Made for Each Other?
December 12, 2012You want fast cash loan? “We have Short term loans online from £1 – £1000 with no fax required. Instant approval, 24 hour self-service account access and 15 minute cash payout guaranteed.” Not exactly the kind of advertising you’d see in the Merchant Cash Advance Industry. It sounds like a payday lender headline, the kind of marketing that critics would jump on and rally regulators to put an end to. It’s the antithesis of what many alternative loan providers that operate in the MCA space have come to stand for. And it could be coming to a theatre near you.
Meet Wonga, an online payday loan company in the U.K. with a representative APR of 4,214%. According to many news sources, they’re looking for an entry point into North America and they may have found one (Watch out Silicon Valley, the Redcoats are coming!). In a deal that would be valued at around $250 million, Wonga is getting cozy with On Deck Capital (ODC). It was only a few years ago that former ODC CEO Mitch Jacobs was warning the public about the high costs of Merchant Cash Advances. It appears their views may be evolving. Not that we have anything against either company, because we don’t. It’s just that when you think of how respected ODC is in the market today, it’s hard to picture them being gobbled up by a company that offers fast cash loans from 1£ and up for a four figure interest rate.
Or maybe this is exactly what we’ve been predicting all along. One of Wonga’s primary investors is Accel Partners, the guys that got in early on Facebook and did a nice deal with Capital Access Network. They are joined by Greylock Partners, a self-described “Leading Silicon Valley Venture Capital Firm,” that coincidentally also invested in Facebook. So what the heck are these two companies doing in the U.K.? It sure looks like they are fulfilling our Silicon Valley Invasion prophesy:
How the Facebook IPO Affects the Merchant Cash Advance Industry 5/18/2012
The Bubble That Wasn’t 8/17/2012
The End of an Era 9/19/2012
Ten Days 9/28/2012
You can't get much more Silicon Valley VC than this...
Bloomberg.com’s article about the advanced stage talks between ODC and Wonga came just TWO DAYS after Steven Mandis walked into the room and bought a material stake of the 2nd largest company in the industry, RapidAdvance.
It seems like just yesterday we were all saying something about financing based off of credit card sales, but now? Now… it’s starting to look like you can get fast cash loan 15 minutes, no fax!
This business gets more interesting every day.
—–
Update: 12/13/12
Wonga does make loans to businesses already in the U.K. The application process takes about 12 minutes and funding happens in 30 minutes. This would be a game changer in the U.S. Refer to this article: http://techcrunch.com/2012/05/07/wonga-extends-its-payday-loans-to-small-businesses-in-uk/
– Merchant Processing Resource
https://debanked.com
MCA Playoffs Begin
December 11, 2012
Congratulations to Merchant Cash and Capital, RapidAdvance, Sure Payment Solutions, and TakeCharge Capital for being the 4 teams to make the MCA Industry Fantasy Football League Playoffs.
The playoffs are 2 weeks long.
Round 1:
RapidAdvance vs. TakeCharge Capital
Merchant Cash and Capital vs. Sure Payment Solutions
Round 2:
Winners of Round 1
Current prize amount to be donated to charity:
Pledged: $7,100
Collected: $6,025
100% of the amount collected will be donated to the winning team’s charity.
Charity candidates remaining:
- Gift of Life Bone Marrow Foundation – Via the Silver Project
- Cystic Fibrosis Foundation
- ALS Association
- Distressed Children & Infants International
A press release announcing the winner and donation is scheduled to go out at the end of this month or early January. If you would like to contribute to the total charity prize and get recognition for it, e-mail sean[at]merchantprocessingresource[dot]com.
Movember Rocked!
December 1, 2012
Movember: Mo’ Merchants, Mo’ Deals
The pre-holiday season is usually big in the Merchant Cash Advance (MCA) industry but this year seemed different. We’ve been saying that we’ve entered a new era for a long time, but it’s finally starting to seem real. It feels like 2007 again in a way, when everybody was getting rich and nobody even knew what the heck they were selling. It took years for account reps to finally stop referring to advances as loans and by then it was too late because the ACH loan industry was born.
E-mails like this don’t happen very much anymore:
You know… the ones where the deal would be blatantly shotgunned to multiple companies at once. The major broker shops would “accidentally” CC everyone instead of BCC to let the funders know who was in charge.
