[AndyYSCISOdept]

Andy, I'd love additional insight because I have banked a lot of the high risk companies and know how profitable they are -- margins in the high risk space are very strong (as you know), well above any form of risk-adjusted cost of capital in an efficient market. If merchants are priced at what they are willing to pay (as you stated) instead of what their risk adjusted price should be, that shows you the market is flawed. So here's what I want to understand if you are willing to provide feedback:

Take your average deal of 1.45x over 3 months, 10% fee -- that is an annualized cost of capital of 410%. Let's assume a 40% renewal rate to be conservative and the advances are refied at 2/3 paid down. Since you guys deduct the remaining balance (including the factor/margin income -- i.e. double dipping), your annualized return on those deals that pay back goes up to over 610%. Isaac, if I remember properly, stated your default rates are 13%. Now lets annualize that rate to compare apples to apples and assume the losses are evenly distributed (this is admittedly simplified (and flawed) math, but it illustrates the magnitude of the the net return) and you get to 98%. So you are looking at net annualized returns of over 300% on non-renewals, and over 500% on renewals.

Or, if you want to forget about annualizing it, just look at factor rates plus origination fee and deduct the default rate. Under any scenario, those are much higher returns than would be expected for the risk you are taking on. What am I missing? Why can't the high risk provide a true risk adjusted product with that much excess margin?

Id love to give you more accurate and detailed information, so please private message or shoot me an email. The fact remains that YSC provides a service and we make no apologies for providing such, having said that we have always been and will always be open to those that ask for information (personal requests)

[Cfairbank]

Id love to give you more accurate and detailed information, so please private message or shoot me an email. The fact remains that YSC provides a service and we make no apologies for providing such, having said that we have always been and will always be open to those that ask for information (personal requests)

Andy, I'm just trying to understand how the math makes sense from two perspectives:

1) given the stated "low" default rate of 13% (relative to what you would expect for lenders charging those types of rates), what justifies charging the merchants that much? How does the market become more efficient so the products are properly priced so the risk-adjusted returns achieved by funders accurately reflects and prices the actual risk?;

2) explain how renewing (and double dipping) a cash advance at those rates is sustainable for a business, and won't ultimately kill the business -- the math makes no sense. I don't know of any clients in this market that are operating at a combination of margin and growth rate that is in excess of 600%. The one time deals are fine -- it's the renewals that are the problem. If you have the answers, I'd gladly speak with you off-line, but not sure what the "secret" sauce you'd be disclosing on this forum given that Isaac already has disclosed the default rate (and your deal stats are your deal stats and pretty consistent with other high risk lenders). My full contact info is in my signature.

Again, this isn't solely a YSC question, if anyone can defend this type of product with math, I'd love to hear it. Products structured like this are predatory (unless you can explain to me how they aren't), and threaten the entire market -- the small businesses that receive the capital, the 1st position lenders being stacked (with the stackers frequently turning their capital multiple times before the first position even recovers principal), and the reputation of the whole space if painted with a single, high risk cash advance brush.

[AndyYSCISOdept]

Andy, I'm just trying to understand how the math makes sense from two perspectives:

1) given the stated "low" default rate of 13% (relative to what you would expect for lenders charging those types of rates), what justifies charging the merchants that much? How does the market become more efficient so the products are properly priced so the risk-adjusted returns achieved by funders accurately reflects and prices the actual risk?;

2) explain how renewing (and double dipping) a cash advance at those rates is sustainable for a business, and won't ultimately kill the business -- the math makes no sense. I don't know of any clients in this market that are operating at a combination of margin and growth rate that is in excess of 600%. The one time deals are fine -- it's the renewals that are the problem. If you have the answers, I'd gladly speak with you off-line, but not sure what the "secret" sauce you'd be disclosing on this forum given that Isaac already has disclosed the default rate (and your deal stats are your deal stats and pretty consistent with other high risk lenders). My full contact info is in my signature.

