Small Business
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
New and improved New York City office location coming soon!
1375 Broadway, 6th Floor, New York, NY 10018
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. đ
– Merchant Processing Resource
https://debanked.com
Follow The Money – MCA
September 8, 2012John Tozzi of BusinessWeek is just about the only journalist that follows the Merchant Cash Advance (MCA) industry. We use the verb “follows” loosely since he manages to write maybe one article per year on the subject. Rarely flattering, he does at least provide something that other writers do not: Substance. In his lastest piece, Wells Fargo Plays Both Sides of the Cash Advance Debate, Tozzi reminded us of something we’ve failed to address in this blog: big banks aren’t just becoming interested in MCA, they’ve already been involved in it for a long time. It also made painfully clear a message we’ve been trying to communicate for years, that ultra low interest rates are simply not feasible in small business lending.
Tozzi accuses Wells Fargo of sponsoring a small business lender that is directly attacking MCA companies while at the same time financing the companies being attacked. California based Opportunity Fund recently began offering a loan program that is…wait for it…repaid by withholding a percentage of credit card sales. They call it EasyPay and they’ve made no effort to hide their belief that they’ve achieved some kind of higher moral ground by charging only 12% APR. In their press release yesterday, they pounced on the competition:
While similar card-based payment systems exist in the private sector in the form of merchant advance loans, they routinely carry exorbitant interest rates that range from 104-177 percent. By contrast, EasyPay loans carry an annual interest rate of just 12 percent.
-Opportunity Fund
Wells Fargo awarded them cash and their “hypocrisy” is apparently history. Why? Wells Fargo has also backed prominent MCA providers RapidAdvance and Capital Access Network. This might come as news to some people, but not to us. What Tozzi may not realize is the main driver of the MCA industry has been and continues to be…banks. Sorry to break it to the small minority of people that suspect MCAs are part of some shadow banking system. Most small businesses are unaware that their funds may indirectly be coming from Capital One, Community National Bank, or even Wells Fargo!
And let’s come to terms with another hard fact about small business lending. Opportunity Fund is proof that you can charge 12% a year and be guaranteed to lose money. In the BusinessWeek interview: “At that rate, the nonprofit is not covering its costs, says Marco Lucioni, the lending director who created the product. Opportunity Fund subsidizes the loans to keep them cheap.”
Subsidies? Whhaaaaa??? Oh you didn’t know? Opportunity Fund is a registered 501(c)(3), a charity. Don’t get us wrong, we love charity and we think it’s wonderful that small businesses in California may be eligible for an EasyPay loan. We can’t help but be bothered though that a charity is attacking the private sector for charging “too much” when they acknowledge that their own rate of 12% (more than double the allowable interest rate on an SBA loan) is entirely unprofitable. We’ve made this charge over and over and over again. The world we lived in where business loans regularly came in at 5% annually was really just an artificial market caused by the SBA’s agreement to reimburse banks for all defaulted loans. But in the real private sector where there is no tax payer default guarantee, or charitable donors to put downward pressure on cost, it becomes clear that the MCA industry is the free market as it should be.
We also reject the characterization that MCAs are “expensive” since there are literally hundreds of funding companies and a thousand ways to structure a deal. That’s the problem with journalists that only drop in once a year or so, Tozzi has no idea how much has changed. Merchant Cash Advance simply means short-term business financing. The costs may be the equivalent of 1% APR or 200%. It could be a purchase of future sales or a fixed daily repayment loan. It might have everything to do with credit card sales or nothing to do with them at all.
The use of the split-funding method by a charitable business lender definitely highlights just how mainstream the ideas of the MCA industry have become. Hopefully they are prepared to deal with the rapidly evolving technology environment. They just might learn there’s a reason that Wells Fargo is also playing the other side. Companies like RapidAdvance and Capital Access Network are well-oiled machines and are respected by the small businesses that fund them. Tozzi calls this awkward. We think the banks in the diagram would beg to differ…
Follow the money and you’ll see why the MCA industry is a bet anyone would make.
– Merchant Processing Resource
https://debanked.com
Notice: the diagram may illustrate relationships that are out of date and omits that nature of the financing arrangement.
