Wednesday, December 12, 2007

Merchant Cash Advance - EAR - Effective Approval Rate

Merchant Cash Advance sales people have always been very focused on what the commission is their merchant funding company is paying them. What most fail to realize it's not what your sales commission in your contract reads but your effective approval rate (EAR). Some merchant cash advance companies will offer teaser commission rates to get you on board and then you will soon realize they are approving 20 - 25% less deals then most and/or giving merchant's 20-25% less funding compared to other companies. Since commissions are typically based on the payback amount of a merchant cash advance, you can see how this can greatly vary and affect your overall commissions earn. In some cases, your actual commission rate may be up to 20 - 25% less than you think it might be based on these two factors.

Next article, the Merchant Cash Advance Industry - 2007 The Year in Review and Predictions for 2008.


Anonymous said...

this is a good point. many agents/iso's, especially all the new ones, have no idea about approval rates. I have read so many 90% approval rate website advertisements and thats not realistic. I believe its closer to 70-75%. We used several companies with volume submissions and found it was around this on average as a blended EAR. I believe MCA's should not advertisie 90% approval rate, UNLESS, they disclose what it takes specifically to get that approval rate (i.e. good credit, TIB, etc, etc). Also, no MCA is telling peopel credit is a factor. Of course it is. Credit Reports are reviewed!

Anonymous said...

I totally agree. I chastise reps who report that your credit doesn't matter."

I also believe that ISO's shoud do away with "funding in as little as 72 hours"...on what planet?

The days of bringing in bodies to field inquiries is over. We need talented and educated sales reps who know how to properly explain the cash advance and what applications require and MCA's require