Aside from using business bank statements for funding initially, there are few, if any, benefits for small businesses and business owners when they share their bank statements with an alternative lender. Our observation is that brokers and many alternative lenders do not safeguard small business owners' bank statements; instead, they may exploit them, particularly during collections.
This article delves into the positive and mostly negative outcomes of sharing bank statements with alternative lenders, brokers, and their collections representatives.
By Thomas Tramaglini, Chief Operations Officer
The Center for MCA Research
Your Business Bank Statements
Perhaps one of the most common things that alternative lenders ask for in determining whether or not they will offer funds to a small business owner is the small business owner's business bank statements. If business owners want to get funded they will be required to submit their bank statements to the MCA broker or company.
However, once your statements are submitted where do they go?
This is a question that should be asked by small business owners, but never is. In fact, we believe that while alternative lenders use the bank statements that they are provided, few things are done to protect small business owners and their businesses and in many cases the information provided are used to exploit the client.
While we understand that bank statements are the bread and butter of how alternative lenders determine fundability, the negative outcomes associated with providing bank statements should caution small business owners at a minimum when they are considering whether or not they are going to share their information.
Alternative lenders and your bank statements:
After a small business owner submits their bank statements to the alternative lender, what occurs?
The alternative lender will assess and scrutinize the bank statements, examining various aspects such as transaction types, daily balances, deposit and withdrawal quantities, and other financial transactions. Their objective is to determine whether they will provide funding based on the business's cash flow and financial condition.
Brokers:
Brokers are a different. Most of the time, brokers are the conduit to your funding as they will collect your statements and application, and then send your materials to a number of different alternative lenders. They are also the conduit of many negative things, including fraud.
Most brokers have no idea of the lending practices of the alternative lender and because they are not apprised to what the alternative lender is looking for, in most cases they will send your application to multiple companies and in the end it will negatively hit your credit, negatively influence your funding with many alternative lenders, as well as serve as a gateway to many people getting your personal information.
While we do not want to say that every broker is incompetent and not understanding of getting small business owners funds, the simple fact is that most brokers do not care about the small business owner and they will prey on the client until they have milked their businesses and personal funds dry.
And with regards to bank statements, once a broker gets those statements, they will not only send them to multiply alternative lenders, some will photoshop the statements and even sell them to other brokers.
Who stores and protects your bank statements?
That said, after funding does or does not happen, what happens to your statements? Are the statements destroyed? Are they stored on a encrypted hard drive? In a CRM? E-Mail Accounts?
The answer is all of the above.
That is, there is no standard for protecting the bank statements of small business owners and in many cases, if you have sent your bank statements to an alternative lender or to a broker, your statements are all over.
Alternative lenders need to do more to protect small business owners
While we are not spending much time in this article regarding what alternative lenders do or do not do to protect small business owners, we have underscored how little is actually done and in some cases leads to stolen data.
Do lenders and brokers sell, leak, or give your statements to 3rd parties?
You can be they do and they will!
The court case referenced above (Itria Ventures LLC v. Eli Gross d/b/a MCA LEADS GEN) shows how one of the biggest MCA companies is going after a lead company for selling so-called protected client information to MCA brokers. In the complaint, Itria Ventures suggests that their trade secrets were stolen and sold.
In this industry, this is commonplace. And while we agree, if true the defendant should be held accountable, the MCA company should also be held accountable for allowing such a blatant breach of it's internal security happen.
While we can surely find many instances of your data being sold, here are a couple of examples that we found online using a simple Google Search:
Selling your statements: MCA Leads on Synergy Direct
Selling your statements: MCA Leads on Fiverr
This is a website where application and bank statements are on sale....
Selling your statements: A broker on Debanked.com selling statements
For any broker and MCA company, Debanked is one of if not the most pertinent MCA website out there. However, forums like the one they have allow brokers to sell their leads and bank statements to others.
Bank Statements Can Be Used for Collections
As previously mentioned, alternative lenders use your bank statements for analysis on where or not they want to fund you.
However, when you default or your alternative loan/MCA becomes a collections event, the collections companies use your bank statements to come after you.
The bank statements give tremendous information for the MCA and collections companies to foundationally support their use of the Uniform Commercial Code (UCC) to collect on unpaid amounts. Once a UCC lien is filed, the alternative lender can freeze your bank accounts(s) (personal and business), stop you from being paid (bank statements tell the MCA company who pays you), and in some cases can stop your vendors from providing you inventory, etc.
Once a person defaults, they go to the bank statements and use what they find to come after you.
What is more scary is that once the person/business begins to have a hard time, the alternative lender will ask for updated statements to show how hard you have had a time so they can "help" you. Immediately, they will take your information from the statements to go after your most recent clients, factoring companies, credit card processors, etc.
Lack of What a Hardship Is Should Be A Red Flag.
A common thing that a collections company will ask for is bank statements to determine whether or not there is a 'hardship'.
However, there are no metrics that these companies state or can come up with that can determine what a hardship is. It is because there is none.
Once you give these companies updated bank statements, they will use the information to make your life miserable.
Beacon Policy
Beacon Client Solutions works with small business owners who are being sued. It is our policy to never ask small business owners for their statements, as well as never voluntarily provide alternative lenders and their collections agents bank statements without a court order.
We feel that less damage will be done. Further, nearly every business owner never wants to default and wants to pay their debt.
Furthermore, alternative lenders (the majority of) and their collections agents do not have backgrounds that would even allow them to generate real financials and determine whether or not the small business owner could actually service the debt.
So, if an alternative lender or their collections agents ask for statements, let them get a court order.
So What?
The team at Beacon Client Solutions regularly works with clients who have been taken advantage of by MCA companies. Specifically, those business owners who have been burned.
Dr. Thomas Tramaglini is the Director of Operations and Negotiation for Beacon Client Solutions, a company that supports small businesses on a host of fronts, especially MCA debt. Thomas has been a small business owner for many years, as well as held leadership positions in several organizations and companies. Thomas holds a B.A. in History, as well as Masters and Doctorates in Organizational Leadership from Rutgers University, The State University of New Jersey.
Disclaimer: Beacon Client Solutions is not an accountancy, or a law firm. We are business consultants. While Beacon works with outstanding attorneys and accountants, we cannot and do not provide legal or tax advice. All of our work is connected to those who are legally certified to give such advice. Beacon does have a longstanding body of work in MCA resolution and understands what small business owners deal with, specific to MCA. Beacon Client Solutions serves clients in all 50 states, Puerto Rico, Mexico, and Canada.
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