[js_closed]

Looking for lender that consolidates and pays 5 points.

[SCCNY]

Powerup consolidates and number of balances and the merchant doesn't need to net anything. 5 points on those fundings.

[SCCNY]

You can get way more than 5 points with most lenders thats a pretty low number to be requesting lol

[John Galt]

Can only tell you my guy at powerup, Charlie Mayo..has been good to me. Got a position not alot would do and funded (small 55K) but did it fast with due diligence and at a good rate, just last week. Paid for dinner.

[Cfairbank]

We do quite a few consolidations/balance transfers. No max positions, no required net to merchant. 5 points up front, 5 points on renewal. If docs are in order, can fund in 24 hours, and you'll get an offer or rejection within one hour. Rates typically sub 1.35x on consolidations. www.breakoutfinance.com. Email me for ISO package and program summary. carl@breakoutfinance.com

[dpFund]

There have been a number of discussions on DF about consolidations, so it is good you bring up points.

There are MCA-type lenders out there that will consolidate other MCA loans. Some will consolidate all of the loans, and some will only consolidate some of them (max limits). But almost all of them charge daily payments to the client, with a marginally lower rate than the client is already paying, so it does in fact save them money.

But if you are truly trying to help your clients to consolidate their daily payments and drastically reduce their payments, you should not be trying to maximize points. Otherwise...you are missing the "point". :-) Not trying to be sanctimonious here...but rather just clarify.

If your client has a solid business with predictable profits and healthy financials, they stand a chance at getting out from underneath the burden of daily payments by truly consolidating the loans, and stretching out payments over a longer period of time (at least twelve months if not longer) and for a lower rate.

But if a lender is paying at least five points, by definition it means they must charge a high(er) rate and/or have a shorter term to honor your request for more points.

I truly do understand the desire to maximize earnings on fundings. It is how we all put food on the table. But we need to clarify which clients we can maximize points on (e.g. a true MCA loan that has strong margins built in to accommodate paying high fees to the referring party vs. a funding designed in principle to lower the rate for the client and therefore by definition does not have the margin to maximize commissions).

In short, if you want to maximize points, consolidations is not a path to take, and you want to get your clients away from a short term (e.g. less than twelve months) and daily payments.

All this stated, it takes the right client with strong financials and solid future revenue prospects to qualify for this type of consolidation financing. Many of them are so far under water from stacking they cannot recover. If they do not qualify, then getting them a somewhat lower rate/longer term can likely help their situation.

Please understand, this is NOT a slam against my MCA colleagues. Quite to the contrary. There are a lot of excellent MCA lenders and there is definitely a place for this funding model in our industry (as proven by the millions that are funded weekly).

I say this from a place of experience as I do a lot of consolidations (on track to consolidate $4M + this month). I don't pay five points, but the referring brokers earn a nice income since I consolidate all the balances and the total amount funded is often very high (I've funded multiple consolidations ranging from $800k - $1.2M for large healthy clients, plus lots of smaller ones, naturally). You can earn just as much from a high balance consolidation with lower points as you can from a low balance funding with higher points. Plus...you now have a product/service in your arsenal that is highly sought after and your client comes out being a stronger company that is more likely to survive and flourish.

OK...I'll hop down off my soapbox now. ;-)

If you have questions or would like to dig deeper feel free to email me.

Best,

Dan Page
dan@fundingstrategypartners.com

[RichardGerard]

Agree with Dan wholeheartedly.. If there is ever going to be a regulating dynamic to this industry, it will pertain to the fiduciary responsibility intermediaries have to their clients. While I understand that this is not a hobby, getting the right solution to a client's cash flow should be what matters most... Ultimately referrals, a greater level of trust, and more business will occur organically..

