[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.