How to Get Capital for Growth from your ISO or Processor

Because I talk to many agents and ISOs, I often see trends in our industry.  I consider an issue a trend when I hear people mention the same scenario over and over.  One shocking trend I’m seeing way too often is a very poor leverage of capital.  Probably four or five times a week, agents tell me about amazing opportunities lost for lack of capital.

Suppose there’s a four-location pizza shop wanting to do cash discounting.  There would be $2,600 per month margin on the account.  However, $4,000 is needed for them to replace their POS system with Mynt.  If the agent has a 50% split, that means a loss of $1,400 per month all for lack of a $4,000 investment!  Think of the return on that investment.  The money would be paid back very quickly.

I’ve heard of agents with opportunities such as a deal making $500 per month in residual.  But the deal is lost because the merchant needs a new Clover mini.  The money would be returned within a month!  I hear those sad stories – and worse – all the time.

Therefore, the episode today is directed to ISO execs and managers and agents.  Agents, you need to learn how to get money from the ISO or Processor to close these big deals.  And ISOs, you should learn how to benefit from great ROI while helping your agents.

Viewpoint of an ISO

Please understand there are many untapped opportunities in the marketplace today because processors have standardized their compensation programs to the point of not allowing for any profitable variation!  Processors give a standard $400 up-front bonus and perhaps a free Ingenico terminal.  But what if a merchant does $200,000 per month?  The program doesn’t have to be so standardized!

Inform your agents that additional capital is available on a case-by-case basis to assist in landing deals with an expected margin of more than $____.  To be competitive and get big deals, you can’t standardize everything to the “N-th” degree!  You might need to pay someone at your company to make logical decisions about return on investments.  And you might have to get capital from banks or other institutions set up for that if you don’t have the cash to facilitate the deal.

Do you really want to leave deals on the table when you could get your money back in three to five months?  Processors are willing to pay $400 up-front bonus and get that money back in 18 months.  But when an agent needs $2,000 which would be returned in three months, the processor is hesitant.  Does that make sense?

I am shocked by how many ISOs want to put money in the marketplace with up-front bonuses and free terminals.  But when it comes to a custom deal with massively better ROI, they’re afraid.  Someone in your company will know how to run the math for ROI!

Situations are unique; offer freedom for creative structuring.  Of course, if there is a necessary investment of several thousand dollars, you must establish an iron-clad merchant contract with a 3-5 year term to ensure pay back.  Merchants will understand that and be fine with it.

Just be willing to do something different; make the adjustment; draw up a contract.  I promise the big deals ARE out there!

Viewpoint of an agent

Establish a relationship with someone at your company who has the power and authority to give you money.  Realize there are different ways to structure a deal.

Stop having the mindset which says, “I can’t close this deal because I need $2000 which I don’t have.”  You wouldn’t ask your processor to GIVE you $2000; you simply need to borrow until it’s paid back.

Say to your processor, “Can I borrow $2000?  You take half my residuals until it’s paid back.  I’ll have the merchant sign a 3-year agreement.  Look at the profits!”  Have that kind of conversation with your company.

Stop having the mindset which says, “They already have a Clover station; guess I can’t sell them.”  Buy a new station!!!  You’ll get the money back quickly.

·       A merchant processing $80,000 p/month would render residuals of $300-$400 p/month.  Learn to pitch your ISO for the capital.  Leverage more effectively.  Go to someone in your company and pitch the deal.

·       You might need $15,000 to land a deal which will generate $3000 p/month in margin.  Although $15,000 is a lot of money to you, there’s someone to whom it’s not.

Stop having the mindset that you can’t land the deal in a large retail business.  Understand these kinds of big deals do exist for the individual agent.  If your provider can’t find a way to get the extra capital, find another provider.

I’m not advocating you should always give something away.  However, I am advocating not to walk away just because you need money.

Find a way to close these deals.