Wow Can started clawbacks again for 90 days.

**John Galt** · 08-02-2016, 07:26 PM

See the new notice. They haven't enforced them all year. Now for 90 days....

**Zach** · 08-02-2016, 07:29 PM

Makes sense, since they are lending to deals with negative balances and NSF's now

**funda21** · 08-03-2016, 06:09 AM

I completely disagree Zach, it makes no sense. CAN is one of the oldest and biggest companies in the space and they have more data than almost anyone. If they need to tighten up their underwriting guidelines and restrictions then do that but you don't keep your marketing/sales partner companies on the hook for 3 months to figure out if they will actually get paid for the hard work and money they put in and spent to sent you business.

I'm sorry but no where else in the business world does this fly. Go buy ad space on Forbes to get additional business and then not pay your bill 90 days later because the traffic didn't "back out". Good luck with that. Bottom line is it's an unsustainable model for their brokers if they enforce it as they say they will. Do shops not pay their reps for 90 days to make sure they get paid? Yeah because that's realistic and sustainable let me tell you

**CreditGuy** · 08-03-2016, 09:01 AM

Originally Posted by funda21

hard work and money they put in and spent to sent you business.

I'm sorry but no where else in the business world does this fly.

Except all brokers aren't doing hard work, they are throwing spaghetti against the wall. For a deal to go bad within 90 days either it is fraud or the borrower was planning on defaulting before they took it. Either way, the lender (CAN) should be able to rely on the broker to root this out before sending the deal over, which is why clawbacks exist. Brokers aren't just lead gen, they are also first line UW and general BS detectors.

Clawbacks happen all over the place, not just in this industry. They happen both internally and externally. Internally, they are just netted out from the next commission payout, not held for 90 days. If there wern't clawback provisions, what would there be to stop brokers from churning ****ty accounts? Hint: nothing.

**PRIMO CASH** · 08-03-2016, 09:42 AM

I believe the notice defines a default as a merchant who stops paying for 32 consecutive calendar days within the first 90 days. Thats a pretty bad deal there.

**Transactionsolutions** · 08-03-2016, 09:51 AM

I have no problem with Clawbacks, but I think 90 days is taking it out a little far.

The more concerning question is 'What the heck is going on with CAN these days?' These are some serious red flags for them

In the past 45 days they have started adopting policies of their competition where they have always been pioneers. All of a sudden they are tightening their credit criteria, implementing a 2% fee, 90 day clawbacks. Either they are trying to become more profitable or their default rate is higher than we think and they need to recover losses

I think this is a huge opportunity for CAN's competition to make up ground on them. The 2% fee is astonishing. Imagine being a client of CAN's for 5 years and all of a sudden they want to charge you a 2% fee.

**ADiamond** · 08-03-2016, 09:55 AM

so then stack all your first position CAN deals with 2nds and 3rds to hedge your commish

**mcaguru** · 08-03-2016, 10:10 AM

That's tough

seems to me like ISO/Vendor should hold off a quarter of a year to spend his earned commissions ?

**Vfunding** · 08-03-2016, 10:18 AM

We have noticed rates and terms slowly tightening up over the last 6 months. It's important to note that when one of the large lenders raises rates, changes commissions, adds origination fees, shortens terms, etc they are doing so because they have to. It is a calculated decision which includes consideration that it makes them less competitive in the marketplace. After all, this business is about profitability which on the lending side is determined by how much yield outweighs risk. If you are losing money on transactions you can't make it up with volume. I expect to see rates rise and some features disappear as our market/industry begins to correct itself after a few years of over ambitious lenders making poor underwriting decisions in order to gain market share.

**ADiamond** · 08-03-2016, 10:23 AM

Originally Posted by Vfunding

We have noticed rates and terms slowly tightening up over the last 6 months. It's important to note that when one of the large lenders raises rates, changes commissions, adds origination fees, shortens terms, etc they are doing so because they have to. It is a calculated decision which includes consideration that it makes them less competitive in the marketplace. After all, this business is about profitability which on the lending side is determined by how much yield outweighs risk. If you are losing money on transactions you can't make it up with volume. I expect to see rates rise and some features disappear as our market/industry begins to correct itself after a few years of over ambitious lenders making poor underwriting decisions in order to gain market share.

so what i heard a few weeks ago about some of the top A lenders in this industry having their LOC's chopped is probably true then huh?

who is CAN backed by? whoever controls the money controls decisions like these.

