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Is Nearly Every Merchant You Talk To Stacked with MCA Debt? Here's What To Do...
Have you noticed that no matter how hard you pound the phones, no matter how many "fresh" leads you buy, no matter how sophisticated your digital marketing methods (Facebook, Google Ads, LinkedIn, etc), and no matter which acquisition channels you target, all you get is dog $h#t? Merchants stacked with 2, 3, maybe even 4 MCA positions? If you're tired of fighting for crumbs, then this post is for you. Read on...
Hey I'm Sean (the owner of lendnet.io), and after talking with loads of ISOs and MCA companies and generating inbound leads for them from the SAME channels that the big companies like Ondeck target, I found a common problem.
No matter how great our digital marketing was... Most of the deals we would get were merchants who already had MCA debt, and some were even stacked with multiple positions. And this was true no matter how much we filtered their revenues, and no matter how thoroughly we qualified them through our marketing funnels.
So the natural question arose...
What if this industry is reaching complete market saturation, and is ripe for disruption by innovators?
To give you a bit of an analogy, let's visualize the alternative lending industry as a trend that started back in 2008 with good intentions... And the trend can be seen below as a pendulum. All movements and trends usually behave in this sort of cyclical way...
In the diagram above, you can see that the pendulum has gone way too far to the right when it comes to Merchant Cash Advance debt. What started off as a benevolent movement designed to help business owners get access to working capital when banks denied them, has somehow turned into a malicious and predatory trend, where now we have merchants out there with extreme levels of Merchant Cash Advance positions. Even when I was running ads to get leads from the freshest lead sources, we were running into merchants who were stacked to the ears with MCA debt...
4 Specific Reasons Why I Think the Merchant Cash Advance Industry has Reached Complete Market Saturation
These are just 4 reasons I came up with off the top of my head, but I'm sure there are plenty more we could find if we really dove deep into the subject...
The Light At The End Of The Tunnel...
It finally hit me when a client whom I had previously worked with to generate deals for them had completely changed their website to focus on Merchant Cash Advance debt restructuring.
When I saw their new website, I realized that the industry is shifting and that there is a potential blue ocean opportunity here for ISOs and Merchant Cash Advance companies.
And if ISOs like you don't take this opportunity to innovate, then there are money hungry lawyers and debt settlement companies who will.
Disruption to this industry is definitely coming, and you want to be on the right side of it.
Side Note: What is a blue ocean opportunity?
----------------------------
In his book Blue Ocean Strategy, W. Chan Kim describes the business landscape as consisting of red oceans and blue oceans, where red oceans are competitive spaces where competitors are being torn apart by each other, creating a red, bloody ocean.
A blue ocean is an entirely new uncontested market space where you have no competition and are the first to market. The book talks in depth about the concept of value innovation where you disrupt the status quo of the industry by doing things that make the competition irrelevant.
----------------------------
A core principle of Blue Ocean Strategy is Value Innovation
So basically, value innovation is where you're creating more value for the buyer while simultaneously cutting your costs for delivering the value. And of course, the value is delivered in a way that runs tangent to the industry standard (no one in the industry expects the value to be delivered in that way).
Keep this concept in mind as we continue our discussion of the alternative lending industry and why I think it's ripe for the application of "value innovation" through debt restructuring and consolidation.
Most ISOs are Competing in a Red Ocean with Diminishing Returns
Contrary to what most ISOs told me on the phone when I was asking about their lead problems, there isn't an infinite supply of A and B paper merchants.
On the phone, ISOs would tell me "we're always looking for new lead sources" or the all too common "we're always looking to diversify our lead sources."
When I dug a little deeper, I realized that they have no clue what they're doing when it comes to this industry.
They really do believe that there are "new lead sources" out there that will bring them A and B paper deals FOREVER.
LOL.
These guys are mainly just sales guys who have been doing sales all their lives and think a lead is some magical piece of paper with a name and number that appears out of the ether.
All they do is pound the phones and hope to get some merchant who is blissfully unaware about all the greed from shady actors in the unregulated alternative lending industry.
This greed translates to stacking debt on top of debt onto merchants (even if the merchant's business cash flow cannot support it).
Why?
Because most ISOs only care about making money and not about actually solving problems like a true entrepreneur does.
Continued in the next post...
Hey I'm Sean (the owner of lendnet.io), and after talking with loads of ISOs and MCA companies and generating inbound leads for them from the SAME channels that the big companies like Ondeck target, I found a common problem.
No matter how great our digital marketing was... Most of the deals we would get were merchants who already had MCA debt, and some were even stacked with multiple positions. And this was true no matter how much we filtered their revenues, and no matter how thoroughly we qualified them through our marketing funnels.
So the natural question arose...
What if this industry is reaching complete market saturation, and is ripe for disruption by innovators?
To give you a bit of an analogy, let's visualize the alternative lending industry as a trend that started back in 2008 with good intentions... And the trend can be seen below as a pendulum. All movements and trends usually behave in this sort of cyclical way...
