Archive for 2016

deBanked’s Top 10 Most Read Stories of 2016

December 28, 2016
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Top 10

If 2015 was the year of the broker, well then 2016 was the year of readjusted expectations. The following are the top 10 most read stories of 2016 per our online analytics, some of which surprised even us. Either way, here’s what you read and shared on our website the most in 2016 in descending order:

10: Do Bank Statements Matter in Lending? Business Lenders and Consumer Lenders Disagree
A 2015 story, it was the 10th most read in 2016. One thing the lending revolution has taught us is that a borrower’s bank statements can mean everything or nothing at all.

9: Should I start an ISO with only $2,000?
Even though this was published two full years ago, it managed to be the 9th most read story of 2016. The short answer to this question is no, don’t start an ISO with such a small budget especially not in 2016 or 2017.

8: Lending Club Class Action Lawsuit Predicated on Madden v Midland Risk
A big story early in the year was Madden v Midland, and the impact an appellate court ruling could have on marketplace lenders who rely on chartered banks to make loans for them in 50 states. This particular post and related ones attracted a lot of readers in 2016.

7: Business Loan Brokers and MCA ISOs Call it Quits
For the first time ever, brokers and ISOs began to say farewell to an industry faced with oversaturation.

6: Merchant Cash Advance Accounting – A How To Guide
Published two full years ago, the merchant cash advance accounting guide managed to be the 6th most read article on deBanked in 2016. The article is meant for MCA funders bookkeeping, not for merchants who use merchant cash advances.

5: Lending Club Borrowers Are Paying Off Really Early – And There’s Something Weird About It
Lending Club’s loan borrowers pay off their loans early at a freakish level. I pondered this in a blog post in February and the trend has not changed. To date, I’ve had 975 borrowers pay off early, nearly double since the time this was published.

4: Platinum Rapid Funding Group Sets Annual Funding Record
An astounding amount of visitors were interested in Platinum Rapid Funding Group’s 2015 origination volume. An announcement that the company had originated $100 million in deals was the 4th most read story of 2016.

3: Merchant Cash Advance Definitely NOT a Loan, New York Judge Rules
Yet another post referencing Platinum Rapid Funding Group, was a decision issued in a New York trial court. In it, a judge opined at length about the nature of purchasing future receivables.

2: Shakeup at CAN Capital – CEO and 2 other Execs Put on Leave of Absence
Despite being less than a month old, this story on its own was the 2nd most read of 2016, technically followed by this one and this one, both also about CAN’s recent issues. We combined them into one story for the purpose of this list since they were all related to the same event.

1: The Closer – Meet the Yellowstone Capital Rep That Originated $47 Million in Deals Last Year
The #1 most read story on deBanked in 2016 was a profile about a salesman at Yellowstone Capital. Juan Monegro, who originated $47 million worth of deals in 2015, was also recently reported to have matched that number again in 2016.

Brief: The CFPB’s Unconstitutionality

December 28, 2016
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This story appeared in deBanked’s Nov/Dec 2016 magazine issue. To receive copies in print, SUBSCRIBE FREE

The Director of the consumer agency wields so much power that his authority actually violates Article II of the United States Constitution, according to the United States Court of Appeals for the District of Columbia Circuit which presided over PHH Corp v. CFPB. “In short, when measured in terms of unilateral power, the Director of the CFPB is the single most powerful official in the entire U.S. Government, other than the President,” the Court wrote. “Indeed, within his jurisdiction, the Director of the CFPB can be considered even more powerful than the President.”

Article II of the Constitution grants the President alone the authority to take care that the laws be faithfully executed. That means that Congress can’t even legally legislate another single individual to possess that amount of power even if they wanted to. But rather than order the dismantling of the CFPB, the Court suggested two remedies, either the director be overseen by the President of the United States or the single-directorship model be reconfigured to become a multi-member commission, a workaround that other executive agencies operate under.

Even though the agency is tasked to protect consumers, the Court recognized the potential for corruption when overseen by a single unaccountable person. “The CFPB’s concentration of enormous executive power in a single, unaccountable, unchecked Director not only departs from settled historical practice, but also poses a far greater risk of arbitrary decision-making and abuse of power, and a far greater threat to individual liberty, than does a multi-member independent agency,” the Court asserted.

