Loan Brokers: Fight Back and Defend Your Brand
January 16, 2016
LIFE DOESN’T PLAY FAIR AND NEITHER DOES YOUR COMPETITORS
Let’s face it, a big part of our job is customer service. As a direct funder or lender, or as a large or small brokerage, a big part of our job is to service our existing customers, partners, vendors and suppliers with the utmost integrity, efficiency and ethics. But even the best of customer service intentions can become scarred when those who compete against you, choose to compete unfairly through vile fabrications, defamations and falsehoods.
MORE MONEY, MORE PROBLEMS
Not many people (including myself) are too fond of hip hop music as most of the time the lyrics are questionable, but in 1997, everybody agreed with The Notorious B.I.G. when he touched on the concept of making more money and having to subsequently deal with new problems.
The bigger and more exposed you get, the higher the probability that you’ll have a run-in with dissatisfied merchants, partners, vendors and suppliers. This is common knowledge, as many of the largest ISO/MSPs and MCA firms are all over the ripoff reports in one form or fashion, with current and prior customers blasting the companies over sometimes legit issues, and other times issues of a petty nature that could have been resolved in means of a lesser depiction. But continuing on, the bigger you get, the bigger your “haters” will get as well. The rise of the internet has multiplied the presence of haters and trolls to a population standing taller than ever before. These haters love to use online discussion boards, social media, blogs, and review sites to spread their lies, hatred and vile.
JUST BECAUSE YOU SMELL SMOKE, THAT DOESN’T MEAN THERE’S A FIRE BURNING
I’m not sure who the author of this quote is, but it says the following: People will question all the good things they hear about you, but believe the bad without a second thought. Haters know this quote to be true and are quick to spread their venom knowing that if it’s coming from multiple sources, then far too many people will take them at their word using the flawed logic of “where there’s smoke, there must be fire.”
Well, I say just because you smell smoke, that doesn’t mean there’s a fire burning. Instead, you could more than likely have a group of haters who have perfected the art of blowing smoke, which is to make unfounded or exaggerated claims. As a result, you need to protect your brand against haters. There are those of you who believe that if you just ignore them then they will go away. Well, I disagree with that notion and so does Motorhead’s Lemmy Kilmister. “I don’t understand people who believe that if you ignore something, it’ll go away,” he was once quoted as saying “That’s completely wrong because if it’s ignored, then it gathers strength. Europe ignored Hitler for twenty years, as a result he slaughtered a quarter of the world!”
LOOK AT DONALD J. TRUMP
If he wins the candidacy or not, Donald Trump will go down as perhaps the most fiery presidential candidate of all time. When Trump believes something, he says it, without filter and without care of political expediency. When Trump is “attacked” by the media or one of his fellow GOP opponents, he fires back. On the O’Reilly Factor after the final GOP debate of 2015, Trump clarified that if the media or one of his GOP opponents makes a valid criticism about him, he’s perfectly fine with that, but what he has a problem with is when they flat out lie about something he’s said, done or believes in.
While I’m an Independent and not sure who I will support for the 2016 Presidential election, I find myself in agreement with Trump on a number of things, including how Trumps responds to “haters.” My stance is that if you have a valid criticism about something I’ve said, done or believe in, then I’m all ears! But when you flat out lie about me, now you are going to tick me off.
GET MAD, GET MAD!
One of the reasons for Trump’s surge in the polls is the fact that a lot of people are angry at leaders in Washington and aren’t going to “take it” anymore. Trump’s fiery persona attracts people to the real estate tycoon, causing him to have a massive lead in the Republican race. Like Trump, you should get mad as well if you have worked to build your brand, resumé and marketplace standing, and then all of a sudden here comes some anonymous troll spitting out all types of defamations across the internet:
- Don’t work with XYZ Company, they are a scam!
- XYZ Company stole my money!
- XYZ Company’s President is a criminal!
- XYZ Company backdoors deals!
The definition of libel is to write something about an individual or a company that is defamatory, which is a statement that is false but written in a way to convince the public that it’s true. The internet has increased the presence of libel so much, that insurance companies market their personal umbrella policies as a form of insurance in case you are sued for libel. Some people don’t realize that typing something on the internet can get you in trouble if you are lying about the person or the company in question. Now, I’m not advising you to run out and sue everybody who lies about you online, as that would be very costly, however, I am advising you to get mad by fighting back and doing some of the following to protect your brand.
FLOOD THE MARKET WITH TESTIMONIALS
Begin to flood the market with positivity. When a prospective client searches for your company in Google and finds the negative reviews, they can also see the various videos, blogs and review sites where your customers, partners and vendors are praising you. You can always say: Look at the many customer testimonials that we have and look at the size of our customer portfolio, clearly more people are satisfied with us than dissatisfied.
