Revenue Based Financing and MCA Training for Business Loan Brokers - YouTube

Hey it's Ty Crandall with Credit Suite with some  more loan broker training for our business loan  

brokers, well today we're going to try even to talk  a little bit more about revenue and cash advances  

how these products work and what they can do to  help your borrowers easily and quickly obtain  

financing. So when we talk about financing that's  based on cash flow what we're talking about is  

lenders that will approve borrowers based on  the cash flow going through their business,  

now sometimes this can be tax returns but in  most cases nowadays especially with revenue  

and merchant cash advances this really has to do with a review of bank statements. So  

what the lenders are typically looking for is  responsible bank management, so they're looking  

to make sure that people have positive cash flow,  that they're not over drawing their account and  

having non-sufficient funds. Basically that they  are managing their bank account responsibly so  

we're looking at consistent deposits not just  random and few deposits but consistent deposits,  

positive cash flow where more money is going  in the bank account than coming out, low to no  

non-sufficient funds again in any kind of loan the  lenders most concerned of the borrower's ability  

to repay the loan. So if they are don't have more  money going into the bank account than coming

out if they're overdrawing the bank account these are good indications they may not be able to pay

the loan back, and this is the same thing with having a positive ending bank balance, making sure

that they have money left over at the end of each month. So some financing does look at tax returns

as I mentioned when you start to get into alternative SBA loans, SBA loans even some term

loans and lines of credit they'll ask for tax returns, and some lenders will even give the customer better

terms when they provide a tax returns, but in most  cases a lot of these lenders for cash advances  

are mostly looking at bank statements. And again  if they do have 1-3 years with the tax  

returns that could definitely help as well, but  when they are looking at tax returns lenders  

are typically looking for revenues increasing from  year to year, and they're looking to make sure that  

the tax returns have some kind of actual profits on them. The difference for a borrower being able  

to get a good long-term loan and credit line often  time comes down to whether they're showing any  

kind of profit or no profit or profit at all  on those actual tax returns. So when we talk about  

these revenue cash advances and merchant cash advances, so we'll talk a little bit of both and talk

about the difference between them, this is really fast money this could be secured in 3 to 7  

days, we've even secured financing for clients as little as 24 hours. It's very easy money to get  

as well remember when we talk about the three C's formula of lending, somebody either needs cash

flow credit or collateral. Now if they have one of those C's they typically don't need the other, so in

this case we're basing the approval on cash flow, that means that collateral and credit don't matter so

they can get approved even if they have very low  credit scores, as matter of fact, a lot of lenders  

don't pull credit and some of the lenders that  will pull credit are looking for scores as low  

as 500. All that's needed for approval is 6 months worth of bank statements and merchant  

statements for reviews, now this differs with some  of the lenders some lenders will actually do this  

electronically they'll use artificial intelligence  to come in and evaluate the bank's name it's even  

pull the bank statements directly from the  online bank account from the borrower, others  

will make you submit 6 months worth of physical  bank statements and/or merchant statements they

like to have both for review the actual merchant  statements that show the credit card approvals  

transactions deposits and the bank statements  that show all amount of money that's going

all deposits going to the account even ones that are not credit card. Now usually loan amounts are  

equal to about 12% of annual revenue again this  really fluctuates per lender some based on risk  

might only go to 8 or 10% some may go higher, but on average you're typically going to see  

that a borrower is able to get about 12%  of their annual revenue advanced them so they  

have twenty-two hundred thousand dollars a year  in annual revenue and they're looking to get an  

advance somewhere around $24,000 for example, now a lot of these lenders are doing daily paybacks

which means that payments are withdrawn daily  from the business owners bank account, but with  

lower risk scenarios borrowers can also be provided weekly or monthly paybacks as well.  