That’s not to say that deals don’t get shopped, Some do, but the circumstances have changed. To minimize the risk of being flooded with bad paper, funders ask resellers to put their money where their mouth is. The syndication game has become THE game in town and it’s led to Super ISO networks like the Factor Exchange. A user on the DailyFunder that seems to be intimately familiar with Factor Exchange is quoted as explaining the model like this:
The “mom and pop” ISOs and “Onesy-Twosey” brokers are backed by one giant ISO network and The Factor Exchange assumes half of the risk by syndicating 50% on nearly ever deal…
The massive volume of FEX submissions to lenders gives the ISOs power to negotiate for better rates and terms, One point of submission reaches 15+ lenders, the merchants credit is only pulled once, and the commission is passed straight through to the ISOs because FEX makes their money from participation.
Companies like this empower the smaller brokerages…
Who Did Mo’ Deals in Movember?
Yellowstone Capital broke their single day funding record… TWICE. This actually happened on back to back days. Executive management reported that they funded approximately $3 million in 48 hours.
Who Got Mo’ Money?
Wall Street wizard and business professor, Steven Mandis acquired a stake in Bethesda-based RapidAdvance. The news is all the more interesting with the fact that RapidAdvance is easily one of the top 5 largest players in MCA. Single individuals don’t exactly just walk through door and buy a stake in companies like this. Mandis is taking on a Strategic Advisor position and it’s our guess Rapid is about to enter another major phase of growth.
Who Got Mo’ Likes?
Merchant Cash and Capital’s (MCC) facebook fan page has gotten thousands of Likes since the third week of Movember when they announced their charity campaign. For every new Like until December 7th, MCC is donating $1 to the American Red Cross to help people that were affected by Hurricane Sandy.
Who Got Mo’ Wins?
RapidAdvance was the first team to clinch the playoffs in the MCA industry fantasy football league for charity. Something tells us that Mandis is behind their incredible winning streak.
Who got Mo’ Leads?
You did if you bought leads from either one of our lead advertising partners, Meridian Leads or SmallBusinessLoanRates.com.
Lendio has also been making a splash on the MCA lead scene with Dave Young being a big contributor on DailyFunder. To discuss pricing, he can be reached at dave.young[at]lendio.com
Who lied Mo’?
According to CNN’s statistics, 247 million people in the U.S. went shopping on Black Friday. That’s equal to the entire American population over the age of 14. Something doesn’t smell right with these numbers. It’s our guess that CNN is using Mitt Romney’s polling experts. 😉
But someone else lied just a little bit Mo’. On Movember 26, 2012, PRWeb published a release that claimed ICOA Inc., a small tech company in Rhode Island was acquired by Google for $400 Million. The release turned out to be a hoax as part of a stock pump and dump scheme. Many critics have been left wondering why PRWeb didn’t do anything to verify its authenticity. Considering PRWeb is such a widely used PR service in the MCA space, we can testify that they’ll pretty much publish anything so long as you pay the fee. Some smaller companies use it as part of their SEO campaigns, which explains why there are so many strange looking releases out there that seem to repeat the same keyword in every sentence.
ABC Funding Co Just announced a program that will help small businesses in need of cash by providing these small businesses in need of cash with a special type of financing that will hep them if they are a small business in need of cash. Not exactly New York Times material…
Will Movember be followed by Make-a-lot-of-Doughcember? We’ll find out!
– Mo’chant Processing Resource
https://debanked.com
MCA History in Honor of Thanksgiving
November 21, 2012
Before fax, e-mail, and e-signatures, merchants used to travel up to 400 miles to fill out a funding application.
The famous response to a British sea captain by John Paul Jones is actually believed to be a misquote. 'Fund' was changed to 'fight' to better preserve his memory but it is theorized that he predicted the birth of Merchant Cash Advance. He died in 1792, two hundred years before the first small business got funded based on their credit card sales
In 1621, the local merchants were funded on the third Thursday of November, just narrowly beating the wire deadline. This feast was almost not possible.
The first underwriters. Yeah... they were British.
The first collections department.
Back then you needed a lot more than just a payoff letter to change companies...
This merchant successfully opened his 2nd location.
This winery just refi'd again last week. $132,292,222,144,923,383,293,819,183,189,380,678 was withheld and credited to the outstanding balance.
Reason for Advance: Need to stock up on more tea inventory.
