[anonymous]

Okay, that should do it for sales tips lol. Let's not create actual competition here haha.

[WestCoastFunding]

Tip of the day: quality leads don't mean anything if you don't fund them. You guys owe me for that advice.

[MCNetwork]

And that's assuming zero renewals. If you factor those in, you should easily hit $200-225k/yr

[jotucker1983]

Thanks guys. My numbers included new and reload deals. I made a good living during my selling time considering that I live in a low cost of living area and embrace Minimalism.

I will tell you guys though that I wasn't doing 6 pts per deal, more along the lines of about 3 pts per deal on average.

That allowed me to generate more reload business as well as merchant loyalty.

In terms of why leave? Well, the writing is on the wall in my opinion and with changes in the industry, I don't think the years ahead will look like those behind. So I wanted to leave out on top.

[Karen37a]

Well , nothing like leaving on top...see you soon have a great next career. Bye ****

[WestCoastFunding]

In terms of why leave? Well, the writing is on the wall in my opinion and with changes in the industry, I don't think the years ahead will look like those behind. So I wanted to leave out on top.

The changes I expect to see are the use of cash advances continue to grow. I don't expect credit unions to suddenly start lending $40,000 in two days to a guy with a 595 scredit score.

The only changes I see are the way people market. As with all industries, you have to stay with or ahead of the trend with marketing. If you're relying solely on UCC lists then yeah, I'm sure business will be stale.

[jotucker1983]

The changes I expect to see are the use of cash advances continue to grow.

I'm curious as to why you hold this position? In terms of the MCA/Alternative Business Loans with the short terms (less than 15 months) with the high costs (1.15 - 1.35), I just don't see how market share increases significantly going forward unless companies take the "no profit model".

There's a market for sure for the alternative short term debt financing, but I just don't see it growing significantly compared to where's it's at now.

The marketplace lenders I would not put in the same category, but the challenges there are more unique as I believe those lenders compete directly with banks. Basically, if your merchant can get a marketplace lender's approval, it's a very high likelihood the bank would also approve them. The benefit in using the marketplace lender is the speed of the transaction.

[WestCoastFunding]

I'm curious as to why you hold this position? In terms of the MCA/Alternative Business Loans with the short terms (less than 15 months) with the high costs (1.15 - 1.35), I just don't see how market share increases significantly going forward unless companies take the "no profit model"..

Supply and demand. There will be a need to short term financing, high risk financing and fast funding financing. No one is filling this need on the traditional side. On the alternative side, institutional lenders are pulling back. Therefore MCAs fill this void. If you can tell me of another type of lending that's eating away at MCA market share, let us know. The only disruption you're seeing is the way lenders are willing to stack merchants, putting a strain on 1st positions. So that part of the industry is working on finding a balance. But overall demand is there. As for regulation, are we really to believe Trump, republican in Congress, and the financial sector's best friend, Chuck Schumer, are going to start regulating MCAs? Zero percent chance.

[WestCoastFunding]

The marketplace lenders I would not put in the same category, but the challenges there are more unique as I believe those lenders compete directly with banks. Basically, if your merchant can get a marketplace lender's approval, it's a very high likelihood the bank would also approve them. The benefit in using the marketplace lender is the speed of the transaction.

Marketplace lenders only require a 650 credit score and can get away with a DSCR of around 0.4. No collateral is required (business and/or personal). This is absolutely not cutting it on the conventional side. No bank would lend to these borrowers. Marketplace lending is not competing with banks - they are filling the space between bank-rate financing and MCAs. But marketplace lending is getting scrutinized and hammered by investors. They are raising lending standards which will cause people who would normally get approved to now be declined. Where will their usual clients go? A bank? Of course not. They'll be migrating to MCAs.

[jotucker1983]

Marketplace lenders only require a 650 credit score and can get away with a DSCR of around 0.4. No collateral is required (business and/or personal). This is absolutely not cutting it on the conventional side.