[Cfairbank]

Great points, Dan. I fully agree with you -- a lot of these companies are too far down the path to be saved, and even for those that aren't, a six month MCA or MCA-like loan won't fix their problems. That said, there are a lot of merchants on the brink -- I believe you can help these folks with a nine or 12 month product and lowered payments, but given risk profile, you can't take them from a 1.49 to a 1.25x factor or straight interest-rate based loan. But for many merchants that fall in that category, you can materially improve their situation by lowering payments and extending term but also mitigating your risk -- take them from the 1.49x to 1.3/1.35x, extend the term to 9 to 12 months and materially lower total monthly payments (and frequently change payment schedule from daily to weekly or monthly). We (Breakout) currently offer three products -- ACH MCA, factor rate-based loan, and interest rate-based loan. We hope to gradually improve our merchants by changing product and/or rate at each reload or new deal. However, we only focus on the smaller deals (sub 100K), typically don't extend past 12 months, and will only take a first position -- that isn't the right deal for many merchants, but a material improvement for many with upside.

That said, we are in the business for getting the right deal for the merchant -- and if they can qualify for Dan's program, I would strongly encourage brokers to consider his program -- the longer the term and the lower the rate, the more effective these consolidations will be. And a sub 5% rate on a $1MM deal is a pretty nice commission

[jotucker1983]

This is a very good discussion and I hope it continues.

I also think a lot of broker houses are seeking the "10 points minimum" because they are blowing through a ton of capital to acquire the client as well as having a high cost of general operations. So they want to have their inside team use whatever type of tactic to make sure they get 10 points on a deal so they can try to recoup or become profitable on the first deal funded, even though a lot of them still aren't profitable on the first deal funded due to their high operational costs.

It's a side benefit to being a one man show like I've been, I don't have a high operational or marketing cost. My "actual and real" business expenses are significantly low, so low they honestly don't even register.

This allowed me to do what's best for the client, win deals from these competing broker houses (because my deal is centered more for the client than making 10 pts on one transaction), and have a longer renewal period with most of the clients where I could "sit back" and do nothing all month but just manage my renewal portfolios.

[John Galt]

Good to see "eyes wide open" guys on the forum. Too many people on here that charge app fees and want/get 15% for a one time shot. Others take that business away quick when the client figures out that there are other less expensive funding vehicles that make sense and he's mad at the original salesman. Those salesmen won't be here a year from now and eventually the business payday advance companies will have to be regulated. Those books of business will be redistributed, hopefully to people that will also work to find out why the client got into that bad credit issue and resolve it. Most of my business is renewal, though I have a couple of salespeople that are all taught to do more than an MCA. On term loans we are lucky to get 3% which is still great, but we try to assist our clients with other forms of financing and credit remediation. A lot of our MCAs go to the CANs of the world at 7% with a 3% bonus. Happy with that and they usually go out longer than the short term stuff.

[Michael I]

It's time to stop the nonsense and all this bs of saying you care for the merchant and the broker doesn't .
Dan I believe charges a 1.31 for twelve months which is nearly the same buy rates as all the other lenders .and more then odc, can, bfs etc. The only difference is his convoluted thinking that only he can make his crazy interest from the merchant and not let the broker make at least 5 points, that paid for all the marketing all called ten thousand ucc to bring it in
I want to be clear that I think Dan is a great guy and has a product for a need for certain people . But please stop being so one sided blinded thinking you care more about the merchant with these crazy rates . Is there really such a difference between a 1.31 and a 1.35 . Bottom line is open your eyes to the other side of the fence and understand it

[SCCNY]

I agree with Michael here, all I am saying is that pretty much any 1st position lender will buy out two advances and you can get your 10-12 points with the merchant still getting a factor in the low 1.3s. There are situations where if the merchant qualifies you can take them to a Term lender or if they are a repeat client and it is fine making the lower points . But what is the problem with making that extra money on big deals if the merchant still getting a good deal , arent we all doing this to make money or whats the point lol

[dpFund]

It's time to stop the nonsense and all this bs of saying you care for the merchant and the broker doesn't .
Dan I believe charges a 1.31 for twelve months which is nearly the same buy rates as all the other lenders .and more then odc, can, bfs etc. The only difference is his convoluted thinking that only he can make his crazy interest from the merchant and not let the broker make at least 5 points, that paid for all the marketing all called ten thousand ucc to bring it in
I want to be clear that I think Dan is a great guy and has a product for a need for certain people . But please stop being so one sided blinded thinking you care more about the merchant with these crazy rates . Is there really such a difference between a 1.31 and a 1.35 . Bottom line is open your eyes to the other side of the fence and understand it

Michael - Not sure why you are slinging mud here, saying that I'm stating that I care about the merchants and brokers don't. I am not saying anything of the sort, and your attempted bullying does not change that. While I abhor the pissing matches that sometimes break out here on DF, it would send the wrong message to sit back and turn the other cheek when your insults are off base. So here goes...



