[Jcoles]

What's lacking in this industry is a funder who gets the job done on high risk deals but isn't over the top on fees. If there would be a high risk player which doesn't have to take 7-12% off the top and can do with 2-3% closing costs -- that'll be something worthwhile.

But that's much easier said than done. You have to pay for commissions, platform fees and turn a profit all while factoring in defaults.

[Michael I]

J what are you talking about . There are high risk lenders paying up to 21 points and charging less then 2 percent origination
With a ten percent closing fee that will be 31 percent

[Michael I]

Interesting comparison. Why would 3 renewals at 4 points be more valuable than 1 renewal at 12? I understand for a syndication portfolio it is more valuable to have diversified risk, but why would it make any difference for a broker, seeing how it is the exact same revenue with less work?

Zach if your merchant stacks , goes out of business , no longer needs . Chambo is 100 percent correct on this

[brokerCompany]

Funding Circle allows you to charge a broker fee if you sign up on their 1.5% commission rate program (they give you 1.5% of their 3.49% origination fee). So you are saying I am greedy if I want to make a total of 8% on the deal?

Dealstruck pays 2% (3% if you close 5 deals) AND allows you to charge up to an additional 2% broker fee. So am I also being greedy if I make 5% on a deal?

I do not think me wanting to make 5%-8% TOTAL on a deal is greedy.

Do you not have an office with overhead? What about the outrageous cost of lead acquisition?

I understand 15%-20% but 5%-8%?

OK you may be on different setup, with volume you get 3%+ of the deal. Read I said 10% ISO fee is greedy
5-8% total is fine but in a cash advance that is already set in and you dont need to charge add if that is what you want to make.

[Jcoles]

Mike would like to here some of those lenders that have low origination fees

[BigIz]

OK you may be on different setup, with volume you get 3%+ of the deal. Read I said 10% ISO fee is greedy
5-8% total is fine but in a cash advance that is already set in and you dont need to charge add if that is what you want to make.

FC has 2 commission structures.

The 2%-3% deal where you CANNOT charge an additional broker fee OR the 1.5% deal where you can charge a broker fee. I wanted to charge an additional 6.5% broker fee to make my TOTAL commission 8%. I would be upfront with the Merchant and tell them that there is a total origination fee of 9.99% BUT that they can get a lot more money, at a very low rate (compared to an advance) for a longer term.
I am not charging a broker fee on advances, just on a term loans.

I will only suggest a term loan to a merchant if I see they will qualify, want over 100K and longer terms.

I am OK with making 5%-8% TOTAL on term loans.

[John Galt]

You can ACH from any company with a voided check and Versa Check (available at most office depots). You simply print a check from the customer's account (get a void one to produce it). I've been doing it for years for my clients (same as a draft, but nowadays bigger banks want you to go in and make the deposit rather than Atm it, so they can verify it. Little known fact also that the banking system in the US now has the ability to actually look into accounts that are not their account. Wells can actually look into a B of A account that is not their customer (done it plenty of times but the bank managers are not supposed to tell you. Shocked me when I watched my banker do it. I don't believe in fees but do it for my other services like business credit.

[Drizzle]

Who is paying 21 points???

[MCNetwork]

Zach if your merchant stacks , goes out of business , no longer needs . Chambo is 100 percent correct on this

Exactly. That's why 3 deals at 4 points each is worth more than a single deal at 12 points. Although the upfront revenue is the same, your risk is diversified and you have more income opportunities with 3 merchants versus 1 when it's renewal time. If you lose 1 of the 3 in the future, you can still earn 8 points on the other 2 when they renew. If you lose the 12 point guy down the road, you're screwed.

[Michael I]

J and drizzle I'll pm you . I don't like free advertising for people

[ridextreme]

How do you mean?

Our renewal rate is through the roof

doesn't wbl owning their assets have anything to do with it?

[anydealfunded]

Just go into the bank that your business account is with and tell them what you want to do. If you pass their underwriting you are good to go and if you don't you are just a loser who makes no money. Try a small regional bank as chase and Bofa won't do it.

[AndyYSCISOdept]

Exactly. That's why 3 deals at 4 points each is worth more than a single deal at 12 points. Although the upfront revenue is the same, your risk is diversified and you have more income opportunities with 3 merchants versus 1 when it's renewal time. If you lose 1 of the 3 in the future, you can still earn 8 points on the other 2 when they renew. If you lose the 12 point guy down the road, you're screwed.

I have always thought that the best way to stay in the game is to keep merchants around, they wont stay around if they get bashed over the head. Give me 5 10K deals over a 50K deal every day of the week. If just 1 of those renews 3-4 times that's a solid win for me, my ISOs, my syndication portfolio and my underwriters.

[dpFund]

I don't reply to many of the philosophical threads like this...but will throw my hat into the ring. :-)

The whole discussion of fees is relative. As a direct lender, I can tell you without a doubt that when I have a broker who is charging fees that are too high, I walk away from the deal since the client is paying too much for the funds and our risk profile goes through the roof so we will not fund the client (FYI: I am not a MCA lender and we do not front load the interest so we do not have the same risk tolerance). I've had brokers walk away because I cannot pay the fees they are accustomed to making I get it and I encourage them to take the client elsewhere, with my best wishes.

That stated, I recently had a client that had shoved his client into eight MCA positions for north of $1M in MCA loans. He was out shopping for a ninth position and not having any luck (imagine that!). The client had good financials and I saw him as a good consolidation prospect for us. When I told the broker that all I could pay him on the deal was two points he almost fainted and exclaimed that he could get 8 points elsewhere. So I asked him which he would prefer... 8 points on $50k or 2 points on $1M.

