[MCA]

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

[AndyYSCISOdept]

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.

[J.Celifarco]

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.

not when you take into account overhead and commission paid. You get over 13% bad debt I dont care what you are charging it is hard to make a profit

[YuliyaG]

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.

Turn length and pricing come into play here. You can make a nice profit on a 20% absolute default rate (where merchant pays back a net of $0) if you're doing 1.48 on 3 month turns for example.

[AndyYSCISOdept]

Turn length and pricing come into play here. You can make a nice profit on a 20% absolute default rate (where merchant pays back a net of $0) if you're doing 1.48 on 3 month turns for example.

Obviously the goal is a Default rate under 5% (Need those Tax Write Offs!)

[YuliyaG]

Obviously the goal is a Default rate under 5% (Need those Tax Write Offs!)

Ha! Definitely MIGHT be gettable if you're giving out ten bucks on a 1.10 PB with a 6 month turn... lol

[AndyYSCISOdept]

Ha! Definitely MIGHT be gettable if you're giving out ten bucks on a 1.10 PB with a 6 month turn... lol

I don't think what Im giving is as important as WHO IM GIVING IT TO. Agree?

[Michael I]

Turn length and pricing come into play here. You can make a nice profit on a 20% absolute default rate (where merchant pays back a net of $0) if you're doing 1.48 on 3 month turns for example.

please explain your math

[YuliyaG]

please explain your math

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

[Michael I]

but are you calculating broker commission , cost of capital and underwriting fees . also no one does 60 days deals anymore

[YuliyaG]

but are you calculating broker commission , cost of capital and underwriting fees . also no one does 60 days deals anymore

Yes I understand no one does 60 day deals anymore. Screen shot just shows what is possible if that were the case. Broker commissions and overhead costs are not calculated in this shot. This is just the most rudimentary thing we did before building out more focused models... just grabbed it and made a screen shot.