When simplicity means strength

Selling a portfolio is like selling a home; it's business, but it's personal, too. Many ISOs and merchant level salespeople (MLSs) have missed family outings, sacrificed vacations and spent long nights alone in the office to build their businesses. When the time comes to sell their portfolios, they want to be well-compensated for the value they have built.

Ensuring that portfolio sellers get a fair shake is just what Cutter LLC was established to do. Founder and President David Daily described Cutter as a "very, very simple company." Cutter provides ISOs and MLSs with working capital from their residual streams. "That's all we do," he said.

Cutter purchases whole and partial portfolios, and it has no regional limitations. "We can do business with people who have a lifetime residual and do not actually own the contract, but own the residuals," Daily said.

On its revamped Web site (due to be back online in late March 2008), Cutter characterizes itself using three words: speed, strength and trustworthy. That's "the way we like to do business," Daily said.

Founded in 2006 and headquartered in Franklin, Tenn., Cutter strives to craft portfolio purchase agreements that are fair to the buyer and seller, as well as carried out in a timely fashion.

The company tries to give a reasonable price in today's market, and doesn't compete with ISOs or processors.

According to Daily, Cutter distinguishes itself from other businesses by its research. It completes essential fact gathering to develop a full understanding of each ISO or MLS portfolio under consideration. "Then we figure the best valuation portfolio and conclude an agreement," he said.

Need for speed

Selling a portfolio is a business transaction with basic goals. Buyers want to get the best deal for their money, and sellers want to get the most money for their product. And both parties inevitably want the transaction completed as soon as possible.

Cutter prides itself on an efficient turnaround. Want a simple transaction to be completed in two days? "We have the capability of doing that," Daily said. "We're fully funded and ready to buy."

A good deal completed nine months down the road turns into a great one when finished in 30 days. "We have the available cash to fund transactions in a very short time frame," Daily said.

Daily believes unfair deals occur because the seller is under pressure or simply unaware of available options. "They get put in a corner; they need to do the deal quickly," he said. "Sometimes there is a lack of knowledge of what they should do."

Many times, according to Daily, selling agents are unaware of the details in their existing processing agreements.

"We've gotten calls from people who don't own their residuals, but the fact of the matter is they don't know they don't own them," he said. Cutter helps ISOs and MLSs comprehend their agreements by taking the time to review contracts with them, "pointing out the good, bad and ugly."

For example, some agents have contract minimums. Other agents do not own their residual stream until they reach a certain sales level, and some contracts don't allow the agent to own the residual stream at all.

Trust is paramount

Cutter materialized once Daily realized a large number of people trying to sell their portfolios were being treated unfairly. "I felt like the smaller portfolio owners were being underserved," he said. "I found a niche and tried to fill it."

Daily found that the terms of some buyouts weren't in the best interests of smaller portfolio owners, but no one was advising them to obtain better deals.

For the majority of sellers, the objective is "to take advantage of the little guy," he said. "Giving them a fair shake is a niche that could be served."

Daily expects positive character traits from those he conducts business with. "We do try very hard to work with people who are forthright, who are good," he said. "We try to stay away from the bad seeds."

Daily noticed that even though suspicious business deals are floating around the payments industry, he has come across more good people than bad.

Cutter's policy is to pay ISOs and MLSs the greatest amount of cash possible, given the valuation. "Agents and ISOs will like doing business with us," Daily said. "We complete the purchase process in the shortest amount of time while always acting with integrity and honesty."

Cutter uses this to create what Daily considers to be the best agreements for ISOs and MLSs who wish to sell all or a portion of their portfolios. "We have the experience and flexibility to tailor a transaction that precisely meets their needs," Daily said.

Strength and endurance

Although Cutter's staff is only six strong, its merchant service experience spans decades. "I have been an ISO for my entire professional career," Daily said.

"Most of the folks who work with me have come through acquisition-related activity and bring a variety of levels of experience, from five to 15 years."

Daily has been in the business for 23 years. He has experience in direct sales, mergers and acquisitions, to name a few areas. He also worked with PMT Services Inc. in global and Internet payments.

Daily hopes Cutter will outlast its competitors. "You want to do business with people who are planning to be around for a long time, who have been around and who have a good reputation," Daily said. "We fall into that category."

Cutter is keeping up a brisk pace in its industry, completing, on average, more than two transactions per month during the past year.

Its average portfolio size is $5,000 in residuals per month, but it expects that figure will grow. "We are looking for the average to be higher; it is just what the market bears right now," Daily said. "It is not a description of our appetite."

With two years under its belt, Cutter is "going great," Daily said. The company has purchased more portfolios than imagined. So, what can the industry expect of Cutter in the future?" More of the same," Daily said. Cutter wants to keep the approach that has reaped results. In other words, simple is good.

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