THE BETTER BUSINESS BUREAU
The BBB will provide you an “A+” or “A” rating as long as you respond to any complaints filed in a timely manner. You can use your “A” rating status in marketing and in response to prospective clients inquiring about negative reviews. You can always say: We have an A+ rating with the BBB, we must be doing something right.
PUBLIC RELATIONS
A lot of direct funders and large brokerages have large sources of operating capital to play with, so why not hire a PR Team? Have a PR Team speak with the media often to generate as much positive press as possible to help balance out the negative press. In addition, have the company CEO and other high ranking officials do various forms of PR when available.
TAKE THE FIGHT TO THE TROLLS
Go to the discussion board, social media post, blog post, vlog post, or website, and directly respond to the person creating the negative press. Debate your points, prove them to be wrong, show them to be a liar, and encourage your employees, vendors and partners to join in on the fight. Silence can be taken in one of two ways, either people will think you are “too big” for this petty non-sense, or they will think that you are silent because you are guilty. I say take the fight to the trolls, debate your points and then move on after you’ve put the verifiable truth on the table.
THE FINAL WORD
Some people will already know something is a lie, but choose to believe it anyway because they want it to be true regardless. Sean Parker’s character from the Social Network said that, “even if you’ve managed to live your life like the Dalai Lama, they’ll still make things up because they don’t want you, they want your idea.” The honest truth is that most of your haters are just jealous of you because, you have something that they want but don’t have. So, don’t allow them to throw you off your game.
As a quote I read the other day from some unknown source said, “you should never hate people who are jealous of you, but instead respect their jealousy as they are the people who think that you’re better than them.” Having haters is a sign that you’re doing something right. Your prospective customers and partners with good judgment should be able to read between the lines to see the truth, and for those that can’t, well, maybe they are too gullible (and stupid) to be doing business with anyway.
Funding Brokers: Critical Thinking is Greater Than Positive Thinking
December 28, 2015
THE NEW THOUGHT MOVEMENT HAS TAKEN OVER THE SALES PROFESSION
Somewhere between the 19th and the current 21st century, the profession of sales as a whole integrated the concepts of the New Thought Movement, going so far as to actually shape the mantras, slogans and thought processes of salespeople everywhere.
In my opinion, the New Thought Movement has the potential to do far more harm than good, because it does not emphasize the importance of individuals learning how to critically think. It has an over-reliance on positive thinking and positive faith, with a complete disregard for critical thought and analysis. When a person fails to critically think, they can easily fall prey to scams, manipulation, brain-washing, etc. and even mismanage their finances through various forms of impulse (emotional-based) spending. As a result, for whatever amount of good that the movement does, in my opinion, it has the potential to do far more damage, such as the damage that I believe it has done to the sales profession.
THE HISTORY OF THE NEW THOUGHT MOVEMENT
It started in the 19th century with the promotion of ideals by philosophers such as Napoleon Hill, that life begins in the mind and that the quality of your life would be based on your level of positive thinking and positive faith. The mantra of the movement is that if you maintain the right level of positive thought processes as well as keep high levels of positive faith, then you can “attract” to you whatever you desire, which usually centers around materialistic items like fancy cars, shallow things like very attractive mates, significant wealth, or good health and wellness.
By the 20th century, the movement would eventually spread to various religious denominations in the form of the prosperity gospel (the word of faith movement), promoted through television evangelists and the vast majority of mega churches throughout the country.
By the 21st century, the movement would spread to even more authors and even film producers with the 2006 film “The Secret” which also included a book version of the ideals promoted during the film.
It was also by the 21st century that the movement had been fully ingrained into the vast majority of sales training material, which would serve as the foundation for a lot of what I deem to be “issues” of the sales profession today. These being the utter lack of critical thinking and critical analysis which leaves too many sales people as mindless, robotic, and routine order-takers, rather than strategic thinkers, innovators, and business developers.
NEW ENTRANTS TO THIS INDUSTRY ARE INSPIRED BY TECHNIQUES FROM THE NEW THOUGHT MOVEMENT
Since this year’s March/April edition of AltFinanceDaily Magazine, we have talked about the Year of The Broker as it relates to the surge of new brokers coming into the space. These new entrants are inspired by funders, lenders and large brokerages using techniques from the New Thought Movement.
