[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