When you deal with a traditional lender, it's typically about the interest rate and the dollar amount and the advanced rate. Flock is much more than that.

We have a deep knowledge of the industry. We have a deep knowledge of analytics. We make sure that the transaction that we're purchasing is going to be profitable for both parties. That's part of the alignment that we set up in our structure.

We find that our clients feel we are truly a partner with them versus just a money lender. Our analytics, from an industry perspective, are very deep. We have underwritten over 1500 portfolios and have performance data on all of them. But better than that, we have Damond Edmondson who's probably the best in the industry at evaluating portfolios and analyzing the data. His knowledge of technology scoring and how data works gives us a distinct advantage in terms of evaluating how our portfolio is going to perform before we even purchase it.

We have created a process that allows us to very quickly evaluate portfolios probably faster than anybody else in the industry.

We’re able to reach back into our historical archives, identify portfolios with very similar attributes and performance records, and apply that to the current portfolio that we're evaluating as well as evaluate our customers processes and how they're going to collect that particular debt. 

We’re able to accurately predict how that portfolio is going perform, not only within the next 12 months, but out to 60 months.

One of the biggest challenges in the industry today as debt buyers is to go out to the market to bid on portfolios. There is a tendency to overpay for those portfolios to feed the engine, to make sure that they have inventory flowing through their organization, that they're collecting on it and generating some cash flow.

As a joint venture partner, we're completely aligned with our debt buyers and investors. So, we're trying to maximize returns for all three–were looking for somebody in the middle market that doesn't have the capital to scale and needs the power of leverage to buy portfolios to fill their shops up or to grow their footprint.

FLOCK's joint venture structure is where we advance 85 to 90% of the purchase price while our, while our debt buyer, our partner invests 10 to 15%.

We're in this together and we have a preferred return that we both enjoy. Then, when the money comes back from a collection we then share in those collections net of servicing fees. We aren't looking for an amortized payment. It's just simply the repayment of the actual portfolio that generates the, that generates the cash flow. We don't have any guarantees and the asset itself serves as its own collateral.

Flock's lending structure doesn't work for everybody, but we think it's important that when you're evaluating a potential lender or potential partner, you need to find out if you're aligned. How is that lender making their money? What is the interest rate, how's the collateral handled and what types of guarantees are you making to repay that note?

The terms we structure have to be fair and competitively fast. 

This market is very competitive. If our customers at Flock aren't nimble and quick to bid on portfolios, they'll miss big opportunities. We have to be flexible for our customers to be able to be nimble and able to win deals for themselves. And so that's why our terms in the joint venture structure are customizable with terms to meet each individual deal opportunity.

Flock has to be fast in order for our customers to win. Many of these deals are very competitive and go through auction or brokerage processes. If we're not fast, our customers can't win. Fair is crucial for our customers to get the returns that they need. And that's why we like the joint venture structure which aligns us with our customers.

Flexibility is important because one way our customers can differentiate their bids for their deals is to tweak some of the economics of the terms of the bids that they're making. And if we're not flexible with our funding, they can't be flexible and when the deals that they need to grow their business, that's why the joint venture structure as opposed to fixed amortization loans is much more effective. Flexibility is crucial. Our customers have to be able to respond quickly and specifically to deal points when they bid on portfolios. And if our funding is so rigid that they can't change their terms when they're bidding on competitive deals, they won't win.

We're in this to build relationships, to align ourselves with our customers' businesses.

We only succeed when our customers succeed. Success is not just a transaction, it's not just one deal. Success is building a long-term relationship, helping our customers achieve their strategic goals. And that's what the Flock Advantage is.

The Flock Advantage from the financial standpoint is that we give personal service.

We're a small group that can work directly with the client and provide them with the guidance and examples and walk them through the process basically, which helps facilitate the monthly close and make sure there's no real gaps in the effort.

The advantage would be in the personal service. With Flock, you are always going to speak to the person who's in charge of that or handles that area. We communicate well with the client, letting them know what's coming up next, what the deadlines are, what formats they need to use.

The Flock Advantage from an investor standpoint is very compelling.