The rah-rah sales motivational speech that’s provided to these new brokers is founded mainly on the New Thought Movement. The people recruiting these new brokers into the space get them to dream about:
- Getting out of debt
- Moving out of their mother’s basement
- Living in a big/fancy house
- Having a very attractive mate on their arm
- Driving a Mercedes Benz S-Class
- Making $25k, $40k, or $50k per month
- Being “the man” in the nightclub, buying up all of the drinks and being the life of the party
They would sum up their rah-rah sales motivational speech with simply, “As you think, so shall you become,” quoting the great Bruce Lee.
Thoughts that arise of a critical nature that look for more market research, market planning, trends, innovative solutions, ROI analysis, and other forms of foresight are either quickly shunned as “over-thinking” or “negative thinking”. You might flat out be kicked out of the room where the rah-rah sales motivational speech is being conducted, with accusations of having “stinking thinking.”
THIS ISN’T ROCKET SCIENCE, IT’S CRITICAL THINKING
The New Thought Movement’s over-reliance on positive thinking and positive faith can be detrimental to personal growth. Being a part of the Mom and Pop Network isn’t necessarily a bad thing, as I have operated within the Mom and Pop Network, but what’s shortsighted is not giving brokers all the tools they need to think critically and truly be successful.
For you to survive, you are going to need to have resources that the vast majority of other brokers don’t have access to. Relying on UCC records and Aged Leads (that every other broker is calling on), isn’t going to cut it. You are going to need resources that provide you with a significant market competitive advantage which includes but isn’t limited to: having better data so you can produce your own exclusive internal leads, having “center of influence” partnerships with banks, credit unions, and other professionals, having access to creative financing in the form of either equity or debt, among other advantages. These advantages will not just give you a leg up over other brokers in the market, but they are truly the key to your long term survival.
A FINAL WORD
In my opinion, The New Thought Movement does more harm than good, by not emphasizing the importance for individuals to learn how to critically think.
We are living in the day and age where to survive in any professional sales environment, you are going to have to be more of a critical thinker and do things outside of “the box”, versus being the stereotypical smiley faced, overly optimistic, robotic, sales guy, that’s incapable of true “independent thought.” You want to be the sales guy that thinks and operates outside of the box, which is basically this bubble in which everybody else is operating and thinking within. You can’t achieve this unless you first embrace cynicism by taking a long hard look at this box, poke holes in it, discover new ways to profit, and then blaze your own trail.
Being cynical, pessimistic and “negative” are the first steps towards becoming an excellent critical thinker, even though they will not make you feel as “good” as compared to that of being optimistic and positive. But in that regard, I must quote Dave Ramsey in that: Children do what feels good. Adults make a plan and follow it.
Critical thinking doesn’t feel good, but you can’t properly plan without it.
Brokers: It’s Okay To Delay Starting A Family
December 25, 2015
WE HAVE NO “MINIMUM” GUARANTEE
The debate to increase the minimum wage across the board in the US to $15 per hour has been going on for quite some time now, with marches in the street from fast food workers, people protesting by walking off the job, and strong political debate with passionate views on both sides.
What’s been strange to me about this debate, in relation to the argument of those that are in favor of increasing the minimum wage, is their reference to workers being “slave labor” by working excessively hard and long, but not making enough in a lot of cases to support a household. The reason this has been strange to me is because for close to 9 years, I operated on a 1099, independent, 100% commission basis, as a solopreneur managing my own one man show sales office. I received no salary, base pay, hourly pay, “floor”, nor company benefits (even though I am fully insured individually). The Harvard Business School report from July 2014 by Karen Gordon Mills and Brayden McCarthy, said that there’s 23 million businesses in the country that do not have any employees and are classified as Solopreneurs.
So, should myself and the other 23 million Solopreneurs in this country all be marching and protesting as well? And if so, marching and protesting against who? I work for 1ST Capital Loans, LLC, but I’m also the sole managing director, member and employee of said entity, so as a result, I should be marching and protesting against myself? We as independent brokers have no minimum guarantee or minimum wage, which not only makes the minimum wage debate strange, but it also points to another reality in that adding a family to our chaotic situation might not be optimal at this time.
RUNNING YOUR OWN SHOP IS VERY DIFFICULT
Running your own show is probably the hardest job you will ever have in your life. Having to juggle the various components of it with no established “minimum wage” just chokes out far too many independent brokers. Some of those various components include but surely aren’t limited to:
- Having to manage regulations, laws and other legal aspects
- Having to manage accounting, insurance and tax related aspects
- Having to design your own business plan and ROI formulas
- Having to come up with your own way of creative financing
- Having to manage your vendor, supplier along with partner negotiations and agreements
- Having to design your market strategy, solutions and spend time actually selling them
On top of this, you might have to deal with pet peeves of your Funder and Lender Partners, which could include them cheating you out of commissions, clawing back commissions after 45 days, cutting you off from your renewal and residual portfolios, among other things. These things rob you out of the hard earned commissions for deals that you fought for in one of the most competitive markets in the country (using your own capital, creativity, time and energy) to win.
