All right, today I’m going to answer two questions that I get quite a bit, and I thought it would be a good idea to do this through my YouTube channel. The first question as you can tell from the title is, is there longevity in MCA industry? Will merchant cash advance industry be around for a long period of time? The second question is, is this industry saturated? Is it just too saturated that it’s not even worth going after and getting into?
We’re going to answer those two questions today and I think it’s going to help a lot of you guys who are considering one, considering to get into the industry, two, who’s already in the industry maybe, and you’ve been exposed to the right type of information, and three, learn more about how to go about it. The thing with the information is once you learn, once you have access to the right information, we’ve got to do something with it, right? If you’re not doing anything with that information, then it’s useless.
If you’re not going to do anything with this, I suggest you save yourself the next couple of minutes and don’t go through this, because it’s not going to help you. But if you already made up your mind about taking action and being in this business, we just have these hanging questions, whether this industry will be around for another 5 years, 10 years, 20 years, or if the industry’s too saturated. Are you getting into a very saturated industry that your chance of survival and success is very low?
You’re going to find out if that’s a valid concern or not. So, as an entrepreneur, whenever I deal with a question or something that’s in my mind, that I’m looking for a proper response for, I try to separate it from how I feel about the situation. I want to look at certain metrics and numbers in order for me to get the right information. Because as I always say, your source of information is very, very important because if your source of information is a bunch of your friends and buddies who have maybe dabbled in the industry, or maybe they thought about it, or they heard someone say something, that’s not reliable information for you to base your conclusion on, right?
Because when you have a question in your mind, the way our brain operates, you ask the question to your brain, your brain looks for ways to get the response back to you. If it has the answer, it’s going to find it, and give it to you. A lot of times this whole process works based on how you feel about the situation. I want to clear away your feelings from it and look at the numbers strictly.
Longevity in MCA industry
Let’s tackle the first question. Is there longevity in this industry? Will this industry be around for a long time? Let’s ask this question a different way. What decides if an industry will be around or not, right? That’s a different way to look at that question. What determines the existence of an industry? So if I look at merchant cash advance industry, I always want to look at from a broader perspective, I want to look at alternative lending industry.
Because merchant cash advance is a product, so one of the small products of the entire alternative lending space. We’ve got to look at alternative lending collectively. When I look at it, how do we answer this question? What drives the demand? What drives the existence of this industry? Well, the answer is demand, right? If there is demand from businesses for alternative lending products, then this industry will exist until that demand is still there. If one day that demand disappears, then there’s no need for this industry.
Now we get that baseline, so we know that currently there is, this industry is around and every single day a couple of million dollars in commissions are being generated. Millions of dollars of commission is generated through alternative lending. That’s every single day. And that just happens through, like these are individuals making that money. A lot of my members getting deals funded, small companies, big companies, anyone in the alternative lending industry, people are making millions per day. Not per month or per year, right?
What’s driving that is the demand from the businesses who want funding. For that to disappear, something needs to happen, right? The way, if you look at this through a scientific method, we’ve got to do a little experimentation and break it down before we build it up again. The belief that this industry might not exist comes from the fear, the root of fear, right? That oh yeah, people may not need merchant cash advance or alternative lending products.
For that to happen, a major massive shift needs to happen. Let’s understand who gets these products anyways. Who’s a good candidate for alternative lending products, including merchant cash advance? I’m going to use a little tool here to draw so that way we have more visuals than just my face. Give me a second. I’m just going to share my screen here. Here we go. I’m using this little tool. Let’s tackle the first question. First question if the industry will be around a long time. If you want to get into a business, you want to make sure that the industry will stay as long as you’re around and you can take advantage of that.
Just like anything, everything has a lifetime, right? No one can claim that X industry will be around forever, but as a business, responsible business owners, our job is to predict the near future of what’s going to happen. I’m going to use AL for alternative lending. If I use this, who’s the target audience for that? Target audience is SBA. Sorry, small businesses, right? Most of them are small businesses. Who is small business?
Small business is 75% of the businesses in US. There’s this massive market, demands funding. The question is then why haven’t they gotten their funding through the banks, right? Instead of going through alternative lending, why haven’t they been getting their funding through the banks instead of dealing with merchant cash advance brokers, or business loan brokers and things like that? That’s the natural inclination, right?
