business cash advance
Is Google Getting Greedy?
October 21, 2012By now, you’ve probably heard of Google’s earnings release blunder when their financial printer published an unfinished report. That version went viral and was clearly not ready for print since it included a placeholder note that said “Pending Larry Quote,” a space that was reserved for a quotable by CEO Larry Page.
Ad revenue was up 16% for the quarter, a 33% surge over last year’s numbers. But is Google getting greedy? We like to search for MCA industry news and in the last couple weeks, we noticed an interesting “glitch” that started to happen. Approximately 1 out of every 15 times (we didn’t run a statistical analysis), zero results show on the page. It doesn’t actually say “no results found,” but rather looks as if the results failed to load. That is of course except for the ads. The ads conveniently become the only clickable options.
This happens often enough that it has become annoying. We’ve experienced it with multiple browsers and three computers. Has anyone else fallen victim to this glitch?
Perhaps it’s psychological, but it seems like this occurs most frequently on business lending related searches, when the revenue-per-click Google earns just happens to be at its highest. Is Google getting greedy?
Is it Just us or are the Deals Getting BIGGER?
October 15, 2012
Two years ago, it was easy to say that the average Merchant Cash Advance (MCA) deal was about $20,000 to $25,000. The claim used to be, funding up to $250,000! And yet very few companies would actually go that high when it came down to it. But now?
A million here, a million there… It’s all just business as usual. Nothing to see here everybody. Go on Tozzi, write another article about how MCA is for minuscule retailers that can’t get approved for a low limit credit card. Whether you call it MCA, Merchant Financing, or Merchant Lending, there’s no doubt that capital has become more accessible to businesses across the country. And the amounts being disbursed are getting BIGGER.
On October 12, 2012, Rapid Capital Funding (RCF), a mid-sized funder in Miami, FL provided $1,250,000 to a national convenience store chain. RCF published an official company announcement about it, but we actually got wind of the deal a week before it closed. deBanked staff is friendly with the folks at RCF, particularly with their lead underwriter, Andrew Hernandez. Hernandez is an industry veteran, with five years of MCA underwriting experience under his belt. So while RCF hasn’t had the reputation for taking on big paper in the past, we can’t say that we’re shocked that they’re marching down that path.
Other big deals this year in the MCA space:
United Capital Source – $1,250,000
YellowStone Capital – $751,000
Do you think we’ll be seeing more of this? Send us your comments.
– Merchant Processing Resource
https://debanked.com
Legal Questions about Merchant Financing?
October 9, 2012
“Many merchant advance agreements state that the sales agent can only send merchant advance contracts to the one merchant advance company. It is important to identify such exclusivity terms and make sure they are deleted from the agreement. Just to make sure, you would also want to add a provision that states unequivocally that the relationship is non-exclusive. Otherwise, if you send merchant advance contracts to a competitor, the merchant advance company that thinks you are exclusive could use that act as a reason to termination your compensation under the agreement.”
– Paul A. Rianda
Whether you’re an agent, ISO, or funder, you will at some point need sound legal advice. There is very little information on the Internet and hiring an attorney is expensive (though we highly recommend it!). If you feel like you just need a little guidance, we recommend you check out the publications by Paul A. Rianda, an attorney that has worked extensively in the bankcard and merchant financing industry. Below are a few articles that everybody should read:
More Companies Cheer For Charity
October 5, 2012The alternative business lending industry has raised even more money for charity thanks to four new companies. Through a fantasy football competition that started with the beginning of the NFL season, each of the twelve participants are representing individual non-profit organizations. At the end of the season, all of the money raised will be donated to the winning team’s charity. Though registration to compete ended five weeks ago, outside individuals and companies are free to add to the total. One of the following charities with be the lucky recipient of the prize:
- Network For Teaching Entrepreneurship
- Epilepsy Foundation
- Society of St. Vincent De Paul
- Kiva
- ALS Association
- 100 Urban Entrepreneurs
- Gift of Life Bone Marrow Foundation on behalf of the The Silver Project
- The Missionaries of Our Lady of Divine Mercy
- Smile Train
- Cystic Fibrosis Foundation
- American Heart Association
- Distressed Children & Infants International
Special thanks to the new contributions from:
Entrust Merchant Solutions
Based in New York City, Entrust has been helping small businesses get financing for more than five years.