MAKE A FAMILY NOW, OR DELAY DOING SO JUST A LITTLE BIT LONGER?
With all of the aspects of building your broker office that must be managed on your own, with no minimum guaranteed wage, benefits or true assistance, the next question becomes, how do you manage a family through the very early stages of all of this chaos? The reality is that there’s only so much time in the day. If you are just starting out your own shop and if you don’t currently have a present family to take care of, putting the creation of a family on hold might be your best bet. I once expressed that it was okay to be a piker, then I expressed that it was okay to be a minimalist, today I’m telling you that it’s okay to delay starting a family.
THE MILLENNIAL GENERATION FACES A LOT OF STRUCTURAL CHALLENGES
It seems as though most of the newer brokers in our space are a part of the Millennial Generation.
Generation Y (The Millennial Generation) begins usually around 1981 and lasts until about 1995, the Generation that follows (Generation Z) are those that were born just after 1995. Being a Millennial myself, I tend to keep abreast of many of the issues facing my generation, and while I currently do not have a family that I’m responsible for, I believe that many Millennials would agree that it’s seemingly more difficult today than ever before to manage a family:
- We Are Over-Educated and Under-Employed: We are in fact the most educated Generation, but some reports state that over 50% of us are under-employed, which means we are mainly a Generation of the over-educated and under-employed, saddled with student loan debt.
- Lack Of Security and Stability: Prior Generations had the luxury of working for one company, in one location and in one city, for the vast majority of their working career, and be able to retire with a pension, 401k, and strong retirement benefits from Social Security. Our Generation has no such securities, as many of us will have to change careers and work locations often during our working career, making it nearly impossible to seemingly ever purchase a home because purchasing a home only makes sense when you can estimate “staying put” in one area for at least 10 years. Also the lack of pensions, strong 401k plans, and the fact that we might not receive strong Social Security benefits further complicates the security issue.
- Our Cost Of Living Continues To Sky Rocket: From food to energy, from property taxes to rent, from insurance premiums to healthcare costs, from college tuition to day care expenses, our cost of living continues to skyrocket.
- Our Opportunities Are Being Stolen Away: Wages and business opportunities are either stagnant or flat out decreasing due to the rise of global competitive forces and IT/robotic automation stealing away our opportunities for income advancement.
So while you are trying to juggle the issues of building your broker office, you are also having to deal with competitive global forces and IT automation, along with the rising cost of living, along with deficiencies in job/income security and stability. So how in the world do you add a family of let’s say two kids on top of this chaos? Regardless of whether or not you are married or a single parent, the costs and risks of managing a family within this chaotic situation are significant.
IT’S OKAY TO DELAY STARTING A FAMILY
If you already have a family, obviously you can’t “give them back” and start over, so if you are seeking to enter this space and build your broker office, you are just going to have to find a way to juggle all of the chaos that’s present. However, if you are like me (a Millennial and Broker within this space), that hasn’t yet created a family, if you are still in the early stages of constructing your office, renewal and residual portfolios, then I would say that it’s “okay” to delay starting a family considering all of the chaotic issues that you would be facing today.
How long to delay such a very important choice is a personal one that you would have to manage, but for some of us, the choice might come down to opting out of creating a family altogether.
Can California Lenders Pay Referral Fees to Unlicensed Brokers?
December 15, 2015
A new California law is drawing attention to a much-misunderstood issue – whether California Finance Lenders can pay referral fees to unlicensed ISOs. Effective January 1, 2016, the answer is yes, but only for commercial loans with an annual percentage rate of less than 36% where the lender reviews documents to verify the borrower’s ability to repay. These restrictions benefit non-profit lenders making business development loans, and shut out their higher-cost commercial lender competitors from paying referral fees to unlicensed ISOs.
Existing regulations under California’s Finance Lender’s Law (“CFLL”) prohibit paying any compensation to unlicensed persons or companies for “soliciting or accepting applications for loans.” 10 CCR 1451(c). This prohibition does not apply to referrals for merchant cash advances or referrals to banks, which are not subject to the CFLL. A number of not-for-profit CFLL lenders offering business development loans complained that it was unfair that they could not pay referral fees to an unlicensed ISO while their higher-cost competitors, the merchant cash advance companies, could.