As a lender, I am intimately aware of the actual numbers behind every client, including commissions paid, the cost of funds, default rates, early payoff percentages and all the other variables that go into the return on capital (or loss) for every single client. With consolidations, we are dealing with a client that has a history of stacking, providing them with a lower rate than they currently have, over a much longer period of time (everyone on this forum knows that risk increases substantially with term), for total funding balance size that nobody else will touch (up to $2M).

I cannot expect Michael to understand what goes into these numbers since he is not the direct lender. Without going into too much detail, here are some high level insights that might shed some light:

1.) I do not front load my interest. I'm guessing that one of the reasons some lenders can afford to pay such high commissions is that they do front load their interest. No judgments. That is absolutely fine. Just a different business model.

2.) I allow (and encourage) clients to pay their note off early to maximize their savings. Clients can pay off at six months with no fees, penalties nor interest. While that may simply sound like some marketing jingle, the client savings (and conversely, the negative effect upon ROI) are substantial. Back to point number one above...since I am not front loading the interest, when a client pays off at six months, their overall cost of capital is LESS THAN HALF of what it would be if they went for a full twelve month term. A significant percentage of clients take me up on the early payoff, which cuts ROI more than half. I never know which clients are going to do it. The early payoff is available for the entire funding term.

3.) We recently instituted a program wherein clients can choose an eighteen month term. This cuts their monthly payments even further, providing them with even more opportunity to pay off early (the six month payoff remains). If they are prudent with their cash flow, this makes it very easy for them to pay off early and enjoy the discounts.

4.) Our maximum funding amount is $2M. I regularly consolidate balances well into the high six figures and seven figures. The risk on this position is tremendous, for all the obvious reasons. If a funding goes south for a large balance like this it will take millions of dollars in additional funding to make up for that one loss.

5.) When clients do pay off early, they immediately qualify for a lower rate, since we would no longer be consolidating debt. And they take advantage of it. In fact, we are working on a model to consistently lower rates (and subsequent ROI) over time as clients prove themselves to be lower risk. I've had clients fund with me 8-10 times and I pay the broker the same amount for the entire lifetime of the client relationship. Over the long term, broker earnings can be significant with this model.

6.) If we paid the high commissions that some of my brethren do, we would be belly up in under twelve months given my explanation above, since there is not room for it in the financing model. It doesn't make other lenders wrong to have their financing model and it does not make me a saint. It's just good business, on both side. Instead, we provide a solid niche product (in the case of consolidations) that is a great fit for some clients and the brokers that bring them to us.

I don't know why Michael has chosen to publicly spit in my eye, but his allegations are grossly uniformed, at best.

Back to the original question that was posed here...If you are focusing on consolidations, I don't think maximizing (front-end) commissions should be your core criteria. Instead, it should be the total amount earned from the client over time, when consolidating large balances and earning commissions on subsequent fundings from the client.

I hope this helps to clarify the situation and dispel Michael's visceral comments.

[Jcoles]

what company are you with dpfund?

[John Galt]

Finally Dan, someone stands up to the ignoramuses. I have him on ignore so didn't read his comment. But but did you really mean uniformed? LOL. I agree wholeheartedly with your dissertation. The fees should not be the goal. In the grand scheme (macro), it is the client who is important and who pays you. Keep them on the books as long as possible by doing the right thing.

[bdshaw]

As you know Dan this is not my area of expertise so help me out here.
If you are consolidating previously written MCA's isn't the client then paying for its unearned discounts/interest which will create a loan that is the some of all the payoffs? My understanding is that you are creating a new loan adding additional interest just reducing monthly payments.
One more thing I'm hazy on. If your clients prepay their loan I understand that you earn less money but how
does your Roi get effected as presumably the APR remains the same no matter when paid.
Bob
ypur ROI does

[Michael I]

Michael - Not sure why you are slinging mud here, saying that I'm stating that I care about the merchants and brokers don't. I am not saying anything of the sort, and your attempted bullying does not change that. While I abhor the pissing matches that sometimes break out here on DF, it would send the wrong message to sit back and turn the other cheek when your insults are off base. So here goes...