Strategic Funding Source
From the flashy district of Times Square in New York City, Strategic is one of the oldest and most successful firms in the Merchant Cash Advance (MCA) industry. They can teach you how to become your own MCA company:
Capital Stack, LLC
Capital Stack is a Brooklyn, NY based financing provider that specializes in high risk deals structured via ACH. They’re also a co-founder of a new industry forum, DailyFunder.com.
Paramount Merchant Funding
Yet another New York City merchant financing company, Paramount is one of the fastest growing firms in the industry.
They’re also helping a separate cause at the same time. Help Paramount raise money for Noah’s Hope!
Dear Friends and Family,
Paramount Merchant Funding is hosting a bowling night on November 2nd to help raise money for Noah’s Hope.
About Noah’s Hope:
Noah’s Hope was started by Jennifer and Tracy VanHoutan, the parents of Noah and twin girls Laine and Emily. Noah and Laine are both battling LINCL-Batten Disease, a rare genetic illness. They have lost the ability to speak, as well as their balance and mobility. At this time, LINCL-Batten Disease is always fatal, usually between the ages of eight and 12.
Fewer than 450 children in the United States have LINCL-Batten Disease, so it doesn’t receive the attention it should. Paramount Merchant Funding has decided to help this great cause. We are raising money to donate to Noah’s Hope in the hopes of finding a cure for LINCL-Batten Disease. All donations, no matter how big or small, help make a difference in the fight against LINCL-Batten Disease.
CLICK HERE TO SEE HOW YOU CAN HELP!
About Paramount Merchant Funding:
Paramount Merchant Funding is a merchant funding company based in Midtown, New York City. We provide capital to businesses in the United States, as well as Canada. Paramount was founded in 2008 and provides professionals with a whole host of funding options depending on their stage of business.
Choose how you want to help!
1. Click HERE to donate money.
2. Donate something to give away at our raffle.
For more information email erika@empiremerchantadvance.com.
We appreciate any and all donations made for this cause!
Sincerely,
The Paramount Merchant Funding Team
It’s awesome what everyone is doing. You’re making the country a better a place!
– Merchant Processing Resource
https://debanked.com
Silicon Valley’s One Punch Knockout
October 4, 2012“This morning I woke up, brushed my teeth, and hopped in my hovercraft to go to the office. As soon as I arrived, I began my routine of playing ping-pong against my co-workers while computers performed the automated tasks I had set for them. Then I went to the gym, came back, and learned that our web portal had generated 12,000 leads, closed 7,000 deals, and funded 5,000 merchants. It was an exhausting day…” — A Senior Account Executive from the year 2013.
We’ve been offering insight on the 2012 invasion of Silicon Valley into the Merchant Cash Advance (MCA) industry. Excuse us, it’s called the “merchant financing industry” now. California technology companies are bringing money, yes, but most importantly, bringing their treasure trove of technologies to companies that were mostly satisfied with the status quo. But are America’s small businesses ready to do business Silicon Valley style or have MCA companies had it right all along, to operate in the way that small business is most comfortable with?
Two weeks ago, California enacted a law that will allow computerized driverless cars to drive on the road. Cars that drive themselves… this is business as usual in parts of California where everyday things such as gasoline, wires, and paper money don’t exist anymore. There, it is believed that clipping coupons from newspapers is something that the Pilgrims did on the Mayflower. There, applying for a small business loan should be as easy as using your brain waves to telepathically connect with a bank’s computer and having the funds instantly transferred to your bank account. There, is a sense that the rest of the country is just like them…. except it’s not.
