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10-06-2016, 02:02 AM #1
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LoanMe
Breakout asked to not hijack a previous thread regarding questions about LoanMe, so I'm starting a new one. Apologies if this is in the wrong Forum.
From the previous thread you mentioned "0.00% interest rate is not the same as 0.00% interest or 0.00% APR." - It's confusing statements like this which leads to people asking for a common comparison tool, like APR or total cost comparison.
In reviewing the fixed payback product details your provided in the previous thread, you're taking $7k off $50k and leaving a merchant with only $43k. Even though it's 0% interest, you're taking such a huge chunk out with the origination fee it seems that the small business will likely fall into a need to borrow more, quicker, considering there are receiving significantly less than what they need.
Perhaps it's reasons like this why Merchant Maverick has you rated the lowest out of 32 small business lenders, with the first bolded copy in the piece calling it "predatory"? It does call out both personal and business loans you offer, so maybe the predatory claim is on the personal loan side, but it doesn't read that way. Would love to get your feedback and understand how this is not the case. It does seem like there are some intriguing ways you offer your products, and it'd be great to learn how this helps the small businesses, not LoanMe.
Also, was it Cash4Rent that you were previously named under? Doesn't really matter, but since it was discussed in the previous thread I figured I would try and shed some light for those interested, if that in fact was the name. If it isn't apologies for a wrong guess.Last edited by J_B; 10-06-2016 at 02:15 AM.
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10-06-2016, 11:42 AM #2
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"Predatory" is a view point, and often an opinion of individuals whom cannot asses risk properly and frown upon those in a high risk field. If everyone that applied for a loan instantly qualified for a multi-million dollar unsecured LOC/SBA Loan, then I would agree some places could be seen as taking advantage of merchants. However, if you are a merchant and lets say you apply with every different type of financial tool from "premiere quality" to a "bottom of the barrel" (don't throw the "well with all of those hard inquires" at me, I am just making a point ) and ever place declined you for X reason(s), and then LoanMe says here is $ @ % are they predatory or properly assessing the risk that transaction imposes with an underwriting model that properly allows them to do so.
Interest/interest rate/APR all dependent on the frequency with which "interest" is compounded, or how frequently the additional payback is charged. LoanMe will charge per day with a simple interest model and while they may have a high "interest-rate" they are also willing to take risks most other financial companies will not even consider. 550 FICO, 2 months in business, 15 NSF's over 60 operating days? LoanMe funds it and everyone else laughs them off of the phone.
Now I am not saying LoanMe is the best financial tool for any given situation but I had a merchant a few months ago with a great FICO (can't remember exact numbers but about 670-700) and strictly due to TIB (about 4 months) this merchant was only being offered 3 month 1.45 at less then half of what was needed to begin a new government contract. LoanMe thankfully came in and offered them more than what the merchant was asking for and as LoanMe has their interest only monthly payment structure it did not place any strain on the merchant's cash flow, and 6 months later when the larger contracts were paying out the merchant ballooned the remaining. It was exactly what the merchant needed
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10-06-2016, 02:54 PM #3
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We believe this answers the questions of this thread starter J_B. Thank you nrh1lp.
Our apologies to Breakout as it was not intended to take over their thread. They commented on LoanMe and we felt the need to address, which turned into a few back and forth posts. Admins feel free to take the back and forth between Cfairbanks and LoanMe on that thread and re-locate them here.
We invite everyone to our "LoanMe Small Business Loans" Promotions thread in the promotions section of DF located here: http://dailyfunder.com/showthread.ph...ghlight=loanmeLast edited by LoanMe; 10-06-2016 at 03:50 PM. Reason: adding link to LoanMe Small Business Loans.
LoanMe Business
949-535-7798
Email: Business.Loans@LoanMe.com
www.loanme.com/SBL-partner
1900 S State College Blvd. Suite 300
Anaheim, CA 92806
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10-06-2016, 04:05 PM #4
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We do have term loans as well, that offers lower origination fees and an interest rate. This fixed payback product you refer too has been called by many of our partners as the MCA look-a-like with a monthly payment.
