Advance America funded 10,000,000 payday loan transactions in 2010. They are the largest brick-n-mortar, regulated lender in the U.S. They received just under 50 complaints TOTAL for the entire year!
With the exception of Jessica Silver-Greenberg at the Wall Street Journal and Carter Doughtery at Bloomberg, why can’t the media “get this?” Because they are lazy! It’s easier to visit one of the paternalistic web sites such as the CRL and swallow the drivel.
I have a novel suggestion for you reporters. Pick up the phone and call an industry insider who spends time “in the trenches.” Then, get off your ass and visit some payday loan stores. Talk to the customers. Leave your bias outside and forget the loaded questions. You want to build your brand? You want to develop a stellar reputation for truth and accuracy? Be an outlier! Dig… do the work… approach your reporting with an open mind!
Everyone wants to know what’s going on in the payday loan industry. What are the latest trends? What’s the newest strategy? How do my defaults compare with every one else and how do I improve? Heck, for that matter how does everyone else even measure or define defaults?
One method of gaining additional insight that we’ve always recommended is to listen in on the earnings calls of the publicly traded companies. By listening in or reading the transcripts, you gain valuable insight into trends, profits or losses, and strategies to enable you to run your business better and manage your investments.
A great example of what you can learn was recently provided by the 4th Quarter earnings report by EZCORP, Inc. Joe Rotunda, President & CEO, reported, “This quarter marks our twenty-fifth consecutive quarter of compounded growth in earnings. It’s also the eighth consecutive fiscal year of earnings growth. I believe this amplifies the strong dynamics within our business. When one component is adversely impacted by an external factor primarily associated with economic conditions, another strengthens and vice versa. This is true both between and within the business segments”.
If you read the transcript, Joe is referring to the ability of EZCORP Inc. to benefit from offering multiple products and services in their stores. Now all their products are focused on sub-prime financial services; pawn, payday loans, auto title loans, gold buying , etc. But the beauty of offering multiple products rather than taking the mono-line approach is that as the economy changes and evolves you always have a spectrum of products that make sense for consumers.
Joe goes on, “For our fourth quarter, we are reporting net income of $16 million. That’s an increase of 44% over last year. Diluted earnings per share were $0.37 compares favorably to $0.26 last year. If you adjust for two unusual elements, which you will be hearing about, the drag of Hurricane Ike …”
Looks like the industry, based on EZCORP Inc., is experiencing record income and phenomenal growth.
Later in the call Joe says, “From a bad debt perspective, we’ve done an excellent job of managing initial defaults through balanced underwriting and an intense focus on getting the customer into the store on the day their loan is due. For this quarter, and as for the year our initial defaults show improvements to last year. However, our net bad debt still increased at a faster rate than fees and we ended the period at 36% of fees versus 31% last year. Without Hurricane Ike, bad debt would have been within three points of a year ago. The increase, I believe, reflects the difficulty in the current economic environment to collect debt once it’s incurred. It shows what the consumer behaves once they default and it shows in the capital markets that buy bad debt as well. So, regardless, we are committed to continue to address process to improve both”.
So, just as we have been harping on, defaults and collections are becoming more of an issue and demand close attention. That’s a trend you need to be aware of. No surprise here but HOW DO YOU DO IT?
Next, Joe discusses some new products EZCORP Inc. has introduced. “Moving from new stores to new products, we have expanded our installment loan to 90 stores in Texas. We’ve been cautious with the product because of the size of the loans, from $1525 to $3000, and the length of the term, which is at five months. We believe we have a pretty good handle on the customer, bad debt management, and we plan to expand the installment loan to several additional states beyond Texas during the New Year.
We also recently began offering another new product, auto title loans. We introduced this product last month in all 11 stores in Missouri. We believe this product offers us an incredible opportunity to leverage our store base and drive incremental returns. It also affords us the opportunity to expand our customer base and to diversify our product assortment beyond solely the payday loan product. Our plans are to move judiciously and expand the auto title loan product to additional three to five states and approximately 100 additional stores by the end of the year”.
And finally, “We are doing installment loans today in Texas and we are doing them under the CSO statutes. We’ve developed the loans so it’s a five-month period, which is as far out as we want to go and the pricing to the customer is approximately 10% of the principal of the loan paid every – twice a month as they go through the period. The rate, if you calculate an APR on it, the APR is somewhat lower for an installment loan than it is for a typical or a traditional payday loan.
