I would like to preface this article by expressing the utmost respect and admiration that we at Veritas Loans have for the trail blazers in this industry. Of particularly noteworthy recognition, stand those that gave birth to what we all affectionately term, the “merchant cash advance” or “MCA” marketplace. Indeed, accolades are well deserved for those who have played such a crucial role in pioneering what has become a bona fide wellspring of free flowing capital, both for the small business owner, as well as the brokers and lenders themselves.
With that said, we at Veritas Loans have recognized that there are inherent systemic maladies that have given us pause; standard operating procedures that we have noted to be the rule rather than the exception. Consequently, we feel it is our duty to operate at the highest level of ethical and moral footing, and have undertaken the responsibility for remedying this situation the only way we know how: by doing the right thing always. There may be things that can be done to make the industry as a whole a bit more efficient and we would like to share those with the community in an effort to begin a constructive dialog, assisting the industries evolutionary trajectory. One of the things we’ve noted with most of our lending partners, as well the ISO’s that we talk to and work with, is that a lot of the underwriting is done manually; that is, case by case, file by file. We think that the industry as whole should move towards a more predictive, A.I. based model, that allows for automatic underwriting as well as algorithmic learning from each file, making adjustments accordingly.
In our opinion this would create and situation whereby, default ratios would be lower and because the underwriting process is automated from the initial application until close, it would reduce the amount of underwriters and funding specialists that are needed to complete a transaction. This would lower a lenders expenses by reducing payroll costs considerably, a savings that could be passed onto borrowers by way of lower rates, which would make the industry space more competitive with the traditional market.
I know some will say “there is an exorbitant cost that would have to be absorbed up front to accomplish this.” That is a true statement, however, the savings long term and increased revenue created long term from lower rates would certainly outweigh the cost of creating a more automated system.
We are in the 21st century and as such, we must adapt our models to fit the ever changing technological advances that are taking place globally. Being competitive in this day and age requires being at the forefront of technology. We believe that if the industry comes together as a whole, and works toward these technological advances, we could really revolutionize this space, while at the same time, cleaning up some of the practices that have become “industry standard” due to the “old way”.
We look forward to and encourage industry and customer feedback on this article, thank you!