This past week I had the pleasure of sitting down with one of our competitors for lunch. This smaller company is one of the few that has been able to successfully raise capital and grow smart and slow with ultra-conservative underwriting. Since then I've called a two of the CEOs of our larger competitors to talk shop with them and confirm the current state of the industry and most importantly the sales agent landscape for Merchant Cash Advance.
The largest surprise in the industry is that while demand for Merchant Cash Advance is rapidly increasing, the "traditional" agent network is shrinking. On average most funding companies have seen anywhere from 20 to 25% of their ISO agents going out of business. The good news is that the majority of these agents are those that jumped on the MCA bandwagon after the mortgage collapse.
Gone are most of the large, boiler rooms pounding the phones with press "1" campaigns that were slamming and jamming MCAs down merchants throats and forcefully taking large broker fees. The costs associated with running such operations are just too costly. What's left are ISOs that focus on processing, providing good customer service and offering MCAs when it makes sense for the merchant.
At AFS we've worked hard to deliver outstanding customer service (and yes we still have a long way to go) to our agents and its paid off well. Those agents that have really partnered with us now have impressive portfolios of 40, 50 and even 100-plus merchants that continually renew their merchant cash advances and payback terrific. We consistently are cutting renewal and residual checks in the five-figures to some agents (and that doesn't even count the processing residuals!)
If your selling MCA or considering selling MCA, I can't think of a better time. Product demand is on the rise, sales competition is decreasing and most funding companies that have survived are consistently approving and funding deals. One just needs to decide if they are going to be the hare or the turtle in the game. Yes, the hare gets off to a fast start and makes some quick bucks but soon things catch up to him. Meanwhile the turtle focusing on building a strong client base with integrity and customer service. We all know who ends up winning the race.
