[AlexSMF]

Just had a merchant tell me that Direct Capital offered him a 10 month 1.08??? In most cases I would reply by saying "then why are you on the phone with me?" but I know he sent me the contract along with email chain forwarded from Direct Capital. (Of Course he still could have made it up) but it looks legitimate. Who the hell offers a 1.08 for 10 months??? Talk about desperation if this is actually real.

[Michael Jagiello BGF]

Just had a merchant tell me that Direct Capital offered him a 10 month 1.08??? In most cases I would reply by saying "then why are you on the phone with me?" but I know he sent me the contract along with email chain forwarded from Direct Capital. (Of Course he still could have made it up) but it looks legitimate. Who the hell offers a 1.08 for 10 months??? Talk about desperation if this is actually real.

He probably left out the part where they charged him a 10% fee on the back end

[J.Celifarco]

I doubt you can get a 1.08 from BOA or Chase how the hell are they getting it from someone in our space.. I dont think that can be rel

[Andy]

I have seen them fund a 6 month 1.03 , pretty insane.

[Michael Jagiello BGF]

I have seen them fund a 6 month 1.03 , pretty insane.

For a return like that you might as well keep the money instead of loaning it out and play the penny slots with it

[MCNetwork]

That's practically free money. Maybe I'll apply.

[FUNd]

I have seen them fund a 6 month 1.03 , pretty insane.

So they do deals for free? How do the investors feel about that rate of return on a high-risk, unsecured loan product? They could get a better return on a fully collateralized instrument.

[TheShitzuofMCA]

Does the ISO make anything on that supposed factor rate?

[J.Celifarco]

how do you cover over head cost of funds and bad debt lending money at that rate. I find that absolutely insane

[AlexSMF]

how do you cover over head cost of funds and bad debt lending money at that rate. I find that absolutely insane

My thoughts exactly, John. I should apply for a loan with them and turn the money around and deplore it at a higher rate. Talk about insane.

[FUNd]

how do you cover over head cost of funds and bad debt lending money at that rate. I find that absolutely insane

You dont. Maybe they are following the Wal-Mart model. Make prices so low it forces everyone else out of business, then raise prices a few notches and make your money in volume once the competition is crushed.

[AlexSMF]

Does the ISO make anything on that supposed factor rate?

This was the merchant dealing directly with the funder, no ISO involved. And I thought my 250k 18 month 1.32 with On Deck offer for him was an unbelievable offer.

[Michael Jagiello BGF]

Does the ISO make anything on that supposed factor rate?

The ISO gets the best payout of all : a big thank you and a testimonial

[J.Celifarco]

You dont. Maybe they are following the Wal-Mart model. Make prices so low it forces everyone else out of business, then raise prices a few notches and make your money in volume once the competition is crushed.

bad debt and having to turn on the lights would put them out of business before that happened charging those rates

[Cfairbank]

still an implied APR around 20. I think you'll see more of that from OnDeck and others for strong credits. We are funding a 100K 1.14x with a broker today -- not saying that for marketing purposes, just stating that i do think the prices will continue to go down on perceived strong credits (right or wrong). I know even we are aggressive on strong credits with security, and we don't have anywhere close to the cost of funds that OnDeck or Direct Capital has.

[Funder Mark]

bad debt and having to turn on the lights would put them out of business before that happened charging those rates

Amen to that. The offer just does not feel legit. From a private investor I can imagine that offer, from a legitimate company, no way. BTW, how much was the offer for?

[nrh1lp]

I had a CC processing company reach out a while back offering rates and terms around this neighborhood, their main goal was to just to do lockboxes and splits and force the merchant into using their cheaper processing unit where they really "make the money" and their cash advance program was more of an at cost structure to keep a hold of the merchant, and with rates that low they know the merchant is not going anywhere else. Renewals are a lot cheaper and easier to fund than a new merchant... That model makes sense in some cases but it does have a few flaws

[mcaguru]

still an implied APR around 20. I think you'll see more of that from OnDeck and others for strong credits. We are funding a 100K 1.14x with a broker today -- not saying that for marketing purposes, just stating that i do think the prices will continue to go down on perceived strong credits (right or wrong). I know even we are aggressive on strong credits with security, and we don't have anywhere close to the cost of funds that OnDeck or Direct Capital has.

Carl do you mind sharing the terms of the 100K at 1.14 deal and the commissions to broker? (the terms to broker not as important to me).

[Cfairbank]

Carl do you mind sharing the terms of the 100K at 1.14 deal and the commissions to broker? (the terms to broker not as important to me).

I believe it was a nine month deal, weekly pay, three points to the broker. Structured as a loan (with PG and blanket lien), not a cash advance. First position / non-consolidation. banks were very strong, as was personal credit of PG.

[jfeinberg]

To clarify everyone's questions.

1) Direct Capital charges 1.06 over 6 months and 1.13 over 12 months. So im 100% sure that is a real offer.

2) Direct Capital does not accept broker business and never has

3) Direct Capital was purchased last year by CIT. CIT's cost of funds makes this program possible.

[TheShitzuofMCA]

To clarify everyone's questions.

1) Direct Capital charges 1.06 over 6 months and 1.13 over 12 months. So im 100% sure that is a real offer.

2) Direct Capital does not accept broker business and never has

3) Direct Capital was purchased last year by CIT. CIT's cost of funds makes this program possible.

Thank you that makes alot more sense. I like their business model.

[MCNetwork]

Nice business model if you're a non-profit. You can put that capital in a stock index fund and earn 7.5% per year (historically) and not have to worry about defaults and overhead expenses, etc. A return of 13% per year in unsecured business loans isn't worth the effort unless you have a zero percent default rate and zero percent cost of capital.

[J.Celifarco]

Nice business model if you're a non-profit.

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

[AlexSMF]

Nice business model if you're a non-profit.

Red Cross funding.

[mcaguru]

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

Right on!