If a small business, if your deli down the street needs $30,000, the logic would dictate that they would go down to their local credit union or their small bank, or their Wells Fargo, Bank of America, and ask for these loans, but the problem is 75% of these loan applications are declined by the banks. Why is that so? Let’s drill deeper into this, to find out why would banks in their right mind decline something to most of the businesses out there? 75% of the US economy is driven by small businesses, right? You would think banks would be pretty stupid to decline these applications.
Only out of four gets funded, and even with that, that 50% of these funded deals, they’re not for the original amount they asked for. This business, even though they got funded, they’re not really happy because it’s not the amount that they wanted. The problem is banks, especially after the recession that we’ve been through, the bubble that burst, the real estate bubble in 2008, they’ve been very strict on their funding, and don’t forget that these are publicly owned companies usually, right?
So, they have to take very calculated risks and getting into alternative lending space for them is a high risk product that can cost them millions and millions, if not billions of dollars per day of loss, if they don’t do it properly. What do they do? Well, the safe haven for them is pretty much mid sized to large sized businesses. If I can draw an L.
So, mid sized to large sized businesses, and these are usually 50+ employees, right? These are 50+ employees and that’s the sweet spot for the banks. Why is that? Because the risk is much lower, and also these banks, they own a ton of real estate, right? They’re really exposed, and each branch, they have employees. Each brand holds 10+ employees per branch, they have to have hundreds of branches. They have to have a branch for pretty much every town to access their customers almost, right?
They have this many employees and real estate, so for them, it makes a lot more sense to get into real estate and fund real estate deals, fund larger companies, mid sized to large sized companies, than deal with mom and pop deli, bagel store, construction company, trucking company. That’s why they’ve become really, really strict, especially after 2008, because prior they’d been funding real estate deals quite liberally, and they lost a lot of money.
They’ve been saved by the government. They don’t want to do the same thing, but the problem is then the demand does not change. Just because the banks cannot provide funding, your small business’ need for the additional 20, 30, 40, 50,000 is not going to change. Because they still need money, because why? Because they need to improve their physical location, they need to buy a new fridge, they need to make payroll, they need to invest, they need to buy their nextdoor neighbor and things like that. They need the money, that’s why alternative lending is in such demand.
If you go by the numbers again, the size of this industry, again, it’s very difficult to put definitive number together, since these are private companies, but based on if you consider all the products within alternative lending and we’re talking about more than 12 products, the size of the industry is 50 to 300 billion, with a B. So, what does this mean? If we compare it against what is being funded currently, so that means that’s less than 1% of the market.
I challenge you, if you drive down the strip mall nearest your home, and walk into 20 businesses and ask them if they know about equipment leasing, if they know about merchant cash advance, most of them will have no idea about the existence of these products. This kind of allows me to segue into the second part of the question. First part of the question, will this industry survive in the long term? I think we kind of answered this, right?
What kind of conclusion and we answered this in a scientific manner, breaking down. What conclusion do we draw from the first question, to answer the first question? Well, if there is this much demand, if the banks whose primary goal is to supply that demand is not able to do it with this decline rate, do you think this industry will go away anywhere, anytime soon? Because whenever there’s massive demand for something, and that thing is going to go out, it’s going to disappear, it has to be … It must be replaced by something else.
If alternative lending or merchant cash advance or other products, if they will disappear, there has to be something that’s going to replace it. Why? Because of the demand. If demand does not disappear, then there has to be supply of something, since we’re supplying very little of this right now I don’t see any way, and under any condition this industry going, disappearing anywhere, right? It’s going to be around for a while. Don’t let that be your excuse for not starting this business.
Because that’s a myth and it does not even exist. We’re not even close to having this industry disappear tomorrow, or the demand going low. And the other question is what if the demand goes down? “Right now, yeah, Oz, this is a number for now. What if the demand goes down?” Let’s think about it for a second. How would the demand go down? When you think of small businesses, how would we get in a position that small business world that’s driving 75% of the economy, all of a sudden they’re going to tell us, “You know what? We have all the money we need, we don’t have any money problems. We have access to capital with no problems and things like that. That means somehow magically, we’re going to have the entire industry will stop needing money.”
I don’t know about you, but at least for the next 4-5 years, I don’t think any economist is predicting that. If anything, it is the opposite. If you look at the certain metrics, we’re going to be experiencing over 10% growth in demand in the alternative lending, until 2023, which is four years from now. Every year, 10% growth is a massive amount of growth, every single year. Economists predicting that, so I don’t think we’re going to reverse that and all of a sudden small businesses do not need money. That’s the first way.
