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12-22-2020, 01:38 PM #26
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In my experience most funders are calling back to try to get the payments raised so it looks shady that they have not changed it back to normal. Also I have never had an issue getting a quality deal done as long as it doesn't look like lowered payments. Meaning as long as it seems like a believable daily/or weekly (not 50$) and the payment has been the same in all the statements you are sending to the funder, it's easy.
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12-22-2020, 02:07 PM #27
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So do you really feel as if the merchants owe a debt to the Cash Advance company that took a gamble by purchasing a percentage of the future receivables based off of past performance? Shouldn't the golden rule of the MCA Companies be "Past performance is no guarantee of future results"?
What seems to be a little concerning is that after being in the industry as long as you have been, and doing thousands of deals, you still in your heart think of the MCA as a loan, and that the merchant is in debt to the MCA company.. So if you feel that way in your heart, when a default occurs, your actions will be governed by how you truly feel about deal. And I guess that is where MCN is coming from when he stated "The problem is too many "funders" act like "Lenders".
If I told you I went to a casino and placed a bet for 100K on Floyd Mayweather winning a future boxing match, in which he loses, and I come to you and tell you I feel as if the casino still owes me money, you would think that I clearly must have misunderstood the fundamental concept of gambling. But then I tell you that I have been gambling for years, you would be somewhat puzzled.Last edited by Winning; 12-22-2020 at 02:16 PM.
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12-22-2020, 02:42 PM #28
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isn't your entire point invalid since these merchants revenue went back to normal... since we bought future receivables and their receivables are back to normal, doesn't that mean they should be paying back to normal as well?
Also maybe this is new to you but funding companies are not in the business of charity? We fund off of future receivables because it enables us to provide businesses money without usury laws but you do know that we still expect our money back right? We don't really look at these cash advances as a casino gamble lol.
So lets say we take your points into consideration and were all just gamblers hoping for the best. Why would we gamble on a company who lowered payments on his first position? Am I supposed to fund them just because the merchant doesn't "owe" a "debt" to the first position and its mean of me to deny them more money?
If you don't understand these concepts, it might be time to close your business and brush the dust off your resume.Last edited by pcfunder; 12-22-2020 at 02:56 PM.
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12-22-2020, 03:22 PM #29
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I was not discussing the amount of the future revenue. I understand if there are future receivable, yes the MCA is owed a percentage of those receivables, what ever that amount is. If there are $0 in future receivables, the MCA is owed $0. My point I was speaking to was on the fundamental mindset, understanding, and expectation of what the MCA & Merchant is agreeing too and gambling with and that there is no debt, just a future revenue sharing contract.
Do you feel if a gambler is in the business of charity? Some professional gamblers make millions of dollars, some gamblers loose a lot more than they win. But at the end of the day the core of who they are is the same. So some funding companies that loose more than they win could be looked at like a charity yes, and the ones that win more than they loose would not be looked at as a charity. So that is a subjective question.
Correct me if I am wrong, but I thought MCA's fund off of historical receivables? They use the historical revenue data, as well as other data points, to establish risk and set dollar amount that they are willing to fund (gamble with)? Once funded (bets placed), the fight starts, every ACH repayment draft is similar to a boxer winning rounds. But just as in boxing, you never know when a knockout may come and completely turn the tables.. Hopefully the MCA won enough rounds to maybe break even, maybe not.. That is the nature of gambling.
So are you saying that MCA's are using cash advances to really lend money with a contracted guaranteed return as if they were giving out loans like a bank? Wouldn't that be fraud?Last edited by Winning; 12-22-2020 at 03:30 PM.
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12-22-2020, 03:24 PM #30
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I think your juding these people really harashly. Look when COVID was in full swing in April i called my CRM company and asked them to lower by rate per user. They said sure we'll do it for a few months until things pick up again. Now its 8 months later, business is back to normal for me, but im still paying the lower amount. Am i doing the wrong thing by not calling them back and saying raise it back? I knows its supposed to be higher. Everyone would do exactly what these merchants did when they wered offered to have payments lowered. Its a bit ridiculous to call that a default.