**Kevin Henry-Seacoast** · 08-03-2016, 10:35 AM

Originally Posted by ADiamond

so what i heard a few weeks ago about some of the top A lenders in this industry having their LOC's chopped is probably true then huh?

who is CAN backed by? whoever controls the money controls decisions like these.

Yep.... I have heard that a few MCA lenders have had their lines pulled. In the factoring world as well as MCA I have heard that the senior lenders have tightened credit policies to finance companies. I have personally seen some super regional banks pull back hard in the last few months. I am also seeing a lot of ugly balance sheets that are a direct result of some loose lending over the last 24 months. When I say ugly...I mean ugly!

**VFG** · 08-03-2016, 10:39 AM

I couldn't agree more with Kevin. I have had two factors call me looking for a replacement of their existing line because their lender pulled the line and gave them an ultimatum to find a replacement.

**Vfunding** · 08-03-2016, 10:52 AM

The funny thing about this business is market share is extremely temporary. Twitter and Linkedin are able to get away with running losses for a long time because they get to claim it is at the expense of capturing market share which only grows. In our industry, that customer loyalty doesn't exist. So if in order to build a client base, you put money out at terms/rates that are attractive to borrowers but make no sense from a yield/risk standpoint, you might gain market share temporarily but once you are forced to tighten up those rates to increase profitability the market share disappears almost overnight.

**Kevin Henry-Seacoast** · 08-03-2016, 10:56 AM

Originally Posted by VFG

I couldn't agree more with Kevin. I have had two factors call me looking for a replacement of their existing line because their lender pulled the line and gave them an ultimatum to find a replacement.

We have bought and will buy existing portfolios of factoring companies.

**FCG** · 08-03-2016, 11:09 AM

Well, Wont be sending any of my deals there.

**Transactionsolutions** · 08-03-2016, 11:19 AM

Originally Posted by FCG

Well, Wont be sending any of my deals there.

CAN used to always get the first look at the my files, if they approved it then the deal was theirs. Since they implemented these changes, (fees, clawbacks, ect), my files go to CAN, ONDK and BFS at the same time...best offer, fees or not, gets the deal.

**JSL23** · 08-04-2016, 10:45 AM

One thing we have done that Lenders have agreed with (assuming your book with them is strong) is to hold back on paying the commission for two weeks in case of default. After two weeks they pay and if the Merchant defaults anytime after they eat the loss without penalizing us. That is a fair compromise and as long as you fund with them on a regular basis without many defaults I think most will agree (I don't know about Can).

**bdshaw** · 08-04-2016, 11:07 AM

I see the answer being one of responsibility and education.
Most credit analysts have years of study and practice under their belt. Many could not sell a dying person an extra breathe but that's simply not their job. They are paid to objectively analyze and decide the risk of a given transaction and to make sure it meets their company's risk model.
I have met few ISO's who have had a bookkeeping course much less accounting, finance and analytical course. Credit decisions are a full time job.
However, every credit grantor has a few lemons that were approved by the "experts." They need to live with that.
If lenders wish to stop brokers/ISO's from sending in garbage just cut the referral source loose.
Bob

**1StopFunding** · 08-11-2016, 02:44 PM

Had an interesting call with my CAN rep today. He wanted to share some info with me regarding all of the new things they are rolling out. Here's something that really got my attention... Some time this year, they are rolling out a 2-4 year term product that will have monthly payments with fundings of $50K-$150K. He said he didn't want to give me the exact time frame as for me not to hold him to it, but it is something their customers have been demanding and they are planning to roll it out this year. With LoanMe currently being the only monthly revenue based funder, this roll out by CAN will be great!

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