ISOs stand to make more money if they provide some of the funding for merchant cash advances, and at least a few are borrowing to do it.
That’s the word from Jon Engleking, president of Super G Funding LLC, a Corona Del Mar, Calif.-based company that provides loans to ISOs.
Super G has loaned money to several ISOs for that purpose in the last few months, Engleking says.
In most cases ISOs simply make the advances available to merchants, and third-party companies that specialize in advances put up the cash. ISOs that assume part of the risk by providing some of the funding earn a bigger cut of the profits.
Merchants repay the advances by assigning a percentage of their card receipts to the merchant cash advance compay.
Although some ISOs are borrowing funds to participate in merchant cash advances, most of the funding Super G provides to ISOs still goes for opening new offices, hiring agents or mounting marketing campaigns, Engleking says.
Super G got its start in 2000 when Darrin Ginsburg began lending funds on an informal basis to friends he had made during a long career in acquiring, says Engleking. Later, Ginsburg decided to turn the practice into a business.
In the last two and a half years, Super G has granted 20 loans worth about $10 million, Engleking says. The company typically loans up to five times an ISO’s monthly residual stream, he notes. Thus an ISO taking in $5,000 monthly could borrow $25,000. ISOs pay back the loans on 12-, 24- or 36-month plans.
Super G sometimes “goes outside the box” to make loans that don’t fit its general guidelines. If, for example, an ISO is growing rapidly or has an especially impressive portfolio of clients the company might make an exception, Engleking says.
The loans make sense for ISOs that want to remain in the acquiring business because they provide a way of raising cash without selling part of their merchant portfolios, he suggests.
Super G is making a push this year to sign up more ISOs for loans by attending the Electronics Transactions Association annual conference and all four of the regional acquirers shows. Engleking made a presentation to attendees at the Midwest Acquirers Association show in July and Ginburg is scheduled to speak next week at the Western States Acquirers Association show.
The company is forming relationships with ISOs that want to make loans available to agents, Engleking says.