september 2011 first data merchant cash advance (fd mca) · a merchant cash advance is not a loan;...

First Data Merchant Cash Advance (FD MCA)

September 2011

First Data Learning Organization LB | Rev: 09/14/11

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Agenda

• Overview

• Merchant Eligibility and Review

• Portfolio Review Options

• Application and Approval

• Merchant Statements

• Agent Compensation

• Sales Information

• Support

• Appendix—FAQ

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Overview

First Data Merchant Cash Advance

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• A merchant cash advance is the sale of a merchant’s future credit card receivables

• First Data Merchant Cash Advance (FD MCA) purchases a set dollar amount of the merchant’s future MasterCard and Visa credit and non-PIN debit card receivables at a discount; in exchange, the merchant receives cash

• A percentage of the merchant’s daily credit card deposits are then remitted to repay the cash advance

• For example, PJ’s Bar and Grill processes $10,000 in MasterCard and Visa credit and non-PIN debit each month

• PJ receives $10,000 in cash from FD MCA

• PJ remits FD MCA 20% of the grill’s daily MasterCardand Visa credit processing dollars to repay the advance

• FD MCA collects $13,500 from PJ over 7 months

Merchant Cash Advance Defined

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A merchant cash advance is NOT a loan; it is apurchase of future processing receivables.

Traditional Loan vs. FD MCA

LoanRequires a fixed term.

Typically requires a fixed payment.

Requires repayment at an interest rate.

Requires perfect personal credit.

Requires a personal guarantee.

Shows as debt at credit bureau.

Generally requires 3 years in business.

FD MCANo term.

No fixed payment —FD MCA paid when the merchant processes MC/V credit and non-PIN debit.

There is no interest rate.

Perfect personal credit not required.

No personal guarantee.

Only an inquiry shows at credit bureau.

Requires only 1 year in business.

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Purchase Price

Not on MSA

The amount being advanced to the merchant—

typically up to 100% of average monthly MasterCard

and Visa credit and non-PIN debit processing

volume.

Purchased Amount

Advance Amt. on MSA

The total amount to be remitted, by the merchant, to

First Data Merchant Cash Advance.

Daily Retrieval Percentage

Split Percent on MSA

The percentage remitted daily to repay the

merchant’s purchased amount, typically 10% to

20%, of MasterCard and Visa credit and non-PIN

debit processing volume.

Estimated Duration

Not on MSA

The estimated time the merchant will take to remit

the purchased amount.

Factor Rate

Not on MSA

The rate multiplied by the purchase price to

determine the purchased amount, typically, 1.25 to

1.35.

Glossary

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Merchant

Eligibility and ReviewFirst Data Merchant Cash Advance

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Prohibited IndustriesAny merchant that is ineligible for FDIS merchant processing and/or the following is ineligible for FD MCA.

Advertising & Marketing Agencies (7310, 7311, 7399) Foreclosure protection/guarantees (6162-02)

Audio/Video text (3651, 3652) Gas Stations (5541, 5542)

Auto Dealerships (5511, 5521, 5571, 5592, 5598, 5599) High Risk Telemarketing (5962, 5966, 5967)

Airlines (4511) Home Based Businesses (5960)

Brokers or Agents for any service (6162, 6163, 6200, 6211,

6221, 6411, 6500, 6510, 6513, 6300, 6529, 6530, 6531) Home Interior Design (7389-02)

Cash advances (other than financial institutions) (6153)

Independent Contractors (1520, 1700, 1711, 1740, 1750,

1761, 1771, 1799)

Cell Phone Resellers (4899, 5999-89) Internet Based Only Businesses (5960)

Charities (6732, 6733) Mail order/Telephone Order Businesses ( 5961, 5964, 5969)

Check cashing (6099-03) Membership Clubs (7997,8699)

Commercial Art & Graphic Design (7370, 7371, 7372, 7373) Money transfer services (6099-04, 6099-10)

Computers (5734, 4816)

Personal Development Schools (8200, 8241, 8243, 8244,

8249, 8299)

Credit card protection (including identity theft protection)

(7322)

Personal Financial Services (6199, 6141, 6282, 7276, 7277,

8700)

Credit repair/Credit restoration (7299-27) Postal/Mailing Services (7330,7331,7338)

Cruise Lines (4411)

Social, Religious, Fraternal, Political or Professional

Organizations (8611, 8621, 8631, 8641, 8651, 8661)

Currency exchange (6099-01) Subscription Services (5968)

Dating services (adult or internet) (7273) Taxis, Limousines (4121)

Debt consolidation (6199, 7320, 7321) Theater & Ticket Brokers (7922)

Employment Agencies (7361,7363) Travel (4722)

