Thursday, September 27, 2007

Invasion Of The Subprime Mortgage Brokers

With the subprime mortgage bust, it's only natural that thousands, if not tens of thousands of mortgage brokers around the country are having difficulty making ends meet. There appears to be an astounding number of mortgage brokers looking to enter the merchant cash advance space. In the past few months alone, I have received a plethora of inquiries from mortgage brokers looking to resell our merchant cash advance product.

While there seems to be some similarities between the subprime mortgage space and the merchant cash advance space, there is also quite a bit of difference. I am hoping the subprime mortgage brokers learned their lesson and will act responsibily when selling merchant cash advances by not taking advantage of the merchant (eg. charging closing costs, application fees, etc.). Acting responsibly will ensure that this is a viable industry that will benefit the merchants, the merchant cash advance companies and their agents for the indefinite future. There is enough margin in the product to go around without having to be a pig.

Sunday, September 16, 2007

AdvanceMe Patent Invalidated - Cover Story of The Green Sheet

The story of the invalidation of the "obvious" AdvanceMe patent just keeps on going. As I mentioned in previous posts, the New York Times wrote an article about it, University of Washington School of Law has made the story of the AdvanceMe patent invalidation part of the course curriculum for its Intellectual Law class and it has been the feature story of many publications.

Once again, the story behind the AdvanceMe patent invalidation is the COVER STORY of The Green Sheet, one of the largest credit card processing industry publications. The September 10, 2007 issue features the cover story, "AdvanceMe patent ruling opens merchant funding floodgates."

To update everyone on some facts since this article written, it indicates that the case AdvanceMe v. AmeriMerchant (the companion case to AdvanceMe v. Rapidpay) was scheduled to goto trial in January 2008. The article indicates, "experts predict it will be dismissed as a result of the August ruling."

Indeed this has already happened, the court dismissed this case shortly after the AdvanceMe patent was invalidated.

Two other items to point out about this article. In the print version of The Green Sheet September 10, 2007 edition page 67, there is a featured quote of the article that indicates:

"When you call someone and say, 'I'm being sued,' the first thing they think is, 'I don't want to get involved,' not 'Oh, I want to go through all my dusty old file cabinets,'

– Glenn Goldman
CEO, AdvanceMe

This is an actually a mistake as you can tell, that was actually my quote that appeared in the article earlier that they highlighted later saying it was Glenn Goldman that said it.

However, Glenn Goldman, CEO of AdvanceMe is quoted in the New York Times article and other publications as well as The Green Sheet as saying, "Although we feel vindicated that the court found clear infringement of our patent by each of the defendants, we respectfully disagree with the court's findings on validity."

That is not a typo my friends, Glenn feels vindicated that the court found that the defendants in the case infringed on an invalid patent that is unenforceable and OBVIOUS. Enough said......

Tuesday, September 11, 2007

New York Times Article On The AdvanceMe Patent Is Now Required Reading At University Of Washington School of Law

It still amazes me the volume of ongoing positive response I received from the NY Times article that was published on the invalidation of the AdvanceMe Patent. Someone had sent me a link today that this article is now a required reading assignment in an Intellectual Property Law Course at the University of Washington School of Law.

Saturday, September 8, 2007

Subprime Mortgage Bust And Its Affect On The Merchant Cash Advance Industry

There isn't a newspaper, magazine or TV show these days you can turn to that isn't talking about the subprime mortgage bust. In fact, even President Bush has had to step in to assist in this national dilemma. Many people have been asking how will this credit crunch affect the merchant cash advance industry? My opinion is that it will actually increase the demand for a credit card factoring product such as the merchant cash advance. Traditional banks and other lending sources have already started to tighten up their already rigid underwriting criteria. In addition, many business owners in the past have used the equity in the house to refinance to obtain working capital for their business. With the refinance industry drying up coupled with the tightening of banks underwriting criteria will only attribute to an increase in market demand for the merchant cash advance for the foreseeable future.

There are also many positive attributes about the merchant cash advance product that can assist and/or correct someone that may have had a subprime mortgage or loan. Here are a couple of attributes that a merchant cash advance has that is more favorable than what a subprime mortgage or loan was:

  • Documentation - there are reports that homeowners were able to get a subprime mortgage or loan with little or no documentation, employment verification, etc. A merchant cash advance is just the opposite. Any reputable merchant cash provider should be doing due diligence on the merchant which includes various document (proof of ownership among other things) and business income verification (the merchant's credit card processing statements).

  • No closing costs of fees - many subprime mortgage or loan brokers were charging extremely high upfront closing costs and fees. Any reputable merchant cash advance provider should be charging NO CLOSING COSTS. Any merchant that is even considering paying a merchant cash advance provider a closing cost should RUN from that provider. There are plenty of merchant cash advance providers that don't charge a closing cost.

  • No surprises in the payback - part of the cause of the subprime mortgage bust is many people entered into Adjustable Rate Mortgages (ARM). These programs typically started off at a lower "teaser" rate and readjusted to a higher rate in most cases anywhere from a year to a few years later. A merchant cash advance has a fixed percentage of a merchant's future credit cards sales that is paid back over the course of the program whose percentage should never adjust.

I think the subprime mortgage bust is an opportunity for the merchant cash advance providers and their sales channels to responsibly introduce this product to people that previously may not have consider it.

And I think the merchant cash advance industry can learn from the mistakes of the subprime mortgage industry by not taking advantage of the customer with upfront fees and being responsible in their underwriting practices.