[mcaguru]

Cheryl thanks for the updates ! hope you get sometime to relax as well

[morgan.quinn]

Came across this article a few weeks back. Pretty interesting and relevant--
http://www.forbes.com/sites/brockbla.../#bc72f8b7f583

[J_B]

Like others have mentioned, it seems APR is being used mostly as just a comparison metric since there are so many different type of funding options available. If you're educating them on your funding solution, but they have an offer from a different firm on a another funding option, it can get confusing pretty quick. Why not offer both total cost of capital and APR and use them as points of discussion while coaching the merchants?

[J_B]

Alex Matini from Rapid is up speaking about businesses and alternative business lending industry. He's speaking now about who RapidAdvance is and what they do.He will also introduce the keynote speaker, Tim Wackel from The Wackel Group.

Did Alex brag about funding one client something like 48 times since 2009 and their offices having a conference room after that client? Did he also quickly change the subject if APR or how they renew came up? He spoke at the SBDC a few weeks back and the audience there, granted they are not from this space at all and were looking to understand the basics of the industry, left pretty confused and underwhelmed with his level of transparency.

[1StopFunding]

Sean's session is up! He is the 3rd speaker this morning. His panel is The Reporter's Viewpoint. I know he is going to nail it!

[1StopFunding]

Moderator asked Sean to elaborate on the numbers in the MCA space as it relates to volume. Sean says, "Can I address what an MCA is first?" He went on to clarify the panelists from yesterday who spoke about MCA's being high risk and 75%. He nailed it!!!!

[1StopFunding]

Bob Coleman with The Coleman Report said he disagrees with Sean. He said if it walks like a duck it's a duck. He said an MCA Is a loan and Sen Elizabeth Warren is wanting answers for lenders who are charging apr's over 100%.
Sean rebuts that Sen Warren is looking at loans involving consumers.
This is much better than the presidential debates! Go Sean!

[jotucker1983]

Bob Coleman with The Coleman Report said he disagrees with Sean. He said if it walks like a duck it's a duck. He said an MCA Is a loan and Sen Elizabeth Warren is wanting answers for lenders who are charging apr's over 100%.
Sean rebuts that Sen Warren is looking at loans involving consumers.
This is much better than the presidential debates! Go Sean!

Sounds like Sean is holding his own, but getting ganged up on by people who really don't understand what an MCA is.

"If it walks like a duck, it's a duck." Really Coleman lol? So every financing product should be put in the same category because they all "walk like a duck" (address cashflow/working capital issues)?

[1StopFunding]

Exactly Joe. Most of these people here are ABL , SBA and Leasing folk who don't understand MCA space at all.

[Sean Cash]

Thanks Cheryl! and it was nice to finally meet you in person.

[Chambo]

Sounds like Sean is holding his own, but getting ganged up on by people who really don't understand what an MCA is.

"If it walks like a duck, it's a duck." Really Coleman lol? So every financing product should be put in the same category because they all "walk like a duck" (address cashflow/working capital issues)?

That is EXACTLY what the judge in California said during the REWARDS NETWORKS, then the AMI lawsuits

[FCF Fund]

Bob Coleman with The Coleman Report said he disagrees with Sean. He said if it walks like a duck it's a duck. He said an MCA Is a loan and Sen Elizabeth Warren is wanting answers for lenders who are charging apr's over 100%.
Sean rebuts that Sen Warren is looking at loans involving consumers.
This is much better than the presidential debates! Go Sean!

What I learned from the first Lend360 is that certain political players look at MCA's like the next coming of Payday advances due to the whole APR issues, there are strong lobbying groups for both sides. Being the fact that we are B2B will only hold weight for so long. Not to mention the source of money that is flowing into these MCA's coming from smaller funders is very questionable.

[BankComplianceGuy]

"If it walks like a duck, it's a duck." Really Coleman lol? So every financing product should be put in the same category because they all "walk like a duck" (address cashflow/working capital issues)?

They are all credit products, so yes, they should. Potential borrowers have a need for financing, and, sometimes, many options. All options should be given with transparent terms and disclosures so an informed decision can be made. Sidenote, I'm willing to bet 99% of apps have "working capital" as the reason for the loan/advance request. Can anyone explain WTF that means? Doesn't anyone ask what about their working capital ratio or cycle has them seeking funding, or would that be bad for business?