So with really low-risk scenarios then it's not  uncommon to see lenders offer monthly payments

on this and for medium to low risk it's also common for lenders to be able to sometimes offer

weekly paybacks instead of daily withdrawals from the business bank account. Now these are

short-term loans typically 6 to 18 months on average yeah a lot of them may go as far as 36

months with lower risk borrowers. Usually in the beginning the lender gives the borrower lower terms

or shorter terms like 3 to 9 months and then as the borrower pays back their first advance it comes

back for more money the terms typically get longer 9 to 18 months and again for really low-risk

situations you can even see these go as far out as 36 months but typically we won't see them go

longer now typically loans amounts go up to 500,000 and again this is with some lenders a lot of

lenders are up to about 4 or 500,000 but there's a lot of niche lenders that may lend in

certain industries to have an amount lower than  this, but again 4 to 500,000 is  

the norm of how high lenders will go. We find that  over 70 nearly 80% of people come  

back for more money after they pay off the first  advance. So it's very common for borrowers to  

come back renew and get more money, and they could typically do this when they pay about half of

the amount that they've borrowed back. Rates fluctuate wildly on this program we've seen rates as

low as 8% 10% are really low-risk borrowers and then you can see rates as high as 50 65 % with

high-risk borrowers. Now what this means is it means this program can work really well for people

that are low-risk and really well for people that are  high-risk that might not be able to get financing  

through other means. Now risk factors that affect  rate include time in business the industry they're  

in the quality of their consumer credit how they  manage the bank account the ending balances etc  

etc there's many factors but see these are some  of the core factors that determine rate, and fees  

an interest 100% deductible tax-deductible as with all financing. So it makes it easier for  

the borrower to write off the taxes as long as  they can afford the payment which means in a lot  

of cases with these this option lenders will give  the borrower options of whether or not they would  

like a longer term and higher rate or a shorter  term and I'll actually pay a lower rate in most  

cases a borrower's going to choose the longer term, and take the higher rate because that's what

will give them the lowest payments. So a really good program because a lot of options are

available for the borrower. Now most of the times lenders are not going to want to see that they're

currently in trouble so this is a bankruptcy or very recent liens they need to have about $120,000  

thousand or more in annual revenue that's about  10,000 a month. Now with compensating factors  

some lenders will go as low as $5,000 monthly on revenue cash advances and  

the main difference between these two is revenue  cash advances really look at everything in the  

business bank account, cash deposits and checks  whereas merchant cash advances are just looking  

at credit card transaction. So with merchant cash  advances it's common to see lenders it'll go down  

as low as 5,000 monthly in revenue, but again  the norm here is 10,000 monthly in revenue and  

the enorm is also to be 12 months in business. Now again with some compensating factors some

lenders will go as little as 6 months in business  and compensating factors can be really good  

personal credit low-risk industry really good banking account management etc. They're going to

look for more than 6 deposits monthly getting this wildly varies between lenders or how many

deposits they're looking for but it's consistent deposits not ones like real estate agents that may

only have 2 or 3 deposits in the account, they  want to see less than ten non-sufficient funds  

again wildly varies this number of non-sufficient  funds from lender to lender. They're looking for  

that positive ending bank balance at the end  of each month, and they're also looking to get  

make sure and this also can provide you with  very lucrative paths, as a matter of fact, this is  

one of the most common type of financing that loan brokers take advantage of because it pays out

more money than any other program that we've really seen when it comes to business financing. So

some lenders now offer credit lines with this program these lines are usually for about 20,000  

bucks or so in addition to the loan they'll get,  so what happens is now that these loans have  

become so popular there are new lenders that will  lend in second or third position behind the first  

position. So some lenders don't want other sources  to come in and offer a second loan after they just  

offered the first, so what they're now doing is  offering their own second loan to the borrower  

and they're really doing it through a form of  a line of credit I probably shouldn't refer to  

that as a loan. So lenders oftentimes want to see  good credit for this 680 plus and they often may  

ask for tax returns but it's a really nice option  for lowers borrowers because they're able to get  

the primary loan financing and then they're also  able to get the line of credit as well, which I  

should probably indicate here that theoretically  this isn't really a loan because what the borrower  

is actually doing is selling their future revenue to a lender at a discounted rate. That's how this  

process really works although it's oftentimes  referred to as a loan that's inevitably what's  

happened is that the actual borrower is selling  their future revenue at a discounted rate, but  

again for the rest of this training and often  times you'll hear me refer to this as a loan.  

