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September 2011First Data Merchant CashAdvance (FD MCA)First Data Learning Organization LB Rev: 09/14/11
Overview Merchant Eligibility and Review Portfolio Review OptionsAgenda Application and Approval Merchant Statements Agent Compensation Sales Information Support Appendix—FAQ 2
OverviewFirst Data Merchant Cash Advance 3
Merchant Cash Advance Defined A merchant cash advance is the sale of a merchant’s futurecredit card receivables First Data Merchant Cash Advance (FD MCA) purchases a setdollar amount of the merchant’s future MasterCard and Visacredit and non-PIN debit card receivables at a discount; inexchange, the merchant receives cash A percentage of the merchant’s daily credit card deposits arethen remitted to repay the cash advance For example, PJ’s Bar and Grill processes 10,000 inMasterCard and Visa credit and non-PIN debit each month PJ receives 10,000 in cash from FD MCA PJ remits FD MCA 20% of the grill’s daily MasterCardand Visa credit processing dollars to repay the advance FD MCA collects 13,500 from PJ over 7 months 4
Traditional Loan vs. FD MCAA merchant cash advance is NOT a loan; it is apurchase of future processing receivables.LoanRequires a fixed term.Typically requires a fixed payment.Requires repayment at an interest rate.Requires perfect personal credit.Requires a personal guarantee.Shows as debt at credit bureau.Generally requires 3 years in business.FD MCANo term.No fixed payment —FD MCA paid whenthe merchant processes MC/V credit andnon-PIN debit.There is no interest rate.Perfect personal credit not required.No personal guarantee.Only an inquiry shows at credit bureau.Requires only 1 year in business. 5
GlossaryPurchase PriceNot on MSAPurchased AmountAdvance Amt. on MSAThe amount being advanced to the merchant—typically up to 100% of average monthly MasterCardand Visa credit and non-PIN debit processingvolume.The total amount to be remitted, by the merchant, toFirst Data Merchant Cash Advance.Daily Retrieval PercentageSplit Percent on MSAThe percentage remitted daily to repay themerchant’s purchased amount, typically 10% to20%, of MasterCard and Visa credit and non-PINdebit processing volume.Estimated DurationNot on MSAThe estimated time the merchant will take to remitthe purchased amount.Factor RateNot on MSAThe rate multiplied by the purchase price todetermine the purchased amount, typically, 1.25 to1.35. 6
MerchantEligibility and ReviewFirst Data Merchant Cash Advance 7
Prohibited IndustriesAny merchant that is ineligible for FDIS merchant processing and/or the following is ineligible for FD MCA.Advertising & Marketing Agencies (7310, 7311, 7399)Foreclosure protection/guarantees (6162-02)Audio/Video text (3651, 3652)Gas Stations (5541, 5542)Auto Dealerships (5511, 5521, 5571, 5592, 5598, 5599)High Risk Telemarketing (5962, 5966, 5967)Airlines (4511)Home Based Businesses (5960)Brokers or Agents for any service (6162, 6163, 6200, 6211,6221, 6411, 6500, 6510, 6513, 6300, 6529, 6530, 6531)Home Interior Design (7389-02)Independent Contractors (1520, 1700, 1711, 1740, 1750,Cash advances (other than financial institutions) (6153)1761, 1771, 1799)Cell Phone Resellers (4899, 5999-89)Internet Based Only Businesses (5960)Charities (6732, 6733)Mail order/Telephone Order Businesses ( 5961, 5964, 5969)Check cashing (6099-03)Membership Clubs (7997,8699)Commercial Art & Graphic Design (7370, 7371, 7372, 7373)Money transfer services (6099-04, 6099-10)Personal Development Schools (8200, 8241, 8243, 8244,Computers (5734, 4816)8249, 8299)Credit card protection (including identity theft protection)Personal Financial Services (6199, 6141, 6282, 7276, 7277,(7322)8700)Credit repair/Credit restoration (7299-27)Postal/Mailing Services (7330,7331,7338)Social, Religious, Fraternal, Political or ProfessionalCruise Lines (4411)Organizations (8611, 8621, 8631, 8641, 8651, 8661)Currency exchange (6099-01)Subscription Services (5968)Dating services (adult or internet) (7273)Taxis, Limousines (4121)Debt consolidation (6199, 7320, 7321)Theater & Ticket Brokers (7922)Employment Agencies (7361,7363)Travel (4722)Extended warranty companies (6351-09)Tour & Guide Services (7990, 7991)Funeral Homes (7261)Travel Agencies ( 4724,4725, 4729)Furniture Stores (5712, 5021,5700)Timeshares & Vacation Rentals (7012, 6513,6519,6531,6532) 8
Existing Cash Advance Considerations AMI with First Data Independent Sales (FDIS) Unacceptable to solicit an FDIS merchant with an open AMI advance Acceptable to solicit an FDIS merchant with a closed AMI advance BFS with First Data Independent Sales (FDIS) Unacceptable to solicit an FDIS merchant with an open BFS advance Acceptable to solicit an FDIS merchant with a closed BFS advance AMI with Another First Data Sales Channel or Competitor Acceptable to solicit a merchant that has an open or closed AMIadvance with another First Data sales channel or any competitor Any Other Provider and Any Competitor (non FDIS) Acceptable to solicit a merchant that has an open or closed advancewith any other provider and any competitor (non FDIS) 9
