Articles by Amanda Kingsley
The following is a guest-authored opinion piece on the business financing space
Everyone is struggling to keep their head above the water. Just imagine the scene in the movie Titanic. Currently we are in the scene where they zoom out to show the ship sinking slowly with more people in the water trying to survive than on the ship. “Never letting go” is something everyone is doing and clinging on to whatever floats is the only way to survive. The decline in submissions and quality of funded deals is one aspect that many Funding Companies are realizing. No one is letting go of a piece of their portfolio without a fight.
For many A/B paper (for those who go by the grade system) or the Prime to Sub-Prime, 1st position companies know what I am talking about and it’s time to come clean on the truth and the real perception of why things are the way they are.
You can’t get that payoff letter because that Funding Company does not want to let go of their good paying Merchant. Whether the funding was originated from a Broker or organically, that Business is in bed with that funding company and did not have any intention of breaking a relationship until the option was brought to their attention. Whether this Merchant was solicited by another Broker or the Merchant decided to take it upon themselves to seek additional funding, there is one thing that will most often happen.
As soon as the Funding Company receives a request for a payoff letter or balance letter, they will ask why it is needed or delay the process in releasing one or not give one at all until the Merchant is 100% positive and the reasoning and demand is final. Is there anything wrong with this?
To a Broker? Yes. To a Business Owner? No. As many Brokers will fight and try to justify the circumventing of their Merchants, in this case, this is not circumventing at all. The Business has a contract with the Funding Company and until they have a zero balance, that Funding Company has the right to review their account and offer additional funds or discounts to keep their business. This is how it is with any company. Try calling your cable company to cancel your service. What do they do first? They transfer you to the reconciliation department to try to appease you, offer you free or discounted features, and find out what they did wrong or what company you are switching to. Companies are always trying to improve their service and give their clients the best experience.
Throughout the years, if the original Funding Company could offer a better rate or term than what the competing offer is, it has always been in the best interest of the Merchant to continue with that original Funding Company. It is NOT in the best interest nor is it ethical to put the Merchant in another position that will hurt the business or “double up” contracts to equal an amount if ONE company cannot adhere to the request. “Stacking” by offering a second position is one thing, squeezing in as many positions is another, and over time it has hurt many 1st position Funding Companies.
Fast forward to now, the rise in funded accounts that have “defaulted” may have fallen victim to the promises of something better. There is no one educating or clearing the air that there probably isn’t something better… but that advice won’t make anyone commissions and those Funding Companies still rely on Brokers to bring in submissions.
There has been no recourse on this issue, rather growth, and those who have paved the way have found their path covered in dirt. Stomping in this path are other funding companies who have adopted practices from veterans but feel the need to set hierarchy to something they can’t control.
So, with that said, who really sets the rules to what is fair when we are all walking on egg shells? The cost of acquiring a customer and the cost of losing one is an expensive and tricky loss. It is safe to say that once a Merchant is stacked- there is no going back. Should ethics rule over the choices and fate of a Business? Should we put more emphasis on realistic expectations before and after a Business is funded?
A simple request for a payoff letter can open a can of worms. The underlying factors of the difficulties companies face in our industry are all brought upon by the decisions we make when working with each Merchant. At the end of the day you have to ask yourself- am I helping or am I hurting the Business?
‘Twas the day before New Year’s, and all through the floor
The staff was busy catching up, but being pushed for more
Submissions kept coming, most missing some stips
The most simplest of standards, the brokers always miss
The underwriters were dizzy, crunching numbers for hours
Getting hustled for approvals because they hold all the power
And management holding meetings, going over collections
Returns and defaults, and next year’s projections
When out of the blue, there arose such a clatter
The originators sprung up to see what was the matter
An announcement being made, attentive they listened
“Employees of the company!” said a face that glistened
With cheer in his eyes, and a non-familiar glow
Everyone was excited and frightened at the same time to know
He continued to explain, news that was both bad and good
Reflecting on the year, in terms they understood
With a lot of fluff talk, numbers, and percents
They knew at that moment, how it all made sense
Understanding their roles, and those who contribute
Appreciating their time and how they distribute
Now, closers! Now, admins! Now, marketing and relations!
