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