Meanwhile, the CFPB has cast the decision aside as nonsense and has refused to comply, even going as far as to directly rebut it in another case shortly thereafter. In CFPB v. Intercept Corporation, the CFPB argued that the D.C. Circuit’s decision was “wrongly decided” and “not likely to withstand further review.” They’ve also asked the D.C. Circuit to rehear the case in part because they believe the decision “purports to override Congress’s explicit determination to create ‘an independent bureau’ to exercise regulatory and law enforcement authority in a particular segment of the economy.” The Court can simply deny to rehear the case.

One wild card to consider in this debate is that President-Elect Trump has pledged to repeal the Dodd-Frank Act, the law that created the CFPB to begin with. At the very least, Trump may feel it necessary to flex the power granted to him under Article II and subvert the directorship of the agency.

CAN Capital Shareholder Files Lawsuit

December 25, 2016
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Add an aggrieved shareholder to the list of CAN Capital’s recent messes. On December 19th, Deborah Clearman filed a motion for summary judgment in lieu of a complaint in the New York Supreme Court, alleging that CAN had failed to comply with a settlement agreement that stipulated she be paid $150,000 by November 14, 2016.

Clearman, who has been a shareholder of the company since 2003, is the owner of 83,362 shares of CAN Capital preferred Series A-1 stock and 48,078 shares of CAN Capital preferred Series A-2 stock, according to the settlement agreement now visible to the public because of New York State’s open court system.

The original dispute between the parties precedes the latest events rocking the company, though the alleged non-payment could be related to liquidity woes. CAN was only just served the summons on Wednesday the 21st and has not yet filed a response to the allegations.

CAN recently suffered a Rapid Amortization Event with their $200 million securitization, has suspended the funding of new deals and has laid off nearly half of their employees.

The lawsuit is registered as case number 656603/2016 in the New York County Supreme Court

CAN Capital’s Collateral ‘Adjustment’

December 24, 2016
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Last month, CAN Capital disclosed that they had “self-identified that some assets were not performing as expected” on the same day that three of the company’s top executives were put on leave. Since then it’s been reported that a discrepancy arose when CAN’s old systems were not equipped to handle the shift from variable payment advances to fixed payment loans. This is notable given that CAN began doing fixed payment loans all the way back in April 2010.

The discrepancy found its way into CAN’s 2014 securitization. S&P Global Ratings recently reported on this that “there was a correction of previously misclassified assets that affected the results of the calculation of [the] adjusted performing asset balance” on CAN Capital Funding LLC Series 2014-1.

Ratings agency DBRS illustrates the collateral dip on CAN’s securitization once the classifications were reported correctly on Series 2014-1 below.

CAN Capital DBRS

Chart appears in DBRS’s recent analytics report

This is the first public glimpse into what CAN’s old systems got wrong and by how much.

The drop triggered a rapid amortization event, potentially causing liquidity issues for CAN, hence why new funding may be paused. The principal balance on the $200 million notes has dropped by nearly $70 million in the last two months, indicating big payouts.

The process to manage a rapid amortization event is described in the original DBRS ratings report. The implications aren’t good given that this appears to be brought on by misclassifying assets rather than a natural deterioration of loan performance.

Last week, CAN laid off nearly half of its employees as it tries to correct course.

Update: On December 25th, deBanked published a brief of a newly discovered lawsuit filed against CAN Capital on December 19th by an aggrieved shareholder alleging the company had failed to pay her a $150,000 settlement payment.

Bizfi Hits $2B Origination Milestone; Providing Financing to More Than 35,000 U.S. Small Businesses

December 22, 2016
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BizfiNEW YORK–(BUSINESS WIRE)–Today, Bizfi, the premier fintech company with a platform that combines aggregation, funding and a marketplace on a single platform for small businesses, announced that it has surpassed $2 billion in financing – through both growth and working capital – to more than 35,000 small businesses across America.

The Bizfi.com marketplace was launched in 2015 to provide small business owners with access to multiple financing options from more than 45 lending partners. These financing options include short-term financing, franchise financing, lines of credit, equipment financing, medical financing, invoice financing, medium-term loans and long-term loans guaranteed by the U.S. Small Business Administration.

“Over eleven years ago, when Bizfi became one of the first alternative finance lenders, we understood that if we remained committed to the principle of providing business owners with fast access to smart capital, we could achieve growth while supporting the number one job engine in the economy,” said Stephen Sheinbaum, founder, Bizfi. “During the last decade we have invested in creating the best platform and user experience with the most advanced technology to ensure business owners can access the financing they need. Hitting this milestone reinforces that our business fundamentals are strong and we are providing a much needed service in this growing economy.”

