Backdooring and Transparency in the Merchant Cash Advance Industry

Some top tier lenders occasionally pick up the phone and call applicants before making an offer, which might rub brokers the wrong way.. But how do you know when a funder is breaching proper protocol and your deal is being backdoored? Backdooring is typically a tactic for struggling funders. For stable companies, this practice is simply short-sighted and bad for business. Damaging their credibility is enough to deter many funders from engaging in shady business practices but, as in any industry, there are always outliers.

Some companies fail to offer their ISOs submission confirmations or timely feedback on their deals. Sometimes, no feedback is provided at all and applications simply disappear into a black hole. This is unfair to brokers, as they have no idea what may be occurring on the other end of the pipeline. Submission-driven funding companies should manage their deal flow and correspondence with professionalism and in a timely manner If you’re submitting deals and not receiving feedback, this should raise some red flags. If this is a persistent problem for your brokerage, you might want to consider replacing merchant phone numbers with your own on applications. Submit the applications to the funders in question and see if someone gives the “business owner” a call instead of contacting your office first.

Broker paranoia is heightened when they utilize middle offices to manage their deal submissions. Enter: the importance of trust and transparency. Your middle office should be able to disclose their funding partners at request. If an entirely different funder is contacting your client, this should cause you to pause. Merchants that are not forthcoming should not be confused with a funder or middle office backdooring your deal. Business owners could be working with various brokers without disclosing this information to you. Having the proper rapport with your middle office is imperative in rooting out the true culprits. Keeping a close knit circle that you can trust and constantly evaluating your network is crucial. This will provide you with peace of mind and the ability to hesitate before blindly standing in solidarity with your client. “Buyers are liars” as they say; Funders can be too… But if you aren’t constantly examining your relationships closely, the person lying to you is, well, you.