[J.Celifarco]

So beside for kalamata every lender will fund on top of regular financing. I have never seen an "A first position lender" ask to see terms on his bank loan or invoice factoring etc to see if they can " stack" on them . Now who decides where to draw the line . Is it the bank?the factoring company? The so called first position lenders ? The second position lenders ? Or companies like wall that will go what ever position as long as in their minds it makes sense for them and the merchant.
I have had enough of the double Standards and each thinking they know where to draw the line .
Bottom line it's the lenders money and the merchant decision on what they want to do . It is not the ISO job to be a moral compass on what to do

Michael Most regular financing is over much longer periods of time and the payments on those loans generally work out to 5% or lower then the total gross sales. In our space most 1st position lenders are comfortable taking 10%-14% of the gross sales as payment. When you get into second positions now that number is in the 20's.
If you go out farther then that you are getting to a point where you are taking 30% or more of a persons gross sales to pay back these loans. Most business's can not afford that and the only way to stay in business is for them to keep taking loans until they go out of business. If a broker knows this and dos it anyway they are wrong. You are screwing over the banks who gave the first loans making what was a good deal a default and you put the merchant in a position they could not sustain. It is not double standards what is should be is common sense. If none of this matters and bottom line you just want to fund the deal and get paid your commission. Think about what happens when you get sued by the 1st position bank when a deal with a big enough balance for them to care defaults. They sue then lender and the broker for tortuous interference. I willing to bet the commission wont cover that.

[Michael I]

Michael Most regular financing is over much longer periods of time and the payments on those loans generally work out to 5% or lower then the total gross sales. In our space most 1st position lenders are comfortable taking 10%-14% of the gross sales as payment. When you get into second positions now that number is in the 20's.
If you go out farther then that you are getting to a point where you are taking 30% or more of a persons gross sales to pay back these loans. Most business's can not afford that and the only way to stay in business is for them to keep taking loans until they go out of business. If a broker knows this and dos it anyway they are wrong. You are screwing over the banks who gave the first loans making what was a good deal a default and you put the merchant in a position they could not sustain. It is not double standards what is should be is common sense.

i am referring to the no stacking clause where people are saying its illegal to stack . All lenders will fund regardless of that and put it in their contracts and then get pissed that they were stacked . i saw a contract of someone who did a fifth have that same crap as swift of all these fees if he stacks . i had someone get in trouble from their trucking factor for taking out a credibly loan as it was a breach in contract

[iso@wallfunding]

Michael Most regular financing is over much longer periods of time and the payments on those loans generally work out to 5% or lower then the total gross sales. In our space most 1st position lenders are comfortable taking 10%-14% of the gross sales as payment. When you get into second positions now that number is in the 20's.
If you go out farther then that you are getting to a point where you are taking 30% or more of a persons gross sales to pay back these loans. Most business's can not afford that and the only way to stay in business is for them to keep taking loans until they go out of business. If a broker knows this and dos it anyway they are wrong. You are screwing over the banks who gave the first loans making what was a good deal a default and you put the merchant in a position they could not sustain. It is not double standards what is should be is common sense.

I have gotten far more deals declined because giving ANY more money would bring them to 30% of monthly deposits going to advances, then I have gotten 4th position deals funded. On this particular deal, even with our funding, all the dailys will be below 30%.

[MCNetwork]

I have gotten far more deals declined because giving ANY more money would bring them to 30% of monthly deposits going to advances, then I have gotten 4th position deals funded. On this particular deal, even with our funding, all the dailys will be below 30%.

It's funny how the blue chip funders have a guideline of <15% of gross sales going to advances, but the stackers think <30% of gross sales is okay. The problem is that the stackers don't know how to properly underwrite deals. smh

[J.Celifarco]

It's funny how the blue chip funders have a guideline of <15% of gross sales going to advances, but the stackers think <30% of gross sales is okay. The problem is that the stackers don't know how to properly underwrite deals. smh

100% agreed

[CreditGuy]

all the dailys will be below 30%.

Let's do some quick math and a little actual underwriting.

It was previously disclosed that this was a $40MM+ home health care business and they needed to stack because of slow pays from the government (Medicare). That means this is being used a bridge loan and not growth capital, so revenue benefit to the borrower is null. The industry average net income for publicly traded (professional management, huge economies of scale, data driven and efficient business decisions, etc.) Medicare home health care is around 3% (citation) and falling as ACA cutbacks drive reimbursement rates lower as a % of gross revenues. This can change slightly based depending on payer mix (Medicare/Insurance/Private Payer). Since we know this is a Medicare bridge, we will use 3% net income. That means a business this size, in this industry, puts $1.2MM to the bottom line annually. If an average 1st will fund 15% of revenues, and average 2nd funds up to 20-25%, and the 3rd and 4th are just seeking to keep it under 30% of daily revenue, how is lending almost 10x net income ("dailys...below 30%") to this business of any benefit to the borrower? 30% of daily revenues would be $47k a day (holy ****!) or 12MM per annum. Compare that to the net income of $1.2MM a year and this scenario is a loser. Now, it is possible that since this is "just over 6 months" in term, this one alone won't put them immediately out of business, but the merchant paying back more than $1.2M principal and interest at any point over the year wipes out their net income entirely. This type of lending isn't subject to underwriting in any traditional sense, it is gambling that your money comes back before the house of cards collapses. It is predatory and reckless.

