[MCNetwork]

Only the origination fee is an additional fee. All the other stuff was already built into the 1.19 factor. It's broken up this way because 19% interest would be considered usurious on a bank loan. The actual funded amount is $97,500. The real factor is 1.22 which is pretty damn good. However, I do work with MCA companies that offer a 12 month 1.28 for premium deals which is comparable to ACH loans.

[Sean Cash]

MCAVet, I think I know which company you are talking about and this tactic is not really that new. In my opinion it seems like whenever someone discovers a pitch or competitive edge that is working really well, everyone starts doing it, and then it doesn't work as well anymore.

Funny that after years of "decreasing factor rates," we are still inevitably working in the land of 1.30 and up. Unsecured business financing simply cannot be made much cheaper unless you're running a non-profit, get a government backed guarantee, or are willing to work exclusively with merchants that have FICOs above 740.

Years ago, the one-up pitch on the competition was to say that you were a direct funder and to convince the merchant that whoever else they were dealing with was a broker. The goal was to convince them that brokers would inevitably charge massive broker fees, even if you were actually a broker yourself. Once everyone started saying they were a direct funder, that line didn't work anymore. Now with widespread syndication, most of us really are direct funders in some way.

Merchants seem to shop around now more than ever. If all parties are going to charge a 1.36, then maybe it makes sense to pitch a 1.19 + FEES even if the net result is the same. If it works and the merchant understands it, then why not sell it this way?

Eventually everyone's going to do this until we see ads for 1.09 factor rates with another .27 added on in fees. Inevitably, we end up back in the land of 1.30+.

I am guessing the problem you have with this MCAVet is that merchants are being misled into thinking they're getting something a lot cheaper, when in fact it's really just the same semi-expensive money. The problem in the short run with marketing a 1.36 outright is that your competition will work to convince your prospects that you will be adding .27 onto your deals just as they are adding that layer of costs onto their 1.09s.

Your competition will say: "He says it's only 1.36 but after his fees, it'll be 1.63 (1.36 +.27) net! Don't believe him when he says there's no added platform fees and guaranty fees. Everyone does this."

The competitive evolution to win in this business is to separate yourself from the others. The tactic of pretending to seriously undercut rates, while painting the competition as a bunch of sharks WORKS! Many ISOs and funders are spending more on acquiring leads than they can afford. A good phone personality isn't going to win enough deals.

You can be mad at the wool being pulled down over the public's eyes, but as long as there is full disclosure of the rates, fees, costs, it's legal and they agree to it, then what can you really do? Merchants will end up paying 1.30+ at the end of the day.

Now might be a good time to announce your own 1.19 program, 1.09 program, or heck 1.04 program + FEES. Make sure the customers understand the costs, go win some deals, and make the next guy mad that you are cheating and making him look super expensive.

Two years from now, everyone will go back to saying they offer a 1.36, either that or it will be a negative factor rate + FEES.