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12-22-2020, 03:38 PM #31
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Winning this is a lot to respond to I honestly recommend you call someone to help you
MCN your right but there is too much uncertainty. I can't imagine that any MCA company would keep someone on lowered payments for 9 months straight, that's basically the term of an MCA. I know that they would, but only to merchants who need help and those merchants should not be seeking more positions.
Maybe I'm wrong but this scenario screams D/F funder high risk to me. Let me know if anyone has funded a merchant whos been on lowered payments for 9 months with someone else due to covid. Has it worked out for you?
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12-22-2020, 03:48 PM #32
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I'm good, I am not currently seeking additional MCA's or a second position.. It's just that the debt comment you made intrigued me and made me want to understand on a deeper level why you would refer to it as a debt. When I thought I understood that MCA's are not debt but more along the lines of a well placed bet.
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12-22-2020, 03:53 PM #33
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I mean yes but that's such a basic concept that I never imagined it would be questioned lol. After understanding that basic concept, you can start to think a little bit past those concepts. No one is saying that MCA's are debt or that they aren't funding companies buying future receivables but its ok to look at someone giving someone 50k for 70k worth of receivables as a form of "debt" and analyze how they managed that "debt" so you could come to a conclusion on how they will handle your own payments.
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12-22-2020, 03:54 PM #34
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12-22-2020, 04:05 PM #35
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A basic concept to you because you operate in this space... But not a basic concept to a merchant or judges that are against MCA's. I am on the outside looking in, and I would say please be more careful when using the term debt as it relates to a merchant repaying a Cash Advance. Unless the merchant has did some sort of fraudulent activity and attempting to not pay the percentage of the received revenue, there is technically no debt.
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12-22-2020, 04:15 PM #36
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12-22-2020, 05:34 PM #37
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yeah, unless your "partner" opens up a new bank account that you don't know about and starts funneling 99% of their deposits into.. you would have to be naive to think any of these merchants consider us as "partners"... we are the debt collectors, just like they look at VISA when they owe them an outstanding balance.. have you ever once thought? oh yeah, i'm a partner with VISA? NO...
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12-22-2020, 05:50 PM #38
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12-22-2020, 05:54 PM #39
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12-22-2020, 06:07 PM #40
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12-23-2020, 11:25 AM #41
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Because you want to fund a deal that doesn't have payment mods. When you fund a 12 month term deal and the customer now knows if they have trouble they can lower payments, now your 12 month deal turns into an 18-24 month deal with the same return. The funder can avoid that situation by declining that merchant and funding someone who never modified payments. Which route would you go?
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12-23-2020, 12:31 PM #42
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12-23-2020, 02:39 PM #43
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You sound like a clown.
#1 - MCA is a debt.
#2 - Moral Hazard. This economy took a big hit starting in March and impacted a majority of businesses and everyone needed to contribute in one aspect or another. If a business owner thinks that the economy stalls again, then they will have the ability to lower payment without repercussions then why not risk it. This is a risk that is held on the funder side. This is simply human nature and I understand that.
#3 - MCA contracts are pretty airtight. If you are not paying back based on the specified rate, then yes you are in default. Most people are not signing an addendum to this payment decrease because they adjusted payments based on decreased revenue. (original contract is still valid and enforceable)
#4 - While strong merchant relationships are partnerships, let's not kid ourselves with this one. MCA is not a sustainable long term financing option for any business. This product was designed to be a 7-9 month product. There are very few industries (read profit margin) that can sustain a 30%+ rate
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12-23-2020, 02:55 PM #44
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Ok!!!
So is MCA a Debt or not a Debt? Who decides? Is there more case law that says it is a debt or more case law that says it isnt?
There are a few companies doing MCA's for 1.06 to 1.09 for 12 to 18 months.. So would you say those types of deals are sustainable for businesses?
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12-23-2020, 03:37 PM #45
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cool. You dont know what the hell you are talking about
1. MCA is not a Loan. Its a partnership on future receivables
2. Yes i understand that side. This has been discussed already. That doesnt change the fact that plenty of funders think they are lenders.
