Archive for 2016
SmartBiz Loans Ranked Number One Provider of Traditional SBA 7(a) Loans Under $350,000
December 5, 2016SAN FRANCISCO, CA – December 5, 2016 – SmartBiz Loans, the first SBA marketplace and bank-enabling technology platform, has ranked as the number one provider of non-Express, SBA 7(a) loans under $350,000 for the 2016 government fiscal year. SmartBiz also ranked number five among providers of under $350,000 traditional SBA 7(a) and Express 7(a) loans combined.
“SmartBiz’s success in this year’s SBA 7(a) ranking demonstrates how technology can support banks in meeting the needs of small businesses,” said Evan Singer, CEO of SmartBiz Loans. “SmartBiz is committed to creating the leading marketplace for both banks and small business owners, by matching small business owners with the bank best suited to their needs and enabling a higher percentage of SBA loans to be approved.”
SmartBiz generated $200 million in funded SBA 7(a) loans through its bank lending partners, which helped them earn the top spot. The data used is based on SBA lending data released in November, reflecting its 2016 fiscal year which ended on Sept. 30. Wells Fargo Bank, which was ranked just below SmartBiz, generated $155 million in funded non-Express SBA 7(a) loans under $350,000. This is the first time a technology platform and marketplace has achieved the number one position in SBA’s ranking of 7(a) loans.
“Small businesses are the driving force of the economy,” said Ann Marie Mehlum, retired Associate Administrator, Office of Capital Access, U.S. Small Business Administration. “By supporting them, the SBA and lending partners like SmartBiz are investing in the economy as a whole.”
SmartBiz is revolutionizing SBA lending. Its marketplace helps increase approval rates by automatically directing businesses to the right lender, while its advanced software streamlines the SBA loan application, underwriting and origination process. In this way, SmartBiz fills a critical gap in the small business loan market and enables small businesses nationwide to grow without settling for the sky-high rates of alternative online lenders or undergoing the typically slow and tedious traditional bank process.
About SmartBiz Loans
SmartBiz Loans is a unique combination of an online SBA loan marketplace and a bank enabling technology platform. The company’s online software provides SBA preferred lenders customized and automated origination, underwriting and documentation, making approval and funding fast and easy. Sophisticated algorithmic sorting in the SmartBiz marketplace also enables higher approval rates for small businesses because the right applications are automatically directed to the right bank. SmartBiz is based in San Francisco and was founded in 2009 by a team of experienced financial services entrepreneurs with backing from leading venture capital firms including Investor Growth Capital, Venrock, First Round Capital, Baseline Ventures, and SoftTech VC. Learn more at www.smartbizloans.com.
Is Marketplace Lending Really Just Westworld?
December 5, 2016
If you haven’t watched HBO’s new flagship TV show Westworld, my analogy may have some broad spoilers so you might want to look away. Also, you should start watching the show.
In a world controlled by banks, people can visit a world where the hosts looks like banks but aren’t. They’re non-banks with bank-like attributes run off of advanced programming. You can borrow from them, pay them back, invest in them and securitize their loans. They seem real indeed, but the real banks are the chartered ones that pull their strings and script their stories.
In this real life version of Westworld, might the proposed OCC charter be the maze?
A rose is a rose is a rose.
The OCC Wants Online Lenders to Become Limited Purpose Banks
December 2, 2016
Earlier today, Comptroller of the Currency Thomas J. Curry announced that the OCC will move forward with chartering financial technology companies that offer bank products and services that meet their high standards and chartering requirements.
“We have decided to move forward and to make available special purpose national charters to fintech companies for a few basic reasons,” he began saying during a speech at the Georgetown University Law Center. “First and foremost, we believe doing so is in the public interest. Fintech companies hold great potential to expand financial inclusion, empower consumers, and help families and businesses take more control of their financial matters.”