Minimum CriteriaMerchants meeting FD MCA minimum criteria may applyfor a First Data Merchant Cash Advance. FD MCA Minimum Criteria Approved First Data Independent Sales (FDIS) merchant processingaccount Minimum one year in business No open bankruptcies, tax liens or judgments Accepted SIC i.e. not on the prohibited merchant list Minimum 5,000 per month, MasterCard and Visa credit and non-PINdebit processing 10
Risk ReviewUpon receipt of the FD MCA application, FD MCA performsa full risk review of the merchant’s business.Risk Review Activities Personal credit review of the signer Business credit review Bank statement review Merchant processing statement review Landlord interview 9 months remaining on lease, preferred Site Inspection Anonymous inspection ordered and paid for by FD MCA 11
Risk Review Considerations There is no fraud potential The business is open and does not appear to be closing The merchant shows recent, positive payment history withpersonal and business payments The merchant is processing all credit card transactions withFDIS on one merchant account The merchant is paying the landlord or mortgage as expected The business bank account does not have an excessive amountof NSF activity or days ending in negative balances The merchant shows no signs of negative trending in processing 12
Knowledge CheckFD MCA requires a minimum of inbusiness.A. 6 monthsB. 1 yearC. 2 yearsD. 3 years 13
Portfolio Review OptionsFirst Data Merchant Cash Advance 14
Portfolio Review Options Upon request, FD MCA will review an agent’s portfoliochecking merchant historical data, years in business, SICcode, etc. to identify strong FD MCA candidates For agents boarding significant new business, FD MCA is open toimplementing recurring reviews on the portfolio’s new merchants E-mail the request along with the agent ID number andoffice name to fdcashadvance@firstdata.com FD MCA reviews the agent’s portfolio then provides theagent with a list of merchants likely to qualify for FD MCA,including an estimated purchase price for each merchant New credit inquiries are not made during a portfolio review The agent uses the list to contact merchants, establishinterest and follows the standard application process 15
Application and ApprovalFirst Data Merchant Cash Advance 16
FD MCA Application Posted on ROLA Application Center Requirements Sales Rep ID agent ID # and office name FDIS merchant ID Name and telephone number of applicant Requested advance amount Requested withholding percentage Intended use of proceeds Does merchant have an open cash advance?If yes, then With who? Balance Owner or authorized signer’s name Owner or authorized signer’s signature 17
FD MCA Application Process The FD MCA application process is easy for agents Complete the simple, one-page application form and submit to FD MCA Prepare merchant for documentation requirements Whenever possible, FD MCA obtains required documentationfrom the merchant’s FDIS records FD MCA may contact the merchant and request any of thefollowing 6 months processing statements 2 most recent business bank statements Copy of signer’s driver’s license or passport For advances over 75,000, tax returns and financial statements Property lease (preferred, 9 months remaining) or mortgage statement 18
Pricing Typical approvals are up to 100% of the merchant’s averagemonthly MasterCard and Visa credit and non-PIN debitvolume, however, the merchant may request more or less The daily retrieval percentage may be up to 20% of themerchant’s net MasterCard and Visa credit and non-PIN debitdeposits (gross less discount, chargebacks, etc.) Estimated duration of contract varies but typically runs from 5to 7 months Factor rates vary but typically run 1.25 to 1.35 Basic factor rate considerations include Competing offers Business and signer’s credit Expected remittance time frame 19
Cash Advance CalculatorFD MCA provides a *cash advance calculator, in the product packon MAO, to help agents estimate purchase price possibilities.*These calculations are an estimate and not a guarantee of an advance. Approval is subject to satisfaction of application requirements,underwriting criteria and execution of merchant purchase agreement. 20
Cash Advance CalculatorFD MCA provides a *cash advance calculator, in the product packon MAO, to help agents estimate purchase price possibilities.*These calculations are an estimate and not a guarantee of an advance. Approval is subject to satisfaction of application requirements,underwriting criteria and execution of merchant purchase agreement. 21
