1
00:00:00.000 --> 00:00:02.070
Sean Murray: The term that's
used in the industry is buy

2
00:00:02.070 --> 00:00:05.130
rate, I get why it would be
confusing to someone who has not

3
00:00:05.160 --> 00:00:08.220
been in the business before. The
buy rate is essentially the

4
00:00:08.220 --> 00:00:10.860
wholesale rate. It's what the
funder tells you is their a

5
00:00:10.860 --> 00:00:15.300
minimum amount that they need to
make on a deal. So the buy rate

6
00:00:15.450 --> 00:00:20.010
might be 1.20. That's the factor
rate, and they would tell you,

7
00:00:20.040 --> 00:00:23.280
this is the minimum amount that
we require to make on the deal.

8
00:00:23.790 --> 00:00:26.850
Now the broker needs to make
something too, so that's the

9
00:00:26.850 --> 00:00:31.500
minimum amount that they can
sell. They can upsell above the

10
00:00:31.500 --> 00:00:35.400
buy rate, and that spread is
their commission. So if the buy

11
00:00:35.400 --> 00:00:38.730
rate is 1.20, they could
theoretically sell the deal to

12
00:00:38.730 --> 00:00:43.680
the customer at 1.30. That would
mean let's say it's a $10,000

13
00:00:43.680 --> 00:00:47.430
deal. Let's run through an
example. I give you 10,000. I

14
00:00:47.430 --> 00:00:51.450
buy $12,000 of your future
receivables that so once you owe

15
00:00:51.450 --> 00:00:55.230
factor rate that's what the
funder requires to make the deal

16
00:00:55.230 --> 00:00:58.140
possible. Now you as a broker
need to get paid, how do you get

17
00:00:58.140 --> 00:01:01.680
paid? Well, you upsell that
1.20, so instead of 12,000,

18
00:01:01.920 --> 00:01:05.700
coming to buy 13,000 of your
future receivables, and that

19
00:01:05.700 --> 00:01:08.190
difference is going to be my
commission. So that's how the

20
00:01:08.190 --> 00:01:11.460
broker gets paid. You upsell the
buy rate. And that's why when

21
00:01:11.460 --> 00:01:16.800
you see ads that say, up to 15
points, up to 10 points, you as

22
00:01:16.800 --> 00:01:21.330
the broker have the discretion
to price the deal, as you wish.

23
00:01:21.540 --> 00:01:24.750
Johny Fernandez: So I have a
question. So as the broker that

24
00:01:24.780 --> 00:01:28.560
you're calling the shots of,
like, is there any limit? Or can

25
00:01:28.560 --> 00:01:34.230
the broker just use a certain
percentage? And kind of go based

26
00:01:34.230 --> 00:01:34.830
off of that?

27
00:01:34.840 --> 00:01:36.340
Sean Murray: Yeah, well, that's
a really good question. There is

28
00:01:36.340 --> 00:01:39.910
typically a cap, you can't just
charge whatever you want. Like,

29
00:01:39.910 --> 00:01:45.130
let's say the buy rate is 1.20.
Theoretically, you could charge

30
00:01:45.130 --> 00:01:49.000
1.90, right? Funders don't want
that to happen, because they

31
00:01:49.000 --> 00:01:51.700
need to manage their risk, they
don't want the customer to take

32
00:01:51.700 --> 00:01:54.250
a deal, that's going to be too
expensive. So they'll put a cap

33
00:01:54.280 --> 00:01:58.840
on what you can charge. And
that's why you'll see ads that

34
00:01:58.840 --> 00:02:04.420
say that the the deal can only
go up to 15 points or up to 10

35
00:02:04.420 --> 00:02:07.030
points, they're basically
limiting what you can charge

36
00:02:07.090 --> 00:02:10.780
above and above and beyond the
buy rate. So if it's up to 15

37
00:02:10.780 --> 00:02:13.420
points and the buy rate is 1.20
well, then the most you can sell

38
00:02:13.420 --> 00:02:14.500
is the 135.

39
00:02:14.740 --> 00:02:17.290
Johny Fernandez: And over the
years has that cap changed?

40
00:02:20.320 --> 00:02:22.510
Sean Murray: You know, a long
time ago, you didn't see 15

41
00:02:22.510 --> 00:02:26.680
points, on deals that didn't
happen. I think 10, 12 points

42
00:02:26.680 --> 00:02:30.700
was kind of a tie that got this
15 Point phenomenon is quite

43
00:02:30.700 --> 00:02:34.150
new, but the whole idea of by
rates was a natural progression

44
00:02:34.150 --> 00:02:36.850
of the industry. And that's
because when this business first

45
00:02:36.850 --> 00:02:41.290
started, there were essentially
just three deals that will be

46
00:02:41.290 --> 00:02:43.450
offered and it was kind of like
a take it or leave it type of

47
00:02:43.450 --> 00:02:45.040
thing. It wasn't very custom.

48
00:02:45.160 --> 00:02:45.460
Johny Fernandez: Okay.

49
00:02:45.510 --> 00:02:47.970
Sean Murray: Right. You could
you could offer this factor rate

50
00:02:47.970 --> 00:02:51.210
and the merchant didn't want it,
you'd be stuck trying to sell

51
00:02:51.210 --> 00:02:54.060
it. Or going back to the
underwriting department and

52
00:02:54.060 --> 00:02:56.310
saying, you know, what did we do
here, and then there was a lot

53
00:02:56.310 --> 00:02:59.730
of negotiating and waiting for
approvals. You know, maybe I can

54
00:02:59.730 --> 00:03:03.720
cut a point of my commission to
try to lower the deal, I used to

55
00:03:03.720 --> 00:03:06.450
do that, by the way, I would
have to go through all these

56
00:03:06.450 --> 00:03:10.110
different, you know, links in
the chain to try to get the deal

57
00:03:10.110 --> 00:03:13.050
that the customer wanted. And I
just wished that I could do it

58
00:03:13.050 --> 00:03:17.370
myself. So the buy rate just
gave that power to the broker,

59
00:03:17.610 --> 00:03:20.400
saying this is the most risks we
can tolerate and where you make

60
00:03:20.400 --> 00:03:23.970
X and this is the minimum amount
that we need you to make where

61
00:03:23.970 --> 00:03:26.820
you make you make nothing and so
the broker had that power.

62
00:03:26.850 --> 00:03:29.610
That's what the buy rate is for
it's to make, it's to make the

63
00:03:29.640 --> 00:03:32.370
negotiation and the whole
process a lot smoother.