“Every dollar we provide to a small business owner returns multiples of GDP,” said John Donovan, CEO of Bizfi. “Being able to support the small business community is at the heart of our company. We believe there is tremendous opportunity to grow our marketplace offerings. We have funded over 35,000 small businesses and we look forward to greatly expanding that number.”

Donovan continued, “One of the key reasons why I joined Bizfi as its Chief Executive Officer was its growth trajectory. In just two years, the company has gone from supplying $1B to small businesses to $2B. This is a testament to our unique business model of providing both a financial product and a marketplace.”

Built from proprietary technology, Bizfi’s platform uses application program interface (APIs) to leverage a wide variety of sources to quickly offer loans and other financial products to small businesses. The platform is strengthened by strategic relationships with more than 45 funding partners, 15 of which are integrated within the platform, including OnDeck (NASDAQ:ONDK), Funding Circle, Bluevine, and Kabbage. Bizfi is also a direct lender on the platform.

About Bizfi

Bizfi is the premier fintech company combining aggregation, funding and a marketplace on a single platform for small businesses. Founded in 2005, Bizfi and its family of companies have provided $2 billion in financing to more than 35,000 small businesses in a wide variety of industries across the United States.

Bizfi’s connected marketplace instantly provides multiple funding options and real-time pre-approvals to businesses from a wide variety of funding partners. Bizfi’s funding options include short-term financing, franchise financing, lines of credit, equipment financing, medical financing, invoice financing, medium-term loans and long-term loans guaranteed by the U.S. Small Business Administration. The Bizfi API provides a turnkey white label or co-branded solution that easily allows strategic partners to access the Bizfi engine and present their clients with financial offers from Bizfi lenders all while maintaining their customer’s user experience. A process that once took hours, now takes minutes.

Contacts
Media
KCSA Strategic Communications
Kate Tumino, 212-896-1252
ktumino@kcsa.com
or
Bizfi
Sales, 855-462-4934
bizfisales@bizfi.com
or
Bizfi
Marketing, 212-545-3182
marketing@bizfi.com

Broker Running Around Calling Himself a ‘Direct Lender’ Shut Down by CA Regulators

December 21, 2016
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A loan broker representing themselves to be a “direct lender,” was not a direct lender at all, according to witness testimony entered against Financial Services Enterprises DBA Pioneer Capital. The California Department of Business Oversight (DBO) noted in its case against Pioneer that “the evidence did not show that respondent actually funds loans itself, and did not include documentation of any loans actually consummated.”

The regulatory action, which was centered around whether or not the business loan broker was unlicensed in California ended unfavorably for Pioneer, with the DBO ordering the company to Desist and Refrain. You can read a good summary on LeasingNews by attorney Tom McCurnin: http://leasingnews.org/archives/Dec2016/12_21.htm#dbo

Citizens Bank to Use Fundation’s Tech and Services in 2017

December 21, 2016
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Fundation is back at it, this time announcing a deal with Citizens Bank to offer “digital lending capabilities to small business customers.”

According to a press release:
The added capability will enable small businesses to apply for loans and lines of credit through a simple online application at citizensbank.com. In most cases approval is provided within minutes, and loans are funded in as little as three business days. Additionally, Fundation will offer credit to some customers that do not meet Citizens’ credit guidelines, helping the bank to serve more of its small business customers’ credit needs.

Expected to go into effect in mid-2017, it should be a huge improvement to Citizen’s existing online loan application process, which doesn’t appear to even exist. A cursory review of their website indicates that business owners can at best, schedule a consultation with a banker over the phone.

Fundation has transformed this process for other banks in the past, Regions Bank for example, as we showed in a prior post. The partnership should be valuable for both Fundation and Citizens.

Online Consumer Lender Argon Credit Files Chapter 11

December 20, 2016
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“Decisioning as a Service (DaaS), specifically the commercialization of Argon’s machine learning algorithms, is being developed to revolutionize the way credit is evaluated for the entire industry.” That’s according to a press release put out by Chicago-based Argon Credit 19 months ago. The company filed for bankruptcy on Friday, December 16th.

Argon offered loans from $2,000 to $35,000 with APRs ranging from 4.99% to 149% to consumers with at least a 540 FICO score.

Listing more than $42 million in outstanding debt, the largest creditor by far is the Princeton Alternative Fund, which provides credit facilities to select, consumer-facing lenders in the alternative lending marketplace, according to a fact sheet. Argon owes Princeton and a related entity $39 million, the bankruptcy petition states.

The company filed for Chapter 11 after “experiencing financial difficulty.”