[Joseph Esparza]

What is the difference between: I can fund you today or you’ll be funded within a few [days]?

In most other financial service industries, it might cost you the deal. In the MCA world, it likely WILL cost you the deal. There is an aspect of this business that cannot be argued, speed is the key – you slow, you blow.

The other side of the equation is: How can you avoid the human touch; the sound-minded, common sense underwriting nuances that built the infrastructure of this industry? Answer: You can’t.

Like an old-school jam, you don’t have to judge it…it works…it always will, but there’s just something about it that feels out of touch.

Don't forget that, adjust-or-die is the mantra that allowed us to reinvent ourselves after the 2008 crisis. So the underlying question is, how else should we adjust?

Does instant coffee taste better than slow brewed – hell no! But in today’s world, who has time to wait for later, for what you could get RIGHT NOW!

Lets putting aside the passé question of: “What are these Direct Funders thinking?” and address the real one...

"Is document verification redundancy a prudent form of securitizing [the risk], or can technology lead the way to a faster and just as accurate approval?"

Paperless is here, Just add water – You’re funded.

[Ryan Shiroky]

analogy... OnDeck is the k-cup of alternative lending... instantly brewed, yet real...

[isaacdstern]

Joseph-well said sir...i agree with a lot of what you wrote ...especially the points you made about speed and automating underwriting...its beyond obvious to me anyways that you simply cant eliminate the human touch...imagine a computer trying to verify that a merchant is current with a landlord...lol

What is the difference between: I can fund you today or you’ll be funded within a few [days]?

In most other financial service industries, it might cost you the deal. In the MCA world, it likely WILL cost you the deal. There is an aspect of this business that cannot be argued, speed is the key – you slow, you blow.

The other side of the equation is: How can you avoid the human touch; the sound-minded, common sense underwriting nuances that built the infrastructure of this industry? Answer: You can’t.

Like an old-school jam, you don’t have to judge it…it works…it always will, but there’s just something about it that feels out of touch.

Don't forget that, adjust-or-die is the mantra that allowed us to reinvent ourselves after the 2008 crisis. So the underlying question is, how else should we adjust?

Does instant coffee taste better than slow brewed – hell no! But in today’s world, who has time to wait for later, for what you could get RIGHT NOW!

Lets putting aside the passé question of: “What are these Direct Funders thinking?” and address the real one...

"Is document verification redundancy a prudent form of securitizing [the risk], or can technology lead the way to a faster and just as accurate approval?"

Paperless is here, Just add water – You’re funded.

[Joseph Esparza]

Thank you Isaac, very kind of you to say...but what if that was all that was left? Just one call. That would truly be a sign of the times, no?

[isaacdstern]

Everyone is pushing towards 60 second approvals, algorithms, automation etc.....you can replace certain aspects of the underwriting process but the final up and down decision needs to be made by an actual human being...that's just my opinion anyways.

[Ryan Shiroky]

Everyone is pushing towards 60 second approvals, algorithms, automation etc.....you can replace certain aspects of the underwriting process but the final up and down decision needs to be made by an actual human being...that's just my opinion anyways.

it should stay that way, in my opinion. again, nothing can beat the human element...

[isaacdstern]

I could not agree more Ryan

[JayBallentine]

it should stay that way, in my opinion. again, nothing can beat the human element...

I am curious to know, in your opinion which elements are appropriate for automation and which are not? I agree that humans ABSOLUTELY need to be involved at some points in the process, but think about the time the human is spending today begging for papers? How much more productive would that human be if he had Joe Merchant sit down in front of his computer while he walked him through the electronic application process?

[MCNetwork]

I believe this industry is more factor driven than speed driven. Most of the merchants I deal with would gladly wait a week or so to get funded with a competitive rate than to be funded a 1.45 factor in 60 seconds. Speed is nice but it's not even among the top 5 reasons why a merchant chooses an MCA program. It's a snazzy selling point and looks great when you demo prequals and electronic signatures on an iPad but it's not that relevant. It's really more helpful for brokers that pound the pavement and meet with merchants and want to make a professional presentation.

