Mr. Broker: Stop Helping ME, Compete With YOUNovember 29, 2015 | By: John Tucker
To quote comedian Dennis Miller, “I rant, therefore I am.” I know everyone is in the holiday spirit and I surely would hate to kill off that jovial mood, but I thought that it was time for Part Three of my Rants, this time on one of the most crucial elements of our industry, The Brokers.
A Look Back At Prior Rants
In Part One I looked at the merchants, and explored some of their questionable behavioral choices. These choices (which a lot of them could be considered flat out stupid) hinder professionals within our industry from truly assisting merchants with their alternative financing needs. These questionable behavioral choices included: not meeting basic deadlines, bank statements being out of order, not being able to find financials, having very bad credit, running the business on overdraft protection, excessive stacking, sending in fake statements/financials, and not disclosing liens, bankruptcies or landlord/mortgage issues.
In Part Two I looked at the funders/lenders and explored some of their questionable practices. These choices hinder broker shops from progressing forward in an industry that’s oversaturated and highly competitive. These choices included: having new deal requirements to keep renewal portfolios, having an incompetent process, allowing merchants to stack, still filing UCCs on good accounts, and 30+ day commission clawbacks.
Stop Helping ME, Compete With YOU
It’s now time for Part Three of the Rants. Mr. Broker, unlike with the merchants and funders where I pleaded with them to “Help ME, Help YOU,” I’m actually going to do the opposite here and plead with you to “Stop Helping ME, Compete With YOU.”
We all know why you are in this industry, you (like myself), believe there is still great opportunity for growth. But some of the things that you do Mr. Broker make it hard for me to figure out if you are competing with me for market share or helping me take market share from you. Please allow me to list some of the things that you do that make it difficult for me to figure out if you are truly against me.
Not Pricing Based On Paper Grade
I understand Mr. Broker, that you believe in the mythical smooth talking, walking, charismatic sales machine, you know, the guy that can sell fire in hell and ice to an Eskimo, but I’m sorry to inform you that no such person exists. If you believe you are going to close your A-paper client by pushing them your 6 month 1.35 factor rate cash advance using your smooth talking skills, then I will not feel sorry for you if your merchant were stolen away by another broker pitching him 6 months at 1.12 – 1.20, which is what I consider to be the proper pricing based on their paper grade.
Forgetting the Endgame
So Mr. Broker, you seem to believe that we are in the lead generation business and not the brokering business. We aren’t paid on lead generation, we are only paid when we successfully broker a deal. To successfully broker a deal, we must find an interested client and match them with a funder that’s interested in funding them. We aren’t paid just to get people to send back an application that we can’t fund anywhere.
So if you propose potential terms without pre-qualifying them just to get an application package back, don’t be surprised if they decide to work with your competitor, the other broker who took the time to pre-qualify them from the beginning.
Mr. Broker, it’s understandable that you decided to open up shop in our industry because you heard about something called UCCs, but I know that you will soon figure out that the UCC Boom is Over.
Using Outdated Marketing Tactics
Speaking of UCCs, Mr. Broker why must you only rely on outdated marketing tactics, including UCCs and aged leads, leading to said merchants having 25 calls per week about funding to where they hang up in your face if you even mention you are from a funding company? Do you know that while you fight with 50 other brokers over the attention of one merchant (that doesn’t want to talk to any of you), there’s other brokers out there calling on data that nobody (or very few) people are calling on?
Not Running A Profitable Office
Every business must have a business plan and every business plan must have return on investment (ROI) projections. What are all of the estimated costs that you will have in acquiring a newly funded merchant? What are all of the estimated revenues that will come along with that, such as the new deal commissions, renewal commissions, merchant account conversion residuals, etc? Too many brokers have no idea what their costs are nor estimated revenues are to produce any type of true ROI forecasts. That begs the question, what kind of business are you running, Mr. Broker? It’s a wonder why so many offices fail, they don’t do any planning.
Not Properly Pre-Qualifying The Merchant
Why clog up your funder’s underwriting queue with applicants that have zero chance of being funded because either their cash advance balances are too high, credit scores are too low, bank statements are bad, they are in a restricted industry, or an assortment of other issues? Why not learn the underwriting criteria of your funder and then do efficient pre-qualification on your clients to where you can build a profile of them, estimate their paper grade, and determine if you even have a funder that could review them at this point in time? Or if the merchant is on the cusp of being eligible, help them get to that point. By not pre-qualifying the merchant, all you do is waste your merchant’s time which reduces the chances that they will work with you again in the future.
Submission Hot Shots
This goes with the situation from above. It’s already established Mr. Broker that you might not properly pre-qualify merchants which does nothing but waste their time, but you also hot shot them to 8 lenders. The key here, as mentioned, is that you have to efficiently pre-qualify the merchant to know where they stand and to know the 2 or 3 funders likely to approve them.
I rant, therefore I am, as comedian Dennis Miller would say. I surely hope I didn’t kill off your jovial mood this holiday season. This has been the Year of the Broker, and my goal is to help the inexperienced and experienced smaller broker shops. So with that being said, I plead with you Mr. Broker to “Stop Helping ME, Compete With YOU” by no longer repeating these mistakes listed above.Last modified: November 29, 2015
John Tucker is Managing Member of 1st Capital Loans LLC, as well as an M.B.A. graduate and holder of three bachelor's degrees in Accounting, Business Management and Journalism. Tucker has nearly 9 years of professional experience in Commercial Finance and B2B Sales. Connect with Tucker on LinkedIn by clicking (here), or contact Tucker at Tucker@1stCapitalLoans.com or at 586-480-2140.