the pages are out of place, most of the pages are missing, and you have to go back to them at least two - three times to refax over all of the pages.

I don't know, it's always something that I never understood, but God Bless the merchants though , who knows maybe they are just so busy running the shop that they lose time to keep their lives organized.

that is why most of these people need a 45% loan, because they are so lazy and don't know how to run a business. And, they take it over and over and over again so this mca becomes their paycheck! Also that is why it takes some of them forever to send an application, when I call them for months and say "I guess you can't really use the money" but he says "Yes I do need it I'll get everything to you tomorrow" which goes on for months.

[blKC]

A COJ only guarantees a judgment. A judgment doesn't guarantee payment. I like my role as a broker, and I sympathize with lenders. In the beginning I thought a 1.459 was outrageous, now, after seeing the portfolio performance over a long period on these merchants, I understand why the rates are what they are.

It's kind of a chicken and egg debate. They are more likely to default due to high rates, yet deserve higher rates because they are more likely to default...

[FUNd]

that is why most of these people need a 45% loan, because they are so lazy and don't know how to run a business. And, they take it over and over and over again so this mca becomes their paycheck! Also that is why it takes some of them forever to send an application, when I call them for months and say "I guess you can't really use the money" but he says "Yes I do need it I'll get everything to you tomorrow" which goes on for months.

If I have to ask more than 2x for an application and banks, a prospect goes in the dead pile. I never give advice, but after careful internal analysis, if you have to ask for an application more than twice, the chances of the deal coming to fruition drop significantly. Your time is better spent chasing new prospects.

[Michael I]

I always thought the purpose of it is to make the merchant think twice before defaulting . Sort of a scare tactic . At the end of the day anothe judgement to a terrible credit guy is not going to faze him to pay .
However it is extremely hard to get a 700 credit merchant looking for a second or highly restricted industry to sign those damn coj .

[Michael I]

Before anyone gets excited about how much is made on funding a file, lets take a look at the inner works and costs for a direct lender making an Advance:

Overhead of Office space in multiple cities.

Cresthill Capital has a pre-underwriting and underwriting department that's entirely salaried based that scrub each and every file.

The costs of fee-based programs to run extensive backgrounds on every file (you can buy homes in many cities just for those annual fees).

Cost behind having Advanced Technology

IT Department

Daily Collections (salaried) department.

Legal Department.

Accounting Department

Cost of capital.

Additional Dozen+ salaried employees to manage the thousands of clients.

Cost of paying ISO's Double Digit Commissions. (love that expense!).

Uncle Sam

the expense list goes on and on ......

Marcus at the end of the day does the coj help you collect your money more then the files you lose because they won't sign it

[Zach]

If I have to ask more than 2x for an application and banks, a prospect goes in the dead pile. I never give advice, but after careful internal analysis, if you have to ask for an application more than twice, the chances of the deal coming to fruition drop significantly. Your time is better spent chasing new prospects.

+1, solid advice

[mcaguru]

Marcus at the end of the day does the coj help you collect your money more then the files you lose because they won't sign it

I don't have the answer.

we fund hundreds of files with no COJ.