New York-based ISO Advance started funding ISO and merchant businesses back in 2012, with merchant funding offered both directly and through ISO resellers. But in the years that followed, strong ISO interest in divestiture of merchant portfolios led to a gradual shift in the company’s business model toward the acquisition of portfolios.
ISO Advance still offers its initial services but does no outbound marketing for them. They maintain that terms and conditions for advances are competitive by market standards. "We collateralize residual income, but it's more based on factor versus a high-interest loan, so it's a shorter term," said Christopher Hernandez, President of ISO Advance. He added that terms are typically six to 12 months, but most advances fall within the six- to eight-month range.
In all of its dealings, the company emphasizes being straightforward. "There are no surprises as far as what you're getting and what you pay for it," Hernandez said. Cash advances for ISOs average between $5,000 and $50,000, depending on residual income and other factors; $1 million is the upper limit.
The application process involves a short set of questions online. An ISO must then submit a copy of the ISO’s agent agreement, the last six months’ residual and bank statements, a copy of the ISO’s driver's license, and a voided check.
Becoming successful as a reliable source for business funding requires the support of a trusted pool of investors, which ISO Advance reported it has managed to gain. "Through the development of this company, I've also established a network of buyers," Hernandez said. "So when an ISO wants to sell, I have the buyer for them." He noted that sellers usually receive an answer within 48 hours.
With a background in marketing and financial services, Hernandez believes a hands-on approach is imperative when dealing with clients who are making life-changing financial decisions. During his career, he has advised a number of individuals and companies. "I'm a consultant beginning, middle and end," he said.
When an ISO decides to sell a portfolio, the progression of steps follows a natural course. "What happens is I will take a look at 12 months of residual statements," he said. "I'll take a look at their agreement with First Data, etc., and evaluate that. Based on my evaluation, I will then place them with the right buyer."
ISOs can expect to receive multiples ranging from 18 to 32 times monthly residuals when selling portfolios via ISO Advance, Hernandez noted. For the higher valuation, an ISO must be willing to remain involved to ensure a smooth transition for merchants. Hernandez recommends dedicating 12 to 24 months to the transfer process. Another advantage to remaining involved is an ISO could receive more than the agreed-upon, negotiated value for additional merchants boarded during the transition.
Hernandez also pointed out that merchants receive full support during and after portfolio transfers. "Every single one of my buyers has a working relationship with pretty much every merchant," he said. "So transfer, customer service, support, everything, absolutely covered. That should be the last thing on the seller's mind. On the investor side, all merchant services are covered."
Hernandez added that ISO sellers should be able to focus on “how much they want for their portfolio, how much they're willing to accept, and if they're willing to see it through by sticking around for awhile." To date, much of ISO Advance’s portfolio acquisition business has focused on the northeast and western regions, but the company welcomes ISOs nationwide.
For those considering selling a portfolio, Hernandez believes now is an opportune moment. "Quite honestly, it's a seller's market," he said. "I have more buyers than sellers." He encourages prospective sellers to contact him for an expert consultation.
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