It Might Be You
August 8, 2012You are innocently eating your bologna sandwich in the lunchroom when some of your fellow elementary school friends start to giggle. You giggle a little too just because you usually all laugh at things together, even though you’re not exactly sure what the joke was. “Damn,” you think to yourself. “I got all caught up in my bologna sandwich and I missed something.” Soon others begin to laugh. You laugh nervously with them, but take a couple quick glances around the room to try and locate the source of the humor. You spot nothing, but realize the chuckles are spreading like wildfire. Some people are looking at you as if they are suspicious that you might be the only one that doesn’t GET it. So instead you double down on your laughter as if to prove you’re enjoying the joke more than they are. “I’m enjoying whatever it is we’re all laughing at more than you are!,” you say under your breath. This only makes the crowd more raucous and by now everyone is starting to point in your direction.
“Ohhhhh crapppp…”
And then you find out it is you. There you are, sitting in the cafeteria, munching on a bologna sandwich with a grade school level obscenity drawn on the back of your shirt. You don’t know who drew it or when it happened, but you quickly learn it was done in red marker, particularly the kind from the 1980s that smelled like cherry, caused dizziness, and made your nose bleed after 15 seconds. There’s always somebody getting picked on, you just never thought it would be you.
Smells Sooooo Gooddddd
“Ohhhhh crapppp…”
It might be you. Every year or so, the MCA industry welcomes in a couple new big players. There’s always one that funds more, pays more, bends more, and brags more as they quickly cut into the marketshare that established funders have had for years. Suddenly they’re the hottest thing in town, that is until about 6 months later when they start telling their “loyal” broker shops to stop sending in new deals for a while. As the newbie’s joyride comes to an end, the established funders roll their eyes and continue on the way they always have, responsibly.
We’re not here to point anyone out or to suggest that brokers purposely send bad paper to an inexperienced funder. It’s just easy to spot the amateurs. Sadly, most people laugh at them behind the scenes until the funder calls it quits, completely unaware that they’ve been wearing a “kick me” sign on their back for months.
This could be an uncomfortable topic for some, but this rapid rise and fall scenario plays out across many industries. If your business is less than two years old, ask yourself this: Is your success a result of awesomeness or do you smell a tinge of red cherry marker?
—————
Does anyone know what the truth is anymore? These contradictory articles were both published yesterday by reputable news media outlets:
Banks Keep Lending Standards Tight For Small Firms
Fed Says Banks Ease Standards On Business, Consumer Loans
Is affirmative action coming to a funder near you?
Dodd-Frank’s small business lending time bomb
Growth in the usage of MCAs (selling future sales for cash upfront) is taking a huge chunk of market share away from traditional lenders.
Some crusty old reporters remain clueless as to why fewer and fewer businesses are turning to their banks for loans. Professor Scott Shane in BusinessWeek fumbled through his recent 700 word article in which he makes several unconvincing arguments for credit cards as being the new holy grail for business owners. Ultimately, he concedes that the decrease in small loans to businesses might simply be a benign statistical anomaly. This guy is a professor??!! Borrow, Borrow, Loan, Loan, Loan. Some people still can’t imagine a world where leveraging can happen without a borrower and a lender.
—————
Have you ever tried to peg down what exactly is happening in the credit markets? The National Federation of Independent Business has already done a lot of the work for you. A few clues:
- Small-business owners are increasingly employing personal rather than business cards for business purposes
- Fifty-seven (57) percent of small employers attempted to obtain credit from a financial institution in the last 12 months, a nine percentage point increase from 2010 with the demand for lines and cards each rising more than one-third. The demand for line renewals and loans were flat. More attempts resulted in more rejections rather than more small-business owners obtaining credit
- Poorer credit risks were more likely to try to borrow in 2011 than better credit risks, other factors equal. A number of financial factors, such as credit score, differentiate the two groups. Men and owners of larger small businesses were also more likely than their counter-parts to try to borrow
Download the full 76 page NFIB January 2012 report
—————
Some MCA underwriters hate when merchants state they aim to use the funding proceeds for “cash flow” as if its unspecific nature was code for betting on the horses. In the traditional lending world, businesses have been offering that up as a purpose for decades. From the NFIB Report:
– Merchant Processing Resource
https://debanked.com
The Funders of Summer
August 2, 2012What’s new? Who funded? What happened? Merchant Processing Resource will try to give you a glimpse into the Merchant Cash Advance (MCA) universe:
We all know salespeople love to fund, but underwriters?!! This banner hangs on the wall of the underwriting department at mid-sized MCA firm, Rapid Capital Funding:
Holy Moses Batman! $10 Million in a month?! Yellowstone Capital is reporting a new personal monthly funding record of $10,245,000.