Now, underwriting and sales! Anyone who had patience!
To the breakroom! To the breakroom with you all!
And they all huddled in, without an argue or a brawl
There on the table sat a wonderful spread
Snacks and desserts, more than enough to be fed
Stuffing their faces with enough food for two
The staff laughed and chatted though there was so much to do
“We can’t take a break! there’s so much to complete!”
“Though this is more than I ate all this week!”
This much is true- as many don’t know
They don’t leave their desks often, like elves at the North Pole
So back to their seats, with plates by their side
Back to reality, but they did it with pride
The realization of all of their hard work
It isn’t all that bad when you look at the perks
As the manager swung by to view his whole team
He realized it too, what isn’t always seen
It takes more than just one, it takes more than just vision
It takes a plan and people, to carry out the mission
As the time grew later, he knew what to do
Since nothing was funding in the late afternoon
He had another announcement which he said with great cheer
You’re all getting out early and have a Happy New Year!
The holiday season is here and I wanted to share an insightful story of a time where a horrible job position made me realize a lot about the basic standards of conducting business
My last call center position was at a huge customer service center for major retail online stores. This was my third holiday season and I took a position in the Escalations Department. I don’t know if I was just a sucker and couldn’t say no because I felt bad (no one else wanted it), or if I wanted to play the “You Ruined My Christmas” game with the others. The previous year, there was a tally on the white board in the back office where weekly contests were held to count how many times we were individually told that we ruined Christmas. Here’s why…
The warehouses served as central clearing houses for multiple retailers and stored all types of products. It wasn’t a surprise if someone ordered a baseball jersey and received a Dora the Explorer play set.
The best part was when you went to help the customer with reordering in time, the item was almost always back ordered or out of stock completely. That meant reordering wasn’t even possible. Sorry, you won’t be receiving your item for Christmas.
We knew that if it was out of stock with one company, it was out of stock for all of them. The customers would end up calling different branches of our call center expecting to reach each individual store’s customer service department. They didn’t understand that all the calls were routed to the same place, to us.
By the time the customer called all ten online customer services, they would call back and get Me; An escalation of the first company that messed up everything and I now took time away that couldn’t be replaced. Imagine eight hours of this. Anyways, we ruined a Christmas and there was nothing that we could do. We knew it wasn’t really our fault and that’s what helped us sleep at night.
Fast forward eight years later, I realize that even though my position sucked (lack of a better word), it was needed and how we handled the situations were actually really effective for the company brand. Here is why…
No matter the negative situation, the following verbal comments and impacts are the same when it comes to Customer Relations…
- The Company
- The Company’s Process
- The Company’s way of getting to that process
- I should have just…
- I will never…
- I’m going to tell/share…
In retail, nothing can be undone immediately when the customer receives the wrong items. Issues are usually out of the hands of any representative if they followed the procedures given to them by the main source. There is something that could have been done in the process, like quality assurance or better shipment organization but you stick to what you can do and follow appeasement procedures. We do this just to “keep them” and not take the negative experience with them and pass it along. If we didn’t appease after negative situations, we would all base our theory on the saying, “it’s just one customer.” In turn, we would have millions of customers complaining and it would catch attention of prospective customers.
Sounds familiar? It sounds like us.
Negative experiences and providing resolutions reflects on the character of not only the company, but the process that everyone shares within an industry or how we represent a brand. We are all pointing fingers at each other for the negative impacts we endure. Defaults, backdooring, lies. Not only is this reflecting on each other functioning in this industry, but the merchant is getting the worst part of this. Individually we have our own standards and best practices on handling a negative situation, but how a negative situation starts and how we could avoid it, is the first step to change.
