Mr. Funder: Help ME, Help YOU (Rants On Funders and Lenders)
As we continue the Year of The Broker, I thought that it was time for a part two to my original rant article that blew off some steam on one of the most crucial elements in our industry, the merchants themselves. For this round, how about we take a look at another crucial element to our industry, the ones who create the platforms, raise the equity capital, create the products, fund the deals and pay the commissions. Of course, I’m talking about the Funders and Lenders.
Help ME, Help YOU
Mr. Funder, please Help ME, Help YOU. We all know the situation of why I, as an independent broker, are working with you and it’s because I’m a part of your Mom and Pop Network. The Mom and Pop Network is just a group of random brokers who will resell for free (we cover our own expenses), so your goal is to recruit hundreds to thousands of us to collectively produce tens of millions in annual funding volume for your organization.
But some of the things that you do Mr. Funder make it difficult for me to help YOU build your Mom and Pop Network, which in terms helps ME build my portfolio and commission stream. So allow me to list out some pet peeves that hopefully you, going forward, can fix.
#1.) New Deal Requirements To Keep Renewal Portfolio
Mr. Funder, you received free marketing and acquired new clients on behalf of my efforts in marketing, selling and closing. You had no cost associated with the acquisition of said client other than the percentage points paid to me in commission, but that was only after the fact that I bought you a quality client (that didn’t default within 30-45 days), there was no risk assumed by you in spending money on marketing with a chance of not recouping profit.
So why in the hell do you put provisions in place to try and cut me OFF from said renewal portfolio? Do you realize that my entire business plan is based on building up a renewal portfolio and “sitting back”? That’s why I’m in Merchant Services related sales, it’s all about the Renewal Portfolio. Mr. Funder, please remove your insane new deal requirements and stop trying to push good brokers out of their Renewal Portfolio.
#2.) Having An Incompetent Process
From the customer service and billing support “little girls” who are flat out rude, to the payment collections team who messes up fixed payment withdrawals, to the underwriters who throw out inaccurate approval numbers, to having an underwriting process that takes 48-72 hours for you to update me on a file, to the excessively long closing process that drags on and on into 10 business days (two weeks) which is way more than the promoted “3 day” closing period, Mr. Funder, can you please take a little more time to fix your process?
#3.) Allowing My Merchants To Stack
So you make sure provisions are in place that I, the Broker, do not stack the merchant and you make this clear in the Broker Agreement that I would be “cut off” from renewals if such action occurs.
But yet, in your Funding Agreement for the Merchant, you have absolutely NO provision, sanction, penalty, or anything in place to punish the Merchant for going out and stacking other than the fact that he might not be approved with you for a renewal (like the Merchant would care, after all, 10 companies are calling him a day offering him money).
This means that the Broker up the street can stack my Merchant with a 2nd position, you will decline them during renewal as a result of such stack, and the other Broker will offer another approval to then 100% steal the client over to their organization going forward. You Mr. Funder get paid off, the merchant gets more money, the other Broker gains a new client……the only one that gets screwed in this situation is ME!
Mr. Funder, please add an Amendment to your Funding Agreements for Merchants that will put fines in place if they stack, similar to how Merchant Processors put ETFs in place to stop merchants from switching their merchant accounts every month to save “$10”. This will STOP the stacking craze when a merchant realizes they will have to pay $7,000 per STACK.
#4.) Still Filing UCCs On Good Accounts
So Mr. Funder, it’s common knowledge that the mass new entrants of brokers into the industry are all pounding away on UCC records, causing said merchants to receive 15 – 20 calls a week for “funding”. So knowing this Mr. Funder, why in the hell do you keep filing UCCs on good accounts?
If an account goes bad, you already have paperwork signed with said Merchant stating that a UCC “will be or could be” filed, can’t you just come back and file the UCCs only on the accounts that went to collections? Why file them on the good paying accounts so the Merchant is harassed all week long?
#5.) Over 30 Day Commission Clawbacks
No more than a 30 day clawback period should be in place. Once we start getting into 45, 60 and 90 day clawback periods, this means that you are inefficiently underwriting the merchant.
#6.) Excessive Stacking and Back-Dooring
Let’s start with back-dooring, once again, you receive free marketing from me and I’m only paid when I bring you a quality deal that funds. So why in the hell are you trying to steal my deals? Aren’t you already getting a good “deal” from me with all of the free marketing I’m doing for you? Mr. Funder, can you please stop back-dooring files?
In relation to Stacking, there’s absolutely no justification you can make for a 3rd, 4th, 5th, and 6th position stack. You can make a case for a 2nd position, even though it might still technically violate the 1st position lender’s Agreement, a 2nd position could work on a case-by-case basis.
There’s absolutely no justification for a 3rd plus position, all you are doing is taking way too much of the merchant’s monthly gross to where he might end up paying 40% (or more) of his monthly gross to Cash Advance companies. This makes absolutely no sense Mr. Funder, so can you please STOP doing this?
Mr. Funder, please Help ME, Help YOU. My position as an independent broker in a highly competitive industry is hard enough. I have to cover my own insurance costs and I’m alone in this world in terms of developing my own profitable business plan to not just eat, but cover my other living expenses, pay for taxes (on time) and fund retirement.
Please stop making it harder for independent brokers with the above inefficiencies, keep your process as efficient as possible so that it can increase the probability of more of your independent brokers having career sustainability.Last modified: November 13, 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.