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Question regarding high volume referrals and Business Funding

by cherrybowl
10 replies
An Associate of mine has a relationship with an online location that gets a million+ visitors a month for business services to brick and mortar merchants. They repeatedly get requests for business funding, which they do not offer.

They are trying to decide the best way to go about monetizing these referrals (few thousand a week). They're bouncing around ideas like partnering with a lender in this space (or an investor seeking to enter the market), but are open to other ideas as well. I would like to hear what people might think as far as the type of arrangement or partnership he should consider?
#business #funding #high #question #referrals #volume
  • Profile picture of the author JohnMcCabe
    My own opinion is that it depends on the type of funding and how open to risk the people running this online location are.

    Are they looking for some type of business loan or line of credit? Or are they looking to trade equity for funding?

    In either case, I think the idea of partnering with someone in the business is a good idea. How to monetize is the variable.

    If it's a straight up loan or line of credit, I'd look for a finder's fee arrangement. Ideal would be a flat fee for the referral and a percentage of the transaction fro successful deals.

    If it's an equity deal, or the company is very risk averse, the same kind of monetization should work.

    If they're open to a little risk, they might make an arrangement with the VC to get a portion of the equity acquired in the deal. That way, if the funded business turns into the next Amazon, they earn a share of the spoils. If it goes bust, they get nothing, which is really what they had before making the referral anyway.
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    • Profile picture of the author cherrybowl
      They're customers are generally brick and mortar businesses ranging from 100,000 a yr in annual sales to 2 million.

      The customers are looking for a combination of funding ranging from short term funding to sba loans. SO the loans would be 99% straight up, not equity. Credit ranges from average to very good, with some bad credit.

      The people running the online location aren't looking to offer loans themselves but would like someone to take over that portion of the services they offer.











      Originally Posted by JohnMcCabe View Post

      My own opinion is that it depends on the type of funding and how open to risk the people running this online location are.

      Are they looking for some type of business loan or line of credit? Or are they looking to trade equity for funding?

      In either case, I think the idea of partnering with someone in the business is a good idea. How to monetize is the variable.

      If it's a straight up loan or line of credit, I'd look for a finder's fee arrangement. Ideal would be a flat fee for the referral and a percentage of the transaction fro successful deals.

      If it's an equity deal, or the company is very risk averse, the same kind of monetization should work.

      If they're open to a little risk, they might make an arrangement with the VC to get a portion of the equity acquired in the deal. That way, if the funded business turns into the next Amazon, they earn a share of the spoils. If it goes bust, they get nothing, which is really what they had before making the referral anyway.
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      • Profile picture of the author JohnMcCabe
        Originally Posted by cherrybowl View Post

        They're customers are generally brick and mortar businesses ranging from 100,000 a yr in annual sales to 2 million.

        The customers are looking for a combination of funding ranging from short term funding to sba loans. SO the loans would be 99% straight up, not equity. Credit ranges from average to very good, with some bad credit.

        The people running the online location aren't looking to offer loans themselves but would like someone to take over that portion of the services they offer.
        Then it sounds like their best bet is to work out some kind of referral deal with a consultant or broker who specializes in that area.
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        • Profile picture of the author cherrybowl
          Gotcha. Part of the issue also was the volume of merchants, a few thousand conversations a week with merchants, so it would take more than a single broker or consultant, and likely more ideal for a large team. Do you think its better to find a bigger player/company or should they find an investors and do it themselves?

          The biggest challenge in the short to mid term funding industry is generally a large, consistent flow of deals, and a low cost per acquisition, and they seemed to have solved both those issues.




          Originally Posted by JohnMcCabe View Post

          Then it sounds like their best bet is to work out some kind of referral deal with a consultant or broker who specializes in that area.
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          • Profile picture of the author JohnMcCabe
            Originally Posted by cherrybowl View Post

            Gotcha. Part of the issue also was the volume of merchants, a few thousand conversations a week with merchants, so it would take more than a single broker or consultant, and likely more ideal for a large team. Do you think its better to find a bigger player/company or should they find an investors and do it themselves?

            The biggest challenge in the short to mid term funding industry is generally a large, consistent flow of deals, and a low cost per acquisition, and they seemed to have solved both those issues.
            Since it sounds like your folks are both uninterested in being in the loan business and inexperienced with it, they should look for an outfit big to handle the deal flow. Perhaps a brokerage or VC firm looking to grow might work out. However this works out, they should probably look for professional assistance in putting the deal together. With government regulation and oversight, the devil is definitely in the details

            I wish you and your friends luck.
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  • Profile picture of the author Oziboomer
    There are plenty of options for partnering up .

    One company pushing hard in the cash flow financing space for small business is Prospa, They have different partnership type options. You can check the types of arrangements they offer here--->
    https://www.prospa.com/partner-with-us

    For established businesses who don't want to put up assets to secure finance these types of services are becoming very prevalent.

    They were just the first outside of some of the majors that sprung to mind.

    Best regards,

    Ozi
    Signature
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    • Profile picture of the author cherrybowl
      I did check out Prospa, and their program looks great, but it looks like their focus is Australia, while these customers are USA merchants only.



      Originally Posted by Oziboomer View Post

      There are plenty of options for partnering up .

      One company pushing hard in the cash flow financing space for small business is Prospa, They have different partnership type options. You can check the types of arrangements they offer here--->
      https://www.prospa.com/partner-with-us

      For established businesses who don't want to put up assets to secure finance these types of services are becoming very prevalent.

      They were just the first outside of some of the majors that sprung to mind.

      Best regards,

      Ozi
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  • Profile picture of the author Randall Richards
    I received your pm, but am unable to reply because I only have 2 posts so far. Can you please pm me your email and I will give you all my info. Thanks.
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  • Profile picture of the author DABK
    SBA 7(a) - Scotsman Guide

    Scottsmans guide lists tons of lenders, sorted any which way you want.

    Generally, you should look for a large lender that works with brokers or accepts referrals (they'd have something like Partners or Affiliate page on their site).

    The link I gave you is for a bunch of lenders that do SBA-7 loans. Sounds like you need more than that but many, most?, that do SBA-7 do other types.

    It's for USA. You did not say where you were.
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    • Profile picture of the author cherrybowl
      Yes I'm in the USA. The merchants are nationwide.
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