Lion Capital Group LLC, a New York-based alternative small-business funder is offering significant commissions to ISOs and merchant level salespeople (MLSs) for promoting cash advances and loans to merchants, according to the company's founder, Joseph V. Ialacci. "Most ISOs don't realize the potential income that can be earned by searching for merchant cash advances opportunities," he said. "My specialty is teaching them how."
More than 50 ISOs with about 600 salespeople are pocketing commissions from Lion at the rate of $10,000 to $200,000 annually, Ialacci said. What's more, he and his four-member support staff seem eager to take on more ISOs and MLSs to grow the business. Lion provides cash advances and loans of $10,000 to $1 million.
Ialacci got started in the industry by investing in deals made by other brokers. He used funds he amassed by inventing a clear UV coating for ophthalmic lenses and creating two companies to market the product. About five years ago, he sold those enterprises and collected hefty financial rewards, he said.
His good fortune and business acumen didn't go unnoticed, and it wasn't long before an alternative funder knocked on Ialacci's door to solicit capital. He was willing to invest, but not without a say in who was getting the funding. By February 2014, he had developed a consultant-like approach to the business, and he formalized it by launching Lion to broker and fund deals.
Merchants qualify for advances or loans that equal their monthly revenue as it appears in their bank statements, Ialacci said. For example, a shopkeeper with $56,000 in monthly bank deposits could receive approximately $56,000 in funding, he noted. Besides cash flow, he also bases risk assessment on positive bank balances, the absence of overdrafts or returned checks, and favorable Yelp or social media ratings.
Merchants often pay back cash advances by remitting a percentage of their card receipts. That way, payments are reduced during lean times and rise when merchants are flush. Still, some merchants prefer the predictability of regular payments and therefore choose unsecured loans. Lion also adds collateral-based loans to the product mix.
Many industry observers urge ISOs and MLSs to offer financing to their merchants because the funding can cement relationships and thus reduce attrition. It's another reason not to jump to a competing ISO for a modest reduction in price, observers said.
Ialacci offers two commission plans to compensate ISOs that bring in prospects who sign up for financing. Under one plan – the referral program – ISOs submit a completed, signed, single-page application and six months of bank statements. Lion pays an average of 4 percent to 6 percent of the amount funded or a 50 percent split of the commission that Lion receives from the direct lender. By comparison, most companies pay 2 percent, Ialacci said.
The other plan, called the full-compensation program, pays the ISO or agent up to 12 percent for submitting the application and bank statements and then selling the deal to the merchant and helping to complete the file from start to finish, Ialacci noted.
"A single $100,000 advance can net the ISO $6,000 to $12,000 in a lump sum within five days," Ialacci said. But the benefits don't necessarily end with the initial commission, he added.
If the merchant accepts additional funding in the future, the ISO or MLS collects another commission without any effort. "ISOs call and ask what the extra checks are for," Ialacci said. Subsequent commissions are likely because 70 percent of Lion's merchants renew their funding, he said.
When a hedge fund puts up 50 percent of the funding for a deal, Lion increases the commission to the ISO or MLS – a perk no other funders offer, according to Ialacci. Lion also advances cash to ISOs themselves, providing 18 times the ISO's monthly residuals for a 14 percent annual percentage rate, he said.
Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.