Extended warranty companies (6351-09) Tour & Guide Services (7990, 7991)

Funeral Homes (7261) Travel Agencies ( 4724,4725, 4729)

Furniture Stores (5712, 5021,5700) Timeshares & Vacation Rentals (7012, 6513,6519,6531,6532)

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• AMI with First Data Independent Sales (FDIS)

• Unacceptable to solicit an FDIS merchant with an open AMI advance

• Acceptable to solicit an FDIS merchant with a closed AMI advance

• BFS with First Data Independent Sales (FDIS)

• Unacceptable to solicit an FDIS merchant with an open BFS advance

• Acceptable to solicit an FDIS merchant with a closed BFS advance

• AMI with Another First Data Sales Channel or Competitor

• Acceptable to solicit a merchant that has an open or closed AMI advance with another First Data sales channel or any competitor

• Any Other Provider and Any Competitor (non FDIS)

• Acceptable to solicit a merchant that has an open or closed advance with any other provider and any competitor (non FDIS)

Existing Cash Advance Considerations

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Merchants meeting FD MCA minimum criteria may apply for a First Data Merchant Cash Advance.

• FD MCA Minimum Criteria

• Approved First Data Independent Sales (FDIS) merchant processing account

• Minimum one year in business

• No open bankruptcies, tax liens or judgments

• Accepted SIC i.e. not on the prohibited merchant list

• Minimum $5,000 per month, MasterCard and Visa credit and non-PIN debit processing

Minimum Criteria

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Upon receipt of the FD MCA application, FD MCA performs a full risk review of the merchant’s business.

Risk Review Activities

• Personal credit review of the signer

• Business credit review

• Bank statement review

• Merchant processing statement review

• Landlord interview

• 9 months remaining on lease, preferred

• Site Inspection

• Anonymous inspection ordered and paid for by FD MCA

Risk Review

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• There is no fraud potential

• The business is open and does not appear to be closing

• The merchant shows recent, positive payment history with personal and business payments

• The merchant is processing all credit card transactions with FDIS on one merchant account

• The merchant is paying the landlord or mortgage as expected

• The business bank account does not have an excessive amount of NSF activity or days ending in negative balances

• The merchant shows no signs of negative trending in processing

Risk Review Considerations

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Knowledge Check

FD MCA requires a minimum of ______ in business.

A. 6 months

B. 1 year

C. 2 years

D. 3 years

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Portfolio Review Options


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• Upon request, FD MCA will review an agent’s portfolio checking merchant historical data, years in business, SIC code, etc. to identify strong FD MCA candidates

• For agents boarding significant new business, FD MCA is open to implementing recurring reviews on the portfolio’s new merchants

• E-mail the request along with the agent ID number and office name to [email protected]

• FD MCA reviews the agent’s portfolio then provides the agent with a list of merchants likely to qualify for FD MCA, including an estimated purchase price for each merchant

• New credit inquiries are not made during a portfolio review

• The agent uses the list to contact merchants, establish interest and follows the standard application process

Portfolio Review Options

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Application and Approval


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• Posted on ROLA Application Center

• Requirements

• Sales Rep ID = agent ID # and office name

• FDIS merchant ID

• Name and telephone number of applicant

• Requested advance amount

• Requested withholding percentage

• Intended use of proceeds

• Does merchant have an open cash advance?If yes, then

• With who?

• Balance

• Owner or authorized signer’s name

• Owner or authorized signer’s signature

FD MCA Application

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•The FD MCA application process is easy for agents

• Complete the simple, one-page application form and submit to FD MCA

• Prepare merchant for documentation requirements

• Whenever possible, FD MCA obtains required documentation from the merchant’s FDIS records

• FD MCA may contact the merchant and request any of the following

• 6 months processing statements

• 2 most recent business bank statements

• Copy of signer’s driver’s license or passport

• For advances over $75,000, tax returns and financial statements

• Property lease (preferred, 9 months remaining) or mortgage statement

FD MCA Application Process

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• Typical approvals are up to 100% of the merchant’s average monthly MasterCard and Visa credit and non-PIN debit volume, however, the merchant may request more or less

• The daily retrieval percentage may be up to 20% of the merchant’s net MasterCard and Visa credit and non-PIN debit deposits (gross less discount, chargebacks, etc.)

• Estimated duration of contract varies but typically runs from 5 to 7 months

• Factor rates vary but typically run 1.25 to 1.35

• Basic factor rate considerations include

• Competing offers

• Business and signer’s credit

• Expected remittance time frame

Pricing

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FD MCA provides a *cash advance calculator, in the product pack on MAO, to help agents estimate purchase price possibilities.

Cash Advance Calculator

*These calculations are an estimate and not a guarantee of an advance. Approval is subject to satisfaction of application requirements,

underwriting criteria and execution of merchant purchase agreement.