Again, this isn't solely a YSC question, if anyone can defend this type of product with math, I'd love to hear it. Products structured like this are predatory (unless you can explain to me how they aren't), and threaten the entire market -- the small businesses that receive the capital, the 1st position lenders being stacked (with the stackers frequently turning their capital multiple times before the first position even recovers principal), and the reputation of the whole space if painted with a single, high risk cash advance brush.

I think the biggest issue is you are using numbers that are of your own making, and that is probably because most people aren't forthcoming ( even your so called A paper lenders) with the real cost of their money

Secondly, the renewal process of re-fi'ing a balance has been a long established practice.

Im not sure what answer your after, we provide a service just like any other business but it seems to me that some people love to play the "holy than thou" card while getting their hands dirty at the same time.

Don't get me wrong, our model isn't perfect but show me one that is and Im ready to poke holes in it

[Cfairbank]

I think the biggest issue is you are using numbers that are of your own making, and that is probably because most people aren't forthcoming ( even your so called A paper lenders) with the real cost of their money

Secondly, the renewal process of re-fi'ing a balance has been a long established practice.

Im not sure what answer your after, we provide a service just like any other business but it seems to me that some people love to play the "holy than thou" card while getting their hands dirty at the same time.

Don't get me wrong, our model isn't perfect but show me one that is and Im ready to poke holes in it

You are welcome to pick numbers, and I'll run the same analysis -- More than anything, I am focusing magnitude here, but if you want to cut those annualized rates in half, you will still have a difficult argument to support (especially with double dipping) -- namely, how does the business support it and what are you in your practices doing to avoid creating debt traps? Regardless, I'm quite confident in the validity of your deal profile both from broader market intel and validated by the times we are stacked by YSC. Again, do a deal once and move on, you have a fine product. It's the cycling that is killer

But you are exactly right, no product is close to perfect and in no way am I playing the "holier than thou" card -- what I can do though is defend our business model, and in deals where we are higher priced, explain how our product is specifically designed to NOT create a debt trap -- again, it's no where close to perfect -- we can and will improve it. But there are also inherent issues in the space (i.e. stacking) that, until they are wiped out, will make products "worse" and higher priced throughout the market.

Last point, then we can take this offline if you want but no reason to keep beating a dead horse on a public forum unless you guys will go through the basic math exercise with me -- just because double dipping has been the "normal" practice since the beginning (and you are right, it has), doesn't mean it is a "good" practice. it's one of the most damaging practices in the space, especially on short term high cost capital. If lenders/advance companies don't regulate themselves and remove it from their products, the CFPB or another party will -- it absolutely is a massive (hidden) driver of debt traps -- the CFPB will have a FIELD DAY with double dipping.

[Michael I]

You are welcome to pick numbers, and I'll run the same analysis -- More than anything, I am focusing magnitude here, but if you want to cut those annualized rates in half, you will still have a difficult argument to support (especially with double dipping) -- namely, how does the business support it and what are you in your practices doing to avoid creating debt traps? Regardless, I'm quite confident in the validity of your deal profile both from broader market intel and validated by the times we are stacked by YSC. Again, do a deal once and move on, you have a fine product. It's the cycling that is killer

But you are exactly right, no product is close to perfect and in no way am I playing the "holier than thou" card -- what I can do though is defend our business model, and in deals where we are higher priced, explain how our product is specifically designed to NOT create a debt trap -- again, it's no where close to perfect -- we can and will improve it. But there are also inherent issues in the space (i.e. stacking) that, until they are wiped out, will make products "worse" and higher priced throughout the market.

Last point, then we can take this offline if you want but no reason to keep beating a dead horse on a public forum unless you guys will go through the basic math exercise with me -- just because double dipping has been the "normal" practice since the beginning (and you are right, it has), doesn't mean it is a "good" practice. it's one of the most damaging practices in the space, especially on short term high cost capital. If lenders/advance companies don't regulate themselves and remove it from their products, the CFPB or another party will -- it absolutely is a massive (hidden) driver of debt traps -- the CFPB will have a FIELD DAY with double dipping.

fully agree here and it is majority of lenders , not just the f paper ones . track record got to count for something . till today can is the best with that . they will go way out of their box to keep a good client .