And don’t stop there! Get access to those companies you want to follow and listen in on the calls or read the transcripts. Typically, you can do a search, click on Investor Relations and receive an email when a call is scheduled.
There’s some great stuff buried in there you just have to harvest it.
Mastering Lending in Risky Times: Unlocking the Full Potential of Cash Flow Analysis
Embrace the Power of Cash Flow Analysis in Lending
The financial market has always been unpredictable, but recent events have emphasized the importance of preparedness and adaptability in the lending industry.
Cash flow analysis has emerged as a powerful tool to help lenders make better-informed decisions during these turbulent times.
This article delves deep into the essence of cash flow analysis and how it can revolutionize lending practices.
Understanding the Importance of Cash Flow Analysis
Cash flow analysis is essential for lenders, providing crucial insights into a borrower’s financial health.
It enables lenders to assess the ability of borrowers to generate positive cash flow, which is the primary source of loan repayment.
Lenders can mitigate risks and make well-informed lending decisions by analyzing cash flow.
Key Components of Cash Flow Analysis
Operating Cash Flow: This component measures the cash generated from a borrower’s core business operations, such as sales, purchases, and daily operational activities.
Investing Cash Flow: This element reflects the cash inflows and outflows resulting from investment activities, such as acquiring or selling long-term assets.
Financing Cash Flow: This aspect captures the cash movements associated with borrowing, repaying debt, and raising equity capital.
The Role of Cash Flow Analysis in Reducing Risk
Cash flow analysis is a powerful risk-mitigation tool, enabling lenders to assess a borrower’s financial health and repayment ability thoroughly. By examining various cash flow components, lenders can:
Identify potential cash flow issues early.
Evaluate the borrower’s ability to service debt.
Assess the borrower’s financial flexibility and resilience.
Strengthening Lending Decisions with Cash Flow Analysis
By incorporating cash flow analysis into their underwriting processes, lenders can improve the accuracy and reliability of their risk assessment, resulting in:
More targeted lending decisions
Enhanced risk management capabilities
Improved overall portfolio performance
Harnessing Technology to Optimize Cash Flow Analysis
Leveraging cutting-edge technology and data-driven methodologies can significantly enhance the effectiveness of cash flow analysis. Advanced analytics, machine learning, and artificial intelligence can help lenders uncover hidden patterns and trends, leading to more accurate and comprehensive cash flow assessments.
Key Technological Innovations for Cash Flow Analysis
Data Aggregation: Access to real-time, high-quality financial data enables lenders to obtain a complete and up-to-date picture of a borrower’s financial situation.
Machine Learning: Machine learning algorithms can automatically identify patterns and trends in cash flow data, enhancing the accuracy of risk assessments.
Predictive Analytics: Using advanced statistical techniques, lenders can forecast future cash flow trends and better anticipate potential risks.
Final Thoughts: Embracing Cash Flow Analysis for a More Resilient Lending Industry
In an increasingly volatile financial landscape, cash flow analysis has proven invaluable tool for lenders, helping them make better-informed decisions and reduce risk. By harnessing the power of technology and data-driven methodologies, lenders can unlock the full potential of cash flow analysis, leading to more targeted lending decisions, enhanced risk management capabilities, and improved overall portfolio performance. Embracing cash flow analysis will not only strengthen individual lending institutions but also contribute to a more resilient and robust lending industry as a whole.
Ready to learn more?
Ready to take action?
Ready to implement cash flow analysis?
Allow us to show you the path...
How to Start or Improve a Consumer Loan Business: Storefront or Internet anywhere!
If you’re worn out spending hour upon hour searching Google for consumer loan business strategies, know-how, software, licensing, consumer credit reporting, sample contracts, collection tactics, profitability, how much start-up capital you need, anticipated default metrics, and on and on and on… Our “Bible” delivers ALL THESE ANSWERS AND MORE!
How to loan money to consumers! Payday loans, car title loans, installment loans, line-of-credit loans… via the Internet and storefront models.
At Trihouse Consulting, Expert Consumer Loan Valuations Determine the Precise Fair Market Value of Your Business
How to Value a Consumer Loan Business
A business valuation for a payday lending, car title lending, or installment lending business by Trihouse Consulting will determine the fair market value of any business-to-consumer [B2C] loan company. Estimating the fair value is a nuanced procedure.
Establishing the actual worth of your lending business is critically important. The valuation process, especially for the consumer loan industry, is challenging. It’s a highly regulated industry requiring intimate knowledge of the loan business environment on a national and state level. The process is not something artificial intelligence [AI] can calculate with a standard formula. After decades of experience, Trihouse Consulting has the practical knowledge necessary to estimate the value of any consumer loan business.
