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The Promise Of a Loan That Does Not Exist Leaves Business Stranded
"Someone promised him a unicorn and delivered a donkey with a broomstick on its head instead"
Richard Moghadam commented
8/11/2021
Editorial/Opinion
Written by Richard Moghadam
Owner- Metromedia Funding Solutions
Host- The Funded Project
The phones ring non-stop and the hustle and bustle of a busy office are underway on the hot August Wednesday morning. The design center is in full swing and the environment is cautiously optimistic as help is found for merchants calling in. But something is not right, the applicants have changed. They notice the story on the other end of the phone is painful. The struggling merchant that placed an application in for funding has a few payments coming out of their account and is stressed. They have merchant cash advances.
For readers of this publication that do not know what a merchant cash advance is, it is a financial transaction where a funder, not a bank, purchases future receivable income from a business owner that would sell it now for cash upfront in exchange for daily payments to come out of their bank account until paid off on auto-draft. The product its self is useful for many businesses that need to boost marketing to increase sales, hire folks, and use it to pay for things the business needs to grow.
The merchant cash advance is like a bulldozer, you should know how to use one before you go get one because if you use it wrong, it can hurt you.
Because of the painful stories on the other end of the line, I think we better understand what this instrument is and clear the air so you, the business owner, are aware of this tool, which is a wonderful tool, but more importantly, the power of this tool and what you need to know. The merchant cash advance tool is a spin-off of what is known as "factoring" which dates back to the biblical days' whereas someone would buy the payments owed to you now for trade as long as the party who owed the bill understood and paid the party directly the whole bill to them directly. Fast forward to modern times, the merchant cash advance was born from the credit card processing companies as a way to advance some cash to a business for a percentage of their credit card sales, still very popular. It was not until after 2008 when the banks dried up and stopped lending money that the ability to run the same concept on someone's business using the bank statements was born. The product grew wildly popular as the fact of a cash infusion that is not a loan was made available to businesses everywhere. By 2010 there were 100's of providers and 1,000's of brokers promoting the service and product, and making a lot of money doing so.
But, The Story Gets Dark
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We all know the world is not a warm and fuzzy place. Most people in the industry are honest, but like every industry, there are always a few bad apples. The issue we heard was there are rouge people telling these merchants they must take out a cash advance to qualify for a loan. Write this down in your fact-checker right now. In NO case does a MERCHANT CASH ADVANCE show any BANK OR LENDER anything. This SHALL ALSO BE REMEMBERED, in any reputable funder the proper payment history WILL show your worthiness to pay and WILL get you lower rates and longer terms, only at reputable real funder. Please read that paragraph again.
Now, we have established this as FACT. Moving on, WHY would anyone do that to a business? Let's explore. They do that to a business owner that may have tarnished credit in hopes to dangle them along and make money, its a sick move and we have found parties that do that, and I do not like them. It gets worse, some have gone as far as to tell you to take a deal that is crappy for your business and hide the fact that there are better options for them. Some out there are going further than that by instructing merchants to default on one funding company in hopes to put them under.
My position on this is that it is tardy to do that to someone in the first place, it is disgusting to use an unsuspecting small business as the vehicle to take out another funder, and that is what I saw. Who is the victim and who is the perpetrator is now the question? First, we look at the "merchant" "business owner" (notice I did not say entrepreneur, more on that in a moment), I am going to be blunt about this, if we worked hard to stand you up after a downfall, and we built your business for a couple of years, let's use some sense here and you should not be taking random funding offers from strangers that call you. You cannot play the victim because the only way I see them there is because you let them be there, YOU let them be there. BUT if you show me where they give you a contract for some term loan that does not exist, I am going to do everything I can to help you grow the business and make good on the advance and try to help you find safe resources afterward. Some of you reading this fit that description perfectly. Do we look at the broker or the funder? Who is who, they change name tags often, and like politicians, you can put them in a bucket, shake it three times and dump it out on the floor and you wouldn't be able to tell them apart.
This editorial is a call out, to every business owner, to every funder, to every broker, to every underwriter, to every processor in the space that there is a MORAL RESPONSIBILITY that comes to selling merchant cash advances, and as a social media influencer, as a Christian, as a business owner of several businesses myself, and as a father, I am setting these ground rules for anyone we work with that are demanded as followed from this point forward. I am giving this platform, my event-planning advertising company- Circle City Magazine as the platform of which we will discuss expectations, and remove the offenders from this space. I am doing this at no cost to the industry.
There are a few merchants who have shown us supporting evidence that this happened to them, it is tragic because they cannot get better funding options because of these offending parties transgressions, I am not going to be the one who tells you who they are, I am going to invite them all to this post and let them tell you in their own words.
Without further delay, let me prescribe the rules for the parties that are working in this industry.:
From this day forward, you pledge to never, under any conditions use the promise of a loan to sell an advance
From this day forward, you promise to never stack a merchant (stacking is the action of a merchant taking out multiple merchant cash advances at the same exact time).
Respect your fellow funders, do not do slimy things to another funder to steal a book of business, there is plenty of business out there that you can serve.
Brokers and ISOs learn to respect each other, and the businesses that chose you and trust you.
Brokers and ISO's please use this opportunity to understand the tool that you are selling, do it immediately.
I am all about fair game competition, I know timing is everything, but let's do this right because this is a great tool.
Business owners This section is for you, I need you to understand that running a business is already stressful enough, I get it, but please, do not shop your broker after you start using one. Choosing a broker should be done carefully. There are many independent ones across the country. Find someone you can get along with, someone who is there for you and your business, my shop is a business development shop. When you come in, we want you to know, everything we are doing is to help you, the same way it is when you go into a broker shop in most parts of the country. Make sure you ask for references, what is the social footprint? Why do they sell these? Most business development firms will have access to the merchant cash advance tool.
It needs to be remembered and applied that merchant cash advances are not loans, these are advances, for every dollar, you take in on an advance, the rule should always be to turn that dollar into five dollars. The broker you work with should be able to provide you with the tools and resources to help you along the way. For instance, my shop has a marketing platform, web development, a videography studio, a software development, and an I.T. solutions center We use the merchant cash advance tool as a vehicle to grow your business and bring more customers to you through over 1,000 services and products available, it's like a Walmart. I was on the other end of the phone many years back, and it cost me years of my life and countless dollars I cannot get back, so please remember, if you choose to come to my shop for funding, I am not here to just "fund you" I am the shop that is going to do everything I can to help you grow. Feel free to visit me on YouTube, join the over-5,000 subscriber base I have and, watch the stories as they unfold. No one is perfect, including me, and I have no clue how everyone else runs their program, but I can tell you mine works and prove it.
If you are a business owner, and reading this post and, you want to grow your business, I invite you to click the link below and let's explore ideas and find the future.
