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06-26-2014, 04:50 PM #11
Finance1 - parameters loosen with time, larger portfolios, renewals, etc. I am not talking about tomorrow, I am talking about us all getting a longer run at this. Remember CAN's criteria back in the day, then through the credit crisis, and now. A lot changes.
Comp Size - comp size is relative to deal size and actual revenue brought in. For example a merchant does $30,000 in gross - the MCA provider pays you 8 points and does a $30,000 deal, gets you $2,400. The long ball player gives the same merchant $75,000 and pays you 3.5 points and gets you $2,625.
The actual comp problem is not the upfront, but it is the fact that you will not get near as many renewals and you have to have your ISO or Funder live for a long time before they ever see renewal rev.
I am not sure I see the same stacking problem, just like BofA does not now. Meaning once a guy gets a taste of 5 and 10 year monthly payments, does he really stack on short term expensive money. Maybe, but again looking at it from a funders point of view, the top 20% of your merchants makes you 80% of your revenue. They pay, they pay on time, and they come back. What happens if a funder loses a group of these merchants.
Isaac - CashCall would do that deal all day long and go past 1 year. regulators are squeezing the Title and the Payday space, those folks with that kind of money are not just going to walk away, they are going to take their automation, their version of risk, and apply it to our space in different ways that we should think about.
Just playing Devils advocate for thought
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