In our industry words and actions play hand-in-hand since we are technically online based. Your words are the characterization and the actions solidify the process and trust you are offering when the customer (merchant) comes to you for that product. When it comes to originators and those who are the representations of the direct funding companies you submit to (contracted to originate for), you must characterize yourself to reflect the product they offer by providing correct information and a streamlined process as any customer would expect from any person or company they decide to do business with.
Do you remember Wimpy? Some of you probably don’t but those who do remember Wimpy, remember him as being a silent scam artist who promised the famous phrase, “I will gladly pay you Tuesday for a Hamburger today.” He never adhered to that promise. I never ascribed cartoons to real life but we can learn a few things from Wimpy and how we understand business relationships.
Back in the day, there was something called Trust. It was a little thing that was swapped like currency with the people that you interacted with on a daily basis. Today, trust has been traded for the Internet and now we have nothing to stand on. We must work harder to build relationships in any capacity and at the end of the day, you might still question if a developing level of trust is reciprocal.
Take trust and mix it with a sales position in 2015 and you have disaster. The countless nos you must endure to get to the few yeses and the pressure to close those yeses is exacerbated by the fear that a Wimpy or the Internet will come and take them away.
While reading Personal Touch Makes Big Difference in Small-Business Loans on the WSJ this morning, I immediately got a little upset. This is such a “Duh Article.” A “Duh Article” is one of those articles that are true, but so true in the fact that you end up saying, “Duh, I know that!” and wonder why such basic teachings become important when they are finally backed up by a case study. Did anyone really not think that personal relationships help? Or that Wimpy, the borrower you didn’t know, would not really pay you on Tuesday when you relied on just his word? It goes both ways.
Below are a few ways to avoid the Wimpy traits of sales when building a relationship between you and a business owner:
#1 Rule of Sales Relationships: What are you even selling?
You are selling money so it shouldn’t be that hard right? WRONG. Even though everyone could use an influx of capital, you have two factors that impact your sales in the MCA Industry. PRICE and PROMINENCE.
- Price: We are already slandered for putting a hefty price tag on advances and even if you say, “We offer factor rates as low as a 1.08!”, How many 1.08 deals do you really close?
- Prominence: Names, Logos, and Promises. Characterization plays a big part in what you represent. With so many MCA Entities popping up, how do you set yourself apart?
You have to offset the two factors by building the relationship and creating an understanding.
Example: Imagine you are selling a line of ketchup to every hamburger shop in the U.S.
Do they already have ketchup? They will eventually need to reorder. So where do they get it now? Are they content with this outlet or have they never thought to seek out an alternative? This is the same “question scenario” you have to answer when selling. Note: Replace Ketchup with Capital.
- Do they need capital now?
- Will they need more capital soon?
- How do they get capital when they need it?
- How can I deliver all of the above and be their new preferred choice?
If the answer to the first question is no, that’s okay, move on to the next question. You are more likely to close double the sales when you answer the second and third one. Either way, one of those will have an answer.
#2 Rule of Sales Relationships: Understand the Market you are Targeting
Who is your target market and do you understand them? This is one of those situations where I feel offering a factor to a manufacturing company that is based on invoices is just plain dumb. There are many alternative financing options that are more mainstream than you think and it all boils down to the top 3 things:
- Industry: Do you understand the industry you are selling to? You will connect better with your merchant if you understand the inner workings, schedule, and the ways they obtain their receivables. Their Industry is their passion. If you don’t connect with their passion (unless there is a dire need for emergency capital) you will not be taken seriously or remembered. Ask yourself, “how can I demonstrate an understanding of the way the business makes money or works with different vendors to get paid?”
- Credit: Don’t promise a low rate to a business that you know has a credit score below 600. Research the different tier programs PROVIDED to you by most Direct Funders. Categorize your tier sales structure and request examples of similar past funded industries from the Funders you work with.
- NEED:If they do need capital now, what is it for? This is a great conversation starter. Whether it’s a seasonal need, equipment-related, or plain ol’ working capital, probe the conversation by finding out their goals so you can better represent the merchant and fit them to a better funding program.
