The following is a 5-part series on my experience in the “MCA”/alternative lending space. How I got started, what I learned at my first position, why I launched my own company and a little of how I plan to change an industry that needs what Wall Street needed in the 80’s.
Part I: Motion breeds emotion
My journey begins just as the summer was coming to a close. I had spent the last 3 months looking to transition out of my position in the real estate market and was excited to begin work learning and honing my sales skills in the alternative lending sphere. I had taken an entry level position at a firm in the financial district, whereby I would be calling “qualified” leads (or so I was told) for a “boutique lending firm”. Two options of compensation were presented to me: option A provided a weekly salary of $400.00 to be a “chaser” – calling said “qualified” leads and pitching them our slew of financial products and services (with really only one product in mind, a Merchant Cash Advance (“MCA”)), as well as getting the potential client to send over a completed application, 4-6 months of business bank statements, a voided check from their business bank account, and copy of their Driver’s License. Known as a “package”, once this information was returned, the deal would be shopped around to different lenders depending on the size and strength of the client’s file. When or if, an offer would come back, it would then be passed on to a closer, who would close the deal and allow for a split of the commission on the deal. The commission split for a “chaser” was 20% of the commission. Option B consisted of the same process (calling the leads, getting the package in, getting the offer back) minus the $400.00 per week salary, and with me closing the deal myself. The commission split for option B was 40% to the closer (me) and 60% to the company. Being in sales since I was 15 years old, the choice was an easy one; option B.
My first few days on the job were just as I expected, manually dialing 300 – 400 times, from 9 AM to 6 PM. Our “bosses” would incentivize us to submit as many packages as possible by providing a bonus of $100 cash for a certain number of new packages submitted during a certain time frame (usually 2 packages from 10 AM to noon). If this wasn’t satisfactorily meeting their package quota (or what they thought should be reasonably submitted during a certain time) they would threaten and then take everyone’s chairs away, making everyone on the floor, sans a few older and more seasoned reps, stand up while dialing. “Motion breeds emotion!” was the standard refrain during one of these standing, dialing barrages. I found this to be comical the first few times it happened but later realized that it was just plain pathetic. The reason for the dismal inflow of packages, I learned within a few short weeks, had nothing to do with the work ethic of the “chasers” or “closers” on the floor (as everyone’s dials were well within the maximum range that could be reasonably expected when manually dialing a phone number), and everything to do with the “qualified” leads being churned and recycled week after week, month after month.
Even with leads that were sold and resold to a million different brokers, through my sales acumen I was able to convert approximately 10 packages a week throughout my first few weeks at the firm. The next step was getting competitive offers back from the lenders. I was advised by my “boss” that I could expect about 10% of the packages submitted to get funded – a number that surprised me at first, but once I learned why they had set the expectation so low, I realized I why the MCA industry has such a negative reputation. It was at this point that I realized my days at the firm were numbered, and the first seeds of entrepreneurship in the alternative funding marketplace were sown.
Part II delves into the reason the MCA space has such an unsavory reputation and why the proverbial “race to the bottom” will bring about a sea change in the industry very shortly.