Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.
Articles by Sean Murray
New to the Merchant Cash Advance Industry? Read first!
November 2, 2011Thinking about starting a career in the Merchant Cash Advance industry or becoming a funding source? We’ve compiled some tips from the people already on the inside. Comments were gathered and organized from an insider discussion board at MCAForums.com
5 THINGS YOU NEED TO KNOW
1. You will apparently need a pair of these:
2. You will need training from those with experience. You can’t get into this market without being familiar with its complexities. Having financial experience, mortgage experience, etc. will help but is not enough to make it without additional training.
– WHAT WAS SAID: “until you learn how each company operates and understand the products, this market is way too competitive to not have support.“
3. The market is extremely competitive.
4. Partner up with companies that fit your needs and capabilities.
– WHAT WAS SAID: “You’ll have to find the MCA companies that fit your ethics. They’re all different, good, bad, fast, slow, flexible, inflexible, etc.“
5. Offer alternative products. A Merchant Cash Advance is not the right fit for every business. You will need to provide or refer alternatives such as SBA Loans or Micro Loans if the situation warrants it.
Don’t Make Us Pay is Back at it Again
October 21, 2011After months of silence, we received a mass e-mail yesterday from the infamous dontmakeuspay.org:
Tell Your Congressman: Repeal the Durbin Amendment!
Take Action!
You know all too well the harm that the Durbin amendment on debit cards has caused to debit card users like you. Across America, we’re seeing higher fees, the end of free checking and disappearing rewards – without a penny of savings at the cash register.
Fortunately, some members of Congress are standing up for consumers. They’ve introduced legislation that would repeal this harmful amendment and reverse the harm it’s causing for debit card users.
This legislation won’t pass without your help. Click the link to send a letter to your representative, and ask them to co-sponsor this important legislation. And don’t forget to spread the word about this important effort.
Let’s join together and make our voices heard: repeal the Durbin amendment. Don’t make us pay.
Occupy Main Street?
October 10, 2011
We didn’t protest… but we decided to see who was. Nowhere in the strange crowd did we find outraged business owners. Could the occupiers of Wall St. also be fighting against Main St.?
Wall St. bankers might have a lot of money, but small businesses employ the most jobs in America. Chances are if you are unemployed, unhappy, or overworked, it will ultimately be Main St. that will save you. But for time being, nobody is hiring. Business owners are pointing the fingers at banks, citing the lack of loans has stalled expansion. Excuses, excuses…
Wall St. might have perverted capitalism to enrich themselves, but Main St. has done just the opposite lately. When presented with an opportunity, thousands of businesses are unwilling to take the risk. “We’re just holding on for right now,” is a phrase we hear way too often from Mom and Pop shops.
We posed this question to an unnamed ‘Occupy Wall St.’ protester today:
MPR: “If we gave you $10 today, could you turn it into $20? “
PROTESTER: “Hell, I could turn it into $100. You can make money on a lot of stuff going on down here.”
Capitalism lives… It’s the drive and execution that enables someone with $1 to turn it into $2, $5, or $100 in a marketplace. It’s an intuition that Americans are born with, even those with anarchistic tendencies yelling in protest against it.
But something has happened to our beloved Main St.
Opportunities to grow are being passed up, and with that the ability to hire more workers. The rich get richer by investing their capital and taking risk. In a competitive marketplace, we must always seek out ways to grow, expand, and improve. “Holding on” is not a strategy, at least not one that will lead to hiring. Stability does not prepare you for downturns, nor will it make you rich in the long term. Stability is actually the beginning of a long road that will one day lead you to being mad at those who got rich.
The math is simple. If you turn $1 into $1.10 everyday, while somebody else turns $1 into $2, expect yourself to be very poor by comparison 20 years from now. Whether you have a small retail store or a national franchise, don’t let your guard down, take chances, think big, and elbow your way to the top 1%. You’ll create a lot of jobs on the way.
Once you’re ready to turn $1 into $2, don’t worry about the lack of bank loans, Merchant Cash Advance providers will offer you $1 in return for $1.30. You net the profits and can redo it as often as you like. Naysayers will tell you it’s expensive and it would be if you didn’t invest the dollar. Rebuilding the economy begins with small business. Show them growth, show them jobs, show them how you were born to turn one dollar into two…
deBanked
http://www.merchantprocessingresouce.com
Learn about Merchant Cash Advance Here
Some video clips we took while we were at the Wall St. protest:
SBA Lending Statistics for Major Programs (as of 9/23/2011)
September 29, 2011This report provides statistics on Year to Date (YTD) SBA Business Loan Approval Activity comparisons for Fiscal Years 2009, 2010, and 2011 for the period ending 09/23/2011.
Largest Merchant Cash Advance in History Ends in Default
September 27, 2011
Six months ago, news headlines publicized just how far the Merchant Cash Advance (MCA) product had reached. Once the ‘Plan B’ option for retail businesses in need of capital, the sale of future card payments was utilized to finance a project at a Las Vegas casino. And it was no small figure. New York based Strategic Funding Source (SFS) in collaboration with Vion, shelled out $3.147 Million in return for $4.092 Million of the Las Vegas Mob exhibits’s future sales. That’s a cost factor of 1.30, a price that typifies the average MCA deal.
While SFS was given high praise from their peers, some began to speculate if transactions that large were practical. After all, the costly financing of a MCA is priced in accordance with the risk of default, not in accordance with big profits for the financier. When your portfolio is in great shape, it can be easy to forget what the pitfalls are. And since the MCA industry paraded the Las Vegas Mob exhibit as the $4 Million deal that changed everything, we’re eerily reminded of the words by Jeff Mitelman, the CEO of AdvanceIt who was quoted two years ago as asking: “How prepared are you to lose $4 million dollars?”
We won’t pretend to know what led to the downfall of the Las Vegas Mob exhibit or why it went south so quickly. SFS could potentially lose 98% of their investment, a hit that will surely change their outlook on doing large deals in the future. The VegasInc article alleges gross mismanagement and fraud, factors that are difficult to foresee in the course of underwriting.
Industry message boards have been abuzz with comments on the default, with some competitors of SFS being accused of kicking a man while he’s down. “you ought to do smart funding, not just showing off your Balls,” one broker fired off at them. SFS has a stellar reputation and is one of the most knowledgeable firms in the MCA space. We have no doubt they inspected the merits of the deal backwards, forwards, and upside down. But nothing is perfect.
The default is expected to attract attention of the news media, leaving many to wonder how this transaction will be interpreted under the public eye. We assert that it will put to rest any criticism the MCA product has ever received about high costs.
Risk vs. Reward
Back in March when the deal was written, an outsider could claim that SFS just had an easy million handed to them. This view clashes with the Risk vs. Reward philosophy that MCA providers hold dear. To the MCA providers, the question was never “how can I make an easy million?” but rather, “how prepared am I to lose $4 Million?”
Any business that can’t get a bank loan, can’t get one for a reason. There’s a measurable value of risk that’s not worth taking. MCA providers fill the gap but compensate to offset defaults. There’s a term for something like this. It’s called a Happy Medium.
Merchant Cash Advance is the happy medium financing option for small businesses. And for the immediate future it is likely to stay within the small business niche. We all know now what can happen when the concept is applied to a multi-million dollar project. The outcome was not so happy and the loss not so medium.
But it will all even out in the end…
– Merchant Processing Resource