There has been an influx of really creative instructional/promotional videos about MCA lately. Cartoons are really “in” right now:
PayPal white labeled a Merchant Cash Advance program in the U.K.
Will the mega banks be next?
It feels like 2006 all over again says First Annapolis Consulting in a recent article:
This seems to be the same bullish sentiment that surrounded the industry in 2006, when there was a constant influx of new MCA providers into the industry and what appeared to be unlimited financial sources. What might be different now is the experience accumulated in the industry during the recession. In the last few years, and as a result of the mounting losses that the industry suffered during the economic crisis, MCA players have implemented more conservative risk management practices and procedures.
Underwriters industrywide are also reporting that stacking, splitting, double funding, and fake statements are on the rise. It certainly brings back some nostalgia for veterans and not the good kind. A screenshot of a current ad on craigslist that is directed at bad apple merchants:
A new chapter opened for Merchant Cash Advance (This is soooo last month but a great read if you missed it).
http://greensheet.com/emagazine.php?issue_number=120602&story_id=3088
Is the loan shortage a banking problem or a merchant problem? Ami Kassar makes the case in his New York Times column.
“Where are the leads? I need the leads. Can you tell me where the leads are?” We literally get asked daily where to get leads from. We recommend:
http://SmallBusinessLoanRates.com
http://meridianleads.com
By the way… for every company that says cold calling doesn’t work, there’s a company getting rich doing just that. Same goes for SEO, mailers, e-mail blasts, PPC, and so. Marketing is an art form. Just because it doesn’t work for you, doesn’t mean it doesn’t work period. Keep doing what you’re doing. Too many ISOs/agents/marketing directors abandon campaigns after 30-60 days. Practice makes perfect!
Have you abandoned social media? We ask this question: What looks worse to a prospect?
Not having a business twitter account or having one but failing to tweet at all in the last 8 months?
Not having a business blog or having one but failing to add any new blog posts in over a year?
We didn’t spend much time researching hard data but we would surmise that freshness is a psychological component to a prospect’s shopping experience. If a business blogged regularly on their site up until May, 2011 and then stopped, might a merchant think the entire business itself is abandoned or gone? Is a facebook fan page with 1 post from 8 months ago a positive or negative selling point? WE SAY: If you build it, maintain it. Nothing brings down your presence on the Internet like abandonment. We understand that smaller companies might not have the manpower, time, or creative energy to write informative articles or engage people through social networking, especially when it’s hard to measure the results and value it creates. Consider the value you might actually be losing by projecting to the world that you have given up. It’s like operating a store with a sign out front that says “THIS BUILDING HAS BEEN CONDEMNED” even though you are actually open for business. If WE stopped posting articles for a year, would you still come back several times a month?
Here are two examples of MCA firms that keep it FRESH!:
http://unitedcapitalsource.com/blog/
http://takechargecapital.com/category/blog/
Don’t you just love MCA? We do! Visit our site again soon.
– Merchant Processing Resource
https://debanked.com
Smart Small Business Owners Have After Sales Strategies
July 27, 2012
We all want to be successful small business owners. And that means being a Smart Small Business Owner. Part of being a Smart Small Business Owner (SBO) is understanding the importance of designing and implementing effective after sales strategies.
SBOâs know that it really isnât about attracting customers. Keeping that pipeline of potential customers flowing is really just a basic cost of doing business. You can be pretty darn successful when it comes to attracting customers. You can be pretty darn successful converting those prospects into making a purchase. But whatâs really going to grow your business isnât only attracting and converting prospects into customers â itâs building strategies into your business model that pull another couple rabbits out of the customer hat: repeat and referral customers.
The term âAfter Sales Strategiesâ should not be confused with selling extended service or product subscription programs. Not that these arenât something to consider as they both represent excellent additional revenue streams. Itâs great to sell a customer a jar of face cream â it is even better to sell them a pre-paid jar of face cream for a year. Itâs wonderful to conduct a home inspection for a client before they purchase a home â itâs even better to sell them a pre-paid seasonal inspection service.