Curry also responded to critics who argued that a limited charter would put fully regulated banks at a disadvantage competitively. “The reality today is that the 4,000 fintech companies out there are already competing with national and state banks, without regard to any of the national bank responsibilities and under a patchwork of supervision,” he said. “Granting national charters to the companies who desire and warrant one doesn’t weaken the competitive position of existing banks or the dual banking system. In some ways, it levels the playing field because statutes that by their terms apply to national banks would apply to all special purpose national banks, even uninsured ones.”
Applying for this charter would be optional, not a requirement.
Like the Treasury RFI last year, the OCC has put up an official 13-question Request For Comment that is open until January 15th.
Those questions are:
1. What are the public policy benefits of approving fintech companies to operate under a national bank charter? What are the risks?
2. What elements should the OCC consider in establishing the capital and liquidity requirements for an uninsured special purpose national bank that limits the type of assets it holds?
3. What information should a special purpose national bank provide to the OCC to demonstrate its commitment to financial inclusion to individuals, businesses and communities? For instance, what new or alternative means (e.g., products, services) might a special purpose national bank establish in furtherance of its support for financial inclusion? How could an uninsured special purpose bank that uses innovative methods to develop or deliver financial products or services in a virtual or physical community demonstrate its commitment to financial inclusion?
4. Should the OCC seek a financial inclusion commitment from an uninsured special purpose national bank that would not engage in lending, and if so, how could such a bank demonstrate a commitment to financial inclusion?
5. How could a special purpose national bank that is not engaged in providing banking services to the public support financial inclusion?
6. Should the OCC use its chartering authority as an opportunity to address the gaps in protections afforded individuals versus small business borrowers, and if so, how?
7. What are potential challenges in executing or adapting a fintech business model to meet regulatory expectations, and what specific conditions governing the activities of special purpose national banks should the OCC consider?
8. What actions should the OCC take to ensure special purpose national banks operate in a safe and sound manner and in the public interest?
9. Would a fintech special purpose national bank have any competitive advantages over full service banks the OCC should address? Are there risks to full-service banks from fintech companies that do not have bank charters?
10. Are there particular products or services offered by fintech companies, such as digital currencies, that may require different approaches to supervision to mitigate risk for both the institution and the broader financial system?
11. How can the OCC enhance its coordination and communication with other regulators that have jurisdiction over a proposed special purpose national bank, its parent company, or its activities?
12. Certain risks may be increased in a special purpose national bank because of its concentration in a limited number of business activities. How can the OCC ensure that a special purpose national bank sufficiently mitigates these risks?
13. What additional information, materials, and technical assistance from the OCC would a
prospective fintech applicant find useful in the application process?
Read the OCC’s 17 page report on the matter. The Request For Comment and submission instructions are at the end of it.
Nude Photos Used as Collateral for Loans, Leak
December 2, 2016Perhaps the only thing worse than sending a nude photo of yourself to a lender as collateral is learning that the photo had been leaked on to the internet. In China, some online lenders hold on to nude photos of their borrowers (typically women) to use as leverage to pay up. If they don’t, the photos may be distributed to the borrower’s friends and family members to shame them. While this practice is certainly not common, about 10 gigabytes worth of such photos from loan platform Jiedaibao were leaked on to the internet recently, according to People’s Daily
Jiedaibao says that loans with such terms are private peer-to-peer loans that they can’t regulate. “We have called the police and collected evidence to protect the company’s reputation. Those who leaked the nude pictures will be punished according to law,” they said in a public response.
Chinese regulators have been working hard to address the growth of p2p lending after investors have lost billions through fraud. P2P lender Ezubao for example, turned out to be a $7.6 billion ponzi scheme. Meanwhile, Moodys reported that by the end of last year, a whopping 800 p2p loan platforms in China had already failed or were facing liquidity issues. In response, banking regulators want all p2p lenders to register with the government.
Bitcoin-based P2P Lending Platform BitLendingClub Shuts Down
December 2, 2016BitLendingClub (not to be confused with Lending Club) has shut down their bitcoin-based p2p lending platform, citing regulatory pressure. A message posted on their website says, “over the last year or so, the regulatory pressures has been increasing to the point that it is no longer feasible to maintain the operation of the platform. We are regretfully announcing that we will have to begin terminating the services effective immediately.”