The second way the demand would drop is if something else is supplying that demand. So, all of a sudden banks start offering alternative lending products and merchant cash advance. And some, for example, private companies … I’m sorry, the big companies, but they’re not banks, like PayPal, they’re currently offering working capital. Then some of the banks are kind of getting into it, but for them to supply this demand and make this a bigger part of their business is impossible. Because of the risk factors involved and their size, and do you know how much effort it takes for a Bank of America to implement a new product?
It takes them millions and millions of dollars to do that and it takes massive decision making and there’s no way they’re going to be able to saturate this market because they still want a bigger part of their portfolio to be this sweet spot for them. Half a million dollar plus loans posted, sent, funded. That’s the bigger part of their portfolio.
For that reason, they’re not going to even consider that to be the bulk of their business. I think we answered the first part of the question, so let’s go through the second part of the question which is is this industry saturated? We cleared that, but I want to touch on that a little bit. While I’m erasing this, where does this question come from, right? Let’s get to the bottom of this. Why would someone want to know if this industry is saturated or not?
One is they’re looking for a reason not to do anything, right? Maybe they want to get into the business, but they’re looking for proof to say to themselves, “You know what man? I would so do this but the industry is just so saturated. If the industry wasn’t saturated, I would certainly be doing this and make a ton of money.” Right? That’s just an excuse that just does not exist.
Is the MCA industry really saturated?
If it is not an excuse, it’s a valid concern, then where does it come from, right? We’ve got to answer that question. If it is the first one, I’m not going to take time to answer, because if someone is looking for an excuse not to do something, they’re just not going to do it. Simple as that. But if there’s a second part, I want to make sure I address that. The second question is, is the industry really saturated, right?
Let me share my screen so we can get this going. All right, so what is the source of that second question? Well, it could be maybe you worked for a merchant cash advance company before. Maybe you talked to your buddies who started merchant cash advance businesses and you’re talking to them and they’re saying, “Oh boy. Man, this industry, there’s so many people getting in, and this industry is just so saturated.”
And when you hear that feedback, what I challenge you to do is figure out where that’s coming from. How do they draw that conclusion? Usually they draw the conclusion because they’ve been on the phone all day long, they feel miserable about their business, but they’re dialing 300 phone calls, 400 phone calls a day, or they have a team of people doing that, right? What that happens is when you’re calling that many people, you’ve got to figure out who you’re calling.
For that reason, you’ve got to buy data, right? You’ve got to buy data from a data source to call these people. Where do the data sources get their leads from? Well, they buy bulk data and just they chunk it up and they sell it to people like your friends who maybe have been in this industry, and they sell that data over and over again, because that’s their source of income, right?
They can’t just keep generating fresh data a lot of times. They’ve got to do with what they have, and they sell that data over and over and over again to other providers, other ISOs, and people call on it. What happens when you buy the same data and call on the same people over and over again? Well then yeah, you have the wrong perception that there is saturation, because don’t forget that these bulk of people have been receiving phone calls from 50 other people, so if you’re the next person getting on the phone with them, they’re not going to treat you very nicely, as you can imagine.
That’s going to give you idea, the conclusion, wrong conclusion that, “Ah wow, everyone knows about this product. Everyone out there is selling it, everyone know about it, everyone’s not interested. That also means that the industry’s saturated, right?” Look at how flawed that process was, right? You got your information from the wrong sources, you draw the wrong conclusion by looking at the wrong sample size.
If you go back to the previous question, you notice that we’re barely funding 1% of what’s being demand. Is there even a possibility that this industry might be even close to getting saturated? No, not to all. If you change your perspective, and look … A lot of people cannot see the forest from the trees, right? [inaudible 00:18:46] stare at one tree, and that’s all their data sources pretty much, and they’re drawing conclusions based on that.
If you go with actual data, I can tell you we’re not even close to saturation. Certain industries are like that, right? Saturated, just getting into that business requires a lot of hustle. In this industry, you’re offering the sexiest product to your customers, which is money for small businesses, and we’re in an environment where they can’t get it. Their way of getting it’s through a bank and if the banks are declining them, because bank wants the perfect customer, right? They need to have a great credit, they need to have collateral, they need to have assets, they need to be in business for a certain amount of time, they need to be generating X amount of dollars.
For a small business, if they had all of that going, they wouldn’t have needed the money, right? It’s almost like that. When we’re in that environment, saturation is not your problem. It just doesn’t exist. Again, just talk to the business owners that you know. If they know about alternative lending, if they know about the products, I guarantee you most of them will have no idea. Saturation does not exist unless you’re looking at a very small sample size and just assuming that that’s what the market is. The market is much different than that.
