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 How many positions is too many positions for emergent?

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 That's the whole thing. It's a broad question. How many positions is

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 too many positions for a merchants?

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 Okay, that's a loaded multi part. Answer.

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 I feel like okay if I'm

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 winning. This is part of the bigger. Okay a thread

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 on The Daily Fender. But yeah, I

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 think that's the main question that we got out of that and I

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 think it'd be a great question to to discuss. Okay. How

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 many positions is too many positions for merchant?

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 Okay, so let's back up.

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 You know, what is the position is essentially it could

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 be alone. It could be an advanced that

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 you have and every layer that you take every additional

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 one that you take is considered another position right

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 and traditional Finance. The first position

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 has first right to the collateral. The second

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 position is next in line Beyond, you know behind the

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 first position to foreclosed on collateral if there's

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 some type of problem and and so on and so forth you have

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 you know, the third the fourth or whatever it doesn't usually

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 go that down that far but from what we've

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 seen in the non-bank small business finance space you

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 get these complex arrangements or Merchants

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 have taken.

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 very very many

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 products from various sources all the same

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 time. We'll literally have read about them having

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 10 12, you

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 know 15

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 Positions at once right? And these

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 are not necessarily traditional type financing Arrangement

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 Arrangements where there's collateral they might be

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 unsecured.

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 So if we're talking about those how many

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 positions is too many I think a long

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 time ago we used to say anything more than one was too many. Yeah, and the

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 reasoning was that the original underwriter on

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 the first one analyze what the

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 business could sustain and gave them

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 something accordingly. Yeah, right and like this

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 is the most they can sustain to be healthy.

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 While you know while being on track with the one that we gave them

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 and then when second company came along and said, well,

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 I think they could use a little bit more they need it and you'd

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 have the first one to be all upset. No, no, they can't

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 handle that. They can't handle it. But lo and

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 behold the world accepted that you could have two. Yeah, and then the world

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 accepted that you could have three and then World accepted that you could have

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 four or five and so on and so forth. And for those who are there in

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 the beginning it became like how can you know what is happening? Yeah

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 right now right overload. It's over versus this

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 one. Now. You can have 13. Yeah, and what's what's

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 become so tricky is that the first company potentially

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 already looked at that business

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 as this is the absolute most that they

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 could handle right if they're if any

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 more is being used to pay loans or

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 being taken to you know for a

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 receivable purchase to go somewhere else. They won't be able

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 to sustain it and when they find out they've taken all the additional ones are

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 saying this isn't fair to me at

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 First person to provide that to provide them Capital because

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 for me it's now too many positions because

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 now my original my Merchant has way more risk to

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 me than they did but from the merchants standpoint,

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 I think that's where we really should be looking how many positions is

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 too many for the merchant and that really all comes

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 down to honestly just if you had to give a single

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 sentence answer. It's

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 What they can afford. Yeah, how many

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 positions there's too many positions one in which they cannot afford.

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 Is too many right? And so that's

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 obviously a judgment that the business itself will

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 have to make it's a business. It's a judgment

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 that the funding companies will have to make we do

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 see advertisements for people offering 10, 11,

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 12 13 14 15 positions.

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 Long time ago this would have been unfathomable unfathomable to

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 me. Yeah, but we also have to recognize that

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 there are various products in

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 the market. Some are offering very small amounts, right? If

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 a merchant got a hundred grand the first time and somebody

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 else comes in and give them five and someone else comes in gives

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 them another five. Yes, they have three positions, but

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 the other two are very small. What's the added risk

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 to the first one right or even to the merchant itself? So

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 you have to weigh all these different factors. I know some people

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 will probably get mad and say no show on the answer is this right? But

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 I also think to kind of go to your

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 point. Every business is gonna be different they're gonna

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 be able to afford whatever they can afford, you know, and

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 they're gonna function a certain way. So I think to go

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 to your point it's very much true because I feel

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 what I've observed in the past is that sometimes there's

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 a lot of comparison like oh if so and so as

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 ten then we should have 10 and we have as well but behind closed doors,

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 we don't know what the other person

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 Doing we don't know what they're going through. We don't know how much they can afford. So, you

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 know, I think comparing and having

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 an exact number is gonna be very different versus,

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 you know, I mean having exact number

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 and trying to use that number as a standard. It's gonna be

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 different for everyone because at the end of the day, like you said it

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 just a matter of what you could afford and how your business runs.

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 And I think this is a great time for Underwriters

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 to pay attention to something because if

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 you have a merchant that's taken many many

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 positions. You need to be very very careful about

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 how you calculate their monthly average revenue

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 be sure not to calculate deposits from

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 competitors as Revenue. That is

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 not Revenue. So the business looks like it's doing

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 a hundred grand a month in revenue and 80,000 of

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 it was deposits from competitors. Well,

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 then that $80,000 should be removed from

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 your calculation. And when you remove that

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 from the calculation, you may find that they

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 don't qualify for whatever level position you're entertaining.

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 So be very careful when you

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 analyze bank statements to make sure that what you're looking at is revenue. We

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 have seen examples of

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 Deals that ended up in the court system where Underwriters I

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 don't know if they were new. I don't know what it was but it

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 turns out they did not think to discard

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 certain figures from the

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 totals and what happened that judged the

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 business based upon deposits from competitors as Revenue

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 extended way more than they should have to the

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 business. It's jeopardize themselves and the business

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 probably did not benefit from it. It ended up in bankruptcy court

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 with a lot of people asking a whole lot of questions about why did

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 you buy your future revenues if they didn't have really any

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 revenues and you're like I thought they did they had a hundred grand in deposits and

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 you're like, yeah, but that wasn't Revenue it was deposit from all their

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 competitors.

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 What were you thinking?

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 If you're a brand new underwriter, you need to look very closely at

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 the bank statements the bank data, whatever it

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 is, whatever type of data you get access to in your

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 job to make sure you understand the classification of

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 the deposits that you're looking

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 at. If it's a if it's a competitors deposit, that's

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 not Revenue throw it out then decide

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 if that business can handle it.

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 But also you should take into account that some

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 funding companies might consider it a breach of contract. If

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 you give funds to that customer you

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 might say you know what this is the deal

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 I would take on this is the risk I would take on I'm gonna

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 do it you could potentially in Peril that

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 business who had already agreed with

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 the previous funding company that they would not take any additional

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 funds from anyone else you could

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 end up putting them in a breach of contract almost inadvertently. Hopefully

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 not intentionally, right, but there's

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 a lot of things you have to keep in mind. You can't just go out.

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 There and throw money out there and not look at the bank statements and not consider who

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 they have money from from other people.

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 You will run into this circumstance with traditional

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 lenders where as new company

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 comes in. They look at

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 oh, they don't have any MCAS. They have some,

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 you know, weird bank loan or something. You know,

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 I don't care about that. Here's my product and the

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 merchant ends up in bankruptcy or something and you're like, okay, I got

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 to get my cut and the bank is like get out of the way. We were a

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 true first position. Yeah, literally move out of the way. You're

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 nobody. Yeah, and you're like, oh what you know, what do you mean I gotta

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 I got to get paid I fun to them and the bank

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 is like we literally have this blanket lean perfected. You

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 know, you see you're nobody

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 to us, you all need to pay attention to traditional Finance

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 products that these companies have as well.

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 You should not be blindly. This is I don't know why we got

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 all into this topic, but the question you ask was so broad. Yeah how many

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 positions there's too many. So let's just talk about all the different types of positions if

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 they have positions from True commercial

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 finance companies you got

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 Consider what the implications are if you fund behind

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 them what could happen to the money that you have

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 invested into that Merchant because you may find that

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 those who funded before you let money before you might have

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 a superior claim if anything goes wrong or

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 my complain about you giving that client money when you

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 weren't supposed to or you put them in a breach of contract.

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 I know this is a long drawn out answer right but you

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 have to use underwriting judgment.

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 When you're deciding if this position to

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 this Merchant makes sense.

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 That's my essay.