Approval Options Approval options are typically issued to a merchant for adaily retrieval percentages of 10%, 15% and 20% of theaverage monthly MasterCard and Visa credit and non-PINdebit processing Merchants with the majority of their business in credit cards (low cashvolume) may only qualify for a lower daily retrieval percentage Continuing with the PJ’s Bar and Grill example, PJ averaged 10,000 monthly MasterCard and Visa credit and non-PIN debitprocessing, received 3 options and ultimately chose the 10,000purchase price that had a 1.35 factor rate 20% daily retrieval %, funded at 100% 10,000 purchase price 15% daily retrieval %, funded at 75% 7,500 purchase price 10% daily retrieval %, funded at 50% 5,000 purchase price 22
Knowledge CheckDuring the risk review process, a credit bureauinquiry is done on the personal credit of theFD MCA application signer.A. TrueB. False 23
Merchant StatementsFirst Data Merchant Cash Advance 24
Merchant StatementFD MCA remittances appear as Adjustments on the FDISmerchant statement. 25
Agent CompensationFirst Data Merchant Cash Advance 26
Agent Compensation 3% upfront commission on merchant’s purchased amount paidweekly on Thursday/Friday for previous week 10,000 purchase price x 1.35 factor rate 13,500 purchased amount x 3% upfront 405 upfront commission 1% residual on merchant’s daily remittance to FD MCA paidmonthly 350 net MasterCard and Visa credit and non-PIN debit x 1% residual 3.50 residual for that day 2% upfront commission on a merchant’s FD MCA renewal paidweekly on Thursday/Friday for previous week Merchants are typically eligible for a renewal up to the original purchasedamount once 60% of the original purchase price has been remitted PJ remits 8,100 ( 13,500 x 60%) leaving 5,400 remaining on original FD MCA PJ can likely renew the FD MCA for an additional 6,000 purchase price with an 8,100purchased amount, bringing the total purchased amount back up to 13,500 27
Sales InformationFirst Data Merchant Cash Advance 28
Target MerchantsAny eligible merchant is welcome to apply for FD MCA.These industries have proven successful for cash advance deals.5812 Restaurants5813 Drinking Places5251 Hardware5331 Variety Stores5411 Grocery Stores5461 Bakeries5531 Auto & Home Supplies5621 Women’s Clothes5641 Child’s Wear5699 Misc. Apparel5921 Liquor Stores5942 Book Stores5944 Jewelry5946 Cameras5948 Luggage7231 Beauty Shops7541 Car Washes7933 Bowling Alleys7996 Amusement Parks7999 Misc. Amusement5814 Fast Food5261 Nurseries5399 Misc. General Merch.5441 Candy Stores5499 Misc. Food5611 Men’s Clothes5632 Women’s Access5651 Family Clothes5912 Drug Stores5941 Sporting Goods5943 Stationery5945 Toys & Hobby Centers5947 Gifts & Novelty5999 Miscellaneous Retail7241 Barber Shops7932 Pool Halls7991 Physical Fitness7997 Sports Clubs8412 Museums, Art Galleries 29
Merchant Value PropositionFD MCA provides easy access to working capital fundsthat can enhance and grow a merchant’s business.Possible uses Expansion Remodeling Equipment upgrade Replenish inventory Web site development Investment in the business 30
Merchant Value Proposition Streamlined application and approval process One stop shop for merchant’s business needs No hidden costs or fees No fixed monthly payments and no application fees Recurring business growth opportunity Opportunity to renew cash advance agreement for business needs 31
Product Value Proposition Very competitive product offering compared to themarketplace Fast, streamlined process for existing FDIS merchants Minimal paperwork required—a single page application tostart the process 32
Agent Value Proposition Robust compensation program Strengthens agent status as a business consultant Possible retention benefit—additional products enhancestickiness of the merchant relationship Portfolio review option—helps identify opportunities that aremost likely to be approved Convenient, one-stop solution for all of the merchant’s needsimproving the overall experience of the agent and merchant 33
Features and BenefitsFeatures No monthly fees, payment isremitted from each daily deposit Does not impact other opportunitiesto apply for traditional financing Fast and easy application process Quick turnaround time for approvaland funding Dedicated customer service teamBenefits Easy access to working capitalat a time when credit marketsare tighter Get value from future cash flowsnow, and use them to invest inthe business Opportunity to expand merchantbusiness Simple renewal process foradditional funds Repayment flows withmerchant’s business 34
Competitive Advantage Convenient, one-stop shop First Data is the processor and the cash advance provider With existing FDIS merchants, there is no need for a merchant toswitch processors in order to obtain a cash advance Application and approval process is simple and fast Minimal documentation required since FDIS already has establishedrelationship with merchant through the merchant account Merchants are typically funded within 72 hours of receipt of all requireddocumentation Single, consolidated statement Cash advance payments are reflected on the merchant statement foreasy reconciliation Experienced sales and service teams 35