3. Yes they are pretty tight, and in most cases working out a lower payment plan becuase revenue has dropped is not legally a default. Blocking payments would make it a defaut.
4. Thats a very narrowminded view of the product. Yes taking multiple 60 day 1.49 deals to keep your business from going under is unsustainable, but consistently taking 9-18 month deals at a 1.20-1.40 is very sustainable with a good business plan
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12-23-2020, 03:51 PM #46
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"So do you really feel as if the merchants owe a debt to the Cash Advance company that took a gamble by purchasing a percentage of the future receivables based off of past performance? Shouldn't the golden rule of the MCA Companies be "Past performance is no guarantee of future results"?
Quote Originally Posted by pcfunder View Post
...After dealing with thousands of deals and plenty of defaults...
What seems to be a little concerning is that after being in the industry as long as you have been, and doing thousands of deals, you still in your heart think of the MCA as a loan, and that the merchant is in debt to the MCA company.. "
You were just so confident that MCA is not debt. Literally one post later from mistamca and your questioning the meaning of MCA and life?
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12-23-2020, 04:03 PM #47
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I thought most industry types were on the same page in regards to what MCA are, but perhaps this is not the case. That is why I would like to hear more about this topic from both sides, people that think they are not debts and people who think they are. This is what is great about internet forums (a place, meeting, or medium where ideas and views on a particular issue can be exchanged.)!
Last edited by Winning; 12-23-2020 at 04:09 PM.
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12-23-2020, 04:19 PM #48
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A merchant cash advance is a friendly product at which one may take out capital or "funding" in exchange for love, guidance, and overall perspective of future receivables. I like to use this analogy for my friends to really sum up what an MCA is: Girls are like phones. They love to be held and talked to, but if you press the wrong button you'll be disconnected.
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12-23-2020, 04:50 PM #49
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01-02-2021, 02:26 PM #50
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The way you used Perspective in that sentence I really enjoyed! Did I arrive at the correct understanding of how you used the word?
Here is how I worked through that statement.
- A merchant cash advance is a product. (I follow you).
- A product that lets a merchant get capital. (I follow you).
- In exchange for the merchant getting capital, the merchant gives love to the investor. (Sarcasm perhaps?).
- In exchange for the merchant getting capital, the merchant gives guidance to the investor. (Sarcasm perhaps?).
- In exchange for the merchant getting capital, the merchant gives perspective of future receivables investor. (Lost me at 1st, I couldn't make sense of the word perspective used in this context).
- A product that lets an investor give capital. (I follow you).
- In exchange for the investor giving capital, the investor receives love from the merchant. (Sarcasm perhaps?).
- In exchange for the investor giving capital, the investor receives guidance from the merchant. (Sarcasm perhaps?).
- In exchange for the investor giving capital, the investor receives perspective of future receivables from the merchant. (Lost me at 1st, I couldn't make sense of the word perspective used in this context).
Perspective
Definition at https://www.merriam-webster.com/dictionary/perspective
Synonyms at https://www.thesaurus.com/browse/perspective
- .... give/receive an overview of future receivables ... Doesn't make sense.
- .... give/receive a point of view of future receivables ... Doesn't make sense.
- .... give/receive a mind frame of future receivables ... Doesn't make sense.
- .... give/receive related future receivables ... Ahhh!! using perspective as an adjective, may work!
- .... give/receive based on future receivables ... Ahhh!! using perspective as an adjective, may work!
- .... give/receive a derivative of future receivables ... Ahhh!! using perspective as an adjective, may work!
So what you were saying on the last part should be comprehend as.
In exchange for the merchant getting capital, the merchant gives a derivative of future receivables to investor.
In exchange for the investor giving capital, the investor receives a derivative of future receivables from the merchant.
LOL!!! It's not how you get there, as long as you get there right... Until I broke it down, for some reason I could not figure out what the heck you were trying to say with the term perspective.. My brain wanted to keep thinking perspective as in "point of view"..
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