Articles by Sean Murray

The Merchant Cash Advance “Don’ts”

August 22, 2011

In sales training, young men and women are taught to negotiate with positive language to close a deal. For example: “We can’t meet the deadline” is replaced with “We can achieve the objective, but we may need to extend the deadline.” Or “We don’t offer that service” is transformed into “We offer many services that can add value to your business but that particular one is a challenge.”We apply a bit of that psychology when developing resources for business owners. People are a lot more open to input when you cast out the negativity. So it’s a bit ironic then that we created a printable reference form, titled The Merchant Cash Advance “Don’ts”. Though it may be perceived as a little condescending, this little banker/business pep talk can protect you from making a major mistake that could cost your business money. So keep it handy even if you don’t plan on applying in the near future.

DOWNLOAD THE DON’TS
1. Don’t wait until the last minute to apply for funding.If a firm is advertising funding in 3-5 days, don’t put yourself in a position where you MUST have the funds in 5 days or less. The underwriting process may take longer than you anticipate. The advertised timeframes generally describe a perfect situation. For example: If all documents are received by day 1, all references checked out by day 2, you could potentially receive funds by day 3 assuming the technical setup is already completed. There are situations where business owners have spent 10 days waiting to obtain a copy of their lease from their landlord, which piggybacks onto the 3-5 days. Additionally, supplemental paperwork may be asked for, a trade reference might be unreachable, or your method of card acceptance might require more time to integrate. Anything can happen so don’t wait until the last minute!

2. Don’t lie about your business ownership percentage.This might be seem like silly advice but underwriters report that it’s a growing trend. People with low credit scores tend to assume that they will be declined for their score alone. Therefore they may feel inclined to state that a partner, friend, or family member with excellent credit is the owner of their business and not them. This is bad for several reasons:

• Credit score isn’t the sole determining factor for a Merchant Cash Advance. So why lie?
• Misrepresentation of ownership will be discovered and the application declined.
• Misrepresentation to obtain financing constitutes fraud and is a crime.

3. Don’t lie to the underwriter or your account rep.The liar loans of the mortgage boom ultimately led to the financial crisis and lending shortage. That means the days of declaring whatever you want to obtain the deal you want, are gone. If you state that you generate $100,000 in sales per month, be prepared to show documentation that backs up that claim. Your sales agent or account rep is probably compensated if you close on financing. That doesn’t mean they will help you get there at all cost. They are bound by a certain code of ethics and all applicable laws. If they become aware of any misrepresentation or intended misrepresentation, don’t expect them to be an accomplice to your dishonorable act. If you put them at risk, they will inform the underwriter and terminate your application.

4. Don’t alter any documents.Changing the expiration date on a lease, editing out the embarrassing withdrawals from the bank statements, or any other more or less blatant alteration will result in a rejection. Merchant Cash Advance underwriters are extremely adept in detecting alterations and fraud. Altering documents in an attempt to secure financing is a crime. You are well advised not to try this, no matter how harmless you may perceive the alteration to be.

5. Don’t over shop for a deal.You are entitled to obtain quotes from multiple sources, but don’t press your luck. Too many credit inquiries can spook an underwriter. For one, it tends to drive down the margins that will be earned because competition, thus making the deal less profitable for them and less attractive to put on the books. On the other hand, they may suspect that the other firms declined you and therefore they are being picked as a last resort. When underwriters start to feel this way, your approval may be retracted and it can be a tough battle to convince them to change it back.

We promise next time to provide a guide full of “Do’s”! But for now, we’re making it a point that Merchant Cash Advance is a serious business. The process may be fast and easy, but don’t get too comfortable and make claims you can’t back up. That will lead nowhere good…

– The Merchant Cash Advance Resource
http://www.merchantcashadvanceresource.com

Small Business Lending Faces Extinction

August 4, 2011

Small Business Lending is about to drop even further. It has to. Today’s 512 point kick to the groin was less about fear of the future and more about the issues we’ve been unwilling to acknowledge in the past. Let’s not water down the facts:

The economy is not growing.

There is no recovery.

There is no improvement.

That is it. There’s been far too many “growth is slow but…” rationalizations in which dismal results are chalked off as seasonal, aberrational blips, just because they don’t fit in line with our delusions of recovery. We all saw today coming, let’s not kid ourselves.  See our evidence:

Seasonally Adjusted Weekly First Time Unemployment Insurance Claims:

Figures that fall below 400,000 are considered to be conducive to hiring and growth.

