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04-18-2014, 10:11 AM #1
And so it starts...
"Please be advised that under applicable law, where there is an existing contract between a plaintiff and a third party, acts by a defendant to induce the third party to breach that contract are tortious and may subject the defendant to civil liability. In Addition to contractual damages, an injured party may also recover for consequential losses resulting form the interference as well as harm to the injured party's reputation. Further, where the interference was conducted with 'actual malice', such as intent to injure, a plaintiff may also be awarded punitive damages."
The "actual malice" part is gonna kill some of these stackers out there.
You still think I an an old fool and paranoid Sean?
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04-18-2014, 10:32 AM #2
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04-18-2014, 10:42 AM #3
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There is a big difference between regulation and law.
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04-18-2014, 10:45 AM #4
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04-18-2014, 04:41 PM #5
We (brokers) should set up the National Association of Merchant Cash Brokers (NAMCB)
Most other industries have an association that represents the brokers side. Our industry is a little more tricky since a lot of places are brokers/funders.
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04-18-2014, 05:24 PM #6
Scott, thats a pretty cool idea man.
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04-18-2014, 05:36 PM #7
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- 117
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04-18-2014, 06:22 PM #8
And so it starts...
I know we do a fair share of funding Scott but we also do a ton of brokering....I am game if you guys are serious
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04-18-2014, 06:44 PM #9
There can be a lot of power when a group gets together but it can also be a positive thing for the funders. We could require background checks on all members (brokers) so then the funder knows a broker doesn't have a shady/criminal past when signing him up. A certified broker from our (NAMCB) is a lot safer broker to have delivering deals to a funder.
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04-18-2014, 10:57 PM #10
That idea has been tossed around for awhile but never executed. It's not a bad idea actually. If namaa can do it for funders why not for brokers. If the intent is pure and aligns itself to improve the industry. But it can't be a association where certain funders are paying ad dollars to influence brokers to send in deals. Has to be pure broker IMO.
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04-19-2014, 07:24 AM #11
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1. Brokers have no skin the game (at best minimal). Funders do. Yellowstone is a "hyrbrid" so I don't necessarily include them.
2. It is not in the best interest of the broker to join some organization where he / she subscribes to rules which will dictate his / her ability to make money. Furthermore, requiring him or her to submit funding (payment) for background checks and overhead of said organization vs. buying leads is laughable.
3. Not all funders will be compliant. Sleazebag funders will instantly see this as a way to capitalize; "Send your deals to us! No background checks required! All brokers accepted!"
4. It's too late.
You guys should sit down and think critically about this.
Who funds this organization?
How do you enforce collection of dues?
Is the leadership of the org full time employees?
What's their charter?
WHO ORGANIZES THIS?
What's that persons motivation?
We think there are only a few options.
1. For their to be gov regulation. Sure if you're a broker you're not trying to hear that. However, that's the best thing for the American small business owner - period.
2. Fierce competition. Fundera and our company, Buynance takes 3% on the funded, period. We also believe data and analytics should fuel marketing. How can brokers compete with our companies as we scale?
Old Saying: "What you don't know, can kill you."
Crazy rest of the year for the biz coming up.Last edited by JayBallentine; 04-19-2014 at 07:42 AM.
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04-19-2014, 03:32 PM #12
I disagree that ISos or brokers have no skin in the game. The cost to acquire an account falls on the marketing and overhead expenses of the broker so the funder can acquire a new customer and monetize on it on renewals. That customer has to be created and the brokers since inception have provided millions upon millions of dollars to funders in revenue while spending their dollars marketing and closing deals (time is money and closing deals take both). A customer does not magically appear. If the average mca is 25k for example and you make 3 points only you are making $750 per unit. How do you make money doing that? Is it just you and a website with internet lead aggregation? Who's closing the deals? Are the funders giving you marketing or sponsorship fees to do this for them? You are not going to capture all of the market with your site. Maybe you do squeeze a few larger ISos out with that model but ppc seo is only one method of marketing and plenty of deals close daily through relationship selling.
Last edited by MCAVeteran; 04-19-2014 at 03:33 PM. Reason: Addtl
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04-19-2014, 10:41 PM #13
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There are a ton of interesting questions here... You remember how Facebook started? It started as this thing at Harvard that was pretty cool. Just a class listing, a photo, and a poke. But it was enough to get people hooked. Then they went to another Ivy league, and then another. 10 years later they're spending $21 billion on acquisitions! (What'sApp + Oculus) in the same year.