However, thatâs not the kind of âafter sales strategiesâ weâre talking about. What weâre going to address here are a category of after sales strategies that do some pretty important things when it comes to growing your small business:
⢠Improve Customer Satisfaction
⢠Improve Customer Retention
⢠Increase Positive Word of Mouth
It Pays to Act in The Best Interest of Your Customer
But first we need to talk a little bit about exactly what type of âAfter Sales Strategiesâ weâre talking about here. Simply put, these are strategies which, from the customerâs perspective, are âfreebies.â Theyâve already pulled out their wallets and handed over their cash and then receive a pleasant surprise: the business theyâve already handed their money over to does something in their best interest without trying to sell them something else in the process.
Hereâs a really simple example of how powerful after sales strategies can be.
You decide to try out a Greek restaurant youâve never been to before on date night with your spouse. You order your meals and theyâre pretty good. No complaints. The server is friendly and attentive. The dĂŠcor is nice. Youâre in the process of signing your check. Youâre not overly wowed, but you might come back. Maybe, if you happen to be hungry and in the area at the same time.
And then you get a nice little surprise. Your server approaches your table and places two small cups of Greek coffee accompanied by two small, yet perfect squares of baklava.
You say, âWe didnât order desert, Iâve already signed off on the check.â
Your server says, âOh, this is just a little treat with our compliments to top off your meal. I can put it in a box if youâre ready to go.â
You donât even like baklava (but your wife does) and youâre not sure how youâre going to feel about Greek coffee. But there is one thing youâre sure of now â youâll be coming back. There were those rolled grape things on the menu youâve always wanted to try. When you show up at work on Monday you tell your friends about the great Greek restaurant you took the wife to over the weekend. Hearing about the free dessert, a few of them ask for directions. On Friday, a group from the office runs over to catch lunch.
That coffee and dessert was a simple, low cost, yet effective, after sales service strategy. As a result you:
⢠Were more satisfied
⢠Planned on making another purchase
⢠Told others about your great experience
All three of the above are certainly responses youâd like from your customers after theyâve bought from you. Which leads us to a great question all you SBOâs out there should be asking yourselves right now:
âWhat are some simple, low cost, yet effective after sales service strategies I can put into place?â
Article By: Annie
https://debanked.com
The American Obsession With Startups
June 20, 2012Hi, I was just driving down 3rd Street and I saw an old building that had a For Sale sign on it. So I was just thinking it would be a great place to open a restaurant. It would have a really big outdoor eating area and I’ve always dreamed of owning my own restaurant. Lord knows I love food. I can’t talk long but I Googled loans on the Internet and you guys came up so I wanted to know if I could get a $4 million loan or line of credit to buy the building, fix it up, and make it into a Mexican restaurant, or maybe even Italian! Is that something you could do? I would need the money by friday…
This is the real transcript of a call to a Merchant Cash Advance brokerage. Don’t let anyone tell you that the U.S. is not a capitalistic society. Opportunity and entrepreneurship is so ingrained into the very fabric of our being that even self-proclaimed communists and socialists cast away their utopian worker ideals for the chance and self-satisfaction of turning something small into something big. We’re also an impulsive society, a trait partially due to our obsession with immediate self-gratification, but more to do with the fact that opportunities come and go in the blink of an eye. It is for these reasons that an individual who was taught to do market research, create a business plan, and mull things over is instead flying down the road with one hand on the wheel while the other hand is furiously applying for a $4 million loan to finance an opportunity he thought up 7 seconds ago.
How many other people driving down this road thought the same thing? How many of them have access to that kind of capital? Some might and so for the ones that don’t, the fear that someone is going to beat them to it turns them into unrealistic cash demanding lunatics. It’s true. The full service Merchant Cash Advance shops should probably offer John (the name we’re going to assign to the guy driving down the road) a proposal to help him create a business plan, form an LLC, and obtain the necessary licenses. These services would come with a price, a price that many people like John misinterpret as obstacles to be handled once he’s received the $4 Million. As John continues driving down the road, the dream of starting a restaurant is repeatedly crushed as he makes phone call after phone call to business lenders he found on the Internet. “There’s just no help for startups,” he concludes, and decides to hold off until the economy gets better before giving it another shot.