I'm sorry, I disagree with you.

For one, (at least with the MP Lender I've been working with) the credit score requirement has increased, but they are still lending based on the merchant having some sort of solid financial position based on "conservative" conditions of the financials, which is very similar to the process at the banks. Also give or take, let's just be honest, the merchant that is more likely to be approved at the MP Lender has a 700 credit score, which is completely outside of the MCA market.

Now, granted, an MP Lender will approve a higher amount than a Bank, but the MP Lender in my opinion is competing to take business from the Banks directly, not business from an MCA, because most merchants who are at the "MCA level" can't get approved for the MP Lender's product (for the most part).

Marketplace lending is not competing with banks - they are filling the space between bank-rate financing and MCAs.

I agree, and that "middle market" you are referring to comes from bank submissions and bank declines. Again, it's from those who are currently going to the banks or have the ability to go to the banks. The banks still aren't going to approve a high amount and many of those can fall right into the MP Lender's bucket. Also those who need financing faster and can't wait on the bank, would fall into the MP Lender's bucket.

This is why bank declines have never really worked for MCAs (from my experience), because MCAs just didn't compete with that type of borrower.

The MCA borrower is the unsophisticated merchant. My average MCA client has a credit score as low as 550 to as high as around 650. Understand that this credit score range, nationally, is considered to be below average/bad credit. Good credit starts at about 670, with Excellent credit starting at around 720 - 740.

In addition, the MCA borrower gets NSFs/Overdrafts, might have a lien somewhere or at some point in time, might have had issues with landlord payments, is completely unorganized (in many cases) in terms of just sending over 3 months of bank statements with all of the damn pages included lol. And goodness, if you need tax return pages, expect to get them unsorted, unorganized, and with pages missing.

The merchant getting approved at the MP Lender has Good Credit, which is usually at around 700. Plus they don't have the NSFs or liens, they are organized and know where all of their financial related documentation is. They are sophiscated just like the traditional "bank customer" is, but the bank might decline them due to their industry or they might need funds "faster" than the bank can move, which brings in the MP Lender.

[WestCoastFunding]

Basically, if your merchant can get a marketplace lender's approval, it's a very high likelihood the bank would also approve them. The benefit in using the marketplace lender is the speed of the transaction.

That's absolutely false. Again, what Funding Circle will approve Vs Wells Fargo is night and day. Also what is night and day are the rates and terms. Wells Fargo you'll probably seen a term from 5-10 years, or up to 30 with real estate involved. Rates will be in the single digits. Marketplace lenders are offering 2-5 year terms with rates double or triple bank rates. Therefore, the monthly debt service of each looks dramatically different. Completely different products and customer profiles. That's why marketplace lenders have approval rates double that of banks. They are using a completely different risk model, and the rates and terms reflect it.

[jotucker1983]

Supply and demand. There will be a need to short term financing, high risk financing and fast funding financing.

My argument is not that the need is going way or the demand is going away, but that the "industry has reached its peaked" in terms of total market saturation of the commercial financing sector.

As for regulation, are we really to believe Trump, republican in Congress, and the financial sector's best friend, Chuck Schumer, are going to start regulating MCAs? Zero percent chance.

MCAs are already regulated in various components and functions, from marketing regulations to specific state related licensing requirements. It's less likely that there will be as "much" regulation added with Republicans in control, but more regulation is coming WestCoast, it's not a matter of "if" but "when". The insane stacking going on (I've seen up to 11 positions on a merchant), causing merchants to go out of business, is doing nothing but speeding up the probability of more regulation, no matter what party is in control.

[WestCoastFunding]

My argument is not that the need is going way or the demand is going away, but that the "industry has reached its peaked" in terms of total market saturation of the commercial financing sector.

What is the alternative? Again, if the mid range marketplace lending is taking a hit and tightening lending standards, the people who would normally be approved for an institutional loan will have to migrate somewhere for operating capital. Where else will they go besides MCAs? Is there an alternative? If so, let us know.

