By Mike Evans
2nd Source Funding
Funding. It's the hot new word in the payment processing industry. But are your merchants being snatched by one of the growing number of cash advance companies offering them unsecured loans?
You may be excellent at selling merchant processing services, but what about funding?
Learning to sell the cash advance product is one way you, as ISOs and merchant level salespeople (MLSs), can retain your customers.
There is no doubt: Your competitors are calling your customers now to offer them unsecured cash. And the way your opposition will guarantee payback of the advance is to take over your merchants' processing services.
Many MLSs don't like the merchant cash advance phenomenon. They complain that cash advances are too expensive and that their customers don't need the money.
However, a recent informal survey by a New York-based funding company found that 80% of merchants who were asked if they needed a cash advance answered with, "How much can you get me?"
Selling the cash advance product follows the same rules as any other sale. A simplified version of the sales process includes the following five steps:
According to many top salespeople in the funding sphere, opening and qualifying is the first and most important part of the sales process. Since you may already have a number of merchant processing accounts, the introduction portion may already be done.
Qualifying your customers is something you can do on an ongoing basis as you interact with them weekly or monthly.
While checking in, determine which of your clients do enough credit card business to qualify for a cash advance.
To qualify for an advance, most funding companies require merchants to have been in business for a year and maintained a minimum of $1,500 to $2,500 per month in credit card transactions for three consecutive months.
Ask retailers if they are looking for a specific amount of cash. On average, funding companies advance about one-and-a-half times the merchant's monthly credit card sales volume.
For example, if a merchant processes $10,000 a month in credit card business, funding companies will advance about $15,000.
Next, make sure a prospective cash advance customer isn't disqualified from receiving a cash advance because of credit or bankruptcy problems.
Funding companies usually allow bankruptcies on a retailer's credit report as long as it has been discharged and the merchant can supply a discharge letter.
Regarding tax liens, if the lien is paid off or the merchant has an up-to-date payment plan and supplies documentation to prove it, most funding companies will approve an advance.
The next step is to ask about the merchant's personal credit history. Although a cash advance does not show up on the retailer's credit report as a loan, a credit check is run to make sure the person applying for the loan is, in fact, the business owner.
A poor personal credit score may mean your customer has few options to get cash other than a cash advance from you -- or one of your competitors.
Next, have customers who are interested in obtaining cash advances tell you exactly how they plan to use the cash to grow their businesses.
When meeting with them, write down what your customers say and repeat it back. This will help your clients visualize the end result that will be created by your cash advance.
Now you can go into some of the advantages that a cash advance will provide to small and medium-sized businesses.
One of the biggest is that funding from a cash advance is unsecured, uncollateralized and does not require a personal guarantee.
This means if a business that has not finished repaying a cash advance closes tomorrow, the funding company has no recourse.
Another big plus is that unlike bank loans, there are no set payments. The funding company captures a set percentage of merchants' future credit card sales, usually between 15% and 30%.
So, during slow months, retailers pay back less money.
In addition, there are no penalties if merchants decide to pay their advances off early, unlike many traditional loans that have stiff prepayment fees.
It seems every week a new merchant cash advance company springs up.
Googling "merchant cash advance" will pull up over a hundred cash advance companies that will be (or are already) offering your merchants quick, unsecured cash.
Protect yourself and your valuable residuals by learning to sell this product.
It's relatively simple to learn and can create solid long-term relationships between you and your merchants as you see them use your cash advance to realize their business dreams.
Mike Evans is a sales manager with over 30 years experience. Currently he is a top funding salesperson at 2nd Source Funding in New York City. He can be reached at email@example.com.
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