Archive for 2010
The Direct Funder Model is Sooo 2009
December 1, 2010Originally posted on Dec. 1, 2010
We touched on this in a previous post and think it’s important to expand on it. The Merchant Cash Advance industry has evolved over the last several years. The clear line between Broker and Funder is becoming incredibly blurred.
Many Direct Funding companies are now offering brokers the opportunity to contribute their own funds towards an advance and share in the profits(And the risk!). On the same token, many big name brokers seem to have filed a handful of UCCs as a secured party, an indication that they have funded accounts all by themselves.
Some industry vets have taken things to another level and are calling on multiple parties to share in a single advance. For example: A broker contacts several other brokers/funders and requests if they want to all chip in. One firm usually takes the lead and services the account to reap a management fee. This collaborative group financing acts like a mini hedge fund but we believe this signals an evolutionary move towards the Peer 2 Peer(P2P) Lending model. In essence a P2B model that looks like this:
This is an an altered picture of the Prosper.com P2P Lending Site.
Prosper boasts of having funded $210,000,000 since their inception. The Merchant Cash Advance industry has put out more than that in just the previous 6 months. So the concept is similar and it fits the mold. Merchants submit documents and an application to a P2B Network. The Network posts the business profile, processing history, personal credit score, reference information, and publicize it on the site. Anyone can then peruse businesses and choose which to contribute funds towards. Once the total advance amount that the P2B Network recommends has been raised, the P2B Network converts the processing, transfers funds to the merchant, and maintains the account for a fee.
While we don’t anticipate the entire industry to convert to this model, nor do we predict if it will actually work, this will inevitably become a segment of the market. The Merchant Cash Advance industry received much criticism back in 2007 and 2008 but the tone has changed dramatically. The phrase “banks aren’t lending” is so worn out that people should be fined for saying it. Self regulating industry practices, the recent mass exodus of devilish sales brokerages, and the banking problem, have not only brought the Merchant Cash Advance industry legitimacy but also made it one of the preferred and most credible funding options available to small business.
A P2B network could do all of the underwriting, complete with a final say on approvals or they could present a business as is and allow everyone in America to be their own underwriter and make the determination themselves. How tempting would be it to invest $100 to a business in your community and buy a percentage of their future credit card sales? We like the concept and the industry is halfway there. Who’s going to start this first?
– An Opinion by the Merchant Cash Advance Resource
https://debanked.com/merchantcashadvanceresource.htm
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UPDATE 12/23: P2P MARKETPLACE FOR MERCHANT CASH ADVANCE FOUND ALREADY TO EXIST, READ HERE
Merchant Cash Advance and Startup Businesses
October 20, 2010
Kudos to the entrepreneurs taking a chance in the worst economic period of modern times. Starting a business is already a truly challenging task in itself but before we shower you with praise for being the ultimate warrior of capitalism, let’s put everything into perspective.
Risk takers are a minority in today’s startup community. A persistently high rate of unemployment is breeding a culture of survivalists; Individuals that have been pushed to the limit via pay cuts, layoffs, and robo-signing foreclosing bankers. It’s resumé rejection, employer double talk, and anger at how Wall Street bankers continue to live. The new entrepreneurs are a resounding chorus of “If I can’t get a job, I’ll make my own job!” These people are going for it on 4th Down and Long and running it up the middle for a touchdown. It’s as if Charles Darwin spiked their Corn Flakes.
Startup survivalists are just as inspiring as their risk taking counterparts. Both groups have the drive and that’s essential. But you can’t forego some basic tools. Financing is a must. No capital, no business. Unless you are fortunate to start with deep pockets, you need access to cash.
New businesses are not likely to be offered credit terms by vendors, nor can you push back overhead expenses such as rent, until you’re generating revenue. If unforeseen demand overwhelms your capacity, a cash shortage can do irreparable damage to your success.
Rather than spew rhetoric about the importance of funds, and shortchange you with a bullet point list of vague sources whom in reality are so illiquid, they’re not actually viable, we’ll offer our real 2 cents.