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FD MCA provides a *cash advance calculator, in the product pack on MAO, to help agents estimate purchase price possibilities.

Cash Advance Calculator

*These calculations are an estimate and not a guarantee of an advance. Approval is subject to satisfaction of application requirements,

underwriting criteria and execution of merchant purchase agreement.

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• Approval options are typically issued to a merchant for a daily retrieval percentages of 10%, 15% and 20% of the average monthly MasterCard and Visa credit and non-PIN debit processing

• Merchants with the majority of their business in credit cards (low cash volume) may only qualify for a lower daily retrieval percentage

• Continuing with the PJ’s Bar and Grill example, PJ averaged $10,000 monthly MasterCard and Visa credit and non-PIN debit processing, received 3 options and ultimately chose the $10,000 purchase price that had a 1.35 factor rate

• 20% daily retrieval %, funded at 100% = $10,000 purchase price



Approval Options

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Knowledge Check

During the risk review process, a credit bureau inquiry is done on the personal credit of theFD MCA application signer.

A. True

B. False

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Merchant Statements


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FD MCA remittances appear as Adjustments on the FDIS merchant statement.

Merchant Statement

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Agent Compensation


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• 3% upfront commission on merchant’s purchased amount paid weekly on Thursday/Friday for previous week

• $10,000 purchase price x 1.35 factor rate= $13,500 purchased amount x 3% upfront = $405 upfront commission

• 1% residual on merchant’s daily remittance to FD MCA paid monthly

• $350 net MasterCard and Visa credit and non-PIN debit x 1% residual= $3.50 residual for that day

• 2% upfront commission on a merchant’s FD MCA renewal paid weekly on Thursday/Friday for previous week

• Merchants are typically eligible for a renewal up to the original purchased amount once 60% of the original purchase price has been remitted

• PJ remits $8,100 ($13,500 x 60%) leaving $5,400 remaining on original FD MCA

• PJ can likely renew the FD MCA for an additional $6,000 purchase price with an $8,100 purchased amount, bringing the total purchased amount back up to $13,500

Agent Compensation

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Sales Information


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Any eligible merchant is welcome to apply for FD MCA.

These industries have proven successful for cash advance deals.

5946 Cameras

5948 Luggage

7231 Beauty Shops

7541 Car Washes

7933 Bowling Alleys

7996 Amusement Parks

7999 Misc. Amusement

5814 Fast Food

5261 Nurseries

5399 Misc. General Merch.

5441 Candy Stores

5499 Misc. Food

5611 Men’s Clothes

Target Merchants

5812 Restaurants

5813 Drinking Places

5251 Hardware

5331 Variety Stores

5411 Grocery Stores

5461 Bakeries

5531 Auto & Home Supplies

5621 Women’s Clothes

5641 Child’s Wear

5699 Misc. Apparel

5921 Liquor Stores

5942 Book Stores

5944 Jewelry

5632 Women’s Access

5651 Family Clothes

5912 Drug Stores

5941 Sporting Goods

5943 Stationery

5945 Toys & Hobby Centers

5947 Gifts & Novelty

5999 Miscellaneous Retail

7241 Barber Shops

7932 Pool Halls

7991 Physical Fitness

7997 Sports Clubs

8412 Museums, Art Galleries

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FD MCA provides easy access to working capital funds that can enhance and grow a merchant’s business.

Possible uses

• Expansion

• Remodeling

• Equipment upgrade

• Replenish inventory

• Web site development

• Investment in the business

Merchant Value Proposition

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• Streamlined application and approval process

• One stop shop for merchant’s business needs

• No hidden costs or fees• No fixed monthly payments and no application fees

• Recurring business growth opportunity• Opportunity to renew cash advance agreement for business needs

Merchant Value Proposition

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• Very competitive product offering compared to the marketplace

• Fast, streamlined process for existing FDIS merchants

• Minimal paperwork required—a single page application to start the process

Product Value Proposition

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• Robust compensation program

• Strengthens agent status as a business consultant

• Possible retention benefit—additional products enhance stickiness of the merchant relationship

• Portfolio review option—helps identify opportunities that are most likely to be approved

• Convenient, one-stop solution for all of the merchant’s needs improving the overall experience of the agent and merchant

Agent Value Proposition

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Features and Benefits

Features Benefits

• No monthly fees, payment is

remitted from each daily deposit

• Does not impact other opportunities

to apply for traditional financing

• Fast and easy application process

• Quick turnaround time for approval

and funding

• Dedicated customer service team

• Easy access to working capital

at a time when credit markets

are tighter

• Get value from future cash flows

now, and use them to invest in

the business

• Opportunity to expand merchant

business

• Simple renewal process for

additional funds

• Repayment flows with

merchant’s business

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• Convenient, one-stop shop

• First Data is the processor and the cash advance provider

• With existing FDIS merchants, there is no need for a merchant to switch processors in order to obtain a cash advance