California SB 197, supported by Opportunity Fund, California’s largest not-for-profit commercial lender, and the California Association of Micro-Enterprise Organizations, a group of more than 170 organizations, agencies, and individuals dedicated to furthering micro-business development in California, aimed to remedy this perceived problem. According to an information sheet on SB 197 available on the Opportunity Fund’s web site:
Often, merchant advance companies offer less favorable terms to small businesses than commercial lenders; however, small businesses never learn about the commercial lenders that offer more favorable terms, because those lenders cannot compensate entities to refer business to them.
http://www.opportunityfund.org/media/blog/introducing-sb-197-(block)!/ (last accessed on December 9, 2015)
The legislature approved SB 197 and Gov. Jerry Brown signed it last October. Starting on January 1, 2016, a CFLL lender can pay a fee to an unlicensed person in connection with a referral of a prospective borrower if:
- The referral by the unlicensed person leads to the consummation of a commercial loan (defined as a loan with a principal amount of $5,000 or more the proceeds of which are intended by the borrower for use primarily for other than personal, family or household purposes);
- The loan contract provides for an annual percentage rate that does not exceed 36%; and
- Before approving the loan, the lender:
- Obtains documentation from the prospective borrower documenting the borrower’s commercial status. Examples of acceptable forms of documentation include, but are not limited to, a seller’s permit, business license, articles of incorporation, income tax returns showing business income, or bank account statements showing business income; and
- Performs underwriting and obtains documentation to ensure that the prospective borrower will have sufficient monthly gross revenue with which to repay the loan pursuant to the loan terms. The lender cannot make a loan if it determines through its underwriting that the prospective borrower’s total monthly expenses, including debt service payments on the loan for which the prospective borrower is being considered, will exceed the prospective borrower’s monthly gross revenue. Examples of acceptable forms of documentation for verifying current and projected gross monthly revenue and monthly expenses include, but are not limited to, tax returns, bank statements, merchant financial statements, business plans, business history, and industry-specific knowledge and experience. If the prospective borrower is a sole proprietor or a corporation and the loan will be secured by a personal guarantee provided by the owner, the lender must consider a credit report from at least one consumer credit reporting agency that compiles and maintains files on consumers on a nationwide basis.
The licensee must also maintain records of all compensation paid to unlicensed persons in connection with the referral of borrowers for a period of at least 4 years.
SB 197 also provides that a lender that pays compensation for a referral to an unlicensed person is liable for “any misrepresentation made to that borrower in connection with that loan.” It is not clear whether the lender is liable only for misrepresentations made by the unlicensed person who receives compensation for the referral, or if the regulator will interpret this provision more broadly. Further, lenders must provide such prospective borrowers this specific written statement in 10-point font or larger at the time the licensee receives an application for the loan:
You have been referred to us by [Name of Unlicensed Person]. If you are approved for the loan, we may pay a fee to [Name of Unlicensed Person] for the successful referral. [Licensee], and not [Name of Unlicensed Person] is the sole party authorized to offer a loan to you. You should ensure that you understand any loan offer we may extend to you before agreeing to the loan terms. If you wish to report a complaint about this loan transaction, you may contact the Department of Business Oversight at 1-866-ASK-CORP (1-866-275-2677), or file your complaint online at www.dbo.ca.gov.
Lenders must require prospective borrowers to acknowledge receipt of the statement in writing.
SB 197 defines “referral” to mean either the introduction of the borrower and the lender or the delivery to the lender of the borrower’s contact information. The following activities by an unlicensed person are not authorized:
- Participating in any loan negotiation;
- Counseling or advising the borrower about a loan;
- Participating in the preparation of any loan documents, including credit applications;
- Contacting the lender on behalf of the borrower other than to refer the borrower;
- Gathering loan documentation from the borrower or delivering the documentation to the lender;
- Communicating lending decisions or inquiries to the borrower;
- Participating in establishing any sales literature or marketing materials; and
- Obtaining the borrower’s signature on documents.
Many for-profit CFLL licensees may find the narrow exemption that permits CFLL licensees making commercial loans to accept referrals from non-licensed entities impractical. The industry may instead choose to focus on the existing prohibition against paying non-licensees for “soliciting or accepting applications for loans” to avoid the limitations on the loan terms.
Brokers: Being a Minimalist is Okay
December 1, 2015
I’ve always wondered why being successful has to be tied to the acquisition of high-dollar materialistic toys. And I’ve always wondered why it wasn’t more tied to your level of freedom. Freedom as in, telling the world to go to hell. Being able to do whatever you wanted to do, live where you wanted to live, and enjoy the limited amount of time you had on this planet before you passed away back into whatever cloud you came from.
