Total Merchant Resources
DEAL
EPISODE SUMMARY
🕓 Air Date: October 25, 2013
Asking For:
$200,000 for 20%
Investor:
Kevin O'Leary
Deal:
$200,000 for 50%
PRODUCT SUMMARY
Total Merchant Resources offers alternative financing solutions to small businesses, providing them with quick access to capital to boost their operations.
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Background Story
Total Merchant Resources, headquartered in New Jersey, was founded by Jason Reddish and Val Pinkhasov, two entrepreneurs with complementary backgrounds in finance and sales. Jason previously owned a mortgage company of significant size for a decade, while Val gained experience in mortgage sales and office management. About six years prior to their appearance on Shark Tank, Val interviewed at Jason’s mortgage company and was subsequently hired, marking the beginning of their professional partnership.
Their journey into alternative financing solutions stemmed from recognizing a prevalent challenge faced by small businesses: undercapitalization. Understanding the struggles of entrepreneurs trying to secure funding in the aftermath of the financial crisis, Jason and Val sought to bridge the gap left by traditional banking institutions. Their vision was to provide accessible funding options for businesses that were often overlooked by banks due to their size or financial situation.
Inspired by their collective experience in finance and sales, Jason and Val conceptualized Total Merchant Resources as a solution to this problem. They aimed to offer quick access to capital for small businesses through alternative financing methods, leveraging their expertise in financial services and their understanding of the needs of small business owners. Thus, Total Merchant Resources was born, with a mission to empower entrepreneurs by providing them with the financial resources they need to grow and succeed.
The Product
Total Merchant Resources offers alternative financing solutions tailored to the needs of small businesses. Their product works by providing businesses with quick access to capital based on their credit card sales. When a business requires funding, Total Merchant Resources evaluates their eligibility and, if approved, disburses the funds promptly, typically within three to four days.
The financing terms are structured as a percentage of the business’s future credit card sales until the borrowed amount, plus a predetermined fee, is repaid. This flexible repayment model ensures that businesses can manage their cash flow without the burden of fixed monthly payments.
One of the key benefits of Total Merchant Resources’ product is its accessibility to businesses that may struggle to secure traditional loans from banks due to factors like size or credit history. By leveraging credit card sales as collateral, businesses can access the capital they need to expand operations, purchase inventory, or invest in growth opportunities.
The process of obtaining financing from Total Merchant Resources is straightforward, involving an application and evaluation of the business’s credit card sales history. Once approved, the funds are disbursed quickly, providing businesses with the liquidity needed to seize opportunities and overcome financial challenges.
How It Went
The company’s position before Shark Tank
As of their appearance on Shark Tank, Total Merchant Resources had demonstrated steady growth and a strong position in the alternative financing market. The company had generated $364,000 in gross sales in 2012, with a net distribution of approximately $220,000. Their success was attributed to their innovative financing model and their ability to provide quick access to capital for small businesses.
Total Merchant Resources relied on partnerships with credit card processing accounts to generate revenue through residuals. These partnerships allowed them to access a steady stream of funding, which they then disbursed to businesses in need of financing. Their customer base consisted of small businesses across different industries, ranging from retail and hospitality to service-based businesses. These businesses sought financing from Total Merchant Resources to support various needs, such as expansion, inventory purchases, and operational expenses.
In terms of funding, Total Merchant Resources primarily relied on the revenue generated from their financing activities. They utilized the credit card sales of their clients as collateral to secure the funding they provided, allowing them to operate with minimal upfront capital requirements. Regarding their financial structure, Total Merchant Resources operated as a private company with Jason Reddish and Val Pinkhasov as the co-founders and likely majority shareholders. Overall, Total Merchant Resources positioned themselves as a reliable and innovative player in the alternative financing industry, serving the needs of small businesses and contributing to their growth and success.
The Negotiations:
During the negotiations on Shark Tank, Total Merchant Resources sought a $200,000 investment for 20% equity in their company. Kevin O’Leary made the first offer, proposing $200,000 for a 50% stake, emphasizing his access to capital and industry contacts. After some deliberation, the founders accepted O’Leary’s offer, seeing the potential for accelerated growth with his involvement.
However, other Sharks expressed concerns about the ethical implications and risks associated with Total Merchant Resources’ financing model. Despite acknowledging the necessity of their services, some Sharks, like Lori Greiner and Robert Herjavec, ultimately opted out of investing, citing personal reservations about the nature of the business. The negotiation process highlighted the tension between the Sharks’ apprehensions and the founders’ confidence in their business model.
While some Sharks viewed the company’s approach as exploitative, others recognized the value it provided to small businesses unable to access traditional financing options. Ultimately, the negotiation culminated in O’Leary’s offer being accepted, with the founders agreeing to a higher equity stake in exchange for his investment and expertise. The deal represented a significant milestone for Total Merchant Resources, providing them with the resources and guidance needed to expand their operations and solidify their position in the market.
