Piscataway, N.J.-based merchant cash advance (MCA) provider Total Merchant Resources LLC appeared on the Oct. 25, 2013, edition of the popular venture funding game show Shark Tank and walked away with $200,000 in capital and a new celebrity business partner. One month later, they are pleased with the dramatic uptick in their business that ensued.
TMR co-founders Jason Reddish and Val Pinkhasov pitched their MCA solution to five Shark Tank panelists, including Mark Cuban, high-profile owner of the Dallas Mavericks, and Canadian businessman and venture capitalist Kevin O’Leary. Reddish and Pinkhasov said TMR’s strategy is to offer merchants upfront capital for a percentage of the revenue from their bankcard receivables as a way to then become the processor of all their electronic payments.
The TMR executives initially sought $250,000 in funding from the “sharks” for a 20 percent stake in the company. Four of the panelists declined the opportunity before O’Leary, who is known as “Mr. Wonderful” on the show, agreed to invest $200,000 for 50 percent equity. Reddish and Pinkhasov were initially resistant to the offer, but finally agreed to take on O’Leary as investor and business partner.
Life in the tank
Pinkhasov said he and Reddish were among approximately 150 small business owners and entrepreneurs out of 37,000 applicants to be picked to pitch on this season of Shark Tank. The co-founders provided an audition “tape” and then underwent what Pinkhasov called a rigorous application process that included financial statement reviews and background checks. However, when the co-founders pitched to the “sharks,” the panelists knew nothing about TMR or its MCA product.
Pinkhasov said the panelists responded positively to their value proposition. “We use common sense to get [merchants] the money that they need very quickly,” he noted. “And the payment terms are what they are. They can use that money to create jobs, by hiring new people, or buying equipment – and just help improve our economy. And that’s what [the panelists] liked that there was a true necessity in our economy for financing businesses the way we do.”
Reddish added that when Hurricane Sandy hit the East Coast in October 2012, TMR shut off its MCA program for merchants who were flooded out or otherwise incapacitated and unable to conduct business. Merchants with bank loans to pay off had a tougher time. “If you had a bank loan, think of all the hoops you had to jump through to even get to the person at the back-end to work with the business,” he said. “And that’s the relationship that’s missing right now in the financial world.”
Hook, line and sinker
Despite TMR being chosen by O’Leary as worthy of his backing, Reddish said being selected for the show was the biggest accomplishment. “I think the home run was getting on the show in the first place with no [physical] product,” he said. “And getting attention to this industry. It’s amazing how many business owners still don’t realize this [MCA] is an option.”
On the surface, O’Leary could be viewed as getting the better of the deal, as a 50 percent interest in a growing business can result in a lot of money for little work. Reddish said he and Pinkhasov thought the same thing at first. “Looking back on it, we were thinking so small,” Reddish said. “We’re very happy just to have him involved. Good will is priceless. And it’s very hard to establish. And the celebrity of his name and his credibility, you just can’t put a price tag on that.”
Expanding beyond the pond
Reddish said TMR, which processes payments via North American Bancard, is in the process of becoming a full-risk ISO. TMR opened its doors in July 2011 and has reportedly provided over $2.8 million in funding to merchants in that time. TMR’s goal is to become a super ISO by leveraging O’Leary’s influence and contacts to land larger processing contracts from larger merchants.
Since doing the show, TMR has been inundated with new business and other inquiries. “In one week we’ve gotten the equivalent of about seven months worth of business,” Pinkhasov said.
With O’Leary’s resources under sail, TMR is seeking to expand nationally. “What we’re looking to do is cookie-cutter branch platforms around the country, where people can become self sufficient and build their own books of business,” Reddish said. “We offer aggressive enough splits where you’re piggybacking off of our relationships. The amount of money you would be making on our split is more than the amount of money you would make at 100 percent trying to do it on your own.”