If you’ve ever had the pleasure of being an MCA underwriter, you know why antiquated funding companies aren’t going to go quietly into the night. We got to speak with one veteran on condition of anonymity. His words:
We had a guy with good credit, processing $15,000 a month in credit card sales, looking for $20,000. He’d been in business for fourteen years and it seemed like a home run but it took seven weeks to close. He didn’t have a printer or a scanner and he had to drive twenty miles to the nearest Fedex/Kinkos every time he wanted to send us something. On his third trip, his ’94 Corolla broke down and we had to wait a few days until he could find a friend’s car to borrow to send the documents.
These situations do not occur every day, but it is evidence that automation will not singlehandedly knock everyone else out with one punch. There is a technology gap in America. Statisticians point out that 78% of Americans use the Internet, but there is a whole generation that doesn’t trust it with their most sensitive information or have the capabilities to use it to its fullest extent. Would a Silicon Valley takeover of the MCA industry alienate them and leave many of America’s small businesses once again without a shoulder to lean on?
Program or be Programmed
The title of this segment here is the title of a book written by Douglas Rushkoff. An article on CNN commented at length about it and its revelations about the digital age. Americans need to learn all the basics when they’re young. Your PHPs are just as important as your ABCs and 123s. CNN interestingly states:
It’s time Americans begin treating computer code the way we do the alphabet or arithmetic. Code is the stuff that makes computer programs work — the list of commands that tells a word processor, a website, a video game, or an airplane navigation system what to do. That’s all software is: lines of code, written by people.
—Just a couple of years ago, I was getting blank stares or worse when I would suggest to colleagues and audiences that they learn code, or else. “Program or be programmed,” became my mantra: If you are not a true user of digital technology, then you are likely being used by digital technology. My suggestion that people learn to program was meant more as a starting point in a bigger argument.
—According to Calacanis, each employee who understands how to code is valued at about $500,000 to $1 million toward the total acquisition price. One million dollars just to get someone who learns code.
Read those last two lines? Each employee that understands how to code is worth up to $1 million. Are they seriously teaching people in school that Microsoft Office proficiency is a leg up in the business world?
College graduates that know more than one language have an edge over people that don’t. But speaking Chinese, Spanish, or Arabic won’t get you as far as JavaScript. According to IT World, JavaScript is the most highly ranked programming language in the world as measured by its use and popularity. Learn French and you’ll really enjoy a vacation in Paris. Learn PHP, Python, or Ruby and you just might become the King of France.
Am I Already a Dinosaur?
No! Don’t let those 10 year olds with a software empire get you down. Anyone can learn and you need not spend $30,000 a year on college tuition to do it. Codecademy can help complete beginners learn code for free. Get real good at it and you may earn yourself a $50,000 salary increase.
One Punch
Silicon Valley with their exotic computer languages and cars that drive themselves may present a challenge to the MCA industry, but many firms will be able to hang on for a long, long time. Some people still pay by check at the grocery store and yes, many business owners would rather not use online banking, no matter how safe they’re told it is. But there will come a time when being bilingual means being able to write Java and Perl. Oh there will come a time when driving twenty miles to Kinkos in a car that one must drive themselves to fax a document that will never again exist on paper, will be an experience we confuse with the Pilgrims trip on the Mayflower.
Everyone should at least take some basic lessons on self-defense. Silicon Valley is coming out fighting. They might not knock you out, but it couldn’t hurt to have a white belt in JavaScript. Anything to keep you in the ring just a little bit longer.
< ?php echo "- Merchant Processing Resource"; ? > 😉
https://debanked.com
Article condensed 10/8/12
Ten Days
September 28, 2012
It’s been ten days since Kabbage announced they had raised $30 million to fuel the growth of their Merchant Cash Advance (MCA) operations at home and abroad. MCA is changing faster than we can report it:
Former Yahoo CEO joins Kabbage. Hello Silicon Valley takeover! Quotes from the story:
Kabbage is providing an old service, merchant cash advances, with a new twist
Did they just call merchant cash advances old?