Banks. For a startup? Not happening. Angel Investors and Venture Capitalists? Slim to no chance. Unless these private investors live in your community, they’re not going to invest in your business. More than 90% of startups fail. For an investor to take that much risk, they’re going to do some hands on management or want to follow you around and critique how you’re spending their money. That’s not necessarily a bad thing. It just means that one can’t reasonably expect a return on their investment without intimate knowledge of the demographics and community the business is situated in.
Looking for private investors over the internet? Don’t. Your pro forma financial statements, data research, and business plan won’t help. Do you know how many businesses fail to open even after they incorporate, sign a lease, purchase inventory, advertise, and make preliminary hires? An astounding number are eclipsed by failed health inspections, license/permit rejections, and building code violations. This reasserts that unless an investor is personally intimate with your progress, the odds are stacked against them.
Lastly, you need not pay to get approved for capital. We’ve spoken with many start ups over the last year and are flabbergasted by the amount of new businesses that are convinced they have to pay a $3,000 upfront fee to get approved for a loan. The ones that actually pay are quick to learn what town the lender is based in; It’s called Scam City.
Real Option? Merchant Cash Advance. A Merchant Cash Advance offers a business with a lump sum of capital upfront. In return, a piece of every sale the business makes will go towards paying it back plus a predetermined fee. There is no due date or set term for repayment. That means if sales are slow to get off the ground, then funds will be repaid slower and with no penalty.
A Merchant Cash Advance provider entrusts you with their capital because of the unique security the repayment method offers. The business itself must accept credit cards as a form of payment. The credit card processing company will automatically deduct the agreed percentage piece of each sale transacted and forward it to the Merchant Cash Advance provider on your behalf for repayment.
A startup can qualify with as little as 1 week in business. As long as you open, you can get funding. Credit can play a limited factor and the cost can be hefty, but the access to capital is unmatched. From the date you apply, funds can be received in as little as 5 days.
Purchase inventory, pay the rent, advertise, hire, or seize an opportunity. Whichever shortcoming you face, it can be overcome with a Merchant Cash Advance. Industry experts project that funding is on pace to reach over $600 Million for 2010 alone. With advances ranging from as small as $1,000 to as high as $500,000, there is proof that numerous deals are being made every day.
We’ve seen the same books, guides, and expert advice columns that you’ve seen and all of them seem to be a reprint of useless suggestions like the SBA and searching for angel investors online. These people earn a living writing. Whether or not the money expert column in your newspaper actually helps you, makes no difference to them. We have many years experience in the Merchant Cash Advance industry and we make careers out of funding you, not telling you about funding.
We try not to promote any one company over another. There is no harm in enlisting the service of a middleman or reseller for one of the direct funding sources. It may actually benefit you. If you are open for business, you can obtain a Merchant Cash Advance. If you have been in business for a long time, a Merchant Cash Advance is still a fantastic option.
It’s 4th Down and Long. You’re ambitious, focused, and ready. You are the ultimate warrior of capitalism. A Merchant Cash Advance will supply the cash. Grow, take risks, survive, and don’t be surprised if your Corn Flakes taste funny.
Direct Merchant Cash Advance Funders / Lenders
October 10, 2010Many ISOs are dabbling with funding their own merchants these days. The industry is maturing into a whole new generation of Broker/Funding hybrids. A great $10,000 deal might be worth your own private investment. 😀
The Merchant Cash Advance Resource has been compiling a directory of actual funding sources and invite you to be listed on our site. There is no cost and this site merely serves as an impartial central hub for industry information. This site receives over 100 visitors every day from ISOs, Funders, Merchants, Financial Firms, Processors, etc. Your company will receive widespread positive exposure to all the right people. If your company has a blog, we will link the feed right to your profile.
To be added, you must be an actual direct funder capable of showing us 5 recent UCC filings as evidence of your advances. We will also seek to verify your status with other insiders in the industry. Hybrid firms are acceptable as long as you also provide your own capital to clients. To be added, please e-mail us at merchantprocessingresource@gmail.com
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