[dpFund]

A question for my esteemed MCA colleagues...

I see so many small business owners that are waaaaay over-leveraged and from what I can see, on their way out of business. They're grabbing more loans for smaller amounts and higher rates to keep up with the payments from the fundings that were made in the previous months.

We've had a few ethical discussions about the right and wrong of this on behalf of the lenders and brokers who bring them these non-sustainable deals, but I have a different question:

If lenders can get their arms around the fact that client insolvency is forthcoming, are they willing to cut a deal to get out from under the looming loss (code for: How much of a discount will they accept?)

Looking forward to your collective insights!

Best,

Dan Page

[AndyYSCISOdept]

This is a really interesting question you pose. I have always said that when it comes to a merchant that is on the verge of defaulting, if there is a deal that can be struck for reduced payments or a settlement offer it is always best to do so rather than take the chances that the merchant cuts you off and decides that they're going to make you waste time resources and money to get back anything.

At the end of the day if you know that the merchant isn't jerking you around and is truly having trouble paying for being over-leveraged then it is absolutely in your (the funder) best interest to work with the merchant on a discounted payback amount or lengthened timeline for payment.

[jotucker1983]

A question for my esteemed MCA colleagues...

If lenders can get their arms around the fact that client insolvency is forthcoming, are they willing to cut a deal to get out from under the looming loss (code for: How much of a discount will they accept?)

Depends on the Funder/Lender and it also depends on why the client is on the form of going bankrupt. If it was because the merchant stupidly (let's just call it what it is) took out 4 cash advances on top of each other, I personally think the Funder/Lender should sue the merchant for breach of contract.

It's time the Funders and Lenders start going to the direct source of stacking, the Merchant. It takes 5 minutes to calculate how much you (as the Merchant) will be paying back in cash advance payments, which can go upwards to 40% of your monthly gross. It's irresponsible for you to sign up (willingly) to stack cash advances on top of each other just because some guy named Larry at PiggyBack Capital called you and "offered" it to you.

That's no different than students signing up for a ton of student loan debt (willingly) and then complaining later that someone "ripped them off". You weren't ripped off, you just failed to do basic math in calculating your ability to pay the debt back.

[AndyYSCISOdept]

John, I mostly agree with what you are saying, however, I think we may have veered away from what was being asked ;-)

Let me understand something, you think if a merchants on the verge of default that the best tactic is to sue them? Which as we all know costs money, time etc and could potentially get you nothing in return.

(Not trying to be combative this is actually something I really want to understand because I have found myself in this situation wth merchants before)

[jotucker1983]

John, I mostly agree with what you are saying, however, I think we may have veered away from what was being asked ;-)

Let me understand something, you think if a merchants on the verge of default that the best tactic is to sue them? Which as we all know costs money, time etc and could potentially get you nothing in return.

(Not trying to be combative this is actually something I really want to understand because I have found myself in this situation wth merchants before)

Andy,

I think it just depends on what the merchant did to get on the brink of default. If it's something normal such as a market downturn, unexpected seasonal period, or something that occurs in the regular/normal operations of said business/industry sector, then for the most part "No" because that's the risk the Funder or Lender takes when doing the deal.

But if the default is coming because the merchant went out and stacked 3 advances on top of your 1st position, then that's a breach of contract and I think Funders/Lenders should start some sort of legal response to these types of Merchants.

[Michael I]

Andy,

I think it just depends on what the merchant did to get on the brink of default. If it's something normal such as a market downturn, unexpected seasonal period, or something that occurs in the regular/normal operations of said business/industry sector, then for the most part "No" because that's the risk the Funder or Lender takes when doing the deal.

But if the default is coming because the merchant went out and stacked 3 advances on top of your 1st position, then that's a breach of contract and I think Funders/Lenders should start some sort of legal response to these types of Merchants.

joe you might be technically right . However it will make no sense to the funder to spend money on legal and lose more money without getting anything from the merchant . Most lenders will take the deal so they get paid back

[AndyYSCISOdept]

I really do believe that there can be some sort of middle ground between the ALL out Stack-a-thon we've seen that has caused a lot of defaults and sensible 2nd maybe 3rd positions which can augment a merchants business in certain situations, especially given the longer and longer term lengths being offered for 1st position deals.

[dpFund]

Thanks for all of your comments/insights. The question I am really trying to ask is how the lenders are handling these issues when they arise. If there is a not a pre-established pattern that is OK. Was just wondering since I'm sure it comes up.

[AndyYSCISOdept]

I'm going to go out on a limb here and tell you that there isn't an established pattern and that most of these situations are handled/treated case by case because of the variety of factors, some of which have been mentioned above.

[Michael I]

Thanks for all of your comments/insights. The question I am really trying to ask is how the lenders are handling these issues when they arise. If there is a not a pre-established pattern that is OK. Was just wondering since I'm sure it comes up.

they play it on a case by case basis . I know that if a merchant has a week with like a death in the family . some will turn it off for a week and some will switch it to a dollar for that week .
Joe fyi i love the name piggyback funding .

[mcaguru]

guys keep in mind this forum ends up on google search. (before everyone get ahead of themselves).

[Michael I]

guys keep in mind this forum ends up on google search. (before everyone get ahead of themselves).

marcus maybe you should stop writing about the double digit commission if you are worried about merchants reading it .

[mcaguru]

marcus maybe you should stop writing about the double digit commission if you are worried about merchants reading it .

you got a Talmudic head.

[Michael I]

you got a Talmudic head.

that is definitely true . i still learn 3 hours a day

[ava712]

I have the perfect solution to this problem: Pay off cash advances with a term loan, or A/Rs or Invoice Financing. Most merchants are not aware there are private lenders with term loans available, if the merchant owns real estate, which most of them do( I know this because I am in the trenches with these merchants everyday.) And if they don't own real estate they can get a no collateral loan from the SBA. Most loans take 7 business days to close, however the SBA loan approval takes only 3 days but the funding takes a month. for more information on helping these merchants and making big bucks also, send me your contact info and a good time fro me to call: adele@fundswired.com

[HDF]

Knock It Off Adele!

[Big Mack]

Knock It Off Adele!

HA!