We apologize if our history is a little off 😉
– Merchant Processing Resource
https://debanked.com
MPR Advises MCA Companies to Perform Penetration Tests
November 20, 2012The Merchant Cash Advance (MCA) industry is riding high from a stream of recent publicity and investor interest. Billions of dollars are pouring into the market and some companies are desperately trying to upgrade their software platforms to keep up with the growth. With more exposure comes new curiosity, and not all of it is positive.
There is no widely used software platform in the MCA industry, which is a good thing and a bad thing. It’s bad in the sense that each company has more or less created their own database system, increasing the odds that some companies will have security flaws. It’s good in the sense that if one company suffers some kind of breach, the method used should not be applicable across the entire industry.
Don’t worry, we’re not posting this to scare merchants. In fact, we don’t recall a single MCA firm ever having suffered a public data breach, a statistic unheard of in other industries. So why bring it up? As MCA firms collect more data and handle more money, the more likely they will become attack targets by hackers. The more valuable the stash, the more sophisticated the attacks. Major players like Heartland, TJX, and Global Payments have had sensitive information compromised on hundreds of millions of customers. The moral of the story? Prepare yourself as much as you can.
If you think it can’t happen to you because your system was developed by a third party, you’re wrong. It’s time to get tested. A Penetration Test, as defined by wikipedia is:
a method of evaluating the security of a computer system or network by simulating an attack from malicious outsiders (who do not have an authorized means of accessing the organization’s systems) and malicious insiders (who have some level of authorized access).
Some may be inclined to compare a Pen Test to sitting in the waiting room of Student Health Services. You’re scared of what they might find and maybe you’d rather not know, but not getting tested at all is the worst thing you can do.
One such Pen Test was performed by an MCA firm months ago that had just purchased a customized software system from a third party. We will not name the firm or the software provider.
After a year of designing, testing, and writing fat checks to a prestigious group of software developers, the MCA firm had finally implemented a state of the art system that would propel them to the next level. After a month of using it, they asked a new hire to do some tests to make sure all of the basic features were working. The bells and whistles were decked out to the nines but no one had tested the easy things like going through the motions of resetting their password if they forgot it.
The new hire noticed something slightly off with the basics and reported his findings to the executives. Interested, but not really worried, they gave him permission to act as if he were a disgruntled employee. Turnover was high in the telemarketing department and there was occasionally a person that would shoot off a couple of dumb e-mails on their way out. But now with a system in place, could they do real damage?
The disgruntled employee test was really a simple Pen Test and this firm is eternally thankful that it performed one. Within 7 minutes, the new hire was able to access and modify every piece of data in the system. He was able to exert administrative power without having administrative level access. The worst part of what he did? There was no way to prevent against this mess because of how the software was coded. The best part of what he did? It was only a test and all modifications were immediately reversed.
It took a long time for the MCA firm to take a corrective course of action. Whether they ended up patching the software or tossing it altogether, we won’t say. What’s important is that they were able to identify these flaws on their own and early on. Many companies in this industry have long-term funding projections that exceed $1 billion. At that size, there will be much more to worry about than disgruntled employees. The bad guys will be lined up around the block in cyberspace trying to get in. SQL injections, buffer overflow attacks, DDoS Attacks, and much more will be lighting up those systems on a daily basis. Most MCA account reps advise their merchants about PCI compliance, but today we’re reminding you to take your own advice.
Resources:
In-house Penetration Testing for PCI DSS
Penetration Testing Guide and Samples
Security Assessment-Penetration Testing and Vulnerability Analysis
Cost of a Data Breach
Estimate Your Risk Exposure
Global Payments Breached
Pass it on.
– Merchant Processing Resource
https://debanked.com
Betting on the Future With Merchant Cash Advance
November 14, 2012
An excerpt of the article in ISO&Agent’s November/December 2012 Issue:
“The business of merchant cash advances is changing, and ISOs are finding they need to do the same to keep up.
Long considered a niche product ISOs could rely on to add value to a contract, today’s cash advance market is highly competitive and heavily saturated. The situation creates a tradeoff for ISOs. On one hand, more merchants are aware of cash advance, which means there’s more demand for it. At the same time, more financial services providers are offering it, and that means greater competition.
With credit card companies offering cash advance and alternative lending, it can be tougher for ISOs to build loyalty among the merchants who receive them, ISOs and merchant cash advance providers say. ISOs might also have to overcome the negative reputation merchant cash advance has in some circles.
