[UCSource]

I completely agree. It has to make a funding bank more comfortable when an ISO says they will put up X amount into a deal. Most of the time ISO's are calling for an exception, now if they put money into the deal i.e. take risk it should and does help get deals done

[miked]

I completely agree. It has to make a funding bank more comfortable when an ISO says they will put up X amount into a deal. Most of the time ISO's are calling for an exception, now if they put money into the deal i.e. take risk it should and does help get deals done

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.

[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.

[Sean Cash]

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.

Extremely well said. Great post!

[MissMCA]

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.

That's why companies like The Factor Exchange exist. The "mom and pop" ISOs and "Onesy-Twosey" brokers are backed by one giant ISO network and The Factor Exchange assumes half of the risk by syndicating 50% on nearly ever deal...
The massive volume of FEX submissions to lenders gives the ISOs power to negotiate for better rates and terms, One point of submission reaches 15+ lenders, the merchants credit is only pulled once, and the commission is passed straight through to the ISOs because FEX makes their money from participation.
Companies like this empower the smaller brokerages...

[Scott Williams]

Some funders like the "mom and pop" ISO's once they have a good track records down. The funder knows the ISO directly and the ISO is the main point of contact with the merchants so he/she knows all the details about the deal/business. I think having a small ISO that has a proven track record of well performing clients is very valuable to some direct funders.

[MissMCA]

Some funders like the "mom and pop" ISO's once they have a good track records down. The funder knows the ISO directly and the ISO is the main point of contact with the merchants so he/she knows all the details about the deal/business. I think having a small ISO that has a proven track record of well performing clients is very valuable to some direct funders.

I agree with you Scott, smaller ISOs tend to be very hands on with their merchants and are quick to obtain stipulations and requested financial documents.
Funder's do value and appreciate this. Unfortunately this is not the case for all direct Funders, this applies more to the larger direct funders who are primarily volume focused...
I do not believe they spend as much time building a relationship with the smaller one-man brokerages (and please correct me if I am wrong)... The UW staff seems to be far more communicative if you are a larger producer...

It takes far more persistence from the smaller ISO to initially "get their foot in the door" to start building that relationship with the lender, and even then, there is less flexibility in negotiating rate and term if the ISO is not assuming any of the risk by participating in the advance.

[Sean Cash]

That's why companies like The Factor Exchange exist. The "mom and pop" ISOs and "Onesy-Twosey" brokers are backed by one giant ISO network and The Factor Exchange assumes half of the risk by syndicating 50% on nearly ever deal...
The massive volume of FEX submissions to lenders gives the ISOs power to negotiate for better rates and terms, One point of submission reaches 15+ lenders, the merchants credit is only pulled once, and the commission is passed straight through to the ISOs because FEX makes their money from participation.
Companies like this empower the smaller brokerages...

Woah, back up. The factor exchange is involved in the MCA space and will syndicate on ISO deals?? I have heard of your platform but didn't think it was at all applicable to MCA. Please elaborate

[MissMCA]

Woah, back up. The factor exchange is involved in the MCA space and will syndicate on ISO deals?? I have heard of your platform but didn't think it was at all applicable to MCA. Please elaborate

Sean, The Factor Exchange revolves entirely around Merchant Cash Advance. There are often misconceptions when people hear "Factor Exchange" they assume FEX is a factoring company or something similar to "Funders Cloud" not the case.

The Factor Exchange is the largest aggregation group/originator and investor in the industry.
The platform is quite simple:
FEX provides one point of submission for ISOs that will distribute and submit their files to over 15 of the most reputable direct funders in the industry (according to their UW guidelines).
Credit is pulled ONCE by FEX, lenders are not allowed to pull their own additional credit reports.
Offers are flowed back to the ISO/Broker by a designated FEX Account Manager in real time.
The broker has 10+ offer options to choose from. If they do not find any of the offers appealing, the AM will go to bat with UW to obtain the rates and terms the merchant is looking for.

Beyond the convenience of a "one-to-many" submission point, the true advantages and benefits come from Factor Exchange syndicating 50%-70% on every funded deal.
Because The Factor Exchange is assuming half of the financial risk, advance amounts are often higher, rate and term negotiations are more effective, UW is generally more flexible.
Relationships between FEX and Lenders on the FEX network are at a C-Level, agreements have been set in place for higher commissions (because of massive submission volume), and because FEX is making money from syndication there is no need to charge the brokers a fee and commissions are passed straight through.

Some brokers are hesitant at first because they are very hands on with their merchants, and they question who the file "belongs to" after submission.
It is very important that brokers are aware that they will NEVER be circumvented. Ever.
FEX understands that a brokers book is their livelihood, and they want their portfolio to flourish so they can build a solid foundation of renewals.
FEX does not have an in-house brokerage and will never compete with their brokers, and Lenders are NOT ALLOWED to renew merchants without the brokers prior consent.

If you want further details contact KC@FactorExchange.com or 888-819-5643.