Archive for 2017
Yellowstone Capital’s Donations Help Volunteer Ambulance Corp Upgrade Equipment
December 15, 2017Hatzalah of Union County, a volunteer ambulance company in New Jersey, was able to secure a new digital communications system, thanks to a fundraiser held by Yellowstone Capital this week. Throughout the past six years, Yellowstone Capital has been by far the largest donor to Hatzalah with total donations exceeding $300,000, according to a press release.
Hatzalah Chief Yudi Abraham said, “There is no doubt that Yellowstone Capital is partners in our lifesaving mission. With their support, we are able to continue providing the utmost in care for our patients. Both our community and our entire squad are forever grateful for their constant support.”
Finn & Co, Inc. To Manage Two New Equity/Debt Funds
December 14, 2017Below is a letter that was circulated by Finn & Co, Inc.
Finn & Co, Inc. is pleased to report the formation of two new equity/debt private equity funds to be managed by our firm. The first of these two funds is a US$100M equity fund which will seek investments in the MLM Industry (multi-level-marketing). This fund will be seeking and entertaining opportunities in North and South America as well as Europe. It is the intention of the fund to have heavy concentrations of ownership in relatively few investments and in addition to the contribution of the invest cash, it is the intention of the fund to offer geographical business partnerships with Asian ‘like-type’ MLM entities. The second fund is a US$200M debt/equity fund engaged in lending to the MCA Industry (merchant cash advance). This fund will offer senior debt, sub-debt and equity investments to the MCA industry here in America and in specific areas of Asia. The management of these funds will embrace additional industry experienced individuals and hopes to ‘fill a void’ of available capital for these traditionally difficult ‘to bank’ business endeavors.
Finn & Co. Merchant Banking Activities at this time.
Please review the following activities of our firm in the areas of consulting, merger and acquisition assignments and current capital fundraising activities. Finn & Co. has recently completed valuations for operating companies engaged within the Direct Sales/MLM industries and that of aerospace and defense. In addition, we are currently engaged with multiple capital raising assignments for companies within the following industries: Nutrition Products, Merchant Credit Advance (MCA), Medical services, Tobacco, Fish Farming, Oil Refinery, Lodging, Technology, Consumer Water Bottlers and the financing of Credit Card Receivables. Finn & Co., Inc. has active M&A assignments detailed later in this communication. We welcome your inquiries for valuation assignments, merger and acquisition advisory services, and capital fundraising needs.
Merger and Acquisition Assignments:
(1) Binocular Manufacturers: The Purchaser is a manufacturer of ‘high end’ binoculars, ground, airborne and maritime Electro-Optic/Infrared cameras sold primarily to the military and law enforcement communities. This acquirer is engaged in the design, development and sale of advanced optical devices to expand its domestic and international sales and is seeking manufacturers of related devices targeting the commercial, law enforcement and military markets. Asian and European-based manufacturers of binoculars and vehicle cameras are of a particular interest to this acquirer. In addition, the buyer is interested in the purchase of optics companies with strong R&D personnel — specializing in the development of binoculars, rifle scopes, and any and all related advanced EO/IR technology. This acquirer will entertain joint-ventures in place or in lieu of outright purchase or merger.
(2) Fish Processing Companies: The acquirer is an international integrated fishing enterprise engaged in catching, processing, and value-added functions in the worldwide fishing industry. This company desires to acquire a value-added fish processing company located in the USA. The desired company will be profitable at the time of purchase, selling into the retail market, restaurants, and the cruise ship sector of the marketplace.
(3) Health Care:
- (A) Seeking Acquisition Targets operating in business process outsourcing, employment, staffing, billing, surgery centers, and ancillary services to health care industry. The target platform company should have an EBITDA of between US$5M and US$20M.
- (B) Home Health & Hospice: Seeking a home health and hospice platform acquisition in any Geographical area, if the acquisition target enjoys US$3.0M in EBITDA or more AND Management team is willing to remain with the company post the acquisition is completed.
- (C) Large, publicly traded NYSE ‘for profit’ hospital ownership and management company seeking additional ‘hospital’ acquisitions and/or management contracts. While any ‘locale’ will be entertained, the States west of the Mississippi River are preferred.
(4) Multi-Level-Marketing Industry/Direct Sales: We continue to seek North American, Latin American and Asian-based operating MLM/direct selling companies for various buyers and investors. We have multiple buyers of nutritional products, cosmetics, personal and health care companies, lingerie sellers, fashion jewelry and other consumable products. The targeted acquisