Leo, thank you so much for having us here in Miami.
Thank you for having me. You are a person
that not only is essential to the MCA world
and the alternative finance world,
but we are in your hometown.
We are on the rooftop, uh, overlooking Miami Beach.
So who are you?
Introduce yourself and the company that you're with
and what it is that you do,
but also give people the tour of South Florida. Well,
First and foremost, everyone, welcome to Miami on Miami.
Um, I'm Leo Vargas.
I am, uh, the CEO of Triton Recovery Group.
And what do you guys do?
We're a collection agency.
We're a commercial collection agency.
We're licensed and bonded here in the state of Florida
to be able to recover in all 50 states.
So kind of talk to me about
the products that you guys offer.
So right now, we, we have two, two products that we offer.
We do commercial collections. Okay.
So that is our main product.
Uh, right now we serve as, uh, the MCA space,
which is our bread and butter.
And we have, uh, just, you know, our commercial
debt recovery that we do as well.
So those are the two products, but our main product
is the MCA space.
So let's talk about the MCA space and collections.
Um, let's talk about the process itself.
When you get into collections, how exactly, uh,
should underwriting be done?
So either you could avoid go going into collections
or just overall the, the right way to do underwriting.
Sure. I, I, I think a lot of it has to do
with the underwriting process, right?
The underwriting process to me is the most important piece
of, uh, of getting a deal done in this industry.
What do I mean by that? Certain questions that I think need
to be answered on behalf of the
merchants when they're taking out these advances
that I think is prudent
and important to your decision making as a funder.
Can you, could you elaborate on Sure.
What specific questions should, like, gimme like two
or three examples of what, so
I'll give you an example. Uh,
what we see a lot of is
what are you gonna use the money for?
It's very important. Um, a lot of, a lot
of the funding calls that we hear, um, on the backend,
once the deal's placed with us,
they don't ask that question.
No one's really asking, what do you need the money for?
What is it that you're actually going to use the funds for?
And I think it's important, um, that the funders understand
that because at the end of the day,
you're not underwriting a deal based off of their deposits.
You're underwriting a deal based on future receivables.
So understanding what they're gonna use the money for
and what exactly you're purchasing,
I think it's the most important piece of, of,
of underwriting and getting and, and, and approving a deal
and getting a deal done, getting a deal out the door.
So understanding where those receivables are coming from
and mapping that out.
I think it's the most important piece
of your underwriting process.
We have challenges with, uh, just understanding
where they came up with the offers, right?
This guy qualified for 50,000.
Is that truly 25% of their receivables
or are they overextended?
Once they're in collections?
You kind of are able to see where the, uh,
downfalls were on the underwriting side.
And, uh, what we see is just mostly understanding
what it is that they're
purchasing. And I think that's important.
Leo, talk to me about what mistakes, uh,
could avoid getting into collections.
Like what mistakes, uh, when, when a broker is starting
to fund a deal that happen often that you see.
So let's talk a little bit about that
Over promising.
I think that's, uh, one, one of the mistakes that I think,
uh, some of the brokers do on our side.
Now, we don't deal with brokers.
We deal with funders directly.
And, uh, it's very rare that I will have a broker assist me
to get to, to get a merchant to pay.
Um, I know on the funder side, meaning first level, uh,
it's a lot more in the sense of the, the brokers are afraid
to lose their commissions within that first 30, 30
to 45 day period clawback period is what they call it.
So, uh, you know, over promising
and under delivering, I think is the, the,
the biggest no-no when it comes down
to truly setting the expectations for these merchants
to take the merchant cash advance.
So let's talk about funders
and how your clients could be proactive in order to like,
not have to be in a position
where they're coming to you for business.
We've seen it all, honestly, I think, uh,
and I'll mention it again and I'll double down.
I think the main mistake is not understanding what it is
that they're purchasing, uh, what receivables, right?
And I, I couldn't tell you
how many times we ask a funder when they place a deal
with us, can you forward us a copy
of the receivables that you purchased?
Right? We don't have that. You had good deposits.
That's not the way to underwrite a deal, um, in my opinion,
not in the sense of putting yourself in the best position
to be able to recover effectively,
and also for the merchants to be able
to afford the advances.
So, Leo, talk to me.
How could a funder be proactive in making sure they
have all their bases covered?
A simple Google search man, honestly, uh,
be being proactive in the sense where, I couldn't tell you
how many times my collectors are or,
or even, um, on the legal side, right?
We run a Google search
and you clearly could see the merchants in trouble.
You clearly can see
that they have court cases against them, right?
Uh, that there's judgements that there's tax liens.
And these are the small things that I think, uh,
are detrimental to your portfolio as a funder.
The basic steps, Google the guy's name, Google the company.
Uh, it goes a long way, honestly.
And then talk to me about the, the due diligence.
Besides Googling, what other steps can a funder do
to really make sure they know
what they're getting themselves into?