BitLendingClub received a $200,000 seed investment from European VC fund LAUNCHub just two years ago. The company changed its name to LoanBase in September 2015 but then changed it back only a few months ago.
This was no small experiment either. Kiril Gantchev, BitLendingClub’s CEO, claims on his LinkedIn profile that the company made more than 10,000 loans worth more than $8 million dollars, originating from 90 countries. The company’s website claims an average APR of 192% and a default rate of nearly 12%.
In March however, the company stopped lending to people in several countries including Iran, Ireland and Nigeria due to elevated fraudulent activity.
It’s unclear what “regulatory pressures” caused them to shut down but the company appears to have been operating from San Francisco despite originally incorporating in Bulgaria. A search for a California lending license connected to them yielded no results. After the US, the country with the 2nd most borrowers on the platform was Venezuela followed by Brazil, the UK and India.
“Investors should understand the risks involved when making bitcoin loans,” their website warned. “The main risks are default and failure to collect.” they added.
Total Merchant Resources Launches Wholesale Funding Division, Secures $20 Million in Private Equity
December 1, 2016Dec 2, 2016 / Piscataway, NJ – An old name in the industry is now a new kid on the block with wholesale. Total Merchant Resources in Piscataway, NJ announced today that it is finished with a first round of funding and has secured $20 million in private equity. This new designation allows TMR to quickly and easily service ISO’s from coast to coast via its wholesale funding division, TMRNOW.
“We are thrilled to open our very successful funding platform to the entire industry. In addition, TMR is now perfectly positioned to do business in California since we are one of the few in this space to obtain a California lending license.” said TMR Co-Founder and CEO Jason Reddish.
Reddish and co-founder Val Pinkhasov, who were featured on CNBC’s ‘Shark Tank’, were among the very first business lenders to enter this space. They are a respected name in the industry and, thanks to their major prime time TV appearance, have brought attention to this underutilized model for businesses to obtain working capital.
“Funding on the retail side all these years, we understand where funders have failed in the past and being that our money is completely private, we have no one to answer to in regards to underwriting. We create our own programs and common sense pricing. We look forward to being a name that ISO’s can trust on every level and making common sense, in house decisions” says Val Pinkhasov President of TMR.
Both Reddish and Pinkhasov have several decades of finance experience and have helped thousands of businesses achieve their goals. They are now excited, in a properly regulated fashion, to do so in on the wholesale side. Please visit TMRNOW.COM for more information.
For more information call Gary Lane (212) 220 9872.
The Trump Effect and Bank Partnerships: Noah Breslow Chimes in on BloombergTV
November 30, 2016On BloombergTV in Canada, OnDeck CEO Noah Breslow answered questions about a Trump presidency, rising interest rates, and the future of bank partnerships. “Online lending is a secular trend that’s not going away,” Breslow said. “Any product that can be delivered over the internet will be delivered over the internet and money is the ultimate digital product.”
Watch the clip below:
Video not loading? View it here.
The CAN Capital Shakeup Is A Sign of the Times
November 30, 2016Update 11/30 7:30 pm: CAN says they are still open for business and still providing access to capital for current customers and renewal business. They are not actively seeking new business at this time, but will evaluate it as it comes in.
Part II of the industry’s season finale has begun. On Tuesday afternoon, CAN Capital confirmed that CEO Dan DeMeo had been put on a leave of absence. The chief risk officer and chief financial officer have also reportedly stepped down. Parris Sanz, the company’s chief legal officer, is now running the company, a CAN spokesperson said. His new title, acting head (which is how their statement referred to him), is perhaps a subtle clue that the company did not plan these moves far in advance. And it’s the phrasing that’s used to describe the departure of these executives that’s worth raising an eyebrow. A leave of absence? A curious fate indeed.