[JayBallentine]

I believe this industry is more factor driven than speed driven. Most of the merchants I deal with would gladly wait a week or two to get funded with a low rate than to be funded a 1.45 factor in 60 seconds.

Let's simplify. Let's take offers off the table. Let's assume that papers go to underwriters who come back with offers. Why are you still being subject to having to solicit pieces of paper when those papers can be solicited electronically? We all know getting the docs back is half the battle, if you can get the docs in 60 seconds why not do that? Why are merchants being subject to multiple credit checks in order to evaluate funding options at multiple funders?

We're technically a broker, and because we downsell our rate and won't require folks to be subject to having to fetch papers, we'll get more apps in faster, and turn them over faster. Shouldn't that be the name of the game?

[Joseph Esparza]

And lets look even closer:
1 - Business Lic? Computer can check
2 - Driver's Lic /ID? Computer can check
3 - Business Bank Statement: Computer can scrub, not to mention you can't get one without a human verifying the first 2 anyway.
4 - Credit Check: Computer
5 - Factor: Computer (can always be adjusted)
6 - Amount offered: Computer (adjustable)
7 - Landlord: human

[MCNetwork]

Jay, a large percentage of merchants do their banking through small regional banks and local credit unions with 1980's technology. Not everyone works with Chase and Wells Fargo. You're quite a few years away from the type of electronic paperless submissions that you envision and the ones you can get currently will be a small minority for a while.

[JayBallentine]

And lets look even closer:
1 - Business Lic? Computer can check
2 - Driver's Lic /ID? Computer can check
3 - Business Bank Statement: Computer can scrub, not to mention you can't get one without a human verifying the first 2 anyway.
4 - Credit Check: Computer
5 - Factor: Computer (can always be adjusted)
6 - Amount offered: Computer (adjustable)
7 - Landlord: human

^^^JACK FREAKING POT ^^^

Jay, a large percentage of merchants do their banking through small regional banks and local credit unions with 1980's technology. Not everyone works with Chase and Wells Fargo. You're 10-15 years away from the type of electronic paperless submissions that you envision and the ones you can get currently will be a small minority for a while.

MCN,

You are way off the mark. As of THIS MOMENT - RIGHT NOW, there are ISO's who are in beta on a private platform who are killing it.

They sit down with merchant on phone. Send merchant a secured link via e-mail, merchant completes app, banking, credit, etc. while being "counseled" through the offers that eventually will appear on the screen. What does this mean? What does that mean, etc. At the end of the process the entire stack is delivered to funder with a SIGNED CONTRACT. Funder may adjust offers, but that's handled electronically too. The funder is left to do the things on Joesph's list that only a human can do.

This is a COMPETITOR OF MINE. They're in beta. This is happening right now, no fairytale. How exactly do you propose to compete with that? You can't - you will need them to survive. So you will be using the product before the year is out because you will have no choice. You want in now - whip me a note and I'll try to plug you in.

By the way Yodlee covers 95% of banks. Small. Regional. Super regional.

[Ryan Shiroky]

^^^JACK FREAKING POT ^^^




MCN,

You are way off the mark. As of THIS MOMENT - RIGHT NOW, there are ISO's who are in beta on a private platform who are killing it.

They sit down with merchant on phone. Send merchant a secured link via e-mail, merchant completes app, banking, credit, etc. while being "counseled" through the offers that eventually will appear on the screen. What does this mean? What does that mean, etc. At the end of the process the entire stack is delivered to funder with a SIGNED CONTRACT. Funder may adjust offers, but that's handled electronically too. The funder is left to do the things on Joesph's list that only a human can do.

This is a COMPETITOR OF MINE. They're in beta. This is happening right now, no fairytale. How exactly do you propose to compete with that? You can't - you will need them to survive. So you will be using the product before the year is out because you will have no choice. You want in now - whip me a note and I'll try to plug you in.

By the way Yodlee covers 95% of banks. Small. Regional. Super regional.

and then, the landlord says "nah man, he is behind 2 months, thats what he wants the money for"... dead deal at that a-paper shop AND now you have wasted the merchants and lenders time...