3/26/2011    392,000

4/02/2011    385,000

4/09/2011    416,000

4/16/2011    404,000

4/23/2011    431,000

4/30/2011    478,000

5/07/2011    438,000

5/14/2011    414,000

5/21/2011    429,000

5/28/2011    426,000

6/04/2011    430,000

6/11/2011    420,000

6/18/2011    429,000

6/25/2011    432,000

7/02/2011    427,000

7/09/2011    408,000

Source: Department of Labor http://www.dol.gov/opa/media/press/eta/ui/current.htm

News outlets have published more recent figures, with the data indicating claims above 400,000 for each of the last three weeks of July. Seventeen straight horrible weeks show no signs of improvement in the job market.

Small Business Loans Drop by $15 Billion in Q1

Greece Has 100% Chance of Default

http://blogs.wsj.com/source/2011/06/20/greece-will-default-but-not-yet

GDP is Shrinking

Rate of GDP growth is declining. The first quarter was dangerously close to a recession.

SOURCE: http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1

U.S. Still at Risk for Debt Downgrade

http://www.reuters.com/article/2011/08/03/us-markets-forex-downgrade-idUSTRE7725ZK20110803

Food Stamp Use Rises to Record 45.8 Million

“Nearly 15% of the U.S. population relied on food stamps in May, according to the United States Department of Agriculture.”

ADDITIONAL INFORMATION: http://money.cnn.com/2011/08/04/pf/food_stamps_record_high/index.htm

 

Stock Market Experiences Ninth Worst Single Day Drop in History on August 4th, 2011

SOURCE: CNN Money

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Where is the good news? There isn’t any. For the first time in a long time, the media isn’t able to keep up the recovery lie any longer. And the Federal Reservce is powerless to help. Interest rates have been kept near 0% for the past couple years and the $14,000,000,000,000+ deficit hinders their ability to issue more stimulus. Yikes!

Small business lending has been on the decline for awhile but the lack of fear in the market has kept the dirt tucked under the rug. Bankers were under the impression that there was a recovery in motion and now that they’ve become aware otherwise, it’s about to get really ugly.

To illustrate what’s already happening, a friend of ours manages the retail underwriting department for a large national bank. He spoke to us under the condition of anonymity and had this to say about their recent shift in policies:

“We are still lending but we’re using a ‘1:1 cash collateral rule’. What that means is, if a business wants to borrow $100,000 they must already have at least $100,000 in cash or cash equivalents on their books. The cash itself isn’t the collateral, it’s just a prerequisite to ensure they are especially equipped for a future cash-flow crisis. $100,000 of real collateral is still required but at this point we don’t ever want to be put in the situation where we’re chasing down a borrower to sell off their assets. Our loans don’t yield nearly enough to survive even just one default. People always joke that banks won’t lend unless the borrower doesn’t need the money. Now we won’t lend unless you already have the money!“

And so we’re entering a dark age, a slow approach back into a recession that we never actually came out of. There’s no reason to think that this will cause banks to increase lending and it is highly doubtful that it will remain at its current levels.

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* Recently added. These poor creatures need your help!

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So what’s the prognosis? The Merchant Cash Advance industry may soon have it’s so-called ‘Moment‘, but not because the small business community demands it, but because there won’t be anything else left…

– The Merchant Cash Advance Resource

http://www.merchantcashadvanceresource.com

Planning a Payoff Just Right

July 17, 2011

According to Scott Griest, the CEO of American Finance Solutions, paying off a competitor is more complex than writing a check to pay off the balance. In his latest blog post, he explains this:

• When calling too early for a balance, the funding provder risks tipping off the competitor that they are about to get bought out of a deal. If its a good, profitable client (which is most often the case) the competitor will often “instantly approve” the renewal and offer to wire funds that day and beat the offer.
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• It’s best to wait until the day of funding to receive the payoff instructions. That is unless the sales agent has grossly underestimated their outstanding balance or account performance.
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• Sometimes you’ll find out the reason that the client cannot renew is because of collections issues, fraud (altered payoff letters) or trying to get double funded on the same day by the old and the new MCA company.
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• Sales partners need to know their clients. Find out the funding date of their current advance and deal terms. If the contract payback amount is $50,000 and they got the advance six months ago and the balance is over $30,000, then there’s an issue with payback.
  

To read the full article, visit Scott Griest’s Blog