Result: Two weeks later I sent him a check for $20k for two points on $1M consolidation deal.

On the flip side, if I cannot fund a deal internally and it works to bring it to another lender, I will not do so unless I earn 3% (which I split with the referring party).

This is an awfully long way of saying the number of points one charges the client (or not) is dependent upon a number of variables. Most people here are brokers so I thought I would share a lender's perspective. Hope this helps.

[MCNetwork]

You guys consolidated over $1M of MCAs over 8 positions for one merchant?? You got balls of steel. The risk to reward ratio probably looked horrible. I'll bet before the month is through he'll have 5 new stacks...

[dpFund]

You guys consolidated over $1M of MCAs over 8 positions for one merchant?? You got balls of steel. The risk to reward ratio probably looked horrible...

Ha! Nope. It was great. Client was doing $18M annually and generating $400k per month in net profit...ALL of which was going to his daily MCA payments. I was able to convert him to monthly payments and get him down to $120k monthly so we immediately dropped $280k of net profit onto his bottom line which he is using to expand his business. They have been a great client, with on-time payments. These deals are doable for the right clients.

Of course, not consolidations fit this well. So many of them I see are so upside down they cannot be saved. But this fellow had a strong, profitable business and I was able to pull him back from the ledge. :-)

[AndyYSCISOdept]

You guys consolidated over $1M of MCAs over 8 positions for one merchant?? You got balls of steel. The risk to reward ratio probably looked horrible. I'll bet before the month is through he'll have 5 new stacks...

What recourse do those that "Consolidate" have to prevent people from stacking on top of their deal? I assume none, but I was hoping someone might drop some knowledge on me.

[MCNetwork]

Ha! Nope. It was great. Client was doing $18M annually and generating $400k per month in net profit...ALL of which was going to his daily MCA payments. I was able to convert him to monthly payments and get him down to $120k monthly so we immediately dropped $280k of net profit onto his bottom line which he is using to expand his business. They have been a great client, with on-time payments. These deals are doable for the right clients.

Of course, not consolidations fit this well. So many of them I see are so upside down they cannot be saved. But this fellow had a strong, profitable business and I was able to pull him back from the ledge. :-)

If you got his payments down to 120K per month, he must have not been able to net much after paying off the other balances, unless you got him $2 million plus over a 24 month term. I just don't see how the numbers can work in your favor. This is a guy addicted to cash advances and he'll pile up positions very soon and leave you guys exposed.

[dpFund]

What recourse do those that "Consolidate" have to prevent people from stacking on top of their deal? I assume none, but I was hoping someone might drop some knowledge on me.

I'm sure there will be lots of opinions on this, but we have a binding agreement with consolidation clients that they are not allowed to have any additional loans while they are repaying us. We have a process in place wherein we do monthly lien searches, monitor bank accounts, etc. to ensure compliance. If they violate the terms they are in default and we take immediate action to come and take all of our money. Too many specifics for this thread, and I do not want to hijack the thread talking about my business model. But suffice to say, we protect our asset and the consolidation can be life changing for the right clients. This plays into other threads that have been started here about clients being forced out of business by greedy lenders and brokers. I can bring some of them back into the land of the living, but it needs to be the right fit.

[dpFund]

If you got his payments down to 120K per month, he must have not been able to net much after paying off the other balances, unless you got him $2 million plus over a 24 month term. I just don't see how the numbers can work in your favor. This is a guy addicted to cash advances and he'll pile up positions very soon and leave you guys exposed.

Again, I am sensitive about hijacking this thread and did not mean to do so. In this client's case, all he needed was $100k which I was able to qualify him for. He was instantly profitable after the consolidation and did not need any additional funds since now he was $280k in the black on a monthly basis. It does not work for all clients but it worked for him. Any additional questions please email me at dan@fundingstrategypartners.com. Thanks - Dan Page

[MCNetwork]

So the merchant receives $100K in hand and owes about $1,400,000 in payback? Let me know how that works out for you

[AndyYSCISOdept]

dpFund - thanks for the response that was what I needed to know.

PS don't worry about the hijacking, Im the DB Cooper of DFer.

[Michael I]

dan
Cant anyone make their financials look good . there is no way someone that had 8 advances is making a profit . If he was working on such margins why would he ever need an advance .
also if he stacks you take all your money back . How he didn't get it and doesn't have it ?

[MCNetwork]

I think the first alarm bell I would have is...why would an $18 million business be willing to pay an exorbitant amount of interest on interest from refinancing a million dollars of advances in order to get a measly $100K??

Sorry for hijacking the thread dpFund, but this makes a very interesting case study...

[FCF Fund]

Gentleman,

Let me be the first to say that Dan looks at all financials, the rates are not MCA rates which allows a true refinance and along with the fact its a monthly payment. Dan's company is a balance sheet lender, if anyone knows what that is.

I personally know whom this merchant Dan consolidated, he has a extremely profitable business in the medical services industry with great margins. Problem is in the past no one was willing to give him what he needed as his business consumed a lot of overhead while being profitable. It was easier to stack him than give him a term loan.

The deal was not done in the normal MCA speed, financials such as tax returns can not be faked. As well looking at his past performance and NEVER bouncing a MCA payment in at least 1 year while maintaining at least 100k in daily balance, I wouldve syndicated on this deal myself as you cant get a better "sure thing" than this merchant.