[AlexSMF]

Or you can do what Swift Capital used to do and just conveniently move the decimal point to the right and call it an APR. Swift's 1.37 Factor rate would appear as a 13.70% APR LOL. The amount of times I had to educate a merchant in explaining to them that just because they say the APR is 13.70% does not mean it is so, 100,000 funded, paying back 137,000...yeah 13.70% APR, makes perfect sense.

[bdshaw]

Alex you're right it does look reasonable. However, it's not and the APR is considerably higher. That's called fraud.
If I were a government regulator I would use some of this thread to make the case for regulating the industry.
BTW, there could be a government agent trolling everything that's written here.
Bob

[jotucker1983]

If you are selling an MCA, there should be absolutely no discussion nor calculation of an APR because, there's no interest rate on the product.

[AndyYSCISOdept]

If you are selling an MCA, there should be absolutely no discussion nor calculation of an APR because, there's no interest rate on the product.

I thought that was the first rule of selling MCA, DO NOT USE THE WORDS, "Loan, Interest, APR" etc

[jotucker1983]

I thought that was the first rule of selling MCA, DO NOT USE THE WORDS, "Loan, Interest, APR" etc

100% agree. When a merchant tries to calculate the APR on an MCA deal, I tell him that no such calculation can be done because there's no interest rate involved in the transaction. A purchase of receivables does not involve an interest rate, all you have to determine "cost" is the cost factor.

[bdshaw]

In this respect this business is almost exactly the same as the leasing industry.
When asked about interest the unsavory one responds with a rate factor or outright lies about the APR. I had one recently where a client asked me to double check what interest rate he would be paying on a particular lease. The lease was for 60 payments at .024 (*the rate factor) with two advance payments. The actual APR is about 16.5%.
In the advance business I've had ISO's approach me for a loan of say 6 months at 1.12 and try to convince me that the APR is 2% monthly.
This is the classic case of the good pay for the bad. In a retail shop a few percentage points of cost (and markup) is from theft and the good pay for the bad.
As I said before its games like this that encourage regulators to try and protect our customers through regulation.
Bob

[ridextreme]

What's the equation to figure out the actual APR from a factor rate?

Thanks in advance!

there is no APR. A factor rate is a discount rate on future sales.

You can't compare apples with oranges.

when you try to sell the product as a business loan, you run into these problems and then the merchant ends up closing you on what his "rate" is.

[AndyYSCISOdept]

I think that when you are presented with that question from a merchant it behooves you as a rep to take the time to educate the merchant on exactly why your product is different and how the pricing works etc. This way your merchants don't suffer from sticker shock when they get their approvals. Of course it takes time and can be irritating but that's why the funders pay commission, because you are "selling" their deals.

[MCNetwork]

I tell merchants that there is no APR calculation because he's paying a flat fee for the funds. A merchant cash advance is repaid from a split of his future credit card receivables. The fee for the funds is represented in the form of a factor. The fee remains unchanged whether it takes him 6, 8, or 15 months to repay the advance; therefore, an APR calculation does not apply. And this is what makes a cash advance better than a bank product with an accruing interest rate.

[AndyYSCISOdept]

^^^ That's the exact way it was taught to me ^^^

[bdshaw]

Guys, you can say call it anything you want but I've seen regulators got after both the leasing and factoring industry because of the "IMPLIED" interest rate. You will never convince a government regulator that if you borrow X and pay back something in addition to X you are not paying interest.
I'm not talking about selling techniques.
right now the both industries are preparing for to fight back regulation that in my opinion could considerably hurt the smaller lenders and their ISO's
Bob

[BankComplianceGuy]

Guys, you can say call it anything you want but I've seen regulators got after both the leasing and factoring industry because of the "IMPLIED" interest rate. You will never convince a government regulator that if you borrow X and pay back something in addition to X you are not paying interest.
I'm not talking about selling techniques.
right now the both industries are preparing for to fight back regulation that in my opinion could considerably hurt the smaller lenders and their ISO's
Bob

Bingo!

