Beware “Cash for Sale” from the Secondary Finance Market

OVER THE YEARS, everyone tells us they enjoy talking to us because we are “self-effacing”… I don’t know exactly what that means, but vocabulary.com tells me it means humble, shy, someone who doesn’t like the spotlight.

Ok, ok, If you watch our YouTube Reality Show, you know that is an incorrect assessment of the entire Media 1 team. So I press people for an explanation and they say, “It’s because you are not afraid to admit your faults and failures.”

Now that is a true statement. Neither my partner Rick nor I have any issue telling people when we royally screw the pooch. It happens. We’re not perfect. Mistakes happen in business (all the time). And anyone who tells you they don’t is lying to your face. So if it’s a universal concept, why not share your “learning” experience with others? That’s how we look at it. If our experience can help someone else avoid a pitfall, why not tell them? That’s been our credo since we started all of this, almost 40 years ago.

And let me tell you, the learning experiences abound here at Media 1. We have made equal numbers of bad decisions as great ones over those years. The key is to appreciate the great ones and learn from the bad ones. All there is to it.

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Which brings me to this month’s topic. We have had financial highs and lows, ups and downs over these years, and although we are a successful, enduring company — as evident from our vendors, our clients and our employees — every once in a while, a company takes on a giant loser project that nearly decimates them. This happened to us. After all these years of experience, we still slipped and fell into an $800K project that we only priced (and received) $400K for… It’s complicated. COVID-driven material costs ate us up. Whole other column.

We completed the beautiful project, but it put us into a financial tailspin that prompted us to seek a line of credit or a loan to help us through this sticky situation. Problem was, we were down and out, so we had to go to the “secondary finance market.” And we felt the need to share our experience.

Make one phone call, send one email and you have opened Pandora’s Box. All of the lenders are the same: “Send three month’s bank statements, and we will deposit $450K in your bank account today.” All with just a “soft-pull” on your credit. “How much can you use today?” But as soon as you send that paperwork, two issues arise:

1. All your information is shared across a sea of lenders. The first texts and emails are from “brokers.” Twenty of them. Twenty different companies. Then come the “direct lenders” (that conveniently avoid the “fees of the brokers”). Forty of them. Two days later you’re told: “We just got an influx of investor cash and can offer a better rate.”
   I currently receive 30 emails a day from different companies.
2. The Rates — OMG. I don’t know how it’s legal (it may not be) but here was my first offer: $250,000 unsecured loan (do whatever you want with it). $5,058 payments. But not monthly. Oh no. That’s weekly! For 65 weeks! Whoa, whoa, calculator time: $5,058 x 65 = $328,770. What?! $79K in interest? Punch those numbers into an amortization calculator and it’s 44% interest. WTF is that about? I’m dead.

Advantage? We did not pull the trigger, but they were begging to drop that loot in our account. They will do it. Right now. But the toll is usurious.
Avoid at all costs. (Unless of course you really need it.)

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