The idea of funding defaults is to cut down on the term to a 20 or 30 day deal, which decreases the risk since the term is extremely short. Once the merchant establishes a payment history many will stack and come into the deal.
This is a concept that has been tested and done for the last two years on a large scale. There are 100s of default deals that have been funded and many of them enjoy a second chance to get back into the game.

But.. no funder wants to lose money. These default shops take bigger risks for bigger returns but in the end if the deals go bad they will cut you off and stop the bleeding.