[WestCoastFunding]

MCAs are already regulated in various components and functions, from marketing regulations to specific state related licensing requirements. It's less likely that there will be as "much" regulation added with Republicans in control, but more regulation is coming WestCoast, it's not a matter of "if" but "when".

No they aren't. Regulation like California makes MCAs more likely - not less. You now need a license to broker loans (marketplace, SBAs, banks, credit unions, community banks) but not MCAs. This will lead to more brokers pushing advances because it's all they can sell.

As far as saying "regulation is coming" please explain how such legislation takes place with a republican president and republican house? When was the last time a republican administration increased regulation on the financial sector?

So do you have some personal knowledge of legislation being crafted and ready to be introduced? Where is the evidence?

[jotucker1983]

What is the alternative? Again, if the mid range marketplace lending is taking a hit and tightening lending standards, the people who would normally be approved for an institutional loan will have to migrate somewhere for operating capital. Where else will they go besides MCAs? Is there an alternative? If so, let us know.

One alternative is to not do anything, which is what I'm trying to pinpoint to you, in that I believe the "peak" of the industry is already here in terms of the quantity of businesses at one time that would consider an MCA.

No they aren't. Regulation like California makes MCAs more likely - not less.

West this doesn't even make any sense. Just a couple of years ago, many funders/lenders weren't even lending in California due to all of the regulation/legal issues going on.

You now need a license to broker loans (marketplace, SBAs, banks, credit unions, community banks) but not MCAs. This will lead to more brokers pushing advances because it's all they can sell.

I completely disagree with that number one, then number two, you can bring in more guys pushing MCAs all day, the bottom line (in my opinion) is that MCAs are still only going to be a niche product for a niche commercial financing market (the unsophisticated merchant). MCAs will never be "mainstream" like let's say, a line of credit is, unless pricing comes way down with approval rates staying at the same level, and I don't think that's even possible.

As far as saying "regulation is coming" please explain how such legislation takes place with a republican president and republican house?

West I don't get how you don't understand that regulation is already here? I can name off 15 different forms of regulations right now that apply to our industry. And in terms of what party controls the government, it really won't matter if merchants whose business gets shut down from 10 stacks, all form some sort of coalition and take the issue to Washington. You really think Republicans don't add regulations, increase taxes, and increase government control as well? If so, you should just do a quick history check.

[WestCoastFunding]

For one, (at least with the MP Lender I've been working with) the credit score requirement has increased, but they are still lending based on the merchant having some sort of solid financial position based on "conservative" conditions of the financials, which is very similar to the process at the banks. Also give or take, let's just be honest, the merchant that is more likely to be approved at the MP Lender has a 700 credit score, which is completely outside of the MCA market.

Now, granted, an MP Lender will approve a higher amount than a Bank, but the MP Lender in my opinion is competing to take business from the Banks directly, not business from an MCA, because most merchants who are at the "MCA level" can't get approved for the MP Lender's product (for the most part).




I agree, and that "middle market" you are referring to comes from bank submissions and bank declines. Again, it's from those who are currently going to the banks or have the ability to go to the banks. The banks still aren't going to approve a high amount and many of those can fall right into the MP Lender's bucket. Also those who need financing faster and can't wait on the bank, would fall into the MP Lender's bucket. .

You fundamentally don't understand what banks look for in borrowers. First off, they have no interest in loans under $250K. None. So with that in mind, let's end this notion that banks are competing with marketplace lenders. Besides, there just isn't a comparison. Would you rather have a 7 year term at 6.25% or a 3 year term with an 18% interest rate and a bunch of origination fees that marketplace lenders offer.

And again, banks will have collateral requirements (marketplace doesn't) two years profitability (marketplace lenders don't) a Debt Sevice Coverage Ratio of at least 1.1 (I've closed deals with marketplace lenders with 0.0 DSCR) and even equity injections (marketplace lenders don't down payments).