As a lender, I am intimately aware of the actual numbers behind every client, including commissions paid, the cost of funds, default rates, early payoff percentages and all the other variables that go into the return on capital (or loss) for every single client. With consolidations, we are dealing with a client that has a history of stacking, providing them with a lower rate than they currently have, over a much longer period of time (everyone on this forum knows that risk increases substantially with term), for total funding balance size that nobody else will touch (up to $2M).

I cannot expect Michael to understand what goes into these numbers since he is not the direct lender. Without going into too much detail, here are some high level insights that might shed some light:

1.) I do not front load my interest. I'm guessing that one of the reasons some lenders can afford to pay such high commissions is that they do front load their interest. No judgments. That is absolutely fine. Just a different business model.

2.) I allow (and encourage) clients to pay their note off early to maximize their savings. Clients can pay off at six months with no fees, penalties nor interest. While that may simply sound like some marketing jingle, the client savings (and conversely, the negative effect upon ROI) are substantial. Back to point number one above...since I am not front loading the interest, when a client pays off at six months, their overall cost of capital is LESS THAN HALF of what it would be if they went for a full twelve month term. A significant percentage of clients take me up on the early payoff, which cuts ROI more than half. I never know which clients are going to do it. The early payoff is available for the entire funding term.

3.) We recently instituted a program wherein clients can choose an eighteen month term. This cuts their monthly payments even further, providing them with even more opportunity to pay off early (the six month payoff remains). If they are prudent with their cash flow, this makes it very easy for them to pay off early and enjoy the discounts.

4.) Our maximum funding amount is $2M. I regularly consolidate balances well into the high six figures and seven figures. The risk on this position is tremendous, for all the obvious reasons. If a funding goes south for a large balance like this it will take millions of dollars in additional funding to make up for that one loss.

5.) When clients do pay off early, they immediately qualify for a lower rate, since we would no longer be consolidating debt. And they take advantage of it. In fact, we are working on a model to consistently lower rates (and subsequent ROI) over time as clients prove themselves to be lower risk. I've had clients fund with me 8-10 times and I pay the broker the same amount for the entire lifetime of the client relationship. Over the long term, broker earnings can be significant with this model.

6.) If we paid the high commissions that some of my brethren do, we would be belly up in under twelve months given my explanation above, since there is not room for it in the financing model. It doesn't make other lenders wrong to have their financing model and it does not make me a saint. It's just good business, on both side. Instead, we provide a solid niche product (in the case of consolidations) that is a great fit for some clients and the brokers that bring them to us.

I don't know why Michael has chosen to publicly spit in my eye, but his allegations are grossly uniformed, at best.

Back to the original question that was posed here...If you are focusing on consolidations, I don't think maximizing (front-end) commissions should be your core criteria. Instead, it should be the total amount earned from the client over time, when consolidating large balances and earning commissions on subsequent fundings from the client.

I hope this helps to clarify the situation and dispel Michael's visceral comments.

Dan I apologize if I came off as an attack . It is not my attention to start another pissing match . I just wanted to point out the other side . Of course they are things I won't know that a direct lender will . I actually thought you will have also brought up cost of capital unless it's all your private money .
We have spoken and I have the upmost respect for you, it is just an ongoing thing on this forum with a bunch of lenders and I let it out on your thread that there are 2 sides

[John Galt]

Holy crap Robert! Use the edit button (lol). Had to read the paragraph 3x to figure out what you were saying. The general idea is to reduce the clients payments. The sum will increase but the effect of the lower payment increases the cash flow, and yes it's interest upon interest. I believe prepayment reduces ROI, because now the funds have to be redeployed.

[Michael I]

Dan also this moght be a noob question but paying 5 points and getting more deal flow wether it's to fund more or be more picky who you take . Won't that bring down your risk score ?

[dpFund]

Dan also this moght be a noob question but paying 5 points and getting more deal flow wether it's to fund more or be more picky who you take . Won't that bring down your risk score ?

