Planning a Payoff Just Right
July 17, 2011
According to Scott Griest, the CEO of American Finance Solutions, paying off a competitor is more complex than writing a check to pay off the balance. In his latest blog post, he explains this:
- When calling too early for a balance, the funding provder risks tipping off the competitor that they are about to get bought out of a deal. If its a good, profitable client (which is most often the case) the competitor will often “instantly approve” the renewal and offer to wire funds that day and beat the offer.
- It’s best to wait until the day of funding to receive the payoff instructions. That is unless the sales agent has grossly underestimated their outstanding balance or account performance.
- Sometimes you’ll find out the reason that the client cannot renew is because of collections issues, fraud (altered payoff letters) or trying to get double funded on the same day by the old and the new MCA company.
- Sales partners need to know their clients. Find out the funding date of their current advance and deal terms. If the contract payback amount is $50,000 and they got the advance six months ago and the balance is over $30,000, then there’s an issue with payback.
To read the full article, visit Scott Griest’s Blog
Merchant Hash Advance
July 16, 2011
Short on capital? Your business may benefit from a Merchant ‘Hash’ Advance. Restaurants, retail stores, and auto repair shops can easily obtain funding, but medical marijuana dispensaries need love too.
A few cannabis related deals have floated around the Merchant Cash Advance (MCA) industry before, but rarely do they close. At best they elicit a few chuckles from underwriters, who will likely make a few juvenile jokes before turning down a viable, serious, and legal business. The store owners walk away frustrated but neither side is to blame.
In states like New York, where many MCA powerhouses reside, marijuana of any kind is illegal. That makes the sale of it for medicinal purposes in states where it’s legal a foreign concept. We spoke to an underwriter of one Long Island, NY based MCA firm who shared this: “I’ve eaten dinner at a restaurant and I’ve bought flowers from a florist. I understand what makes both businesses tick. I’ve never been to, nor met anyone who has been to a medical marijuana dispensary. I don’t really know what the transaction is like, what risks they face, what their profit margins should be. It’s a big unknown. Is it easy for a dispensary to lose their license and suddenly go out of business? Are there laws that prohibit outside financing? Do we need to keep tabs on where they obtained their inventory from? We typically call a restaurant’s vendors prior to funding to ensure they’re in good standing. I would feel a little weird calling up a weed farm for a reference.”
And he’s not the only one that feels that way. Banks do too. Funding aside, evidence shows cannabis related businesses stuggle to fulfill basic needs such as opening a bank account or accepting credit cards. According to a report by creditcards.com, it’s not uncommon for their checking accounts to be closed without warning, sending the business scrambling for help elsewhere.
But the situation isn’t all grim. We interviewed Nick Emerson, the Managing Director of 420 Card Processing in Campbell, CA (420 CP), a firm that’s changing it all. 420 CP not only provides card acceptance services to medical marijuana dispensaries but can also connect them with access to capital.
Using the concept of MCA, 420 CP and their funding partner will provide actual loans based on credit/debit card processing volume It’s a joint partnership. (Sorry couldn’t resist!). And there’s great news. The typical easy criteria that made traditional MCAs so popular still applies. So long as the license to sell medical marijuana can be proven, dispensary owners have the same odds of being approved as a restaurant would.
So the oportunity is there and the target market is bigger than most people think. According to Nick, “Medical marijuana is legal in sixteen states and DC to the best of our knowledge. Those states are: AK, AR, CA, CO, DC, DE, HI, ME, MI, MT, NV, NJ (still pending), NM, OR, RI, VT and WA. Some of these states are in the throes of evaluating how to implement the ballot measures that were passed and they do not all enjoy the same structures.” But once the ground rules are in place, it’s business as usual. “We have faced no problems as our company is dedicated to providing credit card processing services solely to the medical marijuana industry. As you can imagine, our clients love us.”
Add that to the ever growing list that the Mechant Cash Advance concept is being applied to.
- Damaged Credit? Funded!
- Short Time in Business? Funded!
- Restaurants? Funded!
- Retail Stores? Funded!