ISOs should rethink their strategies and stay on top of merchants when it comes to cash advance, says Sean Murray, CEO of Raharney Capital, a New York consulting firm that caters to merchant cash advance companies. “You know the saying, ‘Always be closing?’ Well, you should always be offering merchant cash advance,” he says.
It’s not uncommon for an agent to offer a merchant cash advance in January, then come back to try again in March only to find that 10 other ISOs hit up the merchant in February, Murray says. “You can’t just throw it in there casually every few months. Everyone is marketing cash advance,” he says.
But opportunities arise…”
Read the full article in the November/December magazine available on the site.
It requires you sign up for a FREE subscription
Is Print Media Dead? Why Small Business Owners Should Take a Second Look
November 11, 2012
Many small business owners may have thrown out the newspaper with the bath water when it comes to using print media as a marketing and promotion channel for their small business. Number one, most of us are pretty much convinced that print media is dead. Major newspapers that have been around for eons are dead or dying. Print magazines are failing or subscriptions are woefully down. On top of that there are literally hundreds of thousands of online social media specialists and bloggers out there tooting the digital horn not as “the way of the future” – but telling us that the future is now. Any small business owner out there not engaging in social media marketing isn’t only missing the boat, they’re on a sinking ship.
However, small business owners might want to take a second, and much closer, look at whether or not investing in print media still represents an opportunity to achieve a high rate of return for their particular business.
Print Media Can Hit Your Target
The most obvious example is a small local business owner. A business owner who serves a local community with distinct boundaries is targeting consumers and clients within that local jurisdiction. That local community may be at the neighborhood, small town, or even large municipal area. What is common to all local businesses is that oftentimes print media exists that provides a relatively low cost vehicle to promote their small business.
For example, small business owners in small towns are likely to get a pretty big bang for their buck promoting their business in their local small town newspaper. Many of these small town papers provide what could be classified as “hard journalism” reporting on local political and other town issues such as city budget and the like. However, a major focus in small town newspapers tends to be human interest articles that attract local readers. In turn, those articles attract specific types of readers.
For instance, often there will be a column dedicated to subjects such as gardening, cooking, local events, the environmental, the arts, books, and so on. Because the paper is so small, many local newspapers provide a greater opportunity to locate your ad near copy that relates to your small business, or that is read by people you’ve targeted as your most optimal customers or clients. If you’re a local hardware store, an ad located near the gardening article can be very effective. If you’re a local podiatrist or retail store selling running shoes, an ad near an article about a local 10K is a great opportunity. Most neighborhood and municipal newspapers offer this type or similar opportunities for ad placement.
Loyalty and Numbers Matter
Regarding reach of your small businesses’ ad, local print media can be a better option than promoting your local small business online. For one, many of these publications already have a very loyal readership. Any small business owner with even a modicum of experience creating an online presence can appreciate just how much effort, time, and (yes) money goes into creating a strong, loyal, and large following online. While social media is low cost, it isn’t “no cost.” Even if you’re not outsourcing social media activities (i.e. content creation, posting, replying, etc.) – you are paying a huge premium in time.
Equally important is that print advertising in many ways isn’t as limited as social media. You can get a whole lot more information in an ad in your local newspaper than an online banner ad. Additionally, advertising in your printed local publication can actually create more credibility for your small business. Consumers understand that print advertising comes at a cost and tend to assign credibility to businesses using print advertising. Consumers are savvy and know online banner ads can come pretty cheap – a print ad can effectively communicate your small business is both established and reliable.
Ironically, we’re going to provide you with the best argument for taking a second look at promoting and marketing your small business using print media with an online example. On their “About” page here is how one community paper describes themselves:
The College Park Community Paper has been in circulation since 1989. We are a monthly, full color, family friendly newspaper delivering the good news happening in College Park each month. The paper is delivered free of charge by mail to over 7,000 homes and businesses in the 32804 zip code which includes College Park and the Country Club of Orlando. Additional distribution is provided throughout the community and commercial district through the use of newspaper stands and counter top display. Additional exposure is garnered through our website which includes additional material not shown in the print edition.
You’ll also want to take a look at their ad rates here, but we use them as an example for quite another reason: they provide an excellent example of a small business integrating both on and offline channels to promote their small business, which can be not only a balanced approach, but an approach that provides the biggest bang for your buck.
– Merchant Processing Resource
https://debanked.com