Let many within our industry tell it (as they seek to build their Mom and Pop Network), success is all about the acquisition of high-dollar materialistic toys in conjunction with delusional compensation promises.
I have criticized some of the motivational sales speeches done within our industry by direct funders, lenders and large broker houses, seeking to recruit those (for their Mom and Pop Network) into our industry from the Burger King drive-thru line, with the dream of making big money, fast. But we all know the reality is that only a small percentage of those that enter our space actually end up having some sort of career longevity, as success in our industry is based more on having strategic leveraged resources, rather than being the mythical smooth talking, walking, charismatic sales machine. The misguided sales motivational enticement speech is coupled with pictures of luxury cars like the Mercedes Benz S-class, along with big houses on the hill.
That marketing message clear, if you come in here and resell our services to merchants out of the Yellow Pages or by using the same UCC data that 100 other brokers are calling on, you will soon be closing deals left and right! You will be making $20,000 a month, enough to be driving that S-Class and living in that house on the hill!
THIS MESSAGE AND MILLENIALS
It’s a very enticing message for a segment of Millennials, like the ones that have attended brand name colleges for $100k on student loans, only to come out and be told that they don’t have enough experience to even qualify for entry level positions. Same goes for the ones forced to work in industries that have nothing to do with their expensive degrees.
“So you mean I can skip that nonsense, sit on a predictive dialer all day calling something referred to as a “UCC record?” they might gleefully ask. “And I can start today? I’m in!” I’m sorry, but it’s mostly a pipe dream.
Sure, there are a few individual brokers making $20,000 a month right now, but the majority making anywhere close to that are only talking about “special” months that they have had, not a consistent two-year span of this activity. Or, they have overrides on a team of individual brokers and this amount of money is usually the gross revenue, which means once you take out their very high cost of operations (using their very expensive mailing or online PPC campaigns), it paints a totally different picture.
CAN SUCCESS = MINIMALISM?
There’s a new movement going on and it’s all about Minimalism. Minimalism is based on living below your means to a point where you can survive and live a quality life on what’s been traditionally seen as “not so much,” without getting yourself deep into debt or requiring significant incomes for a long period of time due to having to sustain your high consumption lifestyle.
I once told you that it was okay to be a piker, and I’m telling you today that it’s okay to be a minimalist.
- It’s okay to not want to lease or purchase that luxury car, putting yourself on the hook for $600 – $900 a month in car payments for 36, 60, 84 or even 120 months.
- It’s okay to not want to purchase that big house, putting yourself on the hook for 20 – 30 years of a $2,000 – $3,000 or so mortgage payment before even bringing in the costs of maintenance, repairs, utilities, furniture, taxes and insurance.
- It’s okay to not want to buy every single new gadget that a technology company releases.
- It’s okay to take staycations rather than vacations.
- It’s okay to cook at home, eat healthy and eat less, rather than eat out all of the time digesting processed foods through the drive-thru or at the most expensive restaurants you can find.
- It’s okay to only buy clothes you are going to actually wear and take care of them, rather than going shopping for new clothes every weekend based solely on emotional needs.
CAN SUCCESS = BEING ABLE TO TELL THE WORLD TO GO TO HELL?
It’s okay to be a Minimalist and live longer, on less.
You will eventually find yourself in a situation to where if you stopped working tomorrow, you would have enough saved in liquid and non-liquid assets to where you can tell the world to go to hell.
- You can tell your boss and fellow staff members to go to hell
- You can tell your materialistic friends to go to hell (because you will stop trying to impress them)
- You can tell your bad surroundings to go to hell (because you’ll be in an area you find peaceful)
That’s how Mr. Money Mustache did it. He did it by incorporating Minimalism as well as efficiently managing his income, expenses and investment accounts, to be able to tell the world at 30 to go to hell.
That’s true freedom, which is true success, which is the ability to not be in shackles to a corporation, due to living a high consumption lifestyle trying to impress people that don’t even like you anyway. True success is being free to leave behind the legacy that you prefer as well as to live the life that you prefer, not the type of life that society pressures you into “signing up for” with 5 year, 10 year, 20 year and 30 year installment terms.
Brokers: It’s Okay To Be A Piker
November 5, 2015The Financial Services Industry is famous for coming up with different connotations that are outside of the comprehension level of the general public. Such connotation listings include terms such as: Derivatives, EPS, Diluted EPS, SPO, EBITA, Par Value, among others.
