Quick Tip #6- Know How MCA Brokers Get Paid

How to Leverage the Good Credit of a Friend or Relative to Help Build Your Own.

No Barrier to Entry

Lenders vs. Brokers

Direct Lenders

  • Direct Interaction: Direct lenders deal directly with borrowers. This direct interaction demands a high level of compliance with lending laws and regulations, as there’s no intermediary.
  • Regulatory Scrutiny: They may be subject to more direct scrutiny from regulatory bodies since they are the principal in the lending transaction.
  • Disclosure and Transparency: Direct lenders are responsible for all disclosures and must ensure that all aspects of the lending process are transparent and comply with applicable laws, which can include state usury laws, truth in lending acts, and other financial regulations.

Lenders via Broker Referral Networks

  • Broker’s Role: In this model, the broker acts as an intermediary between the borrower and the lender. While this can offload some of the customer-facing responsibilities, the lender still needs to diligently oversee the brokers to ensure compliance with laws and ethical lending practices.
  • Indirect Interaction: The indirect nature of the client interaction might lead to less control over the customer experience and potential misrepresentations or omissions by brokers.
  • Dependence on Broker Practices: Lenders might face legal exposure if the brokers engage in predatory lending practices, misrepresent terms, or fail to adequately disclose terms. Even though the direct relationship is between the broker and the borrower, the lender can still be held accountable for the actions of the brokers they choose to work with.

Lenders via Broker Referral Networks

  • Broker’s Role: In this model, the broker acts as an intermediary between the borrower and the lender. While this can offload some of the customer-facing responsibilities, the lender still needs to diligently oversee the brokers to ensure compliance with laws and ethical lending practices.
  • Indirect Interaction: The indirect nature of the client interaction might lead to less control over the customer experience and potential misrepresentations or omissions by brokers.
  • Dependence on Broker Practices: Lenders might face legal exposure if the brokers engage in predatory lending practices, misrepresent terms, or fail to adequately disclose terms. Even though the direct relationship is between the broker and the borrower, the lender can still be held accountable for the actions of the brokers they choose to work with.

Different Levels of Depravity

The Art of the Deal Upsell

  • Pristine Payment History: The account should have a record of on-time payments. Late payments can negatively impact your credit score.
  • Long Credit History: The older the account, the better. An aged account adds depth to your credit history.
  • Low Credit Utilization: Look for an account with a utilization ratio below 30%. This indicates responsible credit management.

Stacking the Deck: The Dangerous Game of MCA Positioning

  • Verification: You’ll need to provide personal information such as your full name, address, date of birth and social security number.
  • Long Credit History: The older the account, the better. An aged account adds depth to your credit history.
  • Set Ground Rules: Have an open discussion about card usage, if any, and repayment expectations to avoid future misunderstandings. If you are even remotely irresponsible with credit card usage, don’t even let them give you the card. Note- It does not matter whether you use the card or not- your credit will get the same boost either way.

Caveats and Considerations

  • Shared Responsibility: If the primary account holder mismanages the account (e.g., maxes out the card or misses payments), it could negatively affect your credit score.
  • Relationship Dynamics: Money matters can strain relationships. Ensure both parties are clear about expectations and responsibilities.
  • Temporary Solution: While being an authorized user can help build your credit, you should also work on establishing your credit independently.

BLF is here to assist you

Our goal is to provide you with expert help and guidance for you needs. Whether you need funding or business services for your trucking company, you are in reliable hands.

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