First there's cash flow, monthly cash flow that comes from all the portfolios we invest in. Cash is a beautiful thing. Cash is king. Secondly, we get high returns, equity type returns on the majority of our portfolios. So, we've got very good returns on your money from a portfolio perspective. And thirdly, we've got the controls that meet both the investor needs and are flexible enough for our customers that they are comfortable with that those controls consist of great underwriting. And we've got incredible performance management processes and data to ensure that those portfolios perform the way they're supposed to. Those are some of the controls we have in place that we think are exceptional.

The power of leverage is what financing is all about.

In the specialty finance world, if clients can use Flock leverage at typically, let's say it's 85 to 90% they can double, triple the return on their investment as opposed to doing it all themselves. The way it works is that typically after in our joint venture structure, after the client gets their collection fees and their principal and interest returned, we split residuals at 50-50 so think about it. If the client's putting in 15% flock puts in 85% the principal and the preferred returns are paid back and we split 50 50 the client makes a much better IRR or internal rate of return than flock because they're getting 50% of the residuals on a 15% equity Flock gets 50% residuals after putting in 85% of the equity. So the leverage is serious and very successful for the client.

The clients typically make a much higher return on their money than we do because of the power of leverage. 

An investor may be overpaying for portfolios. 

There's lots of volatility in this market. Volatility is a good thing for Flock because we have a team, the only team with a specialty finance company that has worked in this industry and that's why we have survived in these volatile times because our people have rolled up their sleeves, they know what questions to ask. Whereas other lenders, other capital partners have never ever personally worked in this space. So they don't know how to capitalize on adversity because they've never had to deal with it like we have. We've gotten our hands dirty. 

We know what our customers need, and we love providing it. We're looking at all kinds of opportunities to add value through additional services, getting into additional asset classes so that our customers can grow more quickly than they have in the past.

We think the outlook for the environment in the industry of debt buying or financing - what we call alternative assets, is very positive.

With the arrival of the CFPB in 2011, some of the rules and regulations were necessary because there were some people out there taking advantage of consumers. However, in America, sometimes the pendulum swings too far. The industry made it very difficult for small and middle market buyers to compete. And so there was a period of a retrenchment as a result of the regulatory changes that the CFPB enforced. What's changing now is the regulations are easing up a little bit and that's also occurring at a time when we're seeing the volume of charge offs, increasing the volume of credit growing for the American consumer.

There's a gradual easing of the regulations occurring at a time when the volumes of charge offs are growing, and the American consumer is borrowing more.

We think the environment in the year ahead is going to be very positive for debt buyers. As a result, we have seen a growth in the numbers of debt buying companies emerging. Many collection agencies are now getting back into the business of buying debt that they're actually collecting. So all the trends are very positive and we're confident at Flock that the year or two ahead are going to be very good for the industry.

Culture is really important at Flock.

It’s about our shared values, our passion, and perseverance, which equal performance and what ties all that together is communication and transparency. And that's what builds trust. Trust between the team here at Flock, trust with our customers, trust with our investors. That's what it's all about. Without trust, you can't have the teamwork, you won't get the performance and you don't have a successful business. So, culture is strikes right at the very heart of who we are and what we aspire to achieve each day at Flock Specialty Finance.

With the tools, the analytics, the intelligence that Flock can bring to them, building community is about taking advantage of people's skills, experiences, purposes, and uniting them.

There's power in teams and power in diversity. It's also a value add, a huge value add that Flock can provide to the industry of debt buyers to specialty finance. We develop insights based on sources of expertise, sources of analytics, things like the webinars that we do, and the Capital Club Show podcast, and we listen to our advisory board. We sponsor all the major conferences because we believe that this community of debt buyers and specialty finance can benefit from working in unison or at least in a community that can be more powerful, more effective for both its customers and its investors. We believe there's power in the community. It creates value for everyone to work together.

We're truly a partner. We make smart investments that create returns for all of us.

The process is very easy. We simply come in, and take a look at your operation. We spend time getting to know you, getting to know your team and understanding your capabilities. We complete a financial review, ensure compliance is a priority, and we begin evaluating portfolios with you. If pricing makes sense for all parties involved, terms are agreed to, contracts signed, and funds deployed. Michael Flock has assembled a team of industry professionals from all the different disciplines required to manage, underwrite and finance buying portfolios. This insight and incredible amount of experience creates and ensures long lasting profitable partnerships.