- Auto Shops? Funded!
- Las Vegas Casinos? Funded!
- E-Bay Stores? Funded!
- Medical Marijuana Dispensaries? Funded!
Short on capital? If you accept electronic payments, someone somewhere is willing to provide cash against those future sales. No matter what you do…
– The Merchant Hash Advance Resource
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About 420 Card Processing
420 Card Processing was founded by card processing professionals, with decades of combined experience, who are committed to equal access and opportunity for those involved in all aspects of providing medical marijuana to patients in states that have legalized its use. 420 Card Processing provides services to retailers, wholesalers, suppliers of gardening equipment, and physicians. 420 Card Processing is a member of Americans for Safe Access, California NORML and the National Cannabis Industry Association.
For more information on obtaining a merchant account or funding from 420 Card Processing, contact Nick Emerson:
Sales@420cardprocessing.com
(800) 579-1675900 E. Hamilton Ave.
Suite 100
Campbell, CA 95008
Yellowstone Capital Has Record Month June 2011
June 30, 2011
From what we’ve heard, June was a pretty fabulous month for the Merchant Cash Advance business. How good is fabulous? According to Yellowstone Capital‘s facebook announcement, they did 435 deals for nearly $7 Million. Holy Smokes!
Great work guys! America’s small businesses are fortunate to have a source of capital.
What was your opinion of June? What’s your outlook for 2011? Write to us at webmaster@merchantprocessingresource.com
Small Business Failure Rates a Data Point for MCA
May 24, 2011
If you’re a Merchant Cash Advance (MCA) firm, you probably already know which regions pose a higher risk of default. CNN recently analyzed a report by Dunn and Bradstreet on states with the highest and lowest business failure rates:
- California (69% higher than the national average)
- Nevada (65% higher than the national average)
- New Hampshire (38% higher than the national average)
- Tennessee (36% higher than the national average)
- Colorado (33% higher than the national average)
- North Dakota (67% lower than the national average)
- Vermont (47% lower than the national average)
- Iowa (40% lower than the national average)
- Wyoming (40% lower than the national average)
- Kansas (39% lower than the national average)
Small business failure rates rose overall by 40% from 2007 to 2010. That’s an incredible increase but not surprising given the time period. So what does the data mean for an industry focused on banking the unbankable businesses?
Personal credit scores have been weighted more heavily in MCA underwriting over the last year or so. Once celebrated as credit-blind financing, most funding providers today have minimum score requirements. This began with arbitrary benchmarks such as 500 or 550 but is now resembling a banker’s analysis. “Your client has a 620 FICO but it’s a weak 620 so we’ll pass” is one such phrase that MCA brokers are just beginning to encounter, leaving them stunned and wondering how this product’s high cost seemingly only targets those with excellent credit. This situation has created A Fork in The Merchant Cash Advance Road.
Small business failure doesn’t happen overnight. It begins with a few missed payments. At that point there is either a recovery or a continuation of falling behind. Low credit scores occur in North Dakota and California but a business in North Dakota with 520 FICO is probably more sustainable than one in California with the same score. Therefore those in the lowest failure states should be extended leniency on credit requirements. Afterall, the goal of the MCA industry is to fund sustainable businesses, not those with the best credit report. The two don’t always go hand in hand.
This outlook isn’t new and would probably serve well in a data points based underwiting system. The CEO of Canadian based AdvanceIt was previously cited on this topic, though his firm futher narrows their data points to the city level. Any data that might impact the outcome deserves to be considered, no matter how broad.
The MCA product is most often a purchase of future sales, which does not require conscious payments on the seller’s (business’s) part. A percentage of sales are recovered automatically so the top priority should be to ensure those sales don’t stop.
If you’re a business owner in Iowa (3rd lowest failure rate) with bad credit, don’t get discouraged. You’re still a viable candidate for a traditional MCA. You just need to find the right firm for you. Ask your sales representative what requirements there are and stay away from those that respond with an arbitrary credit score. The smartest firms use data points and data says you’re not that likely to fail…
– The Merchant Cash Advance Resource