For 37 minutes that day, John was one of the many millions of startup businesses searching for capital. For the Merchant Cash Advance brokerage, he may have been one of the few hundred phone calls an account rep was bogged down with, while trying to help businesses that have been open for at least 1 year. The account reps have probably heard it all. “I want to start a home-based gas station“, “I need twenty million dollars for a good idea that I can’t tell you what it is because I don’t want anyone to steal the idea“, “I just got an LLC and I need $100,000 to come up with some business ideas“, “I’m gonna start an online shoe store and I need money to buy my first computer so I can get on the Internet.” We’re not poking fun at entrepreneurs since there are plenty of those who are really serious. But for the millions that call first and think second, they’re creating a disease unique to the U.S. It’s called startup fatigue. Business lenders are losing so much money by just talking to non-business owners, that they’ve taken to putting up big signs to ward them off.
The Internet is a great example because the cost of one click to the lender’s website can reach as high as $20. So how then does one tactfully express that their financing programs are for existing businesses only? It’s an art form that many have difficulty mastering. Advertisements, which are usually created to rope people in are instead being crafted to keep people out. “Hey Startups, GET OUT AND STAY OUT!” is the marketing campaign some lenders might be considering rolling out next quarter.
We expect that at this point in our post, startup specialists have already stopped reading and have instead taken to writing us long e-mails explaining how ignorant we are.
“DEAR MPR,
You are dumb. There are tons of startup lenders out there just begging for business.”
We’ll welcome any e-mails like this. Maybe these companies will stop hiding in the shadows and we can finally start helping people.
Raharney Capital, the organization that owns Merchant Processing Resource has a division that connects existing small businesses with financing companies. Coincidentally, they encounter a lot of pre-operational startups and continuously face the dilemma of how to service them.
Their first attempt to refer them out was with Go Big Network, a gargantuan networking service specifically for startups to obtain capital. Their homepage touts:
We help entrepreneurs find funding.
Over 300,000 Startups Have Used Go BIG to Connection with Millions of Dollars in Funding. Join today to connect with our network of over 20,000 investors.
They’ve been around for years and their advertisements can be seen all over the web. Inquiries about referring startups to them for a fee went nowhere as Go Big Network made abundantly clear that they did not want affiliates. Further attempts to refer them the business (even free of charge) went unanswered. It seems that even the startup masters don’t want to deal with more startups.
So we took to LinkedIn discussion groups and replied to the many individuals claiming to be angel investors or startup lenders. All of them backtracked on their original statements, with most eventually revealing that they were really looking for businesses that have been operating two years with positive cash flow. Are they liars? Not really. A young business is technically still a startup. What we did find though is that some Merchant Cash Advance providers are funding businesses that have been open for as little as three months. Not bad! (Check out: Capital Stack, Yellowstone Capital, United Capital Source, and Merchant Cash and Capital)
We thought we struck gold when we joined Startup Specialists, expecting to find lenders swarming the discussions with startup lending spam. Instead, we found no mention of financing at all. Interestingly though, this group was abuzz with activity. Thought you were cool because your post got 1 thumbs up? Thought that nothing was happening on LinkedIn? Some posts in this group are receiving hundreds or THOUSANDS of engaging, thoughtful responses! Sadly, no one seems to know where the money is, but that doesn’t seem to matter to them.
While writing this, our own inbox has grown considerably bigger and our voicemail box more full. Many are reaching out to us with questions about startup financing. The fatigue is slowly starting to set in.
One is a voicemail from Google, asking us to reactivate our Adwords campaign, something this site experimented with in the past with $100 in free ad credits. In their message, the account rep mentions that they have reviewed our site and can help startup lenders like ourselves create successful ads(what gave them this impression?). In startup-obsessed America, a stable, sustainable, and somewhat aged business is a mythical beast. Even Google has somehow mistaken our small business information site to be startup information. Too many people assume that small business means the act of trying to start a business. “Do You Have An Existing Business?” a bank advertisement might ask. Tons of people who don’t will still answer ‘yes‘ simply because the idea exists in their mind. It’s a beautiful thing in America to think that way, but getting off the ground and generating revenue shouldn’t be like winning the lottery, a game that you’ll never win but is fun to dream about.
We have interviewed writers for our site, some for volunteer positions, others to be paid. While instructing them to use small business as the subject matter, almost all of them revert to writing about starting a business. Marketing companies have also made the same mistake by pitching us their proposal to make cool videos for the site and then go on to create a demo video that talks about starting a business. One company actually asked us to provide a script and still they CHANGED IT to talk about how Merchant Processing Resource is a premier helper of startups. WHAT?!!!