Kabbage is rapidly reshaping the small business financing space in the same way that PayPal reshaped the payments space over the last decade
Start believing this…
Amazon enters the MCA industry with a new division called Amazon Lending. Quotes:
Amazon is lending up to $800,000 to some merchants, Wingo said, adding that this is a pretty aggressive entrance into merchant financing.
Merchant financing…quite possibly the term that will replace “merchant cash advance” in the next couple years. Notice AMEX’s advance program is called the same thing. Trend anyone?
Amazon is competing against a start-up called Kabbage, which extends cash advances ranging from $500 to $50,000
They apparently don’t feel anyone else is a threat in the online space.
“We’re flattered that Amazon is building a business modeled on ours,” said Kabbage co-founder Marc Gorlin. “It’s validating that big companies are getting into the small business financing space.”
Dear Kabbage, you did not invent this model.
The kicker to Amazon’s new program? They charge up to 13% interest annually, on pace with what a little company in California named Opportunity Fund claimed was flat out unprofitable. Does that make them yet another new company walking around with a giant Kick-Me sign on their back? Some industry insiders would argue that offering these low rate programs are like swallowing dynamite.
We did a little bit of digging on this new program to see exactly what Amazon was up to. One of their prospective merchants posted this excerpt of the fine print:
Subject to applicable law, you will be in default under this Loan Agreement if any of the following events occur: ……..
(iii) your gross merchandise sales on Amazon.com as reported in your Seller Account (“GMS”) in any month is less than 50% of your lowest GMS on Amazon.com in any of the prior 12 months,(iv) the collective value of your units stored in Amazon fulfillment centers in the US, based on your list price of those units on Amazon.com, (“FBA Inventory Value”) in any month is less than 50% of your lowest FBA Inventory Value in any of the prior 12 months,
Except as otherwise required by applicable law, if you are in default, subject to any right you may have under applicable law to receive notice of and to cure such default, you agree that we may in our sole discretion exercise any remedy available to us at law or equity or take any or all of the following actions: (I) declare the unpaid balance of your Loan to be immediately due and payable, (II) enforce our rights as a secured party by directing Amazon Services LLC to reserve, hold, and pay to us an amount up to the unpaid balance of your Loan from your Seller Account disbursements until the unpaid balance of your debt under this Loan Agreement is paid in full, (III) enforce our rights as a secured party, by taking possession of your units stored in Amazon fulfillment centers and disposing of them in accordance with the Uniform Commercial Code,……………..
If this Loan Agreement is referred to an attorney (who is not our salaried employee) to collect the amount you owe or otherwise enforce the terms of this Loan Agreement, you agree to pay our reasonable attorneys’ fees, court costs and other costs of collection to the fullest extent not prohibited by applicable law.
6. Financing Statements. You authorize us to file and, as we may deem necessary or desirable, to sign your name on any documents and take any other actions that we deem necessary or desirable to ensure that our security interest in any item of inventory or your Seller Account is properly attached and perfected.
There’s some language in there that would make a lot of MCA companies jealous, particularly the section that states a 50% drop in sales is an automatic default!
Thoughts? Share them on DailyFunder.
– Merchant Processing Resource
https://debanked.com
Merchant Cash Advance Community Teams up for Charity
September 27, 2012You may have seen the news story somewhere already: Twelve Members of the Alternative Small Business Lending Community Join Forces for Charity, but you haven’t heard the background of all the companies involved. We’d like to shed some light on the competitors that are battling it out in an epic competition of fantasy football:
Merchant Cash Group
Based in Gainesville, FL, they are a charity league co-founder and direct provider of capital. They recently launched their Fast Funding Equity Program, a unique financial solution to merchants that may not be able to get approved anywhere else.
Competing for: Kiva
Kiva is a non-profit organization with a mission to connect people through lending to alleviate poverty.
Rapid Capital Funding
Based in Miami, FL, they are a direct financing source. They are one of the industry’s fastest growing companies and recently acquired a major credit facility from Veritas Financial Partners.