But there’s one word that I wanted to discuss in particular that comes off as a form of “slang” within the Industry, and that’s the word Piker. To be called a piker by someone in our industry, is to be called a person that thinks small, reaches for small goals and doesn’t dream big.
MASS NEW BROKER ENTRANTS HAVE BIG DREAMS
The Merchant Cash Advance Industry is in a major bubble right now, with a large quantity of new broker entrants into the market all with big dreams inspired by the myriad of industry recruiting ads, highlighting that with little-to-no experience, you can jump in and make $20k a month. The “rah rah” sales motivational speeches soon follow with examples on how one guy is making $25k per month, how another guy just sold his MCA firm and cashed out for $5 million, how another guy made $1 million last year alone, and how YOU can do all of this too if you just come on in and start dialing!
So the big dreamers begin to dream……
- “This year I’m what Dave Ramsey calls a Whopper Flopper. I hate working in this crappy Burger King drive-thru, it’s time to start making my dreams come true.”
- “Next year, I will be making $20,000 a month and driving around in a Mercedes-Benz S-Class.”
The guy joins the new rolls of rookie/new broker entrants on web based predictive dialers calling merchants about a “UCC” they filed 3- 12 months ago. He will start out with about 150 merchants to call on Monday about this UCC filing, and by the time he calls those merchants on Monday, they would have already been called by 15 – 30 other companies over the previous two weeks alone.
In other words, they will all slam the telephone down in his face after he literally mentions the fact that he’s calling from any “capital or funding” company, without him even being able to get a word in.
DREAM KILLED (REALITY SETS IN)
The reality is that success in our industry is mainly due to leveraged resources, rather than actual superior “selling” capabilities. What happens is that 20% of the brokers in the market remain profitable and sustain a good career/operations going forward, where as 80% of brokers don’t last more than 3 – 6 months, mainly because the 20% has access to resources that the other 80% don’t have access to, that provides them a significant market competitive advantage. These resources include:
- Having Strategic Partnerships with Banks, Credit Unions, Processors and Other Associations
- Having Access To Financing (Debt and Equity) Allowing For A Much Higher Marketing Budget
- Having Access To Better Base Pricing
- Having Access To Better Quality Data
- Having Access To Better SEO Positioning
- Having Access To Better Marketing Channels
Mr. New Broker, you were hired to be a part of what I call The Mom and Pop Network, which is just a group of random brokers who will resell for free (you pay for all of your expenses). So they might maintain a Mom and Pop Network of 2,000 brokers that bring in on average of 10 applications a year (20,000 apps) with 35% getting approved (7,000) and 30% closing (2,100) with an average funding per client of $30,000. This is $63 million in annual funding volume for the firm from this source alone.
A DIFFERENT APPROACH: THE PIKER APPROACH
So Mr. New Broker, how about instead of following the “rah rah” sales crowd, how about you join me over here on the Piker side and we set some goals on being solidly in the middle class instead?
- Going based on individual income, you are considered middle class in the US for the most part if from staying in an low/average cost of living area, you make over $40k a year (lower middle class), $50k – $60k a year (the middle of the middle class) or $70k – $85k (higher middle class).
- $50k – $60k a year in a low cost of living area will still allow you to live in a great quality Suburb, if you strategically manage your expenses with efficient budgeting and tax reduction strategies.
- You also want to be putting away let’s say $7,500 a year into your retirement/investment accounts. If you do this for 40 years from 25 – 65, with just a conservative 5% per year return, you will have over $1 million at age 65. At 65 you could put that $1 million principal into a long term CD paying let’s say 3% per year, opt to receive the interest every month, and get $30,000 a year. Then when you add in your Social Security payments of let’s say $20,000 a year, this now gives you $50,000 a year in spending power without even touching the $1 million principal.
IMPLEMENTING THE PIKER APPROACH
The first thing you want to do is make sure you stay in a low cost of living area, so if you are in a high cost of living area like NYC or LA, I would move immediately. Secondly, you would setup your virtual office (in the cloud) to include your telephone line, fax line, website, etc. Thirdly, you want to focus on doing market research on various market niche challenges where you can come in and creatively solve outstanding problems, for example, you might do some of the following:
- Find new solutions for niche industries that don’t qualify for most MCAs, but would like an MCA.
- Find new solutions for start-up companies seeking working capital.
- Analyze big data sources to find merchants in particular situations that you could address.
Map out a complete strategic business plan with sales forecast estimates, ROI estimates, and partner with companies that have the infrastructure to help deliver the solutions you laid out. Keep your credit clean and use No Interest Credit Card Promo Deals to creatively finance your marketing efforts.
FINAL WORD – AM I DREAMING TOO SMALL?
