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10-22-2015, 01:24 PM #1
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Average Default Rate
What would you guys say is the average default rate in the industry?
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10-22-2015, 01:37 PM #2
6-10, high risk 8-14
Zachary Ramirez – CEO
Phone: 562-391-7099
Email: zach@zacharyjosephramirez.com
1661 N. Raymond Ave #265
Anaheim CA 92801
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10-22-2015, 01:51 PM #3
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10-22-2015, 01:43 PM #4
there are two #'s to consider. Default rate, as per # of deals, or rate as % of money funded
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10-22-2015, 01:46 PM #5
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Do you think that rate is/will go up because of stacking and length of terms? Has it gone up this year compared to last year?
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10-22-2015, 01:59 PM #6
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I don't know too many funders that can be very profitable with a 15% default rate.
A-B paper default rate should be 5 - 8%
C-D paper default rate should be 9 - 13%
From my experience once you go over 13% default rate it is very hard to turn a profit. Cost of money, overhead, commissions, advertising etc... Will not allow you to have a default rate above 13%. Unless your average turn time on deals is under 5 months, closer to 3 months then maybe the D paper shops can stomach 13% + default rates because they're turning their money 2.5 - 3.5 times a year
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10-22-2015, 02:15 PM #7
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Which is exactly where I was going with the 15% number. If you are churning deals over 3X a year, then 15% is completely profitable.
Andrew J. McDonald
Director of ISO Development
Yellowstone Capital LLC
1 Evertrust Plaza
Suite 1401
Jersey city, NJ 07302
PH - 347.464.0785
FX - 646.213.1790
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10-22-2015, 05:27 PM #8John Celifarco
Managing Partner
Horizon Funding Group
3423 Ave S
Brooklyn, NY 11234
T: (347) 773-3990 | F: (718) 795-1990
Linkedin: Profile
Email: john@horizonfundinggroup.com
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10-22-2015, 02:19 PM #9
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10-22-2015, 02:25 PM #10
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10-22-2015, 03:10 PM #11
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10-22-2015, 03:20 PM #12
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10-22-2015, 03:29 PM #13
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10-23-2015, 01:31 PM #14
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The math is not simple. But here's a screen shot based on our formulas...
Screen Shot.jpg
One thing to keep in mind is that the money is going out as fast as it's coming in. So, you're putting money out as it's being paid back. So it's not as a simple calculation as you might expect - it's completely algorithmic... Really took quite a while to even figure where to start... It's based on a lot of assumptions. One of which is that a default is when a merchant pays $0
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10-23-2015, 01:36 PM #15
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but are you calculating broker commission , cost of capital and underwriting fees . also no one does 60 days deals anymore
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10-22-2015, 07:51 PM #16
Chambo was right in the fact that there are two components to default:
The percentage of clients who stop or reduce payments
The cents per dollar that you on average lose (eg. 8 cents of every dollar that goes out is your loss reserve)Zachary Ramirez – CEO
Phone: 562-391-7099
Email: zach@zacharyjosephramirez.com
1661 N. Raymond Ave #265
Anaheim CA 92801
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10-22-2015, 09:10 PM #17
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It's actually true, even at a 25% default you can turn 25k into a million in under 5 years with daily collection, 40%+ rates and 3-4 month terms. The real American Dream...
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10-22-2015, 11:18 PM #18
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Now I understand why we have so many pop up lenders that go out of business . Some people are really that clueless
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10-23-2015, 08:34 AM #19
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They go out off business because of who they target with their money and are under funded, they don't test the waters but instead take on huge debt and jump into the deep end with the "big boys" and if they have a bad string of deals it makes it improbable that they can recover. But I am sticking by my number of 15% of True default rate being the absolute max you can handle and be profitable. However, I am in no way saying that should be the goal.
Andrew J. McDonald
Director of ISO Development
Yellowstone Capital LLC
1 Evertrust Plaza
Suite 1401
Jersey city, NJ 07302
PH - 347.464.0785
FX - 646.213.1790
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10-23-2015, 10:08 AM #20
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i agree with the 15% on the 1.45 deals . i was talking about the 20-25% and still make a profit , you are living in lala land .
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10-23-2015, 10:27 AM #21
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10-22-2015, 11:29 PM #22
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10-23-2015, 10:18 AM #23
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Average Default Rate
LMAO Sean
Last edited by FUNd; 10-23-2015 at 10:25 AM.
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10-23-2015, 01:19 PM #24
Average 10%
Above Average still workable 15%
Bad 20%+
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10-23-2015, 01:48 PM #25
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Word.
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