By now, we’re running a high fever and the doctors suspect we have startup fatigue. Eleven more people have left voicemails, to request $300, $10,000, or $100,000,000 because they have this really sweet idea to make a restaurant named Chesster’s, (Chester’s with a double ‘s’) because each dining table will have a chessboard on it with chess pieces. Boo ya!! They haven’t worked out all the details yet but they thought the name was brilliant and oh yea… they need the money by tomorrow.
We’ll refer them to SCORE, a nonprofit association dedicated to helping small businesses get off the ground, grow and achieve their goals through education and mentorship. They may not get financing, but they will get HELP. And that’s really what Americans need. There isn’t a lending problem, there’s a helping problem.
Entrepreneurs like Mark Zuckerberg made it tougher for all of us. His progression went from random idea to scooping up cash from a classmate, to billionaire CEO of a publicly traded empire. He didn’t sit down with a SCORE mentor, do market research, and consult with a lawyer about how best to structure an organization. These are things he would have considered as obstacles to achieving his dream before someone else beat him to it. “I need the money by friday because this is going to be big,” Zuckerberg might have told a Merchant Cash Advance account rep who had heard the same story 97 times that morning alone.
Zuckerberg’s whirlwind success story portrays him as a role model genius, a boy who acted and capitalized on the split second window of opportunity while all the pieces fell into place after the fact. The rest of America so badly wants to replicate that. Too many people envision themselves in an interview with a New York Times reporter two years from now to talk about how they were driving down 3rd Street and the idea of starting a home-based gas station just popped into their heads, prompting them to Google business loans, and the rest of their billion dollar story is history. Similarly, when that doesn’t happen, just as many people chalk up their failure to a bad economy, Obama’s unwillingness to help, or the big bad banks indifference to the little guy.
It’s okay to go slow and get your ducks in a row. Hell, doing it this way is probably more honorable than what Zuckerberg did. You don’t need the funds by tomorrow, friday, or even next week. What you need is proof that you can provide a product or service for a profit and then to carefully plan and structure an organization that will last. Raising money should be a contingency for expanding sales, not for registering your LLC or to solidify an idea.
There’s a reason that the topic of small business is inundated with information on how to start one. So many fail to get off the ground. There are conflicting and sensational statistics that claim that 9 out of every 10 startups fail. In startup-obsessed America, it’s probably more than that. We would argue that John’s wild foray into entrepreneurship started when he spotted available space for a restaurant and failed when his first instinct was to search for lenders. In the meantime, a few financial firms got caught in the cross fire and spent money to answer his phone calls. Both sides were left frustrated since neither got what they wanted.
In today’s world there is a growing anti-startup movement. Americans want jobs to feed their families and lenders prefer to invest only in existing businesses. The problem is that without startups, fewer businesses will become established (bad for lenders) and fewer jobs will be created (bad for Americans). Our only hope then to turn the tide is to embrace the startups, not shun them. The message shouldn’t be: Get lost you potential job creating jerks! Every lender (and Merchant Cash Advance provider) should have a model to assist startups in some way. It’s okay to charge for this service and profit from it by the way. Any potential business owner who enters the startup arena expecting not to pay anything out of pocket is dreaming.
If America associates small business with starting a business, can a lender really parade themselves as a small business champion if their public message is to send startups packing? We don’t think they can. Similarly, individuals need to do their part and calm their impulses. Drawing up a plan, forming an LLC, and obtaining the necessary licenses aren’t annoying obstacles to take care of after the fact. You can’t really expect to raise capital on a wild whim while you’re flying down the street talking about a random building you saw on the side of the road. Imagine how crazy that sounds to a lender?
Patience and hard work, we say. That goes for the entrepreneurs and lenders alike. Let’s help each other, not hate each other. It won’t be easy, but then again success isn’t supposed to be like winning the lottery, a game that you’ll never win but is fun to dream about.
To Fund or Not to Fund in Hawaii
June 1, 2012
Aloha! The Resource’s main operator is “busy” vacationing in Hawaii, hence the long gap in site news. But since we’ve got Hawaii on the brain, we figured now is a good time to discuss Merchant Cash Advance (MCA) financing in a state that practically exists in its own universe.