#3 Rule of Sales Relationships: The Follow up
This may go far beyond the basic sales guidelines, but categorize your prospects!
Example: Say you have a book of restaurants that you have connected with before and you know they are going to start gearing up for the holidays. Let them know you UNDERSTAND this time of year and how you can assist! Personalize the need of capital with something they base their business on. This is where direct marketing comes into play. If you remind them of who you are and that you are to assist them to manage the most stressful money making times of the year, they will think of you as their go-to when they NEED it.
In the next 6 months, (MANY) Broker Companies will start dying out. To the surprise of many, just when the Year of the Broker was in full bloom, chaos was forming on the horizon and the realization that there is no more room for “new” messes. Simply because we aren’t finished cleaning up and organizing the messes we have now!
There are basic facts that we can take from the “Broker Boom”
– Not enough beginning knowledge about this industry and how the Merchant Cash Advance process works.
– No time to make strong relationships: The concept of having “more” is usually more harmful than having a handful of trusting relationships.
– Overhead costs: the make-up costs from the spending on dead leads and the “start-up” costs of having an office, staff, draws – gave the wrong perception of what a “MCA” is when the rate mark ups pay for those expenses.
– Quick turnover when the top dog can’t fool the sales rep out of commissions any longer: Rep goes out into the world and starts their own company. This can lead to recycled bad practices or the few who want to do right.
– Co-Brokering: Everyone’s done it. I’ve done it. Edited agreements taken from other brokers/funders don’t always cover everything leading to many debacles that turn into “Jerry Springer” Forum threads. P.S. Don’t think merchants can’t see the forum either.
It’s absolutely exhausting to explain to someone from the mortgage industry or any industry that comes into the MCA space the “Rights” and “Wrongs” and the teachings. Most new Broker Company Owners and their sales come from those who don’t believe in “Best Practices” anyway.
Marketing and Leads in the Broker Space is affecting Brokers and Funders Alike – Are brokers ruining leads as well?
So, your questions about Marketing and Leads have the same answer- It does not matter what type of leads you get, it’s all about your presence, knowledge, and your “Handle”. These are the answers from actual merchants who get calls from UCCs. (This information came from old merchants that I had, I shortened the answers and stuck to the points).
- They don’t trust you because of your approach
- They tried before and was promised “X” and got a bunch of “Y” with excuses on how so many “Y’s” = “X”
- Backdoor calls- Sometimes the money isn’t the biggest savior- it’s the relationship that goes with it
- They don’t need it that bad to pay 30%. If they do need it- they want something structured to build their credit and keep their business afloat
When people think of getting money for their business- they used to think “Go to the Bank”. Professionalism, a structure that is always the same for each type of program, and knowledgeable staff they can rely on. They made the choice to come to your bank because of what is offered. Now, all but the “Capital” part is missing from this equation, but merchants still want to have that one consistent place to go to for their business needs.
I think we all lost sight of this Industry.
Brokers = Resellers and Marketers of Direct Funding programs. The Broker takes the programs from these Direct Funders and builds a portfolio of which each tier and industry and credit rating is satisfied by which funders he can qualify them to. The options are given to the merchant to satisfy their need for working capital.
You work for the Funder – Your Sales Target is the Merchant.
The Merchant has put everything into starting and maintaining their business. Most of them wanted the “American Dream” of owning a business since childhood. They have it now, and you come in and try to tell them what they need. Some believe you- some are money hungry and know the game. It’s all a numbers game no matter what kind or type of leads you buy.
All that am I saying is, the way this industry is looked at from a “Brokers” and “New-Age Funders” point of view vs. a “Veteran Broker” or “Veteran Funder” is two totally different aspects.
Unfortunately, there is no immediate solution for new “Brokers” and many solutions for the “New-Age Funders” to be on the path of “Best Practices” and less shenanigans.
There is no room for competition as we don’t know what we are competing for and rather than creating a solution so those leads can understand the growth and structure of what we are offering, we are too busy trying to find out how to get leads that won’t stick.