[bizzcash.com]

http://www.foxnews.com/us/2015/10/21...-cost-so-much/

[MatthewAStucchio]

http://www.foxnews.com/us/2015/10/21...-cost-so-much/

Send this to Zeke Faux over at Bloomberg

[Funder Mark]

Excellent article. The information has been put out before, but this was very well written, and clearly explained the costs of putting out a Merchant Cash Advance.

[MCA]

I see the author is David Rubin, assuming that is Cap Stack/Eprodigy David Rubin?

[Funder Mark]

When I saw the article, that was my first thought.

[AndyYSCISOdept]

Yah I thought it was really well written as well.

[Chambo]

SO merchants reading this will now brow beat you down on commissions, because they know how much you make. that like that some of you use for your fees too ("this is how I get paid") just got flushed down the toilet

Interesting times ahead

[ADiamond]

Rubin is a good guy

i don't understand how the argument is though, that MCA's have high rates because of cost of goods sold??

take a 40% factor, 8-10 points go to commission, 2-3% if you're piggy backing a platform - which covers collections, fees in the contract cover origination and underwriting or so they say so really if you syndicated on deals specifically that were 40-45% @ 80 days paying 10-12 points commission, 3% for platform fees and 7% default rate you're walking away with close to a 25% profit every 4 months after cost, you're walking away with close to 97% profit on your original investment on an annualized basis.

the 25% increases even more for the lender for one reason, those "underwriting and origination fees" that they take out of the funding amount actually drive up the factor rate, so they're in essence getting an even larger return annually say closer to 125%-150%... minus the true cost of capital then because they pay annually interest on lines of credit, they're still making over 100% profit.

obviously these numbers are in a perfect world, and i can honestly say in my syndication account doing strictly 1.419+ max 80 day deals i've seen close to an 80% profit, less for a higher default on riskier deals.

my point is, it's not wise to argue the high factor rates are due to cost of goods sold. our rates aren't annualized, and although it sounds good for the viewers of fox news - 15% (for a fair profit target) is a whole lot different when you're compounding it 3-4 times over a year.

[Chambo]

Zeke wrote an article from the CON side of industry, Rubin wrote one from PRO side....