I have just returned from the annual IFA conference in Scottsdale, Arizona.
Conference is my Factor-geek fest. I see friends and colleagues from around the country and geek out on all things Factoring for a couple of days. I also tack on a day or two for vacation. It is how I am seeing the United States.
Tuesday morning, friends picked me up at the Phoenix airport and we headed to Sedona. For the first hour, I could have been on any road. As we got closer to Sedona, the scenery changed. It stole my breath. I started clicking pictures with my phone as we were traveling 80+MPH. The pictures were pretty. They did not do the scenery justice.
Before we left Sedona, after spending a couple of hours surrounded by magnificent views, I bought a handful of postcards. It was the only way to truly catch the beauty of what I was seeing.
One of the main topics at conference surrounded a “new” (last decade or so, rather than Factoring that has been around for 4000 years) alternative financing product flooding the marketplace. This product, known as MCA, or “FinTech”, allows business owners engage in financing/lending transactions online – with little to no human interaction, and zero guidance or expertise. While the long term viability of the product is still unknown, the short term danger is apparent. These products are putting companies out of business. Business owners, who, for whatever reason, are facing cash flow challenges, are able to get fast cash. They are able to get fast cash without having to address the issues that brought them to the point of needing fast cash.
We regularly see the dangers that the anonymity of the internet causes on social media. We now must face those dangers in the finance world. We have become a world of quick fixes and internet searches. We have become a world of problem solvers via Google searches and Youtube videos. We tell ourselves that we can do it ourselves and it will be expert-level work.
Question – if you needed surgery, would you hire the surgeon who had learned the technique by watching YouTube videos?
There is nothing – NOTHING – that replaces good old-fashioned expertise. There is nothing that can replace the benefit of collaboration and social interaction. Were my phone pictures pretty? Yes. Were they just as good as the professional pictures on the postcards I purchased. Not even close. My mediocre pictures were free. I paid for the photographer’s expertise on the postcards and the result was breathtakingly beautiful.
Factoring is transactional. It is also collaborative, relational and consultative. Most Factors I know (and I know hundreds) work with their clients to overcome the obstacles that created the need for factoring in the first place. Our goal is to provide a needed transactional service while HELPING our clients to move their businesses forward so they won’t need us any more. We are experts at doing this. Sometimes it means we are “in the weeds”, telling clients things they don’t want to hear. Sometimes it means we say no. Sometimes it means we walk away from deals. I have walked away from deals that would have made LDI a lot of money because I knew that factoring would not move the client forward in a positive way. It is an issue of integrity.
Every post ends with a lesson. This one ends with two lessons and a plea…
Money spent for expertise is priceless,
Mediocre pictures are just that…always buy the postcards.
If you or someone you know is using this financing product, PLEASE talk to me or another expert – a banker, CPA, bookkeeper and/or lawyer. It could very well be that there are other options available that will bring more value to the business than the immediate relief of receiving instant cash.