Banks Conclude Dismal Loan Demand is a Result of Business Wariness
March 23, 2012
Banks are lending again but businesses aren’t taking the money… Surprised? We’re not. According to an article in the Wall Street Journal, “much of [last year’s] loan growth comes from lines of credit, not traditional loans. And instead of tapping available credit to power up plants, open factories and hire people, businesses are waiting.”
All of the statistics used to conclude about what businesses are or aren’t doing relied on data provided by the nation’s largest banks.
- Bank loans to businesses grew 10 percent last year after dropping 19 percent in 2009 and 9 percent in 2010, according to the Federal Reserve.
- Analysts are watching bank loan growth closely because it provides clues about whether companies are preparing to hire.
With the blind assumption that banks are the only institutions that provide financing to small businesses, experts are inferring faulty conclusions.
- Wells Fargo assumes businesses are uneasy about the future.
- JPMorgan reports that businesses just don’t want to use the money.
- Chase Bank believes that small businesses have enough money of their own and don’t need loans.
It seems that yet another one of our predictions is coming to fruition. What the banks conclude is wariness, is a direct contradiction to what is being experienced in the Merchant Cash Advance industry: an incredible, insatiable, all consuming demand for for working capital.
Dear Banks,
Small businesses are more confident than they’ve been in a long time.
Sincerely,
The Merchant Cash Advance Industry and Micro-Loan Providers
Why just yesterday, Yellowstone Capital announced the closing of a $1 million deal for a health care service provider. This is right after they financed a trucking business for $751,000. Millions of dollars are literally being poured into small businesses DAILY. United Capital Source recently finalized $1.25 million for a mid-sized business and these are just a few of the deals we’ve caught wind of. If we ran a story every time a large Merchant Cash Advance deal funded, well there would be so many stories that our web servers would crash. And because these deals are not being closed by Chase, Bank of America, or any other national financial institution, the Federal Reserve, major banks, and Wall Street Journal analysts assume that (a) businesses must not be getting financing and (b) businesses must not want capital.
Both are absolutely false. Prediction: The Wall Street Journal will run the following headline two years from now:
Economy and Small Businesses Experience Phenomenal Growth While Bank Lending is at an All Time Low. Experts Stumped.
Other News: President Obama Proposes New Legislation to Allow Him to Run for a Third Term in Office.
Everybody will know the reason for this except the big banks who will conclude that some kind of miracle has happened.
– deBanked
https://debanked.com
Merchant Cash Advance On Huffington Post / Just Call it a Coupon!
March 16, 2012An article was published by the Huffington Post today that explained the need for Merchant Cash Advance providers. Though some of it was described in an unflattering light, it conveyed some important messages.
- Real business owners explain that banks both big and small are not interested in lending to them
- One woman is quoted as saying: “If I ever write a book on how to open a restaurant, the first chapter is going to be ‘Banks Are Not Your Friends.'”
- A direct funding provider revealed that demand for merchant cash advances increased by 15 percent to 20 percent in 2011 and that 70% of businesses use more than 1 advance.
Our favorite line and perhaps the most important thing you can take away from this article is the quote by the CEO of AmeriMerchant. “[Merchant Cash Advance] is less expensive than [offering] a Groupon for 50 percent off or putting inventory on sale for 30 percent off.” Isn’t it ironic that the Groupon/e-coupon/social coupon concept is today’s business as usual and is at the same time significantly more costly than what the media considers to be expensive financing?
LivingSocial has 60 million members worldwide and they operate much in the same way that Groupon does. Let’s discuss this. According to wikipedia, Groupon’s business model works as follows:
For example, an $80 massage could be purchased by the consumer for $40 through Groupon, and then Groupon and the retailer would split the $40. That is, the retailer gives a massage valued at $80 and gets approximately $20 from Groupon for it (under a 50%/50% split).
So the 50% discount to the consumer is actually a 75% loss of revenue for the business owner. This practice is publicly accepted as fair, practical, and a way to increase your sales. If that’s the case, should’t financing that costs $2,800 to receive $10,000 be considered a bargain? We think so. Expensive is in the eye of the beholder. The media has a funny way of convincing people that a 75% discount is a great deal but financing costs of 28% are astronomical. Not to say that 28% is cheap, but there is only one reason that low rate bank loans even existed in the first place. The SBA is willing to cover up to 90% of the defaults and charge it to the taxpayers. That’s an advantage the rest of the private sector doesn’t get.