There are many businesses who would do great things with that business, if they had access to capital. I mean, we even had funding options for startups, like if someone does not even have business, but they need to get the funding they need, to start a business, try to get that from a bank. Try to get a startup loan from a bank and see what happens. It’s almost impossible, right?
How about equipment? If someone is buying equipment, why would they not get any equipment funding for that equipment? If someone is doing bad credit wise, why would not be able to offer them something, even for someone with a bad credit? There’s so many things you can do, but one thing you don’t want to do is just focus on let’s say the merchant cash advance product dead on, and only know about that product, and only offer that.
Why is that a problem? Because then you can’t be a consultant. If all you know is one product, how can you be a trusted advisor to small businesses? You can’t, because you’re favoring one product. It’s just going to a doctor who has a deal with a pharmaceutical company to offer one drug only. If you have a headache, you get the same thing, if you have a stomach problem you get the same thing. If you need a colonoscopy, you get the same medication. Whatever you need, you get the same medication.
How long before you start doubting this doctor’s intentions? Because someone is playing with your health. Same thing with the businesses. You’re playing with the most important thing that they have, their finances, and if all you have is just one product which might be and might not be a good fit for them, you can cause a lot of trouble to them, and you’re not going to be a trusted advisor for them, right?
That’s why most people who join my program, they’re a good fit for that, because they don’t just think short term. They don’t just think, “How much money can I make right away?” Because as you can see on my channel, there are many people who start generating results and getting deals funded and making very high levels of commission within the first month. But in business, if you’re truly entrepreneurial, of course you want to start funding deals first month and build your business, but you’ve got to also see the long game.
What are you going to be doing with your business? What are you going to be doing with your clients? Because hustle is not the name of the game. Hustle is only a temporary experience that you go through until you build up your business. Once your is built up, then you need to have systems in place to take over. You collaborate your systems into your business and they take over a certain percentage of what you do, so business is predictable. And business, predictability is the differentiator, it’s the game changer.
You don’t want to have a rollercoaster
You don’t want to have a rollercoaster, one month you’re doing great, next one you’re not doing great. You’re going to give yourself a heart attack. It’s just very difficult to operate under those conditions. You’re getting a lot of stress, yet most people that you probably get your information from is living that every single day. They just go through a telemarketing, they hire more people and their best, heavy hitter quits on them tomorrow and goes working for some other company, there goes your marketing and the sales funnel because that guy takes it with them. And that’s the end of the story, and then you start complaining about, “Well, this industry is just saturated, man. People back stab you and they leave you and things like that.”
That has pretty much no basis in the grander scheme of things. When you look at the entire business model of alternative lending, the whole industry, it is much bigger, much bigger than you can conquer through just having people dial the same old list, plus we’re not in ’90s anymore. Dialing for a dollar, and just packing your basement with human bodies dialing 300 people, 400 people a day, it’s going to be only be effective if you combine it with something else, like online marketing, right?
Online presence is uber important. So whether you want to build a massive organization, or whether you want to just work from home and generate a couple of thousand dollars per month, you’ve got to condition yourself to start thinking like a business, right? That’s why I wanted to eliminate those two questions from your mind, if that’s been stopping you from getting into this business. Because they don’t exist. There’s no saturation problem in this industry, and this industry’s not going to go away anywhere, as long as small businesses need funding.
Because don’t forget they are offering the sexiest product on Earth, and either they need it or they don’t need it. The process that I teach, the sales process, is very consultative. It doesn’t require a hard sale. You don’t need to hard sell someone on why they need money. They need money or they don’t need money. Ask small businesses if they want more funds, or no. If it is no, then we’re not going to sell them on what they would do with more money. Like, it’s silly, right? That’s why it’s important to have a consultative process in place and also have knowledge about different options so you can be the true consultant and offer the … Not only find diagnosis, but also offer the medication to alleviate the pain that they’re going through right now.
You can’t do that with just one medication, one product, one solution. That’s what is required from being a successful entrepreneur in this industry. I hope this answers your questions. I know it’s a little … I got into the numbers and things like that. I hope I didn’t confuse you, but comment below if this makes sense, and also if you haven’t done so, we have a lot of content on our YouTube channel. Subscribe to my YouTube channel and I periodically create more content, so you can get notifications. All right, great to be with you guys, looking forward to your comments and questions. Take care now. Bye bye.