In this example $43,000 paying back $50,000; the math is the same as a 1.16 factor MCA's use.
This matrix should also provide some more clarity: http://conta.cc/28NmNfbLoanMe Business
949-535-7798
Email: Business.Loans@LoanMe.com
www.loanme.com/SBL-partner
1900 S State College Blvd. Suite 300
Anaheim, CA 92806
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10-07-2016, 11:45 AM #5
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Thanks for the feedback. Much appreciated. Just a couple of quick follow up notes or questions. I don't think merchant maverick did the review in a vacuum. Considering how many other companies they have reviews on, and the level of research they did, i would think they are more qualified to make those statements....unless they are an unbiased reviewer with relationships that are unknown to outsiders.
What I take away from your points is that LoanMe will fund high risk deals. Does that mean at a certain risk level you can make things less transparent? If anything, doesn't a higher origination fee make it less risky for LoanMe by pushing less money out the door? For the poor credit or risky customer you have in your example and in the link you provided (Tier D), 32% origination fee just seems outrageous. From reviews like merchant maverick and the better business bureau, there just seems to be a higher amount of frustrated customers and feedback that leads me to think otherwise. I appreciate your feedback.
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10-07-2016, 11:55 AM #6
JB, it seems like you might be misunderstanding their product. For the tier D borrower, the origination fee is 32%, which is similar to factor rate pricing for that tier of borrower. This is the type of borrower that would likely qualify for Yellowstone or Everest type of money.
Last edited by Zach; 10-07-2016 at 11:58 AM.
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10-07-2016, 12:00 PM #7
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10-07-2016, 12:36 PM #8
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Got it. Thanks for the feedback, guys.
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10-07-2016, 03:27 PM #9
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What I am struggling with, and I'm not trying to start an argument, I'm just trying to understand what the intention is here if it’s not intended to be more confusing. For the 0% interest term product let’s take this example:
$60,000 ‘loan'
35% origination fee, deducting $21,000 from amount sent out the door
Small business receives $39K with a total payback of $60K
That’s a 1.54x factor rate.
Why not present it as that if it's a $39K loan at a 1.54x factor/$0.54 on the dollar, with a total payback of $60K? What's the point to market it the 0% interest way when we recognize there is a factor rate? One of the main issues going on in this space is about confusion around product cost and terms. Isn’t this just making it even more confusing, when the industry as a whole is trying to go in the opposite direction and make the product cost and terms as transparent as possible?
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10-07-2016, 05:15 PM #10
We know you're not trying to start an argument -- no worries man! It took us all a bit to wrap our heads around it.
Here's the economics of the "No Payment" product:
1. They market it as a 0% interest product because it is appealing (and true). We understand there is a "cost" to borrow the money.
2. The "No Payment" product (33% origination) equates to approximately a 1.54 factor rate over 6 months. True, there is a significant cost of capital here, however don't forget this -- the borrower makes NO PAYMENTS for 6 months. It's definitely a very unique product with a defined niche.
Also, their primary product seems to get misunderstood quite a bit as well:
1. Their primary product has interest rates that range from 14.9% to 149%. 14.9% is the equivalent of a 1.08 factor rate over 12 months, whereas 149% is the equivalent to around 1.4 for 6 months (not exactly). Their product is cheaper than almost our entire space, on average.
2. Their product typically has a 10-year amortization period with a monthly payment, which gives the borrower much greater flexibility with their repayment. Compare this to a cash advance over 6 months at a 1.30 factor rate, which may be the same TOTAL COST, but the payments are much higher and taken daily, with fees being added for each missed payment.
The LoanMe product is one of the most efficient in the space, and it is tragic to me that so many people misunderstand it and "beat them up" in an unfair way.Last edited by Zach; 10-07-2016 at 05:23 PM.
Zachary Ramirez – CEO
Phone: 562-391-7099
Email: zach@zacharyjosephramirez.com
1661 N. Raymond Ave #265
Anaheim CA 92801
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