We can’t help but think what would be if the Merchant Cash Advance concept was rebranded as a powerful social marketing tool to drive sales. What if a Merchant Cash Advance provider purchased $12,800 of a store’s future sales in exchange for $10,000 today and then mass marketed that business to local consumers through mailing lists, iphone apps, and website ads to drive customers to the store. That would allow the Merchant Cash Advance provider to recoup their purchase as fast as possible and at the same time create viral growth for the business. The technology already exists and businesses are already willing to accept 75% losses. Isn’t it time they all started getting a lot more bang for their buck?
It’s not expensive when it’s spun that way is it? Sayonara Groupon and LivingSocial! Merchant Cash Advance is the sleeping giant at your doorstep.
– deBanked
https://debanked.com
United Capital Source Provides Medium-Sized Business With $1,250,000
March 9, 2012
deBanked (MPR) has learned and confirmed that New York based funding provider, United Capital Source (UCS) has provided financing to a medium-sized business in the amount of $1,250,000. While the parties have requested to keep certain specifics of the arrangement under wraps, the business is involved in the sale and repair of highly specialized equipment, and has operations and headquarters in multiple states.
While it was not structured in the traditional Merchant Cash Advance sense, it is believed to have been set up with fixed payments. UCS has received a lot of attention in the last six months due to the wide variety of clientele they are servicing. With deals ranging from a few thousand dollars to over a million, they are quickly becoming a top choice for any business in need of capital.
MPR has been doing research to quantify the size of the Merchant Cash Advance industry. In a recent article, the term itself was redefined. We’ve known for some time that there were some larger advances/loans being done within the space but not all of them are being publicized. What we’ve discovered is that it is not unusual for deals to reach as high as $2 million. The recent media attention on CNN and FOX is also an acknowledgment that the Merchant Cash Advance concept has penetrated the mainstream and is no longer an alternative, but the standard.
– deBanked
https://debanked.com
Merchant Cash Advance Leads Page Updated
March 8, 2012We have finally cleaned up the HTML of the Merchant Cash Advance leads page. When we transferred servers in August 2011, a lot of the CSS styling and html for certain pages were no longer supported. If you are looking for Merchant Cash Advance leads or interesting in having your company listed, the interface is now more aesthetically pleasing.
Are You Ready to Ride The Merchant Cash Advance Wave?
February 18, 2012Less than a year after we acknowledged the stunning absence of Merchant Cash Advance financing from the mainstream media, suddenly it’s the only thing being talked about. It took a few years but journalists are finally learning to complete the phrase of banks aren’t lending with, fortunately there are other options. The term Merchant Cash Advance is being thrown around so much that financial institutions that offer different funding programs entirely such as American Express are trying to attach their names to it. They are now trying to rebrand their product as Express Merchant Financing. This isn’t to be confused with a Dallas, TX based company called Express Working Capital which offers Merchant Cash Advances. You can understand why there is so much confusion. Merchant Cash Flow Loans too, which are micro loans based on gross sales are often identified as Merchant Cash Advances even though there is little common ground.
But let’s not fuss over small details because it’s not just the funding companies that are talking about it now, it’s the media.
No matter how well your website is designed or how good your sales people are, it’s important to recognize that small business owners think like normal consumers. According to a 2007 Nielsen Survey, 63% of people’s trust in a company forms from newspaper sources and 56% from television sources. Even though this type of financing has been around since the 1990s, the lack of news coverage has held the industry back. Despite the advancement of social networking and internet background searches, the majority of Americans still have that If it’s on TV, it must be true mentality. Why else would political candidates still be spending billions of dollars on TV commercials to get their message across?
The broad use of Merchant Cash Advance terminology, the recent recognition by the mainstream media, and the march of average Americans into the reseller market is an omen. A wave is coming. Whether some deem the current industry’s size to be $600 million a year or $1 billion is irrelevant. Merchant Cash Advance and similar financing programs have the potential to be a $10 billion market annually, especially since the major banks are retreating from SBA loans.
We suspect that in 2012, particularly the latter half of it will be explosive unlike the entire industry has seen before. Too many small businesses have been waiting on the sidelines since 2008. If the trend of rising employment is correct and a real recovery is underway, then we’ve got all the ingredients for a perfect storm. Confident Business Owners + Fast, Easy Access to Capital = American Recovery.
