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Insights and Expertise
StreetSmarts SM
Where to get capital to grow your business
By Allen Kopelman • Pro: you can sell a small portfolio or portion
Nationwide Payment Systems Inc. of a portfolio, obtain funding and retain some
residual earnings. You can be paid upfront and,
ometimes you have to choose between boot- in some cases, after 12 months if attrition is low.
strapping or going out for investment. Taking • Con: You may be required to support these
on outside funding comes with a tradeoff: you merchants in exchange for funding, even though
S may no longer be working exclusively for your- the merchants are no longer yours, which means
self, and your new boss will be looking for a fast ROI. you can't re-sign them or move them.
From numerous available funding sources, you may • Residual loan: MLSs and ISOs can borrow money
choose to get money from family members, business based on their existing residual flows, which enables
partners or investors. You may tap into savings or credit them to make monthly payments and keep the
card accounts. Don't expect much from your bank. Banks portfolio. Some ISOs will provide funding and take
typically lend to companies that don't need cash and are payments out of your residuals.
notorious for declining small and midsize business loans.
• Pro: they know you and have confidence in your
Ways to access working capital ability to repay the loan, which can make for a
fast and simple transaction.
Here are some popular ways for merchant level salespeople
(MLSs) and ISOs to get access to working capital, each • Con: The loan company usually collects the
residual, then sends a remainder that could
with its own pros and cons: cause cash flow issues. You need to be careful,
• Residual portfolio sale: MLSs and sub-ISOs can sell especially if you still have agents to pay from
to third parties or private parties; their ISOs usually that residual flow.
have first right of refusal. These complex deals
require due diligence; consider getting an attorney. • Traditional loan: Traditional lending sources include
• Pro: A residual portfolio sale will not add debt family offices, the Small Business Association (SBA)
or dilute your ownership; you'll still be your loans, bank loans and lines of credit. These sources
own boss. You'll get money up front and on the tend to be more interested in fintech than in your
backend, such as a payout after 12 months if residuals. They are more likely to fund or provide
attrition is low.
• Con: After selling off these merchants, you can Don't be a serial pump and dumper;
no longer re-sign or move them.
investors avoid people who
• Partial residual sale: MLSs and sub-ISOs can sell a repeatedly build and sell small
portion of their portfolios. These are also complex
deals that require careful review and due diligence. portfolios.
Legal counsel is recommended.
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