So what we do here at Triton is very interesting.
We will go into the county courts
where the merchants reside.
Um, a lot of it people are just banking on the New York
courts or the Florida courts.
And you know, if you have a BC funder
that filed a case against you,
now you're not eligible for funding.
Truth be told, a lot of the funders
are not actually going
after, uh, the, like you said, the due diligence
to figure out whether
or not this person's worthy of your money.
A lot of it has to do with background too.
I've seen so many, well, you know,
I've had funders come back
and say, Hey, look, look, it's a, you know, it's a,
it's a traffic violation.
It's a domestic violence he owe,
you know, it's child support.
Those are very important pieces.
I mean, that is the character
of the business owner that you're funding.
And I think those, as simple as it sounds,
those are very important pieces of, of, of qualifying a deal
and, and actually funding a deal.
So let's talk about breach of contract. Sure.
Um, so let's talk about that process itself.
Like what could one do to kind
of avoid getting into a breach of
Contract? Honestly,
do the reconciliation
that your contract calls for.
That is the simple way.
A lot of the funders, they have a reconciliation clause.
All of them do. Um, one of the things
that I hear a lot on the merchant side is we've reached out
to them at that same email they have on the contract,
and no one's ever gotten back to me.
Well, you're not monitoring it.
And I think that is the most important
piece of your business.
To me, retention is absolutely important.
Um, and just being able to,
and I encourage a lot of the funders,
get a retentions department, have someone reach out
to the merchant couple days
after funding them just to get an idea as to
how things are going and stay in touch with them.
Right? It can't always hit a home run. All right.
There are going to be cases where you're gonna need
to reduce your payments.
You're going to need to work with the merchants
to prevent the defaults.
And I think a lot of the defaults
that we get are preventable.
Where we are, where we stand today, we've had a suc,
we have a lot of success in being able to set a lot
of these merchants up on payments.
Why? Because we take a rehabilitation approach, right?
And merchants saying, I wish you guys would've
been involved from the beginning.
This was so easy to deal with you.
But in reality, we understand we're collections.
We get it, we get the, the pressure points
that the merchant cash advance money has on your business.
So, you know, really taking that rehabilitation approach
and helping the merchants out from the beginning,
I think will go a long way from some of these funders
and prevent them from placing deals with Triton,
which at the end of the day, they have
to pay contingency fee, right?
So, and I couldn't tell you how many funders will come back
and say, that is very expensive.
How do you charge this? It's, you know, it's an art
what we do, you have to be aggressive,
but also at the same time, there's stages
to that aggression, right?
And, and certainly not at that first stage.
I think you're better off,
you get more bees with honey, right?
You're better off negotiating
with the merchant working things out
and following your reconciliation provision, then just
de it a default and sending it over to Triton. So
In your experience, can brokers be useful
during a resolution with
A plan? Yes. On
a first party basis, absolutely. They can be.
Once we've deemed a default, unfortunately,
that is not something that we, uh,
find very useful in this industry.
We have a clawback period.
A clawback period typically is about 30 to 45 days.
What we've experienced is between that time period,
the brokers are a lot more proactive than they would be once
that 30 day to 45 day mark, you know, is over.
Um, I think that the brokers absolutely have that
first point of contact with the merchants.
Um, they are the ones
that have built a report in the relationship,
and I think they could do a lot more than just within
that 30 to 45 day mark in helping the
MCA funders sort of not only get in touch
with the merchants, but also helping them
with the rehabilitation process.
Uh, one of the things that I've seen, uh, that
that's become an issue in our industry is some of these,
I call them ambulance chasers, but these attorneys that go
after the MCA space and,
and sort of poach some of these merchants to come along
and retain their services,
they're getting these leads from some of these brokers,
which is another source of income for them, I'm sure.
But it is detrimental to the industry
because you have an opportunity, you have that communication
with the merchants where on the other side,
they're avoiding our clients.
They're avoiding the calls, they're stopping payments.
And I couldn't tell you how many merchants said,
I was just following the broker's lead on this.
He told me to stop payment.
He told me he was gonna get me an attorney
that was gonna do it pro bono in the state of New York.
Newsflash, we have a lawsuit now I have a judgment,
now I've garnished your bank account.
What do we do now? So the answer is, I think, uh,
as brokers, they could do so much more in the industry to,
to protect the house
and protect the funders
that truly have the best interests at heart for you.
Could you give me an example of like, you know,
just like bullet points of what brokers could do
to protect the house?
Absolutely. I think that a lot
of it is stay in communication, stay in contact
with your merchant, stop funding
them multiple times.
I think that's very important.
I, I couldn't tell you how many times I've seen a merchant
say I was funded simultaneously four times the same day.
You know, so the pointers are, I think stay in contact
with not only the merchants,
but with the MCA funders, not just at your 30
to 45 day clawback period.
Stay on the account, stay on it, have some,
I'm sorry, have some integrity.
Build a relationship and build a relationship.
And I think that goes a long way.
Not only for you as a broker, um,
but also for funders.
They're gonna wanna work with you,
they're gonna wanna do deals with you.
And, um, I think it's very important.
And those are the bullet points for me.
It's just stay the course
and stay in contact with the merchants.
Stay in contact with the funders.
Just don't see it as a commission. See it as a relationship.
What's been the most common thing?
Uh, funders, brokers tell you about
how they ended up breaching a contract?
The most common thing is, uh, no communication,
zero communication with the merchants.
Some of it has to do with the debt.
Settlement companies who are,
are really a true thorn on our side in the industry.
Uh, they don't have the best interests
at heart for our merchants.
Um, I truly believe the funders do.
I truly believe they try their hardest.
In fact, when I get a deal,
our average deal when it goes into default, right?
Compared to the last payment,
it's almost two months, Johnny.
So that means that the funder has held onto the deal even
after they weren't getting paid for two months in attempts
to try to resolve it with the merchant prior to it going
to collections.
I think that's the most common thing, is mostly
contact communication.
And then you have the predators of the world, which I,
I truly believe is, is some, some
of these debt settlement agencies
that are promising the world and under deliver.
Let's talk about defaults
and have they been on the rise lately?
Yeah, defaults are on the rise, absolutely.
We are getting anywhere between 40 to 50 cases a day.
Um, and, uh, these are multiple funders.
And what the uptick is, it's truth be told, is it's a true
testament of where we are in the economy today.
And I think the rehabilitation approach
and really treating these people like people not debtors,
is, is really what, uh, has made us successful.
Right? I'm not saying be soft, okay? That's not the answer.
The answer is stay stern,
but know that there is another human on the other side
of the phone who is truly going
through a financial hardship.
And they want you to hear them out.
They want you to work with them.
And I think a lot of the funders can do that on their own.
They don't need Triton recovery.
Now, I, I will lose business that way,
but, uh, the industry will be a better place tomorrow.
And I, I truly believe that this industry has so much room
for growth, um, and expansion.
Um, so, you know, really truth be told, work
with the merchants, work with your, your, your clients, um,
and they'll be a lot more receptive.
All they want is to be heard.
So for Triton specifically, what exactly is your mission
At the end of the day? Truth
be told, uh, our purpose here
is a very important one.
Um, I think that there is no MCA without collections.
You are underwriting a deal to recover it.
And the reason you're getting bank statements,
the reason you're getting UCC liens,
the reason you're doing your due diligence is
to one day in an event, in a case of a default,
you have the information to be able to
pursue the merchants and go after them.
Um, I think that Triton is a necessary,
call it necessary evil.
That's, I was just thinking of it.
It's a necessary evil at the end of the day
because it sure is you need, we people need you,
but it's also, you're the person everyone wants to avoid.
Everyone wants to avoid, uh, from the funders to the,
to, to the merchants.
But it's, it's, it's necessary
because again, we open the lines of communication, right?
So it's all about how you go about it, right?
And here at Trite, we've trained, um, our employees
to really take a rehabilitation approach.
What can we do to help you get out of this mess you in?
And I think a lot of, a lot of the merchants are,
are very open to having conversations with us.
I mean, our contact ratio is almost 80%,
which is almost unheard of.
Now, I'm not saying we recover 80% of the debt.
I wish I did. Uh, but our contact ratio is high.
So what does that tell me? There's decent underwriting,
you're getting good phone numbers and addresses,
but you're not looking at the true picture.
The true picture is can this guy afford it?
And is he over leveraged?
So Leo, so my big takeaway from our conversation is
ultimately go the extra mile, do the extra work,
do the due diligence upfront.
Correct. So when you're in a position where you have
to call, when they, when people are calling your office,
they know and they have the facts
and they have the receipts, you're like, Hey,
here's why this happened.
Right? Versus surprises being brought up
when you're having conversations. Some of
It's not even surprises.
I think some of the funders know what they're doing.
Uh, it's just more so of do do a little more. Yeah.
And, uh, you're right. It's a great takeaway.
I I think it's important
that the funders do everything they can on the front end
to be able to salvage the relationship
and put these merchants in a better position.
Yeah, it's great. You got a great deal. The broker sold it.
Now you're stuck. Yeah. What do you do next? Rehabilitation.
Leo, thank you so much for
all the information you gave us.
Thanks for, 'cause it truly is the essential part
of the MCA industry, what you guys do,
because you guys pretty much make the MCA world go round.
Yeah. Because it's so important to like really understand
what exactly it is that people are getting themselves into,
either, whether, whether they're a broker
or they're a funder wherever they fall.
It's important to know that, you know,
what you guys do is essential.
Well, Johnny, thank you for having us
and uh, again, I'm so glad
that finally we get the recognition we
deserve as collectors.
Oh, thank you, man. Appreciate it.
Thank you for having us, guys. Appreciate it.