Call these business loan alternatives whatever you want: Merchant Cash Advances, Merchant Cash Flow Loans, Express Merchant Financing, etc. Just make sure you have a surfboard. A giant wave is coming.
– deBanked
https://debanked.com
The SEO War for ‘Merchant Cash Advance’
February 12, 2012
Let’s admit it, we’re all at war. If you’ve uttered the terms Panda, PageRank, Backlinks, or Organic in the last few months, you know what we’re talking about. We didn’t choose this fight, Google forced it upon us. And so after a long day of phone calls and handshakes about affordable working capital, we return to our homes at night and search the web. Not for information of course, but to find out where our company website pops up when we Google the phrase: Merchant Cash Advance or other relevant terms. Today we ask, is the fighting worth it?
In 2007, back when the industry hadn’t put much thought into the Internet, the #1 search result for Merchant Cash Advance was the blog by David Goldin, the CEO of Amerimerchant. It made sense because it was a self proclaimed “online resource dedicated to the merchant cash advance industry.” There, small business owners and competitors could read about the trials and tribulations of an industry on the verge of explosive growth. It was interesting, it was informative, and best of all, he ranked first without trying.
Nowadays, it’s all commercial. Merchant Cash Advance companies with fat advertising budgets are spending thousands to rank for their favorite keywords, with Merchant Cash Advance still high on that list. The friendly information resource has been replaced by a website that not only crushed the competition in search positioning but seems to publicly brag about it too.
As we write this article, the top 10 Google search results for Merchant Cash Advance are:
1. Merchant Cash in Advance
2. YellowStone Capital
3. Entrust Cash Advance
4. Merchants Capital Access
5. Merchant Resources International
6. American Finance Solutions
7. Nations Advance
8. Bankcard Funding
9. Rapid Capital Funding
10. Paramount Merchant Funding
Do keep in mind that your results may differ slightly depending on your region. Google geographically targets searchers to bring them the most relevant matches.
How much is the #1 spot worth? The market priced it at $75,000 three months ago when MerchantCashinAdvance.com was sold in an online auction for that amount (saved in pdf). So which powerful Merchant Cash Advance company unloaded their precious website? None. The owner of the site was actually an SEO guru looking to make a quick buck. He studied the industry a bit and then within two months ranked a site at the top of Google.
75k might even be considered a steal, as we were actually approached to purchase that website ourselves in August 2011. The exchange was a bit contentious, with them being unwilling to accept less than $200,000 and us making an insulting offer of $100. Perhaps it was jealousy or perhaps it was because we didn’t realize how a Merchant Cash Advance website could be worth so much, but the discussion quickly degraded into name calling and we never spoke again.
How many small businesses are searching for Merchant Cash Advance anyway? According to Google, there are 14,800 searches for it a month. We assume that at least 75% of those are from the companies offering it. You probably Google the phrases several times a day yourself. Admit it!
The real money is in the long tail keywords, since merchants are more likely to personalize their search. Being first for merchant loan for bad credit might be more potent than Merchant Cash Advance. It’s tough to say since deBanked doesn’t really rank for either of those. Then again, we’re an information destination, much like David Goldin’s Blog was/is.
We’re not SEO experts, but we do quite alright with Google ourselves. Without giving away all of them, this is our current placement for just the following keywords:
- Merchant Cash Advance directory: 1, 2
- Largest Merchant Cash Advance companies: 1
- Merchant Cash Advance UCC: 1, 2, 3
- Merchant Cash Advance statistics: 1
- Merchant Cash Advance stats: 1, 2
- Merchant Cash Advance default: 1, 2
- Merchant Cash Advance UCCs: 2, 3, 4, 5
- Merchant Cash Advance laws: 2
- Merchant Cash Advance forums: 2
- Merchant Cash Advance articles: 3
- Merchant Processing: 3
- Merchant Cash Advance Jobs: 8
- Sell your mom for cash: 1 (don’t ask)
MerchantCashinAdvance.com was no different and they claimed to be #1 for over 300 business lending related keywords. A spreadsheet of the analysis they put up during the auction can be found here.
With nothing more than an organic search presence, they claimed to have had the following results:
Month of July for 2011: Received 647 calls & 148 online business lending applications: Funded 81 deals, $26,000.00 profit.
Month of August for 2011: Received 731 calls & 234 online business lending applications: Funded 113 deals, $29,500.00 profit.
Month of September 2011: Received 1026 calls & 276 online business lending applications: Funded 147 deals, $41,750.00 profit.