Ask underwriters from different firms about how they approach applications from Hawaii and you’ll get some opposing views. Some will argue that the distance is too vast to risk their capital. A business tucked away in the middle of a remote Pacific island may feel less bound by their contractual terms since there is a very small likelihood that a funder will fly thousands of miles to enforce it. “What consequences am I really facing from a company light years away in New York City?,” a Hawaiian merchant might ask themselves. This is a negative Hobbesian view that promotes the idea that merchants are inherently corrupt and that they need a fear of recourse to honor their contracts. There’s a reason that the MCA industry feels particularly vulnerable.
The nature of the transaction provides funders with barely any recourse, giving credit to the psychology that being worlds apart is more than just a paranoid insecurity. When MCAs are structured as a sale, it is not possible to report a delinquency to the credit bureaus since no credit has been extended. Lawyers will argue that MCA funders are protected by their iron-clad contracts which grant numerous advantages to the funders in the event a merchant breaches their contract. However, if a funder files a lawsuit in Brooklyn, NY, how likely is it that a merchant in Hawaii will fly there to respond to it?
Merchant Cash and Capital may have had reason to hate the state back in 2007, when they got burned by Hawaii Travel Network, a Hawaii-based travel agency for an amount close to $1 Million. However, they have continued to fund businesses there without prejudice.
At the end of the day, underwriters must leave their fears at home and rely on data analysis to make decisions. When the financial crisis hit, there was plenty of real data to support why funding in California, Nevada, and Florida was a bad idea. Many local economies got beat up really bad. It’s no wonder that when people started losing their homes to foreclosure, they began to forgo all of their financial obligations in order to get by. It was then that Hobbes’ theory of humanity was more appropriately applied, as merchants reverted to a state of nature and put self-preservation above all else. “If the recourse for defaulting on an MCA is just a lawsuit then so be it,” said a hypothetical business owner who had just lost 60% of his 401k and was hiding out from the Repo Man.
While Hawaii wasn’t exactly made a poster child for economic devastation, it was hit pretty hard by the loss of Americans’ disposable income. 80% of Maui’s economy is related to tourism. That means they are inevitably affected by problems on the mainland. However, one factor that makes Hawaii all the more resilient, is its location. In April 2012, the number of Canadian and Japanese tourists combined outnumbered visitors arriving from the eastern half of the United States. So in hard times, Hawaii may go down, but it will not go out!
Besides, while many mainland states are now coming to terms that the economy is still stagnating, Hawaii earned more income from tourists this past April than in any other April in history. Sure, there are problems, political qualms, and flaws in the state’s infrastructure, but it is really not that much unlike the rest of the country (except for the fact that it is way cooler đ ). Many of the vacation destinations feel more like America than some parts of mainland America.
So does the MCA industry really have anything to fear in Hawaii? It depends on the risk tolerance. Travel agencies and tour companies have historically been shunned by funders, although that’s changed a lot in the last six months. Even established tour companies can disappear overnight. Tour companies in exotic locations walk a thin line every second of operation. They face constant injury liability, state and local law restrictions, and pressure from the property owners on which the tours explore to meet a certain standard of care. It can’t be omitted that a few bad online reviews can cause all their potential customers to book with their competitors instead. The Internet is the public’s best resource for researching vacation activities. No one wants to book a tour that has poor feedback.
Major resorts and hotels are the lifeblood of local economies there. If a big hotel fails, all the small businesses in the near vicinity will go right down with it. Some of the best restaurants in the state are on the grounds of a major resort, highlighting that nearly everything is tied to tourism. The weather too can be fickle.
If a funder can tolerate those risks, and they’re not unlike many of the other vacation destinations in the country, than we say, go for it! But when a Hawaiian MCA deal goes bad and the business phone number is disconnected, go ahead and file your lawsuit in Brooklyn and see how much good it does. You might end up imagining that the merchant has shrugged off your contract to spend their afternoons surfing instead. You’ll kick yourself for doing a deal in such a faraway land.
After being in Hawaii for just a week, I received a phone call from a friend to update me on MCA industry events. Truth is, I didn’t care what he had to say. It’s way too nice here to care about what’s going on elsewhere. If our website goes down next week, you may start to imagine that we have shrugged off the Resource to spend our afternoons surfing instead.
Don’t laugh, because you would be right. The rules change when you’re thousands of miles from the rest of the world. Mahalo and Aloha!
-deBanked
https://debanked.com
Note: No Hawaiians were injured during the course of this blog post.