In an exclusive interview deBanked conducted with DeMeo last year, he said of CAN at the time, “it’s a self-sustaining business. We’re not forced to approach the capital market to cover our burn rate. We’re cash-flow positive.”
But more recently, there’s a different tone. A spokesperson for CAN said that the company had “self-identified that some assets were not performing as expected and that there was a need for process improvements in collections.” The sudden decapitation of the company’s top officers seems a harsh consequence for this apparent underperformance, especially given that CAN has long been on the short-list as a potential IPO candidate. DeMeo himself had been with the company since 2010, having started originally as the CFO and rising to the CEO position in 2013.
While CAN Capital is a private company, they are notable in that they have originated more than $6 billion in funding to small businesses since 1998 and secured a $650 million credit facility led by Wells Fargo just last year.
Some of CAN’s ISOs report being told that originations have been put on hold until January. A source with close knowledge of the company however, said that’s not correct. The Financial Times reported though that CAN had paused new business until the end of the year and would only be servicing current customers. And they might indeed need time to upgrade their systems since American Banker cited an unnamed source that said “problems arose when CAN Capital used old systems, which were not designed to require daily repayments, to collect money owed by term loan borrowers.”
Some outsiders are not surprised by what’s going. Alex Gemici, the chief revenue officer of World Business Lenders (WBL), said that it’s an indicator that uncollateralized lending is not the panacea everyone thought it was. “What we’ve been saying all along is right there on deBanked,” Gemici said, while directing me to the prediction they made a year ago that appears right on this website. At a December 2015 event at the Waldorf Astoria, WBL CEO Doug Naidus told a crowd comprised mostly of his company’s employees that he believed the bubble was about to burst. He doubled down on that prophecy in an interview four months ago in which he chided companies for having forsaken sound underwriting.
Is he right? In the last six months, the CEOs of Lending Club, Prosper and CAN Capital have all stepped down. Avant shed a lot of its staff. Dealstruck, Circleback Lending and Windset Capital have stopped funding. Confidence in the business side of alternative finance has also started to slip on a measurable basis before the election even happened.
“I believe companies are experiencing higher than normal losses due to a serious lack of proper underwriting practices, policies, and procedures,” said Andrew Hernandez, a managing partner at Central Diligence Group, a company that specializes in risk analysis who wasn’t commenting about any lender specifically. “As I say to people not familiar with the space, ‘putting the money out is the easy side of the business; getting it back is what proves to be the most difficult.'”
But CAN has not specifically fingered underwriting practices as the reason for their management shakeup, instead leaning towards it being a lapse in their process as the company grew. “It became clear that our business has grown and evolved faster than some of our internal processes,” they said in their statement.
The only alternative business lender funding more annually is OnDeck, a company that has garnered its fair share of criticism over its lackluster financial performance. Their stock is currently down a whopping 77% from the IPO price, but they have put on a good face for the industry they lead. The familiarity of their famous CEO and the decade in business under their belt arguably even has a calming effect on the tumultuous world of financial technology startups.
OnDeck too though, has been referenced in the context of bursting bubbles. Less than two years ago, RapidAdvance chairman Jeremy Brown voiced concern that the industry was heading into unsustainable territory, even going so far as to call out OnDeck by name. “When I see some of the business practices, offers, terms and other aspects of our business today, I am worried,” he wrote. “I am worried because I believe that 2008 has been too quickly forgotten, and very few, other than those of us that were on the front lines on the funding side at that time, appreciate what happened to outstanding portfolios at that time when average duration was 6 months and no deals were written over 8 months.”
For risk experts like Hernandez of Central Diligence Group, he thinks the newness of everything has been part of the problem. “I believe [funding companies] have faced a big hurdle in acquiring talent,” he said while adding that funding companies can be forced to hire underwriters with no prior knowledge of the product just to keep up with the growth.
While still very little is known about what exactly happened at CAN Capital, most people that deBanked spoke with were shocked that anything could happen there at all. “It’s insane,” said the chief executive of another competitor who wished to remain anonymous. “This is CAN we’re talking about.”
A sign of the times?