So revenue looks at all deposits and again that's  the difference between revenue loans and merchant

cash advance, revenue cash advances are looking  at all deposits in the bank account cash and  

check, so somebody can typically qualify for more  money whereas merchant cash advances tend to be

a little bit easier to qualify for but they're only  looking at credit-card deposits typically only  

Visa and MasterCard deposits, and then American  Express offers their own financing if somebody  

is having American Express deposits. So again  MCA work exactly the same the only difference  

is for merchant cash advance MCA they're looking  at credit-card deposits, only Visa and MasterCard  

is typically what they're looking at an American  Express will oftentimes lend to that borrower  

direct based on their deposits but not a lot  of what loan brokers do with this with American  

Express as easy as it is for you to work with a  merchant cash advance. That's usually looking at  

Visa or MasterCard deposits, now PayPal, Square  will also lend money based on deposits and in  

these accounts for loan brokers this isn't really going to help you're not going to earn money

at least at this point in time on this financing but I'm a really big advocate on doing what's best for the  

borrower even if you don't make a dime on it, and  we advise pay our borrowers and our clients to get  

set up with PayPal and Square early in their  business one of the other start running part  

of their transactions through there because PayPal  and square make it really easy for borrowers to be  

able to get money through them. They'll even lend  as much as 30% of deposits and really low  

set fees and a lot of cases so great opportunities  for the borrower, if you really want to do what's  

in their best interest advise them to set up a  PayPal or Square account, and start running some  

transactions through their, that money still gets  deposited in the bank account so it still opens  

up revenue options for them. But again it opens  up financing through PayPal and Square as well  

even though you may not make the money it's still  a great options for borrowers to consider because  

of the amount of money they can get and the flat and cheap fees. So remember industry restrictions  

will apply okay, this really differs between lenders  I think that lenders have defaults all have their  

own kind of defaults, and they kind of tend to stay  away from certain industries based on their own  

default statistics and then again some industry  restrictions will apply you'll find with most  

lenders, and loans are based on bank accounts not total revenue. So if they're operating more  

than one bank account then they're only going to look at one bank account to determine the deposits,

so again it's okay for a borrower to have multiple  bank accounts, they just want to run all the  

through one and then take the money out of that a  transfer it to other accounts such as money market

accounts for the purpose of saving. Now there's no  prepayment penalties in some cases so what

happens is that means the borrower can pay the money back without paying all the interest that's

due. This is a really good opportunity for people that need the money to make it to to make a

purchase to have a transaction that's going to immediately give them a great amount of money in

return, because this allows them to pay that off without paying all that interest. And first and second

loan positions available as I mentioned, also it's not uncommon to see third loan

positions to help borrowers get even more money. Approvals are in 24 hours with one-page application   

6 months bank statements with most lenders very fast easy money to obtain, and again can fund as

little in 72 hours for renewals if they've already did a first loan and they're looking to get a second  

advance from that same lender. The lender usually  only wants 1 months bank statement and can fund

that fairly quickly within 24 hours we've done that to help clients actually meet payroll. And  

again the money is used to expand the business  not for slow times this is very important for  

loan brokers to know and understand. Look there's  a lot of financing out there for borrowers and in  

our training we cover a lot of this, but this  is the kind of money that a borrower's going to

specifically use for the purpose of investing  into the business to increase the revenues and  

net profit of the business. Okay, meaning that this  money's not the cheapest money that they're going

to get just to have the money laying around. They  need to invest the money to something is going  

to grow the business grow the revenues and they  can use the growing revenues to pay for the money 

that they're borrowing. Okay, it's not for people  that have slow times for example if you try to  

offer this kind of financing to people in those  scenarios, you're probably going to see them flip  

out because it's really not right for them they  don't need high interest rate money in a situation  

where they're trying to get through a slow time.  So again be wise with this it's best used for  

borrowers that are looking to expand and grow  the business and invest in to things that will  

generate revenue not for slow times. So additional  details we already talked about approvals within  

24 hours and actually that seems to be a repeat the side so that's a lot of what you need to know  

about revenue financing, and merchant cash advances that gives you a basic idea of how these

programs work rates, terms, qualification, everything you need to know again if you have any

other questions along the way get in touch with us 877- 600-2487 [email protected] and don't

forget to access your free training for loan brokers  at creditsuite.com/loanbroker.