FD MCA—Key Selling Points Competitive pricing Quick funding timeframe Ease of application and approval process FD MCA does not show as a debt on credit history Split funding directly from merchant processing account No fixed payments or hidden fees—FD MCA gets paid whenmerchant gets paid Existing FDIS merchants have no need to change credit cardprocessors Opportunity to renew FD MCA agreement for further businessgrowth 36
Overcoming Common ObjectionsMerchantAgent“This product is Tie the advance back to a need the merchant has expressed. “This is not a traditional financingtoo expensive.” alternative, so the cost is different. While most cash advances are very expensive, First Data’s cashadvance rates are very competitive. We can have the funds you need to expand your patio seatingto you in as little as five days, and you can quickly start earning additional revenue off the newtables.”“The advanceamount is nothigh enough.”.“While it may not be the full amount you were looking for now, please understand that yourbusiness is eligible for renewal once you have remitted 75% of the current balance. With thisproduct, FD MCA can give you more in as little as 4-5 months without the hassle of having toreapply.”“I do not needthe moneyright now.”“You never know when that need for quick access to capital may come up. The great part of thisproduct is that we do not restrict how the advance is used in your business. Many of our merchantsuse this simply to have working capital in their accounts—accessible when they need it.“I have badcredit.”“That is not necessarily a problem. While FD MCA does review your credit history, it is not the solefactor that qualifies you for an advance.”“I have ahigher offer orbetter rate withanothercompany.”“While we always try to stay competitive, there are additional features to our product that may makeit more beneficial to you. FD MCA does not require that FDIS merchants switch processors, so youwon’t have to pay an early cancellation fee and FD MCA uses split funding so they do not needaccess to your bank account. FD MCA also provides the funds in as little as 3-5 days, where somecompetitors take a week or more.” 37
Knowledge CheckList the top 5 FD MCA features or benefits youcould share with a merchant who states, “tellme about First Data Merchant Cash Advance.”1.2.3.4.5. 38
SupportFirst Data Merchant Cash Advance 39
Agent Reporting Agents may request access to the FD MCA applicationtracking tool called urReporting urReporting Request form available in the product packon MAO 40
Agent and Merchant Support Telephone (855) 205-6712, 8 a.m. to 5:30 p.m. Easternsales inquiressetup supportmerchant customer serviceurReporting questions E-mail fdcashadvance@firstdata.comsales inquiresportfolio review requestsurReporting questionssetup support firstdatamca@firstdata.commerchant customer service 41
Agent Support Materials MAO Product pack ROLA Application Center Application Brand Center Sell Sheet 42
Knowledge CheckPortfolio Reviews are automatically generatedand the results forwarded to agents on a monthlybasis.A. TrueB. False 43
First Data Merchant Cash Advance(FD MCA)
Appendix—FAQ How does the cash advance program work? Once a merchant has been approved and funded for a cash advance,a daily retrieval percentage of the merchant’s MasterCard and Visacredit and non-PIN debit deposits are remitted to repay the cashadvance. The estimated duration of the contract typically variesbetween 5 and 7 months. How long does it take to get approved? Merchants can be approved in as little as 3-5 business days What can the merchant use a cash advance for? The advance can be used for any legitimate business expense How will the merchant know that they are approved? An FD MCA representative will contact the merchant and inform themthat they have been approved for the cash advance. 45
Appendix—FAQ Why should a merchant choose a cash advance as a wayto obtain cash flow? In today’s economy, it is sometimes difficult to obtain a traditional loanand if the merchant is approved for a loan s/he must provide financialitems related to tax returns, personal financial statements, pay stubs,etc. The cash advance process is a quick and simple applicationprocess with minimal documentation requirements. How may a merchant find out how much they have leftremit? Call the FD MCA customer service team at (855) 205-6712 or e-mailfirstdatamca@firstdata.com. How does the merchant make the remittance? Remittance is extracted from the merchant’s daily MasterCard and Visacredit and non-PIN debit processing deposits (up to 20%). The dailyretrieval percentage is based on credit card volume and several otherfactors. 46
then remitted to repay the cash advance For example, PJ's Bar and Grill processes 10,000 in MasterCard and Visa credit and non-PIN debit each month PJ receives 10,000 in cash from FD MCA PJ remits FD MCA 20% of the grill's daily MasterCard and Visa credit processing dollars to repay the advance FD MCA collects 13,500 from PJ .
