By Sean Murray via DeBanked
How would you like to make $12,000 on a single referral?, a flyer directed at business finance brokers asks. This ad wasn’t offering a commission for brokering a loan or advance, but rather for enrolling a merchant’s debt into the company’s restructuring program. Debt restructuring, negotiation, or settlement is a booming cottage industry these days. Some of these debt restructuring companies promise ISOs that they will be completely discreet with referrals. Others offer them commission bonuses for achieving certain enrollment targets. It’s a way to monetize declined deals, they typically say.
For merchants, the allure of a restructuring company’s help might just be payment terms tied to their monthly budget. That’s allegedly what one NJ firm’s agreement says, in fact. “I hereby authorize [the company] to negotiate my unaffordable business debts and to enter into affordable repayment terms on my behalf based on my monthly budget,” reads a document submitted in a New York Supreme Court case involving Creditors Relief. And based on the marketing materials deBanked has reviewed from several similar companies, their definition of debt is so broad that it can even include things that aren’t debt, like merchant cash advances, for example.
Even if the restructuring company held a critical view of MCAs and believed them to be loans, treating them as such for the purpose of negotiation might actually cause harm to their customers. That’s because a well-formed MCA contract already offers payment adjustments at regular intervals to appropriately match a merchant’s sales activity. Depending on what the language says, a merchant might just have to call their funder and ask them to reduce the debits to reflect their current sales activity….
The point is this: a merchant need notpay a fee to an outside company to restructure anything when sales drop because a free remedy already likely exists and is a key benefit to MCAs in the first place….
2016 Q2 Equifax Subprime Credit Population by County
via FRED Read Full Article Here
The two graphs show the percentage of the population with a credit score below 660 in each U.S. county in 2009 and 2016. A person with a score below 660 will have a harder time securing credit from a lender and may have to pay a higher interest rate if a loan is secured. Comparing 2009 and 2016, we see that the percentage of the population with a subprime credit score has decreased substantially, consistent with the recent changes described above. In addition, the graphs show that counties in the south and southeast have a larger-than-average concentration of subprime population.
David Gens believes the top 3 alternative small business finance players in Canada are funding between $15 million and $20 million to small businesses a month combined. That’s a small market compared to the US, where the top 3 companies are funding close to a half billion dollars per month. Gens, who has a background in private equity, is the founder, president and CEO of Merchant Advance Capital, a company with around 40 employees in offices in Toronto and Vancouver.
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