Expensive Financing Is
Costing You Sales
Your financing providers extract value at every tier of the credit waterfall — through merchant discount rates, high consumer APRs, and lease terms that drive customers out the door.
Your Current Credit Waterfall
When a customer applies for financing, their application moves through a tiered series of providers. Each tier extracts progressively more margin — and each one declines customers to protect its own economics.
The Real Economics of What You're Paying
Second-Look: $4,000 Sale at 40% Margin
| Retail Sale Price | $4,000 |
| COGS (60%) | ($2,400) |
| Gross Profit Before Fees | $1,600 (40%) |
| Current 2nd-Look MDR (15%) | ($600) |
| Your Net Gross Profit | $1,000 (25%) |
At ~30% APR over 24 months, they earn a ~$2,000 gross spread on a transaction you originated and a customer you acquired.
BNPL: $1,600 Sale at 40% Margin
| Retail Sale Price | $1,600 |
| COGS (60%) | ($960) |
| Gross Profit Before Fees | $640 (40%) |
| Current BNPL MDR (8%) | ($128) |
| Your Net Gross Profit | $512 (32%) |
Under third-party BNPL, the payment history, the data, and the remarketing rights belong to the BNPL provider — not to you.
Where Your MDR Actually Goes
Publicly traded financing companies report operating margins of 30–40%. Your MDR is the revenue line that funds all of it.
You pay 15% MDR on a $4,000 sale. That's $600 going to the financing company on a customer you acquired, in your store, selling your product.
Of that $600: ~$270 covers hard costs. The remaining ~$330 is gross profit for the lender.
They then collect approximately $5,400 from your customer at 24–36% APR over 24 months. That's an additional ~$2,000 gross spread.
They use your customer's data to market to them. Payment history, purchase behavior, and contact information all belong to the lender — not to you.
The Found Customers: Your Biggest Hidden Loss
Every provider in your waterfall is declining customers to protect their margins. These declined customers wanted to buy. They could afford reasonable payments. But FICO-based underwriting saw a number, not a person.
But this customer has $5,000/month in steady deposits and manageable expenses. Cash flow underwriting approves them.
A declined application leaves no revenue trace. You can't measure what you never sold.
We use 15% as a conservative estimate. Actual lift depends on your current decline rate.
The Obvious Barriers
These are the reasons retailers have outsourced financing for decades — and they're legitimate concerns:
- No underwriting expertise. Credit risk modeling, cash flow analysis, and decisioning algorithms take years and specialists to build.
- No system of record. Loan origination, servicing, payment processing, and account management require purpose-built technology.
- Collections is a regulated minefield. FDCPA compliance, state-specific rules, and the customer experience implications are complex and costly.
- Regulatory compliance. TILA/Reg Z disclosures, state retail installment sale laws, and consumer protection requirements differ by state.
- Capital requirements. Funding receivables requires capital — either on-balance-sheet or through warehouse facilities.
Why Reclaim Capital Exists
Reclaim Capital was built specifically to remove these barriers:
- Cash flow underwriting platform. Bank-account-level income and expense analysis via secure, read-only integration. Sees what FICO misses.
- End-to-end technology platform. Origination, servicing, payment processing, and collections workflows — all white-labeled as your brand.
- Compliance engine. Automated TILA/Reg Z disclosures, California RISA structuring, ECOA compliance, and state-specific documentation.
- Servicing affiliate structure. We help you establish a servicing entity that handles all customer-facing functions. Your customer never sees our name.
- Asset-light model. You hold the receivables. We provide the platform and operational infrastructure.
See what in-house financing could mean for your business
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