Sean, don't take this the wrong way, but the ETA article/study you wrote about last month is pretty misleading. All it does is confirm that most consumers and small business owners don't understand finance. The whole consumer vs commercial argument is a red-herring. Cash flow is important to everyone, and that is why term, rate/fees, and monthly payment all have to matter, regardless of consumer or business purpose. I would even say it's of greater importance for commercial borrowers that are trying to manage their working capital and may have greater volatility in revenues.

The whole time-value of money concept works both ways. As it is better to receive a dollar today than in the future, it's also better to pay a dollar in the future than now. And so while their example of a 6 month loan has considerably less total interest than a 60 month loan, that monthly payment difference is quite considerable and the study only makes passing reference to the impact this can have on a businesses cash flow. Yes, there is an expectation that the money will be used to generate a return to pay it back, but let's be honest, if most businesses could turn this money around in such a short term, would there really be such a demand for renewals as there is?

Then the study goes on to point out that a small business borrower would generally seek to minimize TCC by minimizing the loan term. Which makes sense, until you remember that there is no early payback benefit for most products if they are able get a return earlier than expected and pay-off the loan early, unless of course they renew.

I get it, this is fast money that comes with high risks, so it has to come at a price but why try to obfuscate that with smoke and mirrors. The brokers/funders that have multiple credit solutions and can offer prospective borrowers the solution that fits their need and priced in accordance with their credit risk will be the ones that stick around. There are times when someone truly has a legitimate need for the money now with a short terrm or can't qualify for anything else. Then you should be clear about the ALL the costs and risks of this type of loan/advance.

[Sean Cash]

Sean, don't take this the wrong way, but the ETA article/study you wrote about last month is pretty misleading.

No offense taken. I didn't author the study and the report seemed to contradict the anecdotal assertions made by some ETA members. I have no opinion about whether or not LENDERS that offer LOANS include an APR regardless of what borrowers supposedly understand or don't.

I am confused about any attempt to put an APR on a purchase product, because (1) it's not a loan, (2) there's no term (3) the APR will be undoubtedly be wrong and a wrong percentage will not help customers (4) an APR would befog the nature of the agreement (5) If an attempt to calculate an APR once the agreement is satisfied diverges at all from the estimate provided prior to funding, a funder would be subject to federal and state enforcement actions (6) it would undermine compliance with state lending laws (7) and again the APR will be wrong (8) you will get in trouble for being wrong (9) you will be wrong.

[J.Celifarco]

No offense taken. I didn't author the study and the report seemed to contradict the anecdotal assertions made by some ETA members. I have no opinion about whether or not LENDERS that offer LOANS include an APR regardless of what borrowers supposedly understand or don't.

I am confused about any attempt to put an APR on a purchase product, because (1) it's not a loan, (2) there's no term (3) the APR will be undoubtedly be wrong and a wrong percentage will not help borrowers (4) an APR would befog the nature of the agreement (5) If an attempt to calculate an APR once the agreement is satisfied diverges at all from the estimate provided prior to funding, a funder would be subject to federal and state enforcement actions (6) it would undermine compliance with state lending laws (7) and again the APR will be wrong (8) you will get in trouble for being wrong (9) you will be wrong.

so what you are trying to say is that it will be wrong. Just making sure I am not misunderstanding in anyway because it wasn't so clear what you said but you believe it will be wrong..

[HDF]

No offense taken. I didn't author the study and the report seemed to contradict the anecdotal assertions made by some ETA members. I have no opinion about whether or not LENDERS that offer LOANS include an APR regardless of what borrowers supposedly understand or don't.

I am confused about any attempt to put an APR on a purchase product, because (1) it's not a loan, (2) there's no term (3) the APR will be undoubtedly be wrong and a wrong percentage will not help customers (4) an APR would befog the nature of the agreement (5) If an attempt to calculate an APR once the agreement is satisfied diverges at all from the estimate provided prior to funding, a funder would be subject to federal and state enforcement actions (6) it would undermine compliance with state lending laws (7) and again the APR will be wrong (8) you will get in trouble for being wrong (9) you will be wrong.

10) and if the business pays the "loan" back swiftly because the funds worked for them, the computed "APR" skyrockets. That's just wrong....

[Sean Cash]

There is nothing less transparent than estimating APRs for a merchant on a purchase agreement than having the net result of the transaction be another percentage entirely or at the very least be up for debate. An APR is a mathematically specific and legally defined number. Once you start getting into nuances of "well if the merchant has slow months and the agreement takes longer to complete and so looking back at the end, it turned out to be some other rate at the end of the day", you would be in a very dangerous position. That would be the opposite of transparent.

If putting an APR on a loan contract makes a company feel more transparent, then by all means put it in.