A class listing at Harvard, a photo, and a poke. 10 years later, they're buying companies for billions.
Point being... You don't START with your end game, you iterate your way towards there.
Let's not even talk about Buynance. Lets talk about Fundera. You really think they raised $3.9M to be a lead generator for CAN + OnDeck when investors expect a 10x return? You really think the guy who shipped and sold Skype (CEO of Fundera) dove into this space to be a lead generator for CAN and OnDeck?
Let's pretend Buynance fails. You're gonna bet that our competitors (Fundera) raised $3.9M in a series A to make $750 per lead and that's it?
Come on man. Is this story every going to be written?
"Jared Hecht, shipped and sold Skype for billions and ultimately started Fundera to become the most super reliable lead generator for CAN + OnDeck Capital."
Think about this kind sir...
What are guys really up to here???
If you surround yourself around the people we're exposed to everyday you'll see guys think and EXECUTE on levels beyond comprehension.
There is a $462 billion market oppty at stake here and you'd be less than wise to take anything any tech company is doing at face value.
Case in point...
GOOGLE 411. Remember that? Folks thought Google was trying to get into the listings business. IT WAS A SMOKE SCREEN.
They used all that voice data to power their voice products today...
It's levels to this stuff my man... levels.Last edited by JayBallentine; 04-19-2014 at 10:50 PM.
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04-19-2014, 11:08 PM #14
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Oh, and in the case of Google. Anyone could build what they did with 411 in a week these days. You take the Foursquare / Yelp API's + Wit.ai + Twilio and your'e good to go.
In order for them to do what they did they first had to:
1. See into the future.
2. Understand folks would walk around with computers in their pockets (smartphones) and having humans command them by voice where applicable would be perfunctory.
3. Aggregate business listings data. There were no listings API's back then. They had to do it the hard way.
4. Design the first voice recognition interface and have it "barely functional." If you recall Google 411 was super buggy at first - that was the point. Collect your queries and make it better.
5. A lot of other stuff.
There's probably a million and one other things I didn't list. Pay particular attention to item #1.
They first had to see into the future.
It wasn't easy. But they got there and they're still pushing (Google Glass for example). When they saw into the future - they didn't look down the road and see $$$ signs. They saw one word; "awesome."
We get to glimpse into the future everyday. Each day we get more excited about it.
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04-20-2014, 04:57 AM #15
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04-21-2014, 11:17 AM #16
so your saying for now, they earn their 1-3 point origination fees paid direct by lenders like your site, and, its a smoke screen to lend directly one day along with brokering? i.e. lendio?
funderas site states these are the companies they refer business to (but not limited to), which means the funders in house sales are doing the closing of the sale-
ODC/CAN/Funding Circle/Celtic Bank/Fundation/SmartBiz SBA
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04-21-2014, 11:58 AM #17
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Something needs to change. I just went to renew a syndicated deal i had. I got his banks. He had my funding, then funding from Capital Stack two months later, then another funding from Fora Financial. Needless to say i was not interested in giving him anything out of my pocket again.
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04-21-2014, 12:03 PM #18
Stacking in this biz is getting common place... if you outright STOP renewing deals based on a stack, your not going to renew half your book...
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04-21-2014, 01:00 PM #19
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04-21-2014, 01:10 PM #20
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04-21-2014, 01:17 PM #21
By the way, my comment isn't based on speculation, but from what I've heard from someone intimately related or involved with them.
Kabbage may have a similar philosophy as they recently licensed their technology to a bank.
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04-21-2014, 02:14 PM #22
Isn't this the EXACT same game plan On Deck has had for the last several years? Build up a technology platform to them sell to a bank?
Shariff used to pontificate that they would be selling their innovative UW'ing platform to Bank of America in the near future. Of course, that was what? 3-4 years ago?
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04-21-2014, 03:28 PM #23
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I've always been under the same impression but I think OD underestimated the extremely slow credit rebound from the meltdown in 08-09. It's much better than it was but risk aversion is still quite predominant. High risk/return lending is still being avoided by banks. Partly due to the new regs and capitalization requirements and partly because they simply don't need it nor want ANY bad press about any risky lending.
