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Thread: merchant defualt rate

  1. #1
    Join Date
    Jun 2008
    Posts
    16

    Default merchant defualt rate

    are more merchants suddenly going out of business? it seems that default rates are soaring as high as the price of oil- is there any correlation?

  2. #2

    Default

    I think it all depends on the quality of the deal that the MCA provider approves. You got merchants that are a collection waiting to happen, yet with the fierce competition some MCA providers are more lenient than others in approving deals, resulting in a higher default rate. The highest default ratio I have heard to date was First Funds at around a 19% default rate. The numbers still work somehow

  3. #3
    Join Date
    Jun 2008
    Posts
    16

    Default

    maybe they don't- i heard first funds is looking to get out of the business.
    they r trying to sell their book of business. i guess second source wasn't the best thing for them.

  4. #4

    Default

    I've heard many things about First Funds default ratio and personally I believe it's because of how the deals are structured. Looking at companies like AMI for example, consider the merchants entire receivable before deciding the retrieval rate. Taking 25% of a merchants CC receivable can be very devastating if most of their revenues are through CC.

  5. #5

    Default

    I must agree with premium.

  6. #6
    Join Date
    Jul 2008
    Location
    Springfield, MA
    Posts
    548

    Default

    Quote Originally Posted by samthemoneyman View Post
    The highest default ratio I have heard to date was First Funds at around a 19% default rate. The numbers still work somehow
    There were a few other companies that went under with default rates a bit higher that that. Sometimes it's not only about the default rate - but also how good the company is on collecting their bad debt. Can they work with the merchant in-house to get them on a payment plan of some sort? Can they find a collections company to buy the bad debt? Or do they get a lawyer to go after the merchant?

    Of course, the numbers would work a lot better if the default ratio was less than 19% - but they have to have some procedures in place to collect some of that back.



    Trust me, you don't want this guy coming after you for shutting your machine off.
    Last edited by GRP Funding; 07-30-2008 at 04:01 PM.
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  7. #7

    Default

    haha thats great!

  8. #8

    Default

    Quote Originally Posted by samthemoneyman View Post
    I think it all depends on the quality of the deal that the MCA provider approves. You got merchants that are a collection waiting to happen, yet with the fierce competition some MCA providers are more lenient than others in approving deals, resulting in a higher default rate. The highest default ratio I have heard to date was First Funds at around a 19% default rate. The numbers still work somehow
    I agree. In addition to approving the higher risk deals there are some companies willing to give merchants more money than they should and/or take more of the processing than they should which does nothing but hurt the merchant and put a black mark in the CA industry.

    Some agents get excited when they are able to get a deal approved with another company when the merchant has a low fico or when they are able to get the merchant more money but you have to ask yourself if a company is willing to take that on, how long will they be around?
    Thanks,
    Laura Franklin
    (937) 626-4697
    laurafranklin45429@gmail.com

  9. #9

    Default

    In general anything over a 25% retrieval for a merchant cash advance is dangerous for the merchant. The higher you go on the retrieval the less likely the merchant will renew, and you are putting yourself at the risk of the merchant defaulting. We typically stick to anywhere between 10% on the low end, and 25% on the high.


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  10. #10

    Talking

    Quote Originally Posted by GRP Funding View Post
    related?

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