[bdshaw]

As a lender I was considered prudent to be skeptical of flip answers to serious questions.
The argument that the minority stakeholders don't have the courage to sign is too simplistic. I would think if there's a disagreement over entering into the agreement a lender is looking at potential future headaches they don't need. Even if the signor is authorized the warning flags are there.
I would pass.
Bob

[FUNd]

As a lender I was considered prudent to be skeptical of flip answers to serious questions.
The argument that the minority stakeholders don't have the courage to sign is too simplistic. I would think if there's a disagreement over entering into the agreement a lender is looking at potential future headaches they don't need. Even if the signor is authorized the warning flags are there.
I would pass.
Bob

Bob, with all due respect, the largest direct lender in the space only requires 5% ownership. This whole argument is null. It's obviously been addressed by legal at the highest levels.

[CreditGuy]

Bob, with all due respect, the largest direct lender in the space only requires 5% ownership. This whole argument is null. It's obviously been addressed by legal at the highest levels.

Being addressed by legal and being defensible are often mutually exclusive. There are plenty of times when our attorney says one thing and then we weigh the potential legal risk against the business needs and decide that the risks are outweighed by the benefits. CAN has probably done the same calculus. For a lender their size, if a few contracts get thrown out in court due to majority ownership disputing the debt and its benefit to the borrowing entity, that doesn't hurt them any more than a default. It simply gets baked into their loss rate over time. I would also add that CAN is originating high quality paper, so the likelihood of default and subsequent litigation that would open them up to such claims is smaller than a Yellowstone or Pearl type shop where the collection and litigation strategy is more important to earnings/capital preservation.

Also, CAN is no longer the largest direct lender in the space.

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[FUNd]

Being addressed by legal and being defensible are often mutually exclusive. There are plenty of times when our attorney says one thing and then we weigh the potential legal risk against the business needs and decide that the risks are outweighed by the benefits. CAN has probably done the same calculus. For a lender their size, if a few contracts get thrown out in court due to majority ownership disputing the debt and its benefit to the borrowing entity, that doesn't hurt them any more than a default. It simply gets baked into their loss rate over time. I would also add that CAN is originating high quality paper, so the likelihood of default and subsequent litigation that would open them up to such claims is smaller than a Yellowstone or Pearl type shop where the collection and litigation strategy is more important to earnings/capital preservation.

Also, CAN is no longer the largest direct lender in the space.

Capture.PNG

I don't think anyone was disputing any of this, and I appreciate the analysis. I think I was simplifying it down to the fact that it seems like a large percentage of people selling this product or in charge of an ISO don't even understand the basic fundamentals of underwriting criteria. It's shocking. The fact that this is even a debate is sad. I can only imagine the slew of lies and misleading information merchants are told by novice hacks in call centers costing jobs, financial ruin, and undue stress on merchants and the sector as a whole.

Let's not play semantics either, CAN is a huge player.