Hi Michael - I guess there is not a perfect answer to this question, but I will try. I guess first off, I have lots of deal flow (at least at the present, but you never know what the future will bring). But the deeper answer is that we know what our ROI needs to be to service our investors (we have our own personal money in the fund but some wealthy investors provide us with a lot of funds). Working backwards is what brings us to the discount rate we must charge. There are many variables included in that calculation, a few which are mentioned in the discourse above. If we add more points to the front end, the net result would be to raise the cost of funds to the client.

I do allow the referring party to put a couple points on it if they need to in order to make it worthwhile for them. But I need to know what those amounts are. Our experience has been that there is an inverse relationship between the amount of points charged and the default rate, which makes sense if you think about it. Hope that helps.

[dpFund]

Funding Strategy Partners. dan@fundingstrategypartners.com


I am a principle. We have a very dated and ugly website that is in dire need of updating, but have not gotten to it yet since 100% of my business comes from referral.

[dpFund]

As you know Dan this is not my area of expertise so help me out here.
If you are consolidating previously written MCA's isn't the client then paying for its unearned discounts/interest which will create a loan that is the some of all the payoffs? My understanding is that you are creating a new loan adding additional interest just reducing monthly payments.
One more thing I'm hazy on. If your clients prepay their loan I understand that you earn less money but how
does your Roi get effected as presumably the APR remains the same no matter when paid.
Bob
ypur ROI does

Hi Bob,

Sometimes clients can get a little bit of relief from their MCA lenders if they negotiated a pre-pay before they funded. And some MCAs will give some type of pre-pay discount even if it was not negotiated. But the short answer is yes, the client will be paying interest on interest and we make sure they go in eyes wide open. We are intently interested in HOW they are going to use their savings. The clients we fund use our money to earn a ROI in excess of the cost of our funds. If they cannot do so we will usually not fund (or they might not get as much as they want). For example, we are consolidating a client now with about $160 of MCA debts. The client wanted another $20k to redecorate his office. We refused the extra funds. That is something he should be using his profits for, and not my expensive money. Some clients want extra funds so they can put it in their bank account just in case they might need it and we refuse to do that also. They have to demonstrate how they are going to use my money to generate incremental profits or they don't get the funds. Might sound like we are being control freaks, but at the risk of sounding sanctimonious...I want to do everything possible to be sure clients are making smart decisions with my money.

In answer to your second question, if a client pays early our overall ROI goes down because we are not front loading interest. That stated, during the time frame the money is on the street (e.g. six months) we still earn the same ROI on a monthly basis. That stated (and this addresses the now infamous "5%" question), if I had to pay high fees on the front end, we are not front loading interest AND the client pays off early, that 5% would drastically reduce the ROI since it would come right off the top. And to John Galt's point above, we have a sunk cost to redeploy those funds, since we do not charge DD fees.

[John Galt]

DArn....I thought Dan was "MY FAATTHHER"! said in a truly star war way. LOL.

[#1closer]

Looking for lender that consolidates and pays 5 points.

Fusion Capital will consolidate and pay 5 plus points

[Seth A]

Power up is currently one of the most active DIRECT FUNDERS . Although we do all types of loans from 1st - 4th positions, our niche is consolidating outstanding loans and lowering daily payments. The average loan in regards to consolidation is $185,000. Our family fund has allocated an additional $85,000,000 for future funding's. We are currently looking to expand and offering our ISO's 6 - 12 % points. Below I have provided an overview of our funding parameters.

- We look for credit scores 550 and above

- The only state we do not fund is CA, NY, RI & TN

- The industries that we do not fund is CAR SALES, CONSTRUCTION GENERAL CONTRACTORS , LEGAL OFFICES & ACCOUNTING OFFICES.

- We cant fund sole proprietorship's ( has to be corp,llc etc.)

- We do all types of loans from 1st to 4th positions

- Our niche is the consolidations, where we look to consolidate outstanding loans and lower daily payments. Average loan amount on consolidations is around $185,000.

- Our loan amounts range from $20,000 up to $500,000

- Our rule is to come back every couple months with additional loans

Contact Info:
Seth A
P (516) 498-9890
F (516) 498-9894