[Ryan Shiroky]

and what happens when your merchant tells u to suck wind because he wants the deal he already signed for?

[JayBallentine]

and then, the landlord says "nah man, he is behind 2 months, thats what he wants the money for"... dead deal at that a-paper shop AND now you have wasted the merchants and lenders time...

Have you sat down and quantified this? Isn't time saved avoiding underwriting deals being underwritten at X funders more than worth it. Mathematically speaking?

[ADiamond]

anything automated and computerized is easy to fraud

[funding pro]

2 very important points to make here

1 - kcup coffee is terrible
2 - Merit's underwriting is fully automated and they are killing it!!!!

oh-no-he-didnt.jpg

[JayBallentine]

2 very important points to make here

1 - kcup coffee is terrible
2 - Merit's underwriting is fully automated and they are killing it!!!!

oh-no-he-didnt.jpg

Good to know!

Crazy how the tide is shifting right under guys' feet and they are in denial. As humans we are wired to fear and resist change. Any basic college psych teaches that. But it's still almost laughable.

Remember the Iraq "Defense Minister" during operation Iraqi freedom?

"Tanks? I see no tanks - the invaders are committing suicide by the thousands by the Iraqi border."

That's what this reminds me of.

[MCNetwork]

I used to work for an MCA boiler room in 2008 that did the whole prequal and instant contract routine during the 1st phone call with the merchant. They were able to get all the stips in on the same day. Half of these deals died and needed to be revised by the lender and many merchants subsequently backed out. It was a colossal waste of time and this boiler room, which had a beautiful sales office in downtown Manhattan in 1 Liberty Plaza with an army of sales reps, went out of business in less than 6 months. There are no shortcuts when it comes to proper underwriting. The human element will always be needed IMHO.

[JayBallentine]

I used to work for an MCA boiler room in 2008 that did the whole prequal and instant contract routine during the 1st phone call with the merchant. They were able to get all the stips in on the same day. Half of these deals died and needed to be revised by the lender and many merchants subsequently backed out. It was a colossal waste of time and this boiler room, which had a beautiful sales office in downtown Manhattan in 1 Liberty Plaza with an army of sales reps, went out of business in less than 6 months. There are no shortcuts when it comes to proper underwriting. The human element will always be needed IMHO.

You're equivocating a boiler room op of yesteryear to 2014 technological innovation?

Didn't you see the post where one of the leading CEO's in the biz has stated that his position has changed on this tech stuff. Why? Not because it started to sound cool. BUT BECAUSE HE HAS LISTENED TO AND HEARD HIS CUSTOMERS.

What reality distortion field are you living in?

The Lean Start-Up teaches us to IDENTIFY OPPTYS TO BUILD WHAT CUSTOMERS SAY THEY WANT. Read it.

The guys who will get sharked out in the next 18 months will be those who listen to their customers LEAST. Funders and ISO's.

I'd be strapped to a customer 24/7 if I had the chance - dead serious.

[Sean Cash]

2 very important points to make here

1 - kcup coffee is terrible
2 - Merit's underwriting is fully automated and they are killing it!!!!

oh-no-he-didnt.jpg

merit?????

[isaacdstern]

Computers can't detect BS on a merchant interview, computers can't figure out if a merchant is having his cousin do a fake landlord verification....there are absolutely some things that can be automated...but some things should never be

[cashguy]

Technology will prevail.

[MCNetwork]

Instant underwriting and funds disbursements has already been perfected by Kabbage. There are several reasons why their model works. Merchants can link their various bank, paypal, ebay accounts to Kabbage's portal and they run their algorithms to determine eligibility. More importantly, there is only one lender involved so the underwriting is centralized and the technology is seamless. If you want to try this process with a bunch of different lenders, each with his own type of underwriting criteria and various levels of efficiencies (and inefficiencies), then you'll be banging your head in frustration. Remember, some lenders can take up to 72 hours to review a submission! And once the contracts are signed, some lenders come back with ridiculous amounts of stips which have to be chased in, verified, and then the contract terms are revised, etcetera, blah blah blah!!! It ain't gonna work!