If that’s the case, then $75,000 was a bargain. That no doubt led to the auction of a similar site just a month later. MerchantCashAdvances.org is currently ranking 51st for Merchant Cash Advance. They claimed to earn $12,500 annually in ad revenue and $200,000 in commissions. The starting bid was $10,000 and although there were many inquiries, it didn’t sell.
That doesn’t mean it wasn’t worth the price. Most Merchant Cash Advance companies are secretly or not-so-secretly investing thousands into SEO campaigns. Black hat SEO is rampant and even the most reputable companies have engaged in it at some point. The underwriting room is the one they show their clients. The sales floor is the one they show their new recruits. But ask where the internet marketing room is, and they’ll claim it doesn’t exist. But it does of course. They’re usually small quarters with no windows that are filled with computers armed with software like ScrapeBox, Article Marketing Robot (AMR), XRumer, and a list of working proxies.
Even the white hats are building backlinks manually and creating endless articles for use on their own company blogs or for services like BuildMyRank. One moderately sized Merchant Cash Advance company in New York City has just as many SEO employees as they do sales representatives. For some, this is just the beginning. It’s not unusual to spend $10,000 – $20,000 a month on pay-per-click campaigns.
The Internet has become a place where the person with the most to spend wins. Because of competition, a paid Google campaign for Merchant Cash Advance keywords can cost $20 per click! We did a phone call with Google and were told that less than 10% of clickthroughs convert into a sale or completed form. If only 1 out of every 10 visitors calls or inquires through the site, that amounts to $200 for a single lead. If only 1 out of every 5 of those leads turn into a closed deal, the acquisition cost is effectively $1,000. That number is awful especially considering commissions and factor rates have been rapidly declining over the last year. And merchants wonder why this financing is more expensive than a bank loan…
It also explains why the practice of closing costs and service fees have survived internal industry scrutiny. Some resellers would be operating in the red without them. Organic traffic is in essence free, that is if you don’t consider the salary or fees you pay your SEO team. Hopefully they don’t overdo it and place your site in the Google sandbox. Until then, the rewards outweigh the risks and every day the industry pushes the envelope a little further in the quest to rank on page 1.
If you can earn $200,000 a year from a website or sell one for $75,000 after two months of work, then there is plenty of room for growth. If the industry was saturated, it wouldn’t be that easy. If your mother is getting into the Merchant Cash Advance business, make sure she knows how to market her website. It’s a war out there.
– deBanked
https://debanked.com
Does Your Mom Sell Merchant Cash Advance?
February 4, 2012Five years ago, everyone seemed to add the phrase, “but I also do mortgages on the side” in response to questions about their career.
“I’m a stockbroker, but I also do mortgages on the side.”
“I’m a school teacher, but I also do mortgages on the side.”
“I’m a stay at home mom and a loving wife, but I also do mortgages on the side.”
Times have changed and today the new side gig is reselling Merchant Cash Advance (MCA), at least in the New York metropolitan area. The Independent Sales Office (ISO) model is dissipating into a few thousand sole proprietors, all of whom are competing for the same prospects. Most of them started at one of the larger ISOs or funding sources and have over time traded it for the opportunity to work for themselves. Others have pushed it aside as a part time gig while earning a living in another line of work.
It’s encouraging to see that the entrepreneurial spirit is alive and well in the city that never sleeps, but riding solo has its disadvantages. For instance, marketing budgets are more constricted. This inhibits the ability to attract clients, especially when competing against a sizable ISO, who likely has thirty times more to spend on advertising, systems, and service.
And yet, I haven’t heard many complaints from independent agents, which may mean the MCA industry is far from over-saturated. Sixteen of my former co-workers have gone on to start their own MCA ISOs. I even know a pair of twin brothers that run ISOs independent of each other. Some of these newly formed mini-ISOs (less than five people) break apart and each member seems to go on and repeat the cycle.
The Derailing of the Shakeout
In early 2008, it was predicted that low budget marketing would cause a massive shakeout of MCA resellers. David Goldin, the CEO of AmeriMerchant published the following in his blog:
There is another train of thought that is inevitable to fail – those that thought they can sell business cash advances with minimal capital expenditure, meaning hiring unqualified salespeople using inexpensive marketing techniques such as voice broadcasting (with these providers giving the same data to 100s of phone rooms) to dial hundreds of thousands of businessses an hour with a prerecorded message. (Merchants around the country are getting 3 – 5 prerecorded calls a day). The challenge is the quality of anyone that is going to press ‘2’ on their phone for money tends to be “lower hanging fruit” and lower quality deals. With the recent credit crunch and many merchant cash advance funding companies tightening up, some merchant cash advance agents were seeing approval rates as low as 15%-20%. There is no way they can survive and stay in business with that kind of approval rate.