From the American Bankers Association this morning...

“Meanwhile, the CFPB will build a new focus on small business lending, assembling a team and conducting research in advance of an eventual rule requiring the collection of business lending data. The bureau also said it will work to begin collecting complaints about small business lending.”

http://bankingjournal.aba.com/2016/0...on-cfpb-radar/

[AlexSMF]

Alex you're right it does look reasonable. However, it's not and the APR is considerably higher. That's called fraud.
If I were a government regulator I would use some of this thread to make the case for regulating the industry.
BTW, there could be a government agent trolling everything that's written here.
Bob

Bob, I was being sarcastic by pointing out Swifts unscrupulous ways.

[Chambo]

Bingo!

From the American Bankers Association this morning...

“Meanwhile, the CFPB will build a new focus on small business lending, assembling a team and conducting research in advance of an eventual rule requiring the collection of business lending data. The bureau also said it will work to begin collecting complaints about small business lending.”

http://bankingjournal.aba.com/2016/0...on-cfpb-radar/

And so it starts.....

[ridextreme]

Bingo!

From the American Bankers Association this morning...

“Meanwhile, the CFPB will build a new focus on small business lending, assembling a team and conducting research in advance of an eventual rule requiring the collection of business lending data. The bureau also said it will work to begin collecting complaints about small business lending.”

http://bankingjournal.aba.com/2016/0...on-cfpb-radar/

I sure hope the CFPB is going to be able to lend money at a lower cost, or direct small businesses with horrible personal credit, bank statements and financials to secure a loan elsewhere.

[bdshaw]

Yes and it will end poorly if the industry doesn't clean itself up in the regulators eyes.
Shout out to Alex....ooooops, sorry

[AlexSMF]

Yes and it will end poorly if the industry doesn't clean itself up in the regulators eyes.
Shout out to Alex....ooooops, sorry

I agree, however not sure what the shout out was for.

[AndyYSCISOdept]

I agree, however not sure what the shout out was for.

Bob was shouting because, as he has said many times, "he is the oldest member on the forum" and we know how poor elderly folks' hearing is.

However regardless of his auditory deficiencies Bob makes great points and the self regulation is the only way to avoid government storm troopers ruining a good thing

A Literal SHOUT OUT to Bob

[AlexSMF]

Bob was shouting because, as he has said many times, "he is the oldest member on the forum" and we know how poor elderly folks' hearing is.

However regardless of his auditory deficiencies Bob makes great points and the self regulation is the only way to avoid government storm troopers ruining a good thing

A Literal SHOUT OUT to Bob

Still confused as him and I were on the same page. In any case, yes, self regulation is a must but lets be honest here, there will always be bad apples. On top of that, self regulation or not, there still will be government regulation in this industry, even if ever bad apple decided to become an angel. Self regulation should not be about avoiding government regulation but about just doing the right thing. You can make money, but you can sleep well at night as well.

[AndyYSCISOdept]

Oh, I agree. If individuals did the right thing by their clients/the industry as a whole there wouldn't be a need for govt. regulation. Because while we're being honest, the government doesn't want to have to regulate the industry(in my opinion), its better for all parties involved if we regulate ourselves.

[bdshaw]

I'm sorry Andy. I didn't hear that.
Trust that this old man is sometimes not a blathering idiot.......just sometimes.
Thanks for the shout out.....
.
Sonny

[AndyYSCISOdept]

I'm sorry Andy. I didn't hear that.
Trust that this old man is sometimes not a blathering idiot.......just sometimes.
Thanks for the shout out.....
.
Sonny

No problem pops. LOL

[bdshaw]

Mr. pops to you

[AndyYSCISOdept]

Mr. pops to you

Would you like to be knighted? We can call you Sir Pops then.

[Regium]

What's the equation to figure out the actual APR from a factor rate?

Thanks in advance!

What's the purpose of converting it to APR? Almost same as shooting yourself (and the concept of MCA) in the foot