• Application and approval process is simple and fast

• Minimal documentation required since FDIS already has established relationship with merchant through the merchant account

• Merchants are typically funded within 72 hours of receipt of all required documentation

• Single, consolidated statement

• Cash advance payments are reflected on the merchant statement for easy reconciliation

• Experienced sales and service teams

Competitive Advantage

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• Competitive pricing

• Quick funding timeframe

• Ease of application and approval process

• FD MCA does not show as a debt on credit history

• Split funding directly from merchant processing account

• No fixed payments or hidden fees—FD MCA gets paid when merchant gets paid

• Existing FDIS merchants have no need to change credit card processors

• Opportunity to renew FD MCA agreement for further business growth

FD MCA—Key Selling Points

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Overcoming Common Objections

Merchant Agent

“This product is

too expensive.”

Tie the advance back to a need the merchant has expressed. “This is not a traditional financing

alternative, so the cost is different. While most cash advances are very expensive, First Data’s cash

advance rates are very competitive. We can have the funds you need to expand your patio seating

to you in as little as five days, and you can quickly start earning additional revenue off the new

tables.”

“The advance

amount is not

high enough.”.

“While it may not be the full amount you were looking for now, please understand that your

business is eligible for renewal once you have remitted 75% of the current balance. With this

product, FD MCA can give you more in as little as 4-5 months without the hassle of having to

reapply.”

“I do not need

the money

right now.”

“You never know when that need for quick access to capital may come up. The great part of this

product is that we do not restrict how the advance is used in your business. Many of our merchants

use this simply to have working capital in their accounts—accessible when they need it.

“I have bad

credit.”

“That is not necessarily a problem. While FD MCA does review your credit history, it is not the sole

factor that qualifies you for an advance.”

“I have a

higher offer or

better rate with

another

company.”

“While we always try to stay competitive, there are additional features to our product that may make

it more beneficial to you. FD MCA does not require that FDIS merchants switch processors, so you

won’t have to pay an early cancellation fee and FD MCA uses split funding so they do not need

access to your bank account. FD MCA also provides the funds in as little as 3-5 days, where some

competitors take a week or more.”

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Knowledge Check

List the top 5 FD MCA features or benefits you could share with a merchant who states, “tell me about First Data Merchant Cash Advance.”

1.

2.

3.

4.

5.

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Support


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• Agents may request access to the FD MCA application tracking tool called urReporting

• urReporting Request form available in the product pack on MAO

Agent Reporting

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• Telephone

• (855) 205-6712, 8 a.m. to 5:30 p.m. Easternsales inquiressetup supportmerchant customer serviceurReporting questions

• E-mail

• [email protected] inquiresportfolio review requestsurReporting questionssetup support

• [email protected] customer service

Agent and Merchant Support

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• MAO

• Product pack

• ROLA Application Center

• Application

• Brand Center

• Sell Sheet

Agent Support Materials

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Knowledge Check

Portfolio Reviews are automatically generated and the results forwarded to agents on a monthly basis.

A. True

B. False


(FD MCA)

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• How does the cash advance program work?

• Once a merchant has been approved and funded for a cash advance, a daily retrieval percentage of the merchant’s MasterCard and Visa credit and non-PIN debit deposits are remitted to repay the cash advance. The estimated duration of the contract typically varies between 5 and 7 months.

• How long does it take to get approved?

• Merchants can be approved in as little as 3-5 business days

• What can the merchant use a cash advance for?

• The advance can be used for any legitimate business expense

• How will the merchant know that they are approved?

• An FD MCA representative will contact the merchant and inform them that they have been approved for the cash advance.

Appendix—FAQ

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• Why should a merchant choose a cash advance as a way to obtain cash flow?

• In today’s economy, it is sometimes difficult to obtain a traditional loan and if the merchant is approved for a loan s/he must provide financial items related to tax returns, personal financial statements, pay stubs, etc. The cash advance process is a quick and simple application process with minimal documentation requirements.

• How may a merchant find out how much they have left remit?

• Call the FD MCA customer service team at (855) 205-6712 or e-mail [email protected].

• How does the merchant make the remittance?

• Remittance is extracted from the merchant’s daily MasterCard and Visa credit and non-PIN debit processing deposits (up to 20%). The daily retrieval percentage is based on credit card volume and several other factors.

Appendix—FAQ

september 2011 first data merchant cash advance (fd mca) · a merchant cash advance is not a loan;...

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