Competing for: Epilepsy Foundation
Financial Advantage Group
Based in Land O’Lakes, FL, they have been a financial provider since 2004. They have helped fund some big name franchises including individual locations for Sonic, Dunkin’ Donuts, and Quiznos.
Competing for: Society of St. Vincent De Paul
The Society of St. Vincent de Paul offers tangible assistance to those in need on a person-to-person basis.
RapidAdvance
Based in Bethesda, MD, RapidAdvance is one of the oldest and largest MCA firms in the country. They are often called upon to offer expert insight on the industry.
Competing for: Cystic Fibrosis Foundation
This foundation is the world’s leader in the search for a cure for cystic fibrosis.
Sure Payment Solutions
Based in New York City, they made a name for themselves by offering low credit card processing rates to merchants nationwide and expanded on that success by providing businesses with financing. They are well known for their industry blog, Sure Resources.
Competing for: ALS Association
The ALS Association is the only national non-profit organization fighting Lou Gehrig’s Disease on every front.
Meridian Leads
Meridian provides direct marketing programs for financial services companies. They are one of the most used and acclaimed marketing firms in the MCA space.
Competing for: 100 Urban Entrepreneurs
100 Urban Entrepreneurs is dedicated to helping provide a meaningful, long-term economic boost to urban communities throughout the United States by supporting minority entrepreneurship at its earliest stages.
Merchant Cash and Capital
Headquartered in New York City, they have funded over half a billion dollars to small businesses since 2005. They’re heavily involved in the financing of retail and food service franchises. Check out their new website.
Competing for: Gift of Life Bone Marrow Foundation – on behalf of The Silver Project
Gift of Life is a world leader facilitating transplants for children and adults suffering from many life-threatening diseases, among them leukemia and lymphoma.
NVMS, Inc.
A Manassas, VA firm, NVMS offers a full range of inspection services for the Mortgage, Banking, Commercial and Residential Property, Construction and Insurance industries. They’ve established a stellar reputation and are the inspection company of choice for many MCA providers.
Competing for: The Missionaries of our Lady of Divine Mercy
They provide humanitarian assistance to those suffering from poverty
United Capital Source
Based in Long Island, NY, United Capital Source has garnered much attention from their recent spate of seven figure financing deals. They are constantly adding new staff to satisfy the incredible demand for funding from mid-sized businesses.
Competing for: Smile Train
Smile Train partners with local surgeons in developing countries to provide free cleft care for poor children and follow-up services 24/7, 365 days a year.
Swift Capital
From the wonderful city of Wilmington, DE, Swift Capital has made a major splash in the alternative business loan space with low cost working capital. They have helped over 10,000 small businesses nationwide.
Competing for: American Heart Association
This association helps to build healthier lives, free of cardiovascular diseases and stroke.
TakeCharge Capital
TakeCharge Capital has offices in Connecticut, Mississippi, and Florida. They built their reputation on spectacular payment processing services and grew into becoming a national financing provider.
Competing for: Distressed Children & Infants International
DCI’s primary objective is to provide children in rural areas the opportunity to receive an education instead of entering into child labor.
Raharney Capital, LLC
Raharney Capital is a Merchant Cash Advance industry consulting firm based in New York City. They are a charity league co-founder and the operators of this very website, Merchant Processing Resource.
Competing for: Network for Teaching Entrepreneurship
This organization’s mission is to provide programs that inspire young people from low-income communities to stay in school, to recognize business opportunities and to plan for successful futures.
The above companies are participants in the Merchant Cash Advance/ Microloan fantasy football league. Other firms within the same industry are constantly making charitable efforts as well, such as Yellowstone Capital. They recently raised money to help Hatzalah Volunteer Ambulance Corp acquire two ambulances. Noticeable company donors included Strategic Funding Source and Benchmark Merchant Solutions.