Before we proceed, and while we’re on the topic of acquisitions and investments, does anyone want to purchase a Georgia Pawn shop? Owner retiring; Baby Boomer lacking a family to take over the 25 year business. [A common situation!] Let me know!
Want to invest in a BHPH operation?
Do you have car title loan portfolios for sale?
4 locations offering title loans and installment loans both online and storefront?
10 locations offering title loans and installment loans both online and storefront?
35+ operation offering title loans and installment loans both online and storefront?
A $2MM+ portfolio backed 100% by a CD earning 10% to 12% annually?
What Is A B2C Loan Business Valuation?
A consumer loan business valuation is the process of determining the economic value of a business or business unit. What’s the company worth to a buyer and seller lacking undue, stressful motivation?
Generally [WE EMPHASIZE “GENERALLY!], a <$1,000,000 consumer loan store is a multiple of SDE [seller’s discretionary earnings.] >$1,000,000 is typically a multiple of EBITDA.
A business valuation to unearth the fair market value is necessary for many situations.
Conducting a consumer loan business valuation to determine the value is essential when selling, buying, or closing a business. It can be a mind-numbing calculation EXCEPT to us! We get excited! We get pumped! To us, a valuation project is structured, disciplined, and exhilarating! Multiple valuation calculations exist for valuing a consumer loan business.
How Does the Trihouse Consulting Valuation Process Work?
Because Trihouse Consulting facilitates consumer lending business acquisitions and mergers, business valuation is in our wheelhouse.
Trihouse Consulting expert appraisers focus on determining the fair market value of a consumer loan business. Our valuation process entails an in-depth analysis of your lending data, fundamental market analysis, geographic area [state], business model [online, storefront, blended], loan products & resulting margins [payday loans, car title loans, installment loans], and more. In addition to determining fair value, Trihouse Consulting helps identify favorable merger and acquisition opportunities to scale your business goals.
When Will You Need A Consumer Lending Business Valuation?
Lenders offering payday loans, car title loans, installment loans & line-of-credit loans need a valuation in multiple scenarios.
[BULLETS] These include:
Partnership dissolution
Estate issues
Retirement planning
Divorce proceedings
Family disputes
General asset management
Acquisitions
Legal circumstances
Other cases include ownership changes, merger and acquisition opportunities, and banking credibility evaluations. Also, an objective assessment, establishing fair market value, helps with tax reporting.
The Business of Lending to the Masses Achilles Heel Is A Lack Of Understanding Of Financial Metrics
As an intelligent “lender to the masses,” it is time to stop running your business with your eyes closed. Knowing the worth of your business and how well it performs is enlightening in a life-changing way.
Unfortunately, this is not the consumer loan industry norm. There is an overwhelming lack of knowledge regarding actual loan performance. The majority of lenders operate in a vacuum. They fail to build a network of peers with whom they can share strategies and tactics. A few rely on industry trade shows and conferences. Trust us! You’ll learn more in the hotel bar than sitting in a conference room listening to the lawyers and vendors attempting to sell you their wares!!
Enter The Consumer Lending Industry With Decades Of Experience
Are you thinking about becoming a lender to the masses? The subprime? B2C lending? Do you want to participate and enjoy the > 100%, 200%, 300%, and higher APR loans typical of our industry? Trihouse Consulting will help you identify opportunities in the “business of lending to the masses.” With our assistance, start your path to subprime lending with a sophisticated, advanced understanding of key metrics and financial analytics.
Trihouse Consulting has the network and connections to deliver profitable investments, acquisitions, and know-how to enable you to avoid typical start-up and acquisition pitfalls.
Benefit From Data-Backed Determinations Only Trihouse Consulting Can Provide
Having entered the business of lending to the subprime in 1998 as lenders ourselves, Trihouse Consulting has an intimate understanding of the analytics, key performance indicators, vendors, and platforms that serve our industry.
Customer acquisition, onboarding, underwriting, funding, collecting employee hires… we know the ropes!
Partnering with Trihouse Consulting means you can acquire the seemingly unattainable data analytics competencies you need to succeed and scale. No need for you to make rookie mistakes! [We already made them over the years!]
