Originally Posted by
TedFundy
Well..... For some time now I have been watching ignorant and helpless business owners get coaxed into accepting fast money in return for brutal rates and terms. I only call them ignorant because they are unaware of all options available. And I only call them helpless because they are unable or unwilling to explore all options of financing their business. The majority of small businesses are ONLY being exposed to one solution to their financial duress: a Merchant Cash Advance. Is this a viable solution sometimes (.01% of the time), yes. Are there FAR better avenues of securing capital for these businesses? Yes.
Let's all act like we are all honest and intelligent here. This cancerous nuisance known as an MCA is an unhealthy, obstructing, encumbering, mickey mouse "loan" that is knowingly bankrupting companies everyday. Show me just one halfwitted business that was completely satisfied with their Merchant Cash Advance and I will show you 1,000 businesses that curse and spit on this uninvited loophole in the system.
There are 4 reasons for this plague:
1. Marketing. Not to mention the call centers, if you type "business loan" in google, you all know what happens.
2. Brokers. MCA uneducated brokers far outweigh any other industry and they push only one product.
3. Time. MCA's fund in a few days at most.
4. Credit. Liens, bad credit, other loans, UCC's, no worries.
Don't get me wrong, there is indeed a time and a place for an MCA, we have all surprisingly seen it work in a business's favor. But our firm has gotten to the point where the majority of small businesses are infected. All I ask is that you brokers explore other options before getting your tool erect for 11 points on a $27,000 merchant cash advance when you knew damn well they could have benefitted from a factoring company.
I am not complaining. I am just pointing out facts. I enjoy competition so we are going to change. We can fund fast now. 3 days is what we shoot for. We can fund with a UCC in place. We can fund with loans and LOC's in front. Tax liens require a payment plan. We can fund with no credit. Bad credit is fine, too. As long as their customers are commercial businesses with decent credit, the vault will open.
Factoring rates are literally one tenth of the cost of an MCA. The upfront commission is less, but the commission is residual. And you are less likely to be covered in an oozing, foul, slimy mucus at the end of the day.
Now let's talk commission numbers. Correct me if I am wrong:
Scenario 1: You obtain XYZ Company an MCA for 20k which pays around 2k in commission. XYZ is now encumbered in 20,000 dollars of debt which they have to repay so quickly they do not even get to use the full amount of the funds. More than likely their growth is now hindered due to their daily MCA payments.
Scenario 2: With accounts receivable factoring, we can usually secure three times the capital of an MCA (sometimes more, sometimes less). So, we finance 60k in receivables for XYZ Company. At 3% per month, your commission is around 200 per month. With that company stagnant, you will reach your 2k in commissions before the year is over. If XYZ grows, obviously you will make more money. Oh, also, XYZ Company will probably give you referrals and this will create more revenue for you. And less slime on your suit.
I'm not telling you to stop pitching MCA's to Dr. Happy Smiles, Jiffy Lube, or Paco's Taco Truck. I am just telling you to have an intelligent, meaningful, and creative conversation with the B2B business owners that are looking to secure capital. If you're lucky enough to get one of them to trust you, don't **** them over because it's quick and easy. Explore other options and use the plethora of resources that are available to you.
Best Regards,
Ted Fundy
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