All of the mentioned firms are strongly recommending others to donate to the charities they are representing. In addition, any company or person that would like to contribute to the competition’s prize donation can do so by contacting sean@raharneycapital.com or heather@merchantcashgroup.com. We are not accepting contributions to individual charities, only to the prize donation that will be given to the winner’s charity. $5,850 has already been pledged to the prize as of the publication of this story.
– Merchant Processing Resource
https://debanked.com
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Donate to one of the represented charities today!
The End of an Era
September 19, 2012It’s the end of an era. Sound ominous for a blog that reports on the Merchant Cash Advance (MCA) industry? It shouldn’t. In the last 10 years, MCA firms played in the minor leagues. No one was really paying attention to them and truthfully, a lot of critics didn’t think this business model would still be around. But today it still stands, funders are still funding, and this blog is practically struggling to keep up with the incredible amount of action that is taking place. Coincidentally, 2012 marks the end of the Mayan Calendar. Yes, it’s the end of an era.
MCA Goes From 0 to 60
There were a few big firms in the Mid-2000s (RapidAdvance, Merchant Cash and Capital, Strategic Funding Source, AdvanceMe, etc.) and they’ve all experienced modest success. It was “modest” in the sense that it is nothing compared to today’s standards. The level of play is changing. Wining and dining an Independent Sales Office (ISO) that could bring in $300,000 a month in deal flow used to be all the rage. 300k for one company was 300k less for a competitor. An extra point of commission here or a freebie approval there was enough to make you the big dog in town, at least for awhile. Despite all the supposed innovation and growth, the talent pool remained the same. Lead generators became agents, agents became ISOs, ISOs became syndication partners, syndication partners became funders, and funders became technology companies that were basically clearing houses for groups of funders. If the industry was Sally, Joe, and Tom in 2005, it was still Sally, Joe, and Tom in early 2011, just with new company names or titles. Then everything changed…
Money poured in:
Merchant Cash and Capital Announces $25 Million in new financing 10/4/11
Snap Advances raises $3 Million from TAB bank 11/21/11
Capital Access Network raises $30 Million 2/7/12
RapidAdvance Receives new financing facility through Wells Fargo 4/2/12
1st Merchant Funding | $5 Million re-discount line of credit from TAB bank 6/12
Strategic Funding Source secures $27 million 6/27/12
On Deck Capital raises $100 Million 8/23/12
Kabbage raises $30 Million 9/17/12
Industry insiders loosely redefined what a Merchant Cash Advance was:
Merchant Cash Advance Redefined Merchant Processing Resource 3/25/12
Big companies entered the market:
American Express Announces Their Own Merchant Cash Advance Program 9/22/11
PayPal Pilots Merchant Cash Advance Program in the U.K. 7/13/12
Some funders became licensed lenders in major states such as California:
A New Chapter Opens for Merchant Cash Advance The Green Sheet 6/25/12
Search the California licensed lender registry
New products formed:
FundersCloud creates platform to raise capital and find syndicate partners faster 8/29/12
A charity announces a new way to make subsidized business loans using the split-funding method 9/6/12
These barely scratch the surface of industry events. What used to be a competition to score the local neighborhood ISO has morphed into a race to be the first to partner up with Facebook, twitter, Groupon, and Square. Anyone not moving full speed ahead to integrate technology and social media will be gone in the next 24 months.
May 18, 2012 was the first time we noticed and commented on what was happening. In How The Facebook IPO Affects the Merchant Cash Advance Industry, venture capitalists and Silicon Valley had finally found MCA and there’s no hiding from them. Now it seems all of our far-fetched predictions are not only coming true, they’re happening moments after we predict them. In our last article we instructed everyone to keep their eyes on Kabbage. Six days later they announced they had raised $30 million in new financing and would be expanding overseas. For a company that makes wild claims about the correlation of facebook fans with account performance, all while humorously being named after a boring vegetable, they sure seem perfectly able to threaten the status quo. Nobody dared touch Ebay or Amazon businesses until they came around.
