Direct Capital 1.08 factor rate for 10 months??????

**CreditGuy** · 03-22-2016, 03:50 PM

Originally Posted by J.Celifarco

I dont care how good your underwriting is with these rates the cost of underwriting, bad debt, and an electric bill I dont see how there is any profit left at the end of the day

The nice thing about having CIT money is that they can break even (or even loss lead) on the new units and build a nice book of renewals.

**MCNetwork** · 03-22-2016, 03:54 PM

Another company that has a revenue model that doesn't make much sense is www.fundbox.com. They charge a flat fee of $50-$80 over 3 months. No interest is being charged.

**J.Celifarco** · 03-22-2016, 04:22 PM

Originally Posted by CreditGuy

The nice thing about having CIT money is that they can break even (or even loss lead) on the new units and build a nice book of renewals.

personally I dont get

a model that is based on losing money in the present on purpose for the hope of making money in the future.. I get a new business that loses money until it starts making money, but to have a model that is based on the premise that we will lose money now and hope to make money later makes very little sense to me

**MCNetwork** · 03-22-2016, 04:27 PM

That model is like the one used by a little company called Amazon.com

**J.Celifarco** · 03-22-2016, 04:33 PM

Originally Posted by MCNetwork

That model is like the one used by a little company called Amazon.com

yes but they wanted to make money and new the sales would catch up once they did the volume. I dont care home much volume they do at those rates they will never make money on the first loan at those rates. Amazon as sales went up in volume they had enough static costs that they knew they could be profitable on sales when they got to a certain point. Charging 6% over 6 months and 13% over 12 I dont see how they could ever be profitable on that first loan with all the different over head costs in order to fund the deals, especially when most of those costs aren't static. The more you fund the more the over head will be.

**Chambo** · 03-22-2016, 04:34 PM

Isn't this the same model that On Deck used...and has been using? How's it working out for them?

**Kevin Henry-Seacoast** · 03-22-2016, 04:36 PM

Originally Posted by Chambo

Isn't this the same model that On Deck used...and has been using? How's it working out for them?

Chambo-Their stock chart looks great upside down.....

**J.Celifarco** · 03-22-2016, 04:38 PM

Originally Posted by Chambo

Isn't this the same model that On Deck used...and has been using? How's it working out for them?

that depends if you are long or short

**jfeinberg** · 03-22-2016, 04:49 PM

But how about being able to capture the client from all ends. Think about all of the leasing business that comes from the portfolio of working capital merchants. After getting them with there capital program they are charging 15-20% over 1-5 years for equipment. This program is to just assist the customers needs after purchasing equipment. I'm not saying 100% of the time that is the reason why they do it but if I had to take a logical guess it would be around 80% of the time its after they finance equipment for there merchants. Also no one should be comparing OnDeck to Direct Capital as they are not even close to the same company nor have the same business model. They are 100% direct and have a substantially low default rate, they are 80% equipment financing & leasing, and have been in business for over 17 years.

**jfeinberg** · 03-22-2016, 04:52 PM

Originally Posted by jfeinberg

But how about being able to capture the client from all ends. Think about all of the leasing business that comes from the portfolio of working capital merchants. After getting them with there capital program they are charging 15-20% over 1-5 years for equipment. This program is to just assist the customers needs after purchasing equipment. I'm not saying 100% of the time that is the reason why they do it but if I had to take a logical guess it would be around 80% of the time its after they finance equipment for there merchants. Also no one should be comparing OnDeck to Direct Capital as they are not even close to the same company nor have the same business model. They are 100% direct and have a substantially low default rate, they are 80% equipment financing & leasing, and have been in business for over 17 years.

Also give us a call, as we provide equipment financing and leasing. 10% commission, monthly payments, rates on average are 6-12%. Give us a call 888 777 8144.

**CreditGuy** · 03-22-2016, 04:56 PM

Originally Posted by Chambo

Isn't this the same model that On Deck used...and has been using? How's it working out for them?

CAN is something like 70%+ renewals business at this point, no?

**happysales** · 03-22-2016, 08:31 PM

I have also had a merchant getting loans from Direct Capital-they stack their own deals and still offer these insane rates. My merchant had three payments coming out daily. I thought she was lying initially when she said she went with the same lender, but three months later she sent recent statements with two more payments added and sent me her 3rd agreement to show rate.

**BankComplianceGuy** · 03-23-2016, 10:27 AM

Originally Posted by J.Celifarco

The more you fund the more the over head will be.

The more you fund the more your direct costs will be. Overhead expenses are your fixed expenses or indirect expenses, those that can't be directly attributed to the product or service provided.

Direct Capital as an affiliate of CIT is a whole different animal. CIT acquired OneWest Bank, putting about 60% of their funding in the form of deposits. CIT is now a SIFI, systematically important financial institution. When they acquired Direct Capital, CIT basically imposed these low rates on Direct Capital because they already had regulators up their ass and they were trying to get the OneWest deal done. OneWest was the surviving entity of IndyMac, an innovator in "no-doc" mortgages and major contributor to the financial crisis.

It's possibly a play to increase customer lifetime value by these large universal banks. Will be interesting to see how it shakes out, especially with Chase getting into it with OnDeck's platform. Pretty sure you will see the same rates with Chase as Direct Capital/CIT.

**anydealfunded** · 03-23-2016, 10:32 AM

Direct Capital is a legitimate bank. They offer leases on a daily and now traditional loans the same way. I think they are out if New Hampshire.

**jfeinberg** · 03-23-2016, 10:51 AM

Originally Posted by anydealfunded

Direct Capital is a legitimate bank. They offer leases on a daily and now traditional loans the same way. I think they are out if New Hampshire.

They do not offer leases with daily payments. All the equipment programs they have is on a monthly basis. Working capital is daily.

**Kevin Henry-Seacoast** · 03-23-2016, 03:05 PM

Originally Posted by J.Celifarco

that depends if you are long or short

I can't borrow enough!

**VFG** · 03-23-2016, 03:44 PM

In my opinion I see factor rates dropping and commissions as well.

**bdshaw** · 03-23-2016, 03:55 PM

I agree with that analysis.
The more successful players in the future will expand into other, more traditional financial products.
Bob

**MCNetwork** · 03-23-2016, 03:56 PM

I just lost a 100K deal to On Deck. They offered the guy a 9 month 1.16 with zero origination fees. Jeez...

**Chambo** · 03-23-2016, 04:26 PM

Yup, they sell it at the buy rate....no junk fees attached.

Have to be mighty quick and pretty on point to beat those deals

**Kevin Henry-Seacoast** · 03-23-2016, 04:28 PM

Originally Posted by VFG

In my opinion I see factor rates dropping and commissions as well.

Like a stone.....

**Zach** · 03-26-2016, 01:37 PM

They must have some ancillary way of making money on these deals... Equipment leases, etc

**bizloanbroker** · 04-22-2016, 08:01 AM

Can is now doing 36 month 120's

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