Even more, nearly every marketplace lender will subordinate to a bank facility. No bank will ever subordinate to a marketplace lender. Ever.

[jotucker1983]

You fundamentally don't understand what banks look for in borrowers.

I fundamentally do.

First off, they have no interest in loans under $250K. None.

That's "somewhat" true for straight commercial loans (not completely true though), but many small business owners are able to secure other types of loans from traditional sources that they use to finance their business operations.

So with that in mind, let's end this notion that banks are competing with marketplace lenders.

Let's not. The criteria of the marketplace lender (in general) is to take business away directly from the traditional banking sources, not to take business from an MCA as many MCA clients don't qualify for the marketplace lender's programs (like I've already touched on).

The MP Lender was formed to compete with the Banks. The criteria of the MP Lender is more liberal than a Bank and a whole hell of a lot faster, which means the MP Lender will approve a higher portion of apps than a Bank will. But the MP Lender is still directly competing with the Bank for business.

And again, banks will have collateral requirements (marketplace doesn't) two years profitability (marketplace lenders don't) a Debt Sevice Coverage Ratio of at least 1.1 (I've closed deals with marketplace lenders with 0.0 DSCR) and even equity injections (marketplace lenders don't down payments).

West, I completely understand the criteria of banks for many commercial finance programs. The bottom line is, as I've stated prior, is that the MP Lender was formed to compete directly with Banks and take marketshare directly from them. The MP Lender's criteria will be more liberal than the Bank, as I stated prior, but your argument that the MP Lender isn't directly competing with Bank related business is inaccurate.

[WestCoastFunding]

I fundamentally do.




That's "somewhat" true for straight commercial loans (not completely true though), but many small business owners are able to secure other types of loans from traditional sources that they use to finance their business operations.




Let's not. The criteria of the marketplace lender (in general) is to take business away directly from the traditional banking sources.

Wrong. Period. Marketplace lending was created to FILL THE GAP between bank loans and MCAs. They aren't competing because banks DO NOT WANT these borrowers. These borrowers are, on average, seeking financing $200,000 or less.

BANKS DONT TOUCH THEM without a govt enhancement. They don't want them without a loan guarantee. Not only do banks not want to originate these small loans, they damn sure don't want to touch provide financing amortized over 7-10 years for lower than prime borrowers.

How many bank loans have you brokered dialing from UCC lists?

[WestCoastFunding]

That's "somewhat" true for straight commercial loans (not completely true though), but many small business owners are able to secure other types of loans from traditional sources that they use to finance their business operations.

Can you please let us know what these mysterious "traditional" financing resources that are not "commercial loans" that marketplace lenders are trying to compete with? Remember, we are discussing loans under $250K.

And I love how you claim they're trying to take market share from banks, yet they are providing rates that are way higher than banks, and terms that are way shorter. but hey, if you qualify for a bank loan you will damn sure qualify for a SBA Express. So if you really feel that marketplace lenders are solely trying to compete using speed, then SmartBiz and others that use the Express program would crush the Marketplace lenders, no? The timing of closings aren't much different. But the rates of an Express is superior. Not to mention interest only lines of credit.

[jotucker1983]

West,

I'm just going to agree to disagree lol.

[WestCoastFunding]

The criteria of the marketplace lender (in general) is to take business away directly from the traditional banking sources, not to take business from an MCA as many MCA clients don't qualify for the marketplace lender's programs (like I've already touched on).

No one has argued that marketplace lenders are trying to take business away from MCAs. Youre either trying to distract or deflect.

And your claim that marketplace lenders approve more loans because "they're faster" is wrong. They approve more loans because they take higher risks. And you know what happens when you take more risk? It reflects in your rate, thus: marketplace lenders having rates double and triple that of banks.

[SCFunding]

..........

[helpinghand]

My only piece of advice is not to view this as a start-up but rather a small business that generates cash. Manifest that and be fair and you'll do well