Back then, it was quite popular to have a hundred sales agents in a single room making phone calls. Overhead was the biggest part of the budget, which in places like New York City, could consist of tens of thousands of dollars in rent alone. Add that to all the money that was spent on technology, payroll, dialers, and commissions, and it became really easy to generate a net loss.
With the emergence of mini-ISOs, many are foregoing traditional overhead expenditures such as the renting of a centralized office. Technology costs are also being eliminated since most people already own a personal computer and a cell phone, the only two tools really necessary to interact with prospects. As for state of the art auto dialers? Well, many agents are completely fine using inexpensive resources such as phone books or public UCC filings. Ask around in the MCA industry and you’ll learn just how prevalent this practice is.
There are so few barriers to entry in the MCA industry, that it catches a lot of folks from other financial fields off guard. We receive a dozen e-mails a month from mortgage brokers, stockbrokers, and insurance agents asking what licensing requirements they will need to sell MCA. There are none of course, but they more are shocked to learn that there are no regulations to abide by either. Take your cell phone, throw in your e-mail, spend twenty bucks on a website and you’re an official MCA reseller! It’s just that easy. Thousands of people are getting in on it.
Who is Who?
The flood of resellers and fly-by-night agents is making it increasingly difficult to know where all the MCA money is actually coming from. Here on the Merchant Processing Resource’s website, we’ve created transparency by listing the largest direct funding providers. Need to know if that UCC filing is MCA related? We can help you with that too.
We’re also working on creating an official directory of resellers, for which there will be some requirements for inclusion. That means if you’ve e-mailed us on this topic already and you haven’t heard from us yet, be patient. You will be contacted soon with instructions on how to become an approved MCA reseller.
Consolidation
In the meantime, the increasing fragmentation also presents an incredible buying opportunity. Large ISOs that are looking to add to their portfolios and leverage the brand names that mini-ISOs have created should be able to buy them out at very affordable prices. When this practice starts to happen, it’ll be interesting to see what the market value of mini-ISOs are. Could a business owned by two individuals with a pool of two hundred clients be worth $50,000? $100,000? $300,000? Once someone sets the bar, we should prepare for a year of consolidation, and the little guys will get gobbled up by the big ones. A lot of folks could end up walking away very rich or disappointed. Perhaps now is a good time for your Mother to go into the MCA business for herself and flip the value created for a nice profit a year from now.
ISOs on Steroids
The popularity of co-funding or syndication is also allowing the remaining large ISOs to really flex their muscles in a way they weren’t able to in 2008. Syndication is where an ISO is able to invest their own capital in the MCA deals they close. For instance, on an advance of $20,000, $15,000 of it might come from the MCA funding source, and the remaining $5,000 from the ISO themselves. As long as these accounts perform well, syndicating can create a supernatural rate of growth. This further whets the appetite for opportunities to expand.
So why are mini-ISOs a buying opportunity? Customer loyalty is something big companies can’t always shake, no matter how much is spent courting them. Furthermore, these mini-ISOs tend to have historical performance records on their clients, data that is incredibly valuable. Should a Super ISO invest $20,000 in a small business that has never used MCA before or should they invest it in a business that has responsibly used MCA for two years with no issues, exhibits fierce loyalty, and has a proven record of success? The opportunity to participate in funding that business now and repeated times in the future should be worth a lot.
The Unknown
There are other forces at work that may reshape the industry in a way we can’t predict. The incredible rise of micro-lending is cannibalizing the MCA market, but is also allowing ISOs to offer a variety of financial products to a larger pool of businesses. One New York City MCA funding source privately revealed that micro-loans now make up 80% of their monthly funding volume, a stunning shift from their MCA-only portfolio of 2010.
The growing popularity has also caught the attention of regulators and in some states, the purchase of future credit card receivables is being governed by existing lending laws. The day may come when every agent needs a license to sell, but until then, thousands of people are playing the biggest game in town, helping small businesses get funding to grow. Are you a part of it?
– deBanked
https://debanked.com