Price
On the cost basis front, the middle ground is eroding even further. We first discussed this phenomenon on April 25, 2011 in The Fork in the Merchant Cash Advance Road. In it, we explained that the combination of competition and defaults were placing downward pressure and upward pressure on price at the same time. Today, there is surging demand for “starter deals” at 1.49 factors that are payable over 3 months at the same time that more and more new lenders are offering 1 year loans at 10%. The low rate, 12-18 month term deals are nothing new. A few funders tried them in the past and most suffered irrecoverable consequences. This is history that the new players didn’t witness.
Some outsiders view the MCA industry as a bunch of Wall Street guys that got fat, happy, and disincentivized to lower costs. On the contrary, one only needs to take a single look at this chart to realize that undercutting the entire market isn’t so genius after all. How can a funder survive with extremely low margins when 15% – 71% of their target market is likely to experience problems repaying their loans? These aren’t our stats, these are FICO’s:
Veteran industry insiders know this and acknowledge that the coming tide of low rate financing is a bubble that has burst before. On the DailyFunder, a few folks have offered this insight:
The mca/unsecured loan biz is very risky. It’s all fun and games till deals start going south. My guess is they either adjust rates to match defaults or go out of business. I know first hand that this is not a get rich quick business. It may look like it is from the outside but once you are inside you see the world differently pretty quickly.
[these new low rate deals are] just like On Deck did. When they first came out, they offered 12 month 1.09’s. Then it dropped to 6 month 1.12’s, then 1.18’s. Now you see 1.25’s to 1.35’s offered by them
Governance
On the other side of the cost war is potential federal regulation. At least one D.C. consulting firm is prodding the leaders of the MCA industry to take a proactive approach on self-governance. According to Magnolia Strategic Partners, MCA is on the radar of regulators and members of congress, especially in light of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The new MCA playing field has invited media attention, and not all of it is positive.
The North American Merchant Advance Association is the only organization for industry cooperation but their ability to dictate policies and standards is weak. They receive very little press and their website has been down for weeks. Many argue that they have been effective in minimizing defaults by sharing data on fraudsters. While this does stand to serve the community, it is but a footnote in their orignal intended purpose.
New Barriers to Entry
For the first time ever, potential resellers are facing barriers to entry. Becoming an ISO has long been as simple as owning a phone and purchasing a list of businesses that have used MCA financing before. Today, it’s not that easy. These lists have been sold literally hundreds of times over and called tens of thousands of times over. Pay-Per-Click marketing is dominated by the million and billion dollar firms with money to burn. If John Doe ISO wants to advertise on Google, he better be prepared to compete with the likes of American Express and Wells Fargo. Good luck! Putting skin in the game has also become more of a prerequisite for ISOs to succeed. Funders want to know if a sales agent would put his or her own money into a deal… and then actually commit them to doing just that. The odds are becoming stacked against the undercapitalized and it isn’t likely to change.
In 2009, the most prevalent pitch used by sales agents was to inform prospects that they themselves were “a direct lender” and that anyone else the prospect might be talking to was a broker. “Cut out the middleman and go direct with us,” they’d convincingly argue. This line became less effective when prospects heard this from all five agents they spoke to. Name dropping strategic partnerships will be the new way to build credibility. “We’re partnered with Facebook, twitter, Groupon, and Square,” a sales agent will soon be saying. “Can our competitors make the same claims? Go with us.”
See You On the Other Side
2013 will kick off a single elimination tournament. Funders that didn’t realize 2012 was the end of an era will begin to fade. 2014 will eliminate the weaker firms that remain and by 2015, Merchant Cash Advance will no longer be a term that anyone uses. Big banks and billion dollar technology companies will go on to rebrand all that which the funding warriors of the last decade have worked so hard to establish. MCA will simply assimilate into other financial products. The metaphorical Sally, Joe, and Tom will probably still be in the business, but be working for companies like Capital One, Wells Fargo, and American Express. And as for us…well… we’re going to need something else to talk about. But we’ll keep you posted until that day. 🙂
– Merchant Processing Resource
https://debanked.com
