The Green Sheet :: Company Profiles

Resource-full lender

When it comes to merchant loans, an inverse relationship usually exists between merchant size and risk. The smaller the merchant, the larger the perceived risk; the larger the merchant, the lower the risk.

However, when it comes to the amount borrowed, this is not the case; large merchants borrow substantial amounts of money.

So, it makes sense – at least on paper – to get in the business of loaning money to bigger merchants. There is less risk, and the funding amounts are larger. Therefore, the revenue from the loan will be considerable.

However, there is a reason few companies are willing to lend significant sums to merchants: It takes money – and lots of it. Most lenders don't have such resources, so they focus on smaller merchants. It is more work, but still profitable.

Most likely, if a company has the means to offer a $3 million loan to a credit-worthy large merchant, it will. Credit Cash extends credit to larger merchants only and has the resources to assist clients whose monthly credit card volume is at least $200,000.

It provides working capital and funds a maximum of a company's average monthly credit card sales amount, offering amounts from $150,000 to $3 million.

This is of interest to ISOs and merchant level salespeople (MLSs) because agents who work with Credit Cash can typically earn better commissions for less legwork.

Credit Cash is comfortable providing sizeable loans to the large-business segment. In fact, through its affiliate firm Entrepreneur Growth Capital, it has been lending to this niche since 1937. Credit Cash managers have a combined 100 years of experience in this business, and their clients represent more than $500 million in annual sales.

One of the advantages agents enjoy with Credit Cash is the ability to simultaneously work with smaller merchants.

"Because our target markets are larger merchants, we do not compete with other cash advance companies," said Paul A. Ficalora, Vice President Marketing Director of Credit Cash.

"Processors, ISOs and MLSs can maintain their existing cash advance relationships and utilize Credit Cash for their larger merchants."

Untapped market

Unlike other funding options developed in the payments industry over the last five or six years, such as the purchase of future credit card receivables, Credit Cash adheres to true loan processes.

It also reviews account receivables, inventory, equipment and real estate. Another advantage for agents and their clients is merchants and other clients do not need to change processors.

Ficalora noted that many of Credit Cash's clients borrow funds in addition to a bank loan, while some use the company instead of going through a bank.

"[Clients] may want to grow and know they shouldn't or can't go back to the banker," he said. "We are a good option for them. We fill in. We subordinate to the bank, and we don't interfere with that relationship."

Seasonal businesses, such as restaurants and stores in vacation destinations, are particularly well-suited to borrow funds from Credit Cash.

Often it can be difficult for these types of businesses to secure additional funding, because they have low cash flow during off season months.

In these cases, when a bank loan or additional funding from investors is either not ideal or impossible, Credit Cash can be a viable solution that pleases owners, as well as investors and creditors.

Credit Cash is also a solution for businesses that have considered mortgage refinancing, but due to the recent tightening of the mortgage market, either can't or don't wish to pursue that avenue.

Also, mortgage refinancing takes time that many businesses don't have. Credit Cash typically supplies funds within 10 days of receiving all the appropriate paperwork.

Appealing numbers

In terms of funding options, larger merchants typically are more experienced than their smaller competitors. "Others focus on small merchants and charge high rates," Ficalora said.

"As you get to the larger merchants they say, 'We are bigger, more savvy. We know enough not to pay those kind of rates.' This is a new sales product, to a new group."

Credit Cash rates are 1% per month, so a six-month loan is 6%, 12 months is 12% and so forth. Terms are from six to 24 months. Repayment is typically 3% to 15% of credit card sales. Merchants can either pay a percentage of credit card sales or a fixed daily payment.

Credit Cash uses a variety of channels to generate sales, including referrals, an inside sales force, brokers, processors, ISOs and MLSs. "This is another vehicle and source of income," Ficalora said. "Agents are always looking for valued added products for added income."

ISOs can customize the Credit Cash application with their company name, so the process appears seamless to the client.

Credit Cash pays its agents a 10% commission on new loans and 5% on renewals. For example, if an agent brought in a merchant who borrowed $1 million for a 10-month loan, Credit Cash would earn $100,000, and the agent would earn $10,000 of that.

Full return

There are many ways to measure customer service. You can study surveys, ask people for recommendations or look at an existing client roster.

In the case of Credit Cash, 100% of its customers have renewed their loans. "After three generations of being in the lending business, we understand customer service," Ficalora said.

This renewal rate is not only good for Credit Cash, but also for the agents who brought in those accounts, as they earn 5% commission on each renewal. Credit Cash makes it easy for clients to renew loan applications. "Once they've paid 50% of the loan, they become eligible to renew," Ficalora said. "Our average commission is $5,000."

Not only is it important for MLSs to hold on to valuable accounts, it is also essential for ISOs to reduce attrition within their sales force.

If an office has a stellar sales agent, it doesn't want him or her to be enticed away by a competing ISO. By offering a unique and lucrative product, Credit Cash strives to help ISOs attract and retain valuable agents.