In the diagram above, you can see that the pendulum has gone way too far to the right when it comes to Merchant Cash Advance debt. What started off as a benevolent movement designed to help business owners get access to working capital when banks denied them, has somehow turned into a malicious and predatory trend, where now we have merchants out there with extreme levels of Merchant Cash Advance positions. Even when I was running ads to get leads from the freshest lead sources, we were running into merchants who were stacked to the ears with MCA debt...
4 Specific Reasons Why I Think the Merchant Cash Advance Industry has Reached Complete Market Saturation
These are just 4 reasons I came up with off the top of my head, but I'm sure there are plenty more we could find if we really dove deep into the subject...
- Reason #1: Everyone and their mom is a business loan broker nowadays. It seems to be a tradition especially in NYC that everyone should be aware of this opportunity. With movies like "Wolf of Wall Street" creating a frenzy of people excited to become high-ticket salesman. That movie romanticized the boiler room type of atmosphere that is all too common all over NYC, and that is what drives so many people into the MCA industry. It's filled with people just like Jordan Belfort who consider themselves "alpha closers" and want to be seen as a "Wolf of Wall Street". So basically, it's clout and status chasing as usual driving more schmuck brokers into the MCA and similar industries.
- Reason #2: The economy is in the gutter and it's only going to get worse. People are desperate, so they are flocking towards industries like MCA and Real Estate and Recruiting, which offer large commissions in sales. When people can't afford to make their rents, especially in expensive cities like NYC, Miami, Los Angeles, Chicago, they will flock to industries like MCA and you will face more competition because the barrier to entry is so low to get started.
- Reason #3: Sophistication of marketers entering the space has increased significantly since 2018. These dudes are saturating the space even more with MCA debt. They know about "Clickfunnels," they know about marketing funnels, they know about "HelloSign", they know about CRMs, they know about email marketing automation, they know about systems and processes, they know how to use technology to get the bank statements without chasing clients, etc.
- Reason #4: There are dudes like Oguz Konar creating online courses for "how to become a business loan broker" and he has A LOT of members in his course. His course is pumping new brokers into the market at unprecedented rates, creating a race to the bottom for ISOs who work in this industry (and not just with MCAs but also with other financial products). I have nothing against Oguz and I respect his hustle, but you have to admit that guys like him are adding fuel to the fire when it comes to market saturation for the merchant cash advance industry. The main problem is that there is a low barrier to entry in this industry and anyone can become a business loan broker.
The Light At The End Of The Tunnel...
It finally hit me when a client whom I had previously worked with to generate deals for them had completely changed their website to focus on Merchant Cash Advance debt restructuring.
When I saw their new website, I realized that the industry is shifting and that there is a potential blue ocean opportunity here for ISOs and Merchant Cash Advance companies.
And if ISOs like you don't take this opportunity to innovate, then there are money hungry lawyers and debt settlement companies who will.
Disruption to this industry is definitely coming, and you want to be on the right side of it.
Side Note: What is a blue ocean opportunity?
----------------------------
In his book Blue Ocean Strategy, W. Chan Kim describes the business landscape as consisting of red oceans and blue oceans, where red oceans are competitive spaces where competitors are being torn apart by each other, creating a red, bloody ocean.
A blue ocean is an entirely new uncontested market space where you have no competition and are the first to market. The book talks in depth about the concept of value innovation where you disrupt the status quo of the industry by doing things that make the competition irrelevant.
----------------------------
A core principle of Blue Ocean Strategy is Value Innovation
So basically, value innovation is where you're creating more value for the buyer while simultaneously cutting your costs for delivering the value. And of course, the value is delivered in a way that runs tangent to the industry standard (no one in the industry expects the value to be delivered in that way).
Keep this concept in mind as we continue our discussion of the alternative lending industry and why I think it's ripe for the application of "value innovation" through debt restructuring and consolidation.
Most ISOs are Competing in a Red Ocean with Diminishing Returns
Contrary to what most ISOs told me on the phone when I was asking about their lead problems, there isn't an infinite supply of A and B paper merchants.
On the phone, ISOs would tell me "we're always looking for new lead sources" or the all too common "we're always looking to diversify our lead sources."
When I dug a little deeper, I realized that they have no clue what they're doing when it comes to this industry.
They really do believe that there are "new lead sources" out there that will bring them A and B paper deals FOREVER.
LOL.
These guys are mainly just sales guys who have been doing sales all their lives and think a lead is some magical piece of paper with a name and number that appears out of the ether.
All they do is pound the phones and hope to get some merchant who is blissfully unaware about all the greed from shady actors in the unregulated alternative lending industry.
This greed translates to stacking debt on top of debt onto merchants (even if the merchant's business cash flow cannot support it).
Why?
Because most ISOs only care about making money and not about actually solving problems like a true entrepreneur does.
Continued in the next post...
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