Am I dreaming too small? Shouldn’t I be up all night focused on how to be the next CAN Capital?
My issue with the “rah rah” sales speech is that they preach from the TOP of the ladder in terms of the extravagant income estimates ( $250k – $1 million per year), without providing any information to New Brokers on actual strategies, competencies, networks, and resources needed to ACTUALLY amass such levels of annual income. It doesn’t make any sense.
So my advice for all New Brokers is to be a PIKER, which is to establish yourself solidly in the middle class first, then once that’s done, you can look at ways to expand on your competencies, resources and networks to grow into the six figure income range.
Former SBA Administrator Applauds Growth of Alternative Small Business Lending, Says Loan Brokers are Under Watch by Regulators
October 21, 2015
Former SBA Administrator Karen Mills spoke at the LendIt Europe Conference yesterday. The title of her speech was “The State of Small Business Financing in the U.S.” In her talk, Ms. Mills summarized the negative effects that the last economic recession had on small business lending in the U.S. and how alternative small business lenders have played a large role in countering these effects and expanding access to credit.
Ms. Mills urged alternative lenders to continue product innovation to meet the varying needs of small business customers. She stated that she believes that product innovation will be a key differentiating factor among industry participants and a critical component of market success. To that end, she echoed the views of many industry commentators that regulators should allow the marketplace to mature and develop before implementing a new regulatory framework.
“I believe this is a nascent market that is serving a need that small businesses have. These entrepreneurs have found a gap in the market and they are filling it in a cost effective way… The industry should get together and the industry should self-regulate.” Ms. Mills stated.
Ms. Mills did note, however, that some regulators are concerned about certain aspects of the small business finance marketplace.
“In the U.S., we’ve seen the rise of the loan broker. This may or may not be good news.” Ms. Mills stated.
She went on to note that loan brokers were a group that were “under some watch” by policymakers. Ms. Mills’ comments are similar to those she made at the LendIt U.S. conference earlier this year but appear to be the first time she has specifically referenced the monitoring of loan broker activity.
New Funding Brokers Struggle As Industry Grows
August 3, 2015
Here’s a few things that will have you scratching your head.
1. A new sales agent recently took to an industry forum to ask for help with ACH processing. According to him, he charged a closing fee on a loan that closed and then realized that he had no idea how to collect the fee. His problem was perplexing because he had the merchant sign an agreement that authorized him to debit the funds out despite not having an ACH processing account.
Some sympathetic veterans advised him to have the merchant write him a check, but others were too dumbfounded by his use of an ACH agreement when he did not know anything about ACH. The agreed fee was probably too large to write off as a mistake so hopefully the merchant will understand and write him a check for services rendered.
The lesson: If you don’t know how to do something, don’t guess. The agent would’ve been in a much better situation if he had asked how to collect fees prior to drawing up an agreement that referred to a methodology he had no familiarity with.
2. A semi-seasoned sales agent griped about a recent experience on an online message board about a business lender that stole his deals and turned out to be a repeat felon. The broker community was not sympathetic when they learned that the “lender” used a gmail address to communicate. What’s worse is that a perfunctory Google search revealed a record of violent crime.
The lesson: At the very least, do not send deals to anyone using a free email address. This was item #3 on my Advice to New Brokers list, published back in February. This also violated item #4 on my list, which says, don’t send your deal to some random company just because they went around posting on the web. A simple Google search for this broker would’ve showed that the “lender” was a serial criminal.
3. One broker e-mailed me to say that a lender had stolen his syndication money and disappeared. Another told me that they had stopped receiving their syndication deposits for their entire portfolio and wasn’t sure what was going on. This situation often doesn’t make the public forums because the aggrieved parties are sometimes too embarrassed to tell others that they got hustled. I recommended a lawyer to one of them.
The lesson: Refer to #4 on my Advice to New Brokers list. Even if others claim to be having a positive experience, there are a few red flags to look out for when it comes to syndication:
- Were they too eager to accept your money?
- Did they have an Anti-Money Laundering process in place?
- Would your funds be co-mingled with their operating funds or isolated in a separate account?
- How is their system structured? Will you get paid even if they declare bankruptcy?
- Was the owner of the company ever charged or convicted with fraud? This is probably the most important and for some reason the most overlooked. If the owner was previously charged with fraud and your money eventually gets stolen, you can only blame yourself. And if you don’t know if someone has a past criminal history, you should probably ask around in addition to conducting a formal background check.
Syndicating brings me to item #1 on my Advice list, hire a lawyer. If you can’t afford a lawyer, you definitely can’t afford to syndicate.