I made a lot of assumptions because I don't have all the facts (banks, financials, etc.). It is possible this business is an absolute gold mine run super efficiently with 30% margins and has $12M in free cash flow a year, but those folks aren't stacking MCAs like pancakes. Hell, even if this had 4x the margins of the industry average with 12% net income, anything north of 24% daily for more than 6 months would wipe out their entire profit for the year.

Not only of the ethics of the transaction are poor, but the math sucks too.

[omegafund]

I tend to agree with this. We have funded a dozen or so health care business with revenues 15M+ in the past. The guys with 25% + margins are few and not MCA candidates, and never would stack. We qualified one for 1.5M LOC and they were only at $5M gross. Not sure what would drive a 40MM+ revenue company to get 4 MCAs not many with margins over 75%! but that is for another day

Let's do some quick math and a little actual underwriting.

It was previously disclosed that this was a $40MM+ home health care business and they needed to stack because of slow pays from the government (Medicare). That means this is being used a bridge loan and not growth capital, so revenue benefit to the borrower is null. The industry average net income for publicly traded (professional management, huge economies of scale, data driven and efficient business decisions, etc.) Medicare home health care is around 3% (citation) and falling as ACA cutbacks drive reimbursement rates lower as a % of gross revenues. This can change slightly based depending on payer mix (Medicare/Insurance/Private Payer). Since we know this is a Medicare bridge, we will use 3% net income. That means a business this size, in this industry, puts $1.2MM to the bottom line annually. If an average 1st will fund 15% of revenues, and average 2nd funds up to 20-25%, and the 3rd and 4th are just seeking to keep it under 30% of daily revenue, how is lending almost 10x net income ("dailys...below 30%") to this business of any benefit to the borrower? 30% of daily revenues would be $47k a day (holy ****!) or 12MM per annum. Compare that to the net income of $1.2MM a year and this scenario is a loser. Now, it is possible that since this is "just over 6 months" in term, this one alone won't put them immediately out of business, but the merchant paying back more than $1.2M principal and interest at any point over the year wipes out their net income entirely. This type of lending isn't subject to underwriting in any traditional sense, it is gambling that your money comes back before the house of cards collapses. It is predatory and reckless.

I made a lot of assumptions because I don't have all the facts (banks, financials, etc.). It is possible this business is an absolute gold mine run super efficiently with 30% margins and has $12M in free cash flow a year, but those folks aren't stacking MCAs like pancakes. Hell, even if this had 4x the margins of the industry average with 12% net income, anything north of 24% daily for more than 6 months would wipe out their entire profit for the year.

Not only of the ethics of the transaction are poor, but the math sucks too.

[MCNetwork]

Let's do some quick math and a little actual underwriting.

It was previously disclosed that this was a $40MM+ home health care business and they needed to stack because of slow pays from the government (Medicare). That means this is being used a bridge loan and not growth capital, so revenue benefit to the borrower is null. The industry average net income for publicly traded (professional management, huge economies of scale, data driven and efficient business decisions, etc.) Medicare home health care is around 3% (citation) and falling as ACA cutbacks drive reimbursement rates lower as a % of gross revenues. This can change slightly based depending on payer mix (Medicare/Insurance/Private Payer). Since we know this is a Medicare bridge, we will use 3% net income. That means a business this size, in this industry, puts $1.2MM to the bottom line annually. If an average 1st will fund 15% of revenues, and average 2nd funds up to 20-25%, and the 3rd and 4th are just seeking to keep it under 30% of daily revenue, how is lending almost 10x net income ("dailys...below 30%") to this business of any benefit to the borrower? 30% of daily revenues would be $47k a day (holy ****!) or 12MM per annum. Compare that to the net income of $1.2MM a year and this scenario is a loser. Now, it is possible that since this is "just over 6 months" in term, this one alone won't put them immediately out of business, but the merchant paying back more than $1.2M principal and interest at any point over the year wipes out their net income entirely. This type of lending isn't subject to underwriting in any traditional sense, it is gambling that your money comes back before the house of cards collapses. It is predatory and reckless.

I made a lot of assumptions because I don't have all the facts (banks, financials, etc.). It is possible this business is an absolute gold mine run super efficiently with 30% margins and has $12M in free cash flow a year, but those folks aren't stacking MCAs like pancakes. Hell, even if this had 4x the margins of the industry average with 12% net income, anything north of 24% daily for more than 6 months would wipe out their entire profit for the year.

Not only of the ethics of the transaction are poor, but the math sucks too.

Spoken like a true underwriter!

I'm all for making money in this industry. It's hyper competitive out there and it's tough to make a decent living if you're a small ISO. But when pop-up stack funders come into this space with their bull**** underwriting criteria and start causing merchants to default on their 1st position funders because they think taking 30% of their monthly gross makes perfect sense, then that's where you have to draw the line.