OD changed gears by going after market share and getting capitalized. I've often wondered that once you peel it all back, is OD as stable as they say they are. I'm sure many have asked the same question.
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04-21-2014, 06:27 PM #24
New Merchant Cash Advance Regulations ???
Stack funding refers to a situation in which a merchant “stacks on” an additional merchant cash advance while still owing another lender for a different advance? right ?. The question is, why are so many merchants choosing to take out second, third and even fourth cash advances when they already have existing balances?
Lending Regulations For MCA
Potential lending regulations have been a hot topic in the lending industry. Whether or not stacking will become more highly regulated is secondary to the fact that any and all regulations should be fair. They should apply to all three parties involved in business lending: The borrower, the broker, and the lender. Unfair practices such as refinancing and delaying balance and payoff information should be replaced with options that that benefit all parties.
Limited Options for Additional Capital
One major reason that merchants are taking out additional cash advances is because many lenders are holding off on offering the merchant more working capital. Many of these lenders have arbitrary financing rules that benefit them rather than the merchant and prevent the merchant from receiving necessary funding.
Delays in Providing Balance and Payoff Letters
When a merchant finds a better offer and decides to take out another advance, the second lender often requires a balance or payoff letter before financing the merchant. Most lenders are slow to give this information and may take days to provide these letters. They may use this long delay convince the merchant not to take out a second loan.
Lack of Advanced Technology
Many lenders are very slow to upgrade their technology. Most still rely on Excel spreadsheets as their primary method or record-keeping. This is a major reason that these lenders are slow to provide the merchant with loan status information.
Expensive Refinancing Deals
In cases where the merchant is seeking additional working capital, many lenders offer refinancing “options” that sound like good opportunities but in fact lead the merchant to pay large sums in additional FR. Re-financing can also reduce the amount of time that the merchant has to pay off their balance. 95% of lenders use refinancing.
Refinancing vs. Add-Ons
An Example of Refinancing
Let's say a merchant gets funded from lender X for $50,000 at 1.38% to pay back $69,000. The merchant is given 6 months to pay off this advance. The merchant's daily payment is $547.61, or $11,400 per month.
This merchant, 3 months later, has paid off 50% of the cash advance and has a remaining balance of $34,500. The merchant calls lender X and asks for additional funds. Lender X approves merchant for $50,000 again. However, lender X gets the merchant to agree to still pay off the existing balance of $34,500. Lender X takes $34,500 out of the new $50,000 approval to pay itself off. This means that the merchant will net only $15,500 on this second approval. Also, note that the merchant originally had 6 months to pay off the original $50,000, but was forced to pay it off in 3 months.
The merchant's new balance is $69,000. The merchant is getting charged for money that Lender X is giving back to itself. Now the merchant is paying full FR on that second $50,000 dollar loan when the merchant only received $15,500 of it.
Let's look at how much FR the merchant is actually paying. The merchant's original FR was 38%, or 76% over a whole year. After the merchant is refinanced, this FR on the first loan jumps to 800%. This is a result of just the FIRST refinance. Most cash advance companies refinance up to 4 or 5 times a year, and you can see why. What we need is regulation on this unfair practice of refinancing.
An Example of an Add-On
Let's say a merchant gets funded Funding for $50,000 at 1.38% to pay back $69,000 in 6 months. The merchant's daily payment is $547.61 or $11,400 per month.
This merchant, 3 months later, has paid off 50% of the cash advance and has a remaining balance of $34,500. The merchant calls and asks for additional funds. x lender approves the merchant for $35,000 to pay back $48,300. The $48,300 will be added onto the current balance $34,500 for a total of $82,800. The FR is not compounding. The merchant nets the FULL $35,000 that he is approved for. Also, the merchant still has the full agreed-upon 6 months to pay off the original $50,000 advance.
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04-21-2014, 07:36 PM #25
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C4B- That is probably the best post I've read on this site!
About a month ago I tried to jump into a stacking debate, saying maybe stacking is mainly a byproduct of the overall culture of MCA that is created by Lenders. I suggested that if some Lending practices expand (among other things) a lot less stacking would go on. I got the usual "Well why don't you just use your own money and fund it yourself" response, which some may be tempted to give you as well. Or they will make sure to point out your Refi example can never happen to them because the Merchant must net over 50%..... How many Funders would let a Merchant in good standing with strong balances do a true add-on when they are 50-65% paid off?