Small business sub prime crisis forming

Anybody remember the last subprime incident? It was kind of popular a few years ago, sometime around the end of 2007.

What's a merchant cash advance you ask?

A merchant cash advance (MCA) is not a loan, but rather an advance based upon the future revenues or credit card sales of a business. A small business can apply for an MCA and have an advance deposited into its account fairly quickly.

this is the tricky, subliminal language used to sell this product

Each day, an agreed upon percentage of the daily revenues or credit card receipts are withheld to pay back the MCA.

this is what they really mean, like I said, subliminal language... it's really just a loan they payback using micro transactions. this is actually being built back into the crypo blockchain networks

Merchant cash advance providers evaluate risk and weight credit criteria differently than a traditional banker might.

and here is where they get you.... not sure if any of you are old enough to remember 2008 (probably not) but.... the subprime loans brought the market down

In finance, subprime lending (also referred to as near-prime, subpar, non-prime, and second-chance lending) means making loans to people who may have difficulty maintaining the repayment schedule

not good people this is not good, I have it on good information from someone working in this market that this MCA subprime lending is THRIVING right now, I mean very busy... that means business aren't making it

reallly awesome

The merchant cash advance industry runs largely unregulated. People who take out these high-interest loans often put their livelihood and business at risk as they struggle to keep up with the payments.

if you are still on the fence about where to move your portfolio you now have an option and you know why the Egyptian billionaire moved into gold

Sounds almost like peonage.

😎

a reply to: xuenchen

you mean capitalism?

originally posted by: toysforadults
Anybody remember the last subprime incident? It was kind of popular a few years ago, sometime around the end of 2007.

What's a merchant cash advance you ask?

A merchant cash advance (MCA) is not a loan, but rather an advance based upon the future revenues or credit card sales of a business. A small business can apply for an MCA and have an advance deposited into its account fairly quickly.

this is the tricky, subliminal language used to sell this product

Each day, an agreed upon percentage of the daily revenues or credit card receipts are withheld to pay back the MCA.

this is what they really mean, like I said, subliminal language... it's really just a loan they payback using micro transactions. this is actually being built back into the crypo blockchain networks

Merchant cash advance providers evaluate risk and weight credit criteria differently than a traditional banker might.

and here is where they get you.... not sure if any of you are old enough to remember 2008 (probably not) but.... the subprime loans brought the market down

In finance, subprime lending (also referred to as near-prime, subpar, non-prime, and second-chance lending) means making loans to people who may have difficulty maintaining the repayment schedule

not good people this is not good, I have it on good information from someone working in this market that this MCA subprime lending is THRIVING right now, I mean very busy... that means business aren't making it

reallly awesome

The merchant cash advance industry runs largely unregulated. People who take out these high-interest loans often put their livelihood and business at risk as they struggle to keep up with the payments.

if you are still on the fence about where to move your portfolio you now have an option and you know why the Egyptian billionaire moved into gold

The biggest challenge small businesses often face is cash flow. MCAs fill a niche. It is up to the business owner to figure out if it makes sense for their particular business. If a business knows they have receivables coming in but they are tight on cash, they may take out an MCA to make payroll or something.

Sub prime lending isn't bad. It fills a need. The problem though is when underwriting gets too lax which is what happened in the mortgage market which allowed a lot of fraud by speculators and investors.

The reality is that lending involves risk I've stated this on numerous threads, anyone can start a bank or lending institution. If you think banks or lenders are charging egregious rates or being predatory, then start your own bank and risk your capital to make loans that you feel are fair.

a reply to: Edumakated

So this vast amount of businesses are operating on margins this th in?

According to one of my sources this is very predatory and most businesses who do this go out of business

Are these loans backed by anything?

a reply to: Edumakated

So this vast amount of businesses are operating on margins this th in?

According to one of my sources this is very predatory and most businesses who do this go out of business

Are these loans backed by anything?

a reply to: Edumakated

So this vast amount of businesses are operating on margins this th in?

According to one of my sources this is very predatory and most businesses who do this go out of business

Are these loans backed by anything?

a reply to: Edumakated

So this vast amount of businesses are operating on margins this th in?

According to one of my sources this is very predatory and most businesses who do this go out of business

Are these loans backed by anything?

a reply to: toysforadults

After the sub prime crash not a single law changed that would make it illegal for banks or other financial lenders to give out these loans. Hedge funds and the like all of them are dangerous trading practices. NOBODY WENT TO JAIL!

So if they are allowed to cause harm to their customers and even when they are caught it costs them fractions of the money they make......well then its just good business for them to continue.

-ThoughtIsMadness

a reply to: toysforadults

So this vast amount of businesses are operating on margins this th in?

Probably.

I think the vast majority of people who complain about businesses making huge profits would be amazed at how thin the profit margin actually is due to competition. Only a few classes of businesses are really lucrative. The convenience store that's charging such high prices for gasoline may actually be losing money on gasoline sales (if you include the electricity required to operate the pumps, pump maintenance, tank maintenance, etc.) but selling gas makes people stop, which means most of them will buy the overpriced drinks and snacks.

The real winners are the oil companies, right? Not necessarily... they are pushing the limits on their refineries to try and squeak out a profit. If you want to see where the money is really winding up, take a gander toward the Middle East and another at our own government.

That's just one example.

As to the subprime issue, the problem in 2008 was that the Federal government was actively and financially encouraging banks to make loans to people who would not normally qualify. I'm sorry, but if you're making $20k/year, you simply can't afford a $200k house (and don't get me started on why houses are so overpriced in the first place). Yet, banks were making those kinds of loans and spreading the risk by packaging them with more stable loans. The packages were sold to investors, who expected that a certain percentage would fail. But too many failed, and the investments became almost worthless. In the meantime, the banks were still making the bad loans, and still trying to bundle them. When houses were repossessed at too high a rate, the resulting sales glutted the real estate market, depressing the real estate prices. The sheer number of people who had invested their savings into real estate meant that the entire economy was affected.

If these micro-loans are being made to untrustworthy businesses, in other words businesses which do not have sufficient receipts to repay without creating a hardship in the future (the collateral), then it's a problem. Otherwise, it's a needed aid for cash flow that will stimulate the economy.

TheRedneck

Not only small business in trouble. Zerohedge article on Credit Cracks are Showing might help explain why Fed didn't increase interest rates. If companies are already failing to pay the 100%+ increase in short term debt (interest rates have doubled since 2017) then any further increases in interest rates could bring an avalanche of dominoes falling (if that's not already occurring).

a reply to: toysforadults

Most companies operate on very thin margins. The larger your sales volume, the thinner the margin.

The issue with subprime loans back in 2007 wasn't that they were being made. It's that the financing of them was reported incorrectly, and that they were much riskier loans than was advertised. When that risk blew up, many investment vehicles that were supposed to be in the business of having very stable investments were affected.

There's nothing wrong with risky investments, but they need to be properly disclosed as risky so that investors willing to tolerate that type of risk buy in, and those who are managing portfolios who want to avoid risk don't.