[J.Celifarco]

10) and if the business pays the "loan" back swiftly because the funds worked for them, the computed "APR" skyrockets. That's just wrong....

I think the confusion is that half think a loan with a fixed daily payment is a loan and half still believe it an MCA even thuough the term is fixed with the daily payment.. Until everyone agrees what is what you cant have the rest of the conversation.

[Sean Cash]

I think the confusion is that half think a loan with a fixed daily payment is a loan and half still believe it an MCA even thuough the term is fixed with the daily payment.. Until everyone agrees what is what you cant have the rest of the conversation.

There shouldn't be MCAs with fixed terms. They should have reconciliation clauses at the very least. Fixed payments does not necessarily equal fixed term. If a purchase agreement truly has a fixed term, that's an entirely different debate.

[BankComplianceGuy]

I am confused about any attempt to put an APR on a purchase product, because (1) it's not a loan, (2) there's no term (3) the APR will be undoubtedly be wrong and a wrong percentage will not help customers (4) an APR would befog the nature of the agreement (5) If an attempt to calculate an APR once the agreement is satisfied diverges at all from the estimate provided prior to funding, a funder would be subject to federal and state enforcement actions (6) it would undermine compliance with state lending laws (7) and again the APR will be wrong (8) you will get in trouble for being wrong (9) you will be wrong.

A purchase product is a questionable description. Does Wells Fargo call my mortgage a purchase of a portion of my future income? Again, I'll ask what is the use case for this product. If I'm a business owner and I need financing, why do I choose an MCA over any other financing product. If I have multiple choices, what should I use to compare? Usually the best solutions can be found in understanding the user's pain points and decision making process.

The term issue and any enforcement action again can be easily overcome. Anyone could provide an offer with an APR cost assuming a payoff of 12 months or whatever the average payoff of an MCA is. If MCA funders don't know their average term, then they probably shouldn't be in business. Any basic lawyer could add a disclaimer/disclosure explaining the the agreement is not a loan under whatever state law/UCC/etc. and that variations as result of payoff timing differences will adjust actual rate. Transparency and disclosure is the best safe-harbor to UDAP.

[Sean Cash]

The term issue and any enforcement action again can be easily overcome. Anyone could provide an offer with an APR cost assuming a payoff of 12 months or whatever the average payoff of an MCA is.

You will inevitably be held to this number when the customer uses this as the basis for their comparison.

and that variations as result of payoff timing differences will adjust actual rate.

And when it varies from that number, despite your having legally disclosed "variations may occur," no one will care about that disclosure. Class actions, FTC lawsuits would undoubtedly follow.

[J.Celifarco]

You will inevitably be held to this number when the customer uses this as the basis for their comparison.



And when it varies from that number, despite your having legally disclosed "variations may occur," no one will care about that disclosure. Class actions, FTC lawsuits would undoubtedly follow.

I am selling these MCA products for a while and I dont see how you can use an APR. I believe in transparency and being upfront and not hiding anything but this just doesn't work. What happens when someone refi's their 10 month program in 5 months and takes money what is the APR at that point every company would look at things differently and there would be no consistency making things more confusing

[BankComplianceGuy]

You will inevitably be held to this number when the customer uses this as the basis for their comparison.



And when it varies from that number, despite your having legally disclosed "variations may occur," no one will care about that disclosure. Class actions, FTC lawsuits would undoubtedly follow.

I think there's more upside with this as a selling point upfront than downside on the back.

An offer letter that says here's your 12 month rate compared to a competing offer. If your sales boom and you payoff early the implicit rate is higher but you'll have had a great ROI. If things don't work out as well, no worries, you'll get to pay it down over a longer term and the implicit rate is lower.

[BankComplianceGuy]

I am selling these MCA products for a while and I dont see how you can use an APR. I believe in transparency and being upfront and not hiding anything but this just doesn't work. What happens when someone refi's their 10 month program in 5 months and takes money what is the APR at that point every company would look at things differently and there would be no consistency making things more confusing

Doesn't need to be that complicated. It's priced as a new transaction. No different than a cash out mortgage refi. No mortgage lender has to give you an apr of the combined transaction.

[Sean Cash]

I think there's more upside with this as a selling point upfront than downside on the back.

An offer letter that says here's your 12 month rate compared to a competing offer. If your sales boom and you payoff early the implicit rate is higher but you'll have had a great ROI. If things don't work out as well, no worries, you'll get to pay it down over a longer term and the implicit rate is lower.

There is only downside because the APR will be wrong. There is no upside.