Building An Alternative Lending Sales Profile

Merriam-Webster dictionary defines the word, independent, in a number of different ways, but one of the definitions provided relates this word to the concept of freedom. Most of us operate in this industry on an independent basis, which gives us a significant level of freedom that revolves around not having a boss, freedom to set our own schedules, freedom from being down-sized, freedom from office politics, but more importantly:

• freedom to craft our own business plans
• freedom to target our own market segments
• freedom to decide what we will sell
• freedom to create our own products
• freedom to negotiate our own market pricing
• … and freedom to innovate

With such high levels of freedom, you have to wonder why a lot of brokers in our industry don’t exercise such liberties? Why do we sell the same products (cash advances and alternative business loans)? Why do we use the same marketing tactics (UCCs and aged leads)? Why do we market, promote and sell to the same merchants (UCCs)? Why do we use the same “pitch”? Why do we submit to the same funders?

If we are truly independent contractors, why do we all look, act and sound the same?

As we continue The Year Of The Broker, I wanted to begin a discussion on a concept that integrates your capability of independent expression. It’s the concept of constructing an alternative financing sales profile. It allows you to display your level of true independence by pre-qualifying your prospective clients and recommending solutions that are different from the pack of brokers recommending the same “me too” solutions, seeking to submit the merchant to the same “me too” funders.

ARE YOU A “BROKER” OR NOT?

Are you paid only when you broker (fund) a deal?

If so, the generation of a financing lead or application in and of itself, doesn’t produce value as it doesn’t create revenue. Revenue is only created when you successfully broker a deal, which is to match a merchant with alternative funding needs and with a particular terms/conditions comfort range, with products funded by lenders whose pricing lines up with the particular comfort level of your prospective client.

As a broker, you are much more than a salesperson, you are more of a match-maker, an arbitrator, and an consultant. You can’t consult someone if you don’t know their current situation for one, and two, you can’t consult someone unless you have the resources to prescribe appropriate solutions.

See yourself more as a doctor than a salesperson, where as a salesperson has one or two products that he’s looking to “push” on a prospect using various tactics such as cost cutting and overcoming objections, a doctor isn’t trying to “push” anything out of the gate without firstly diagnosing the client through a series of questions. After said questions have been inquired and answers provided, the doctor creates a “profile” of said client and through his wealth of medication, he prescribes a couple of solutions to assist the client.

To help increase your chances of brokering (funding) your deals, you want to increase your level of pre-qualification and increase your level of product offerings, both of which will allow you to create firstly an alternative financing sales profile of your client, and then secondly allow you to go into your wealth of alternative financing products to prescribe an array of products.

EFFICIENT PRE-QUALIFICATION

Going forward, make sure to do serious pre-qualification to create an estimated risk profile as well as an estimated sales profile. You want to know all of the following: their credit, time in business, annual sales, cash flow situation, level of profitability, type of assets, outstanding commercial debt, any current tax or judgment liens, recent bankruptcies, and current status of commercial mortgage or commercial lease agreements.

From this information you are able to create an Alternative Financing Sales Profile along with an occupying Risk Profile for each product you will soon be recommending, to know which lender within that product category is best to serve your client.

YOUR WEALTH OF ALTERNATIVE FINANCING RESOURCES

So for example, say we have a restaurant owner that’s in need of $250k in working capital for expansion. You shoot him over the pre-qualification survey and receive the following: 700 FICO, 5 years in business, $1 million sales, zero NSFs/Overdrafts for 6 months, $10k average bank balances over the last 6 months, company has been profitable for the last 3 years, no tax liens, no judgment liens, no bankruptcies, current on commercial lease payment, outstanding debt that includes $25k on a credit card with $50k outstanding on a bank loan. The merchant’s commercial assets includes business equipment, free and clear, with appraised value of $150k.

As an alternative financing broker, you should have access to more than just merchant cash advances and alternative business loans, you should also have access to: merchant processing, equipment leasing, asset based lines of credit, inventory loans, SBA loans, business credit cards, factoring, purchase order financing, commercial mortgages and real estate hard money loans.

So based on the answers to the pre-qualification survey completed by the restaurant owner, in conjunction with his total financing needs, you might be prescribing an SBA loan, a merchant cash advance, and a sale-leaseback.

1. You would seek to get him an SBA loan first and let’s just say he only gets approved for $50,000. So you guys complete the process to fund the SBA loan.
2. Next, you would look at doing either a merchant cash advance for let’s say another $100,000 using split funding. You notice that his current processing rates are a little higher than market average pricing for Restaurants and show him a savings analysis with your interchange plus pricing structure with a 10BP mark-up that should be saving him $400 a year which is $1,200 over three years. So in the process of this you also convert his merchant processing over to one of your processing platforms that can handle split funding. Now you have raised $150,000 of the $250,000 funding goal that the merchant has in mind.
3. Finally, you would look at doing a sale-leaseback on his pre-owned equipment that’s appraised for $150,000. With a 70% LTV, this comes to $105,000 in funding. Now you have successfully funded the merchant over $250,000 and in the process closed three different alternative funding products as well as converted over his merchant processing at the same time.

In an upcoming article, I will continue this discussion on pre-qualification by going into information on how this level of efficiency includes the creation of Risk Profiles that allow you to limit your submissions to your funders/lenders as to not clog up their underwriting pipelines with unnecessary submissions. It allows you to focus on submitting 10 applications and funding 5, instead of submitting 50 applications and funding 5.