The EMV to MCA Bridge: A Unique Deadline Based Opportunity for ISOs to Cross-Sell – By David Rubin

As featured in this month’s issue of ISO & Agent – eProdigy’s CEO David Rubin gives his take on the unique opportunity ISOs have to cross sell alternative financing.

In the ever-dynamic world of financing and payments, there’s a great new opportunity for ISOs to cross-sell their merchant clients and significantly expand revenue streams as a result. All without having to find new clients.

With the looming fraud liability shift taking effect in October 2015, independent merchants will want to be EMV (chip card) enabled. Even as they’re engaging with their clients on EMV conversion, ISOs have a great opportunity to turn the conversation to merchant cash advances (MCAs).

For those ISOs not already familiar with these financing vehicles, MCAs have been around for 17 years. Simply explained, a merchant cash advance is a short-term advance of funds against a business’s receivables. A fixed debit, or in the case of some companies, a percentage, is taken directly off each sale daily or weekly. The merchant cash advance industry has mushroomed and is booming, mainly because bank lending criteria became so tight after the Great Recession that very few small businesses have been able to qualify for bank loans. If the virtual disappearance of bank lending to small businesses was the impetus that gave birth to this new category of lending, what made it possible to actualize and accelerate so fast, was the existing infrastructure that provided for a split between the various parties in the credit card money flow, between acquiring bank, merchant bank, credit card and processor.

Since the 2008 crash, and subsequent credit crunch, a lot more players have come into the alternative payments and lending space, and the industry has grown exponentially, from $500 million five years ago to an estimated $5 billion industry in 2014. ISOs, with their roots in the credit card processing industry, have been a big part of this explosive growth, acting as the alternative lending industry’s agency arm in selling merchant cash advances and making deals
that enable merchants and other small business people to get financed even as they service these clients with their POS and processing needs. And again, it all started with the split.

There’s a very compelling reason for ISOs not already involved with MCAs to get themselves up to speed on this business. In the case of processing-specialized ISOs, the average income stream from processing an account ranges from $50 to $70 a month of residual revenue.
MCAs can add a significant amount to an ISO’s bottom line, both in the form of lump sum payments and residuals. For example, by selling a $100,000 cash advance, the ISO could realize $8,000-10,000 in revenue up front. An additional income stream becomes possible when 50 to 60 percent of the MCA has been paid off and it becomes eligible for renewal: those
renewal fees will go to the ISO, as well. Selling MCAs opens up a whole new realm of income for the ISO, in denominations larger than income streams from processing.

Sound good? Well, if you’re an ISO who isn’t dealing with cash advances, you might want to consider familiarizing yourself with this part of the industry and learning how to sell these
products. And right now is the perfect time to start, because you’ll be proactively contacting merchants about their EMV upgrade needs anyway. While you’re helping them price and
install their new POS and software upgrades, you can ask them in the course of that conversation if they have an immediate need for ready cash. Then let them know how MCAs

When you’d most likely guide a client toward an MCA is when the client needs money, and needs it fast. As the ISO, you’re able to offer the client fast capital with limited documentation,
even against a potential background of poor credit. There are few if any other channels through which the merchant could access this kind of instant infusion. There are some peer-to-peer crowdfunding platforms, focused mainly on the A- and B-paper buckets of clientele. However, MCAs cover A- through D-paper markets, to get capital to a business very quickly – sometimes in just a day or two.

For you as the ISO, this is a perfect time to expand your knowledge of the industry while adding to your existing income streams. If you don’t already know the nuances of the business, you’ll want to become knowledgeable about the circumstances where an MCA is the most expedient financing vehicle, which companies only advance to A-credit businesses, which ones finance B through D, what the term times are, what the rates are, and so on. And because you’re already talking about EMV with your clients, the door is wide open
with this natural cross-selling opportunity.


Reprinted from ISO & Agent magazine.

We Can Fund Your Business

Does your business accept credit cards? If so, you may be sitting on a great source of working capital. The alternative business financing, or Merchant Cash Advance industry, as it is commonly called, has stepped in to assist small business owners when traditional banks couldn’t or wouldn’t.
Companies like eProdigy have worked with merchants for years to assist them with obtaining the working capital they need to keep their businesses growing.

By tapping into your future receivables, we can work with your business to provide funding from $1,000 to $250,000, with a repayment plan that spans anywhere from 6-18 months – all based on your business’ daily transactions.

Our funding is more inclusive than a traditional bank, because as direct funders, we use different variables to determine the eligibility of our merchants. With our state-of-the-art underwriting software, we are able to take into account a businesses’ receivables, daily transaction amounts, payments and other factors before making a funding decision.

More than a credit score calculator, eProdigy’s software takes existing financial information and aggregates it with other business related data. This gives us a fuller view of the business’ health and ability to repay – and oftentimes is the difference between receiving much needed funding and being declined by a traditional bank.

The beauty of our process, is that we can get the data we need and have a decision in less five minutes-instead of the weeks or months a traditional lender may take just to turn your application down. This software is backed by a professional staff of funding officers who will work with you to get the best possible rates and repayment terms.

Purchasing new equipment, adding inventory for a new location or preparing for a major bid has never been easier. At eProdigy, we can help you get the working capital you need to move your business forward.


Fast and Easy Repayment

One of the most important factors to consider when you’re seeing alternative financing for your business is how and when the funds will be repaid. Since the funds are not a traditional loan product, repayment is done a little differently.

Our technology allows us to work with our merchants to pay back a small percentage of their advance daily, usually over the course of 6-12 months.

This is usually done through a preset debit of a percentage of credit card receipts, or a preset amount to be pulled from a business bank account via ACH. This ensures that repayment is as pain free as securing funds for our merchants.

For merchants who choose our credit card repayment option, we offer access to a full complement of card processing services, often at a lower rate than their existing processor. They can save money while processing with us-and repay their advance without having to think about it. Our ACH withdrawal plan is the simplest and fastest way to set up repayments with us-and requires only that merchants provide access to a business account they make regular deposits to.

Our online system helps our merchants to stay focused on what they do best, and grow their businesses while keeping up with their payments. With unlimited access to our portal, merchants can see exactly where they are with repayment amounts, current remaining balances and additional funding options.