In short, Trihouse Consulting stands atop a mountain of priceless data from twenty-plus years of collecting detailed lending industry data affording Trihouse Consulting unique abilities and insights. Specifically, we understand past and present industry trends. As a result, we’ve developed data-backed strategies and tactics for clients based on tens of thousands of informed data decisions generated in forty states and ten-plus countries via our loan portfolios, the portfolios of the clients for whom we’ve consulted, and our network of 8,000+ readers of our free monthly Newsletter.
Trihouse Consulting provides expert B2C consumer loan business valuations. Ready to explore with us? Contact us [Jer@TrihouseConsulting@gmail.com] to get started today.
Ready to Enter the Business of Lending to the Masses? Payday loans, car title loans, installment loans… We thoroughly discuss all these loan products. Launch your lending business or improve your existing operation!
Your investment? $297.00 for our 500+ page Manual delivered to your Inbox in minutes.
Available: EXPERIENCED SMALL DOLLAR LOAN [AFS] EXECUTIVES
Small team of experienced legal, operations, tax & asset protection executives:
Tribe sovereign nation model. Introductions, pros & cons evaluations…
State-by-state licensing model.
California CFL license holders: impact of AB539 effective January 1, 2020 strategies and tactics t remain in business.
Online personal loans: both collateralized and non-collateralized.
Underwriting analytics.
Customer acquisition cost reduction strategies.
LMS: Loan management software evaluations, analysis and recommendations.
Ohio CSO alternatives
Texas CAB/CSO consultants
Development of alternative loan products and ancillary services to meet 36% APR caps while maintaining Lender margins
Connections and introductions to 3rd party banks, payment processors, attorneys, credit bureaus, lead aggregators, LMS…
Macro Description of a Few Past projects
Orchestrated launch for new Personal Loan product to expand market share and generate over $600,000 in revenue the first year.
Increased top line revenue of online tribal lender to $50M <3 years.
Directed HR operations for 200+ employee operation across 25 locations, including strategic workforce planning, goal cascading, performance management, staffing, and benefits administration.
Planned, monitored and appraised employee work results by training managers to coach and correct employees.
Identified, initiated and completed transition of bullet proof asset protection and tax minimization entities for a multitude of Lenders in the B2C space
Counseled leadership and offered actionable initiatives to reduce compliance-related issues addressing equal employment opportunity and sexual harassment.
Facilitated conversion from Paychex payroll system to new ADP HRIS technology in a smooth, efficient and diligent manner to minimize impacts and proactively address any problems.
Evaluated developing call center operations and current market trends to identify necessary improvements and capitalize on changes.
Recruited and developed over twenty employees for call center sales department and developed quality employees within the call center to take on leadership positions.
Consulted with technology development teams to create and enhance CRM, lead generation, websites, and automated marketing campaigns.
Researched, negotiated, facilitated and managed real estate transactions.
Outlined work plans, determined resources, wrote timelines and generated initial budgets as part of project scope determination for tenant improvement projects.
Grew small dollar loan B & M company from 9 locations experiencing negative cash flow to 43 locations and annual cash flow in excess of $10mm.
Gathered, analyzed, prepared and summarized recommendations for financial plans and acquisition activity, including future requirements for operating expenses.
Conducted research on emerging trends within the industry and capitalized on creating, identifying, and developing new products, services and strategies to increase business market share, drive growth and onboard new customers annually.
Devised, deployed and monitored processes to boost long-term business success with optimal sales and profit levels.
Supported regulatory compliance by implementing policy, procedure and overseeing all audits to verify protocol adherence.
Developed program to promote new managers from within, building and maintaining cohesive leadership structure.Wrote detailed training materials.
Developed banking relationships, selected and negotiated with vendors.
Hired, trained, coached and mentored staff.
Managed all day-to-day operations and ensured timely and accurate accounting of financial results.
Negotiated the sale of the business for profit.
SUMMARY
Experienced strategists, entrepreneurs and startup enthusiasts with a passion for building businesses and challenging the status quo. Cumulative 100+ year track record of defining new business strategies, launching new ventures and delivering operational impact, both as founders and executive managers. Expert presenters, negotiators, able to forge solid relationships with key partners and build consensus across multiple organizational levels.
SKILLS & EXPERTISE
Business Acumen • Proactive and Strategic Leaders • Project Management • Financial Analysis/Projection • In-Depth HR Knowledge • Product/Concept Development and Implementation • Innovative Thinkers • Excellent Communication Skills and Content Writing • Organized, Motivational Leaders • Strong Problem Solving and Analysis • Customer/Client Focused • Real Estate Site Selection and Purchase/Lease Negotiations • Technology/Software Proficient
