[Finance1]

This is squeezing out the mom and pop ISOs who are not capitalized well enough to participate. A wave of industry consolidation has already started.

I agree about the consolidation. It's a natural evolution and not necessarily a cause/effect of syndication though. Easy money in this business really doesn't exist anymore. You can compare the evolution to other major industries like mortgage, finance, and insurance. Brokers can survive easily but they have to be well versed, have access to all available products (especially loans and premium MCA's) and they also have to have a solid marketing plan.

There are alot of similarities to the mortgage world in the MCA space. I know first hand because I owned a mortgage banking/broker firm for 8 years. There was a time when anybody could sit in a seat, make phone calls, and close deals. You didn't even have to know what you're were talking about. Just close deals and make fat commissions. The industry started changing even before the financial meltdown. Big call center warm body broker shops were already closing before the financial meltdown. The meltdown definitely made the consolidation happen much quicker.

The commission part of the mortgage industry is mostly pro's now. Folks that are committed to their business. Folks that are well versed in all products. Marketing is done strategically. Professionalism is required. And there are no more big fat checks and with little effort anymore. My wife is a b2b insurance pro. There are many similarities in that market as well. You can make a solid living in the insurance world nowadays but you have to be a true professional focusing on the bigger picture. You have to build a book through hard work and very competitive pricing. This means giving up some upfront commissions as well.

I think the MCA space is moving full speed in this direction. Clients are smarter and the box is smaller. They will shop for the best deal. They need to trust who they are doing business with. My favorite clients are the ones many are afraid of. Intelligent business owners with good credit and good statements. They embrace this type of financing more than many agents realize and I think all the premium programs out there are excellent. Risk based pricing was greatly needed to help the space grow. A good book of business can be made of savvy owners. Constantly targeting the desperate is not worth the reward IMO. Too many dead deals. Far too much time chasing ghosts with no paycheck. I think too many agents focus on bad credit / desperate merchants because it's easy to get them to apply and sign but the % that actually fund keeps getting lower and lower.

Our business model has all 3 components though. We direct fund, syndicate, and broker so I probably see the world a little differently but I believe that a small broker only shop can survive and even thrive in this market. Home runs are few and far between but you can hit singles all day long. Always shooting for max commission hurts more than it pays. I think a small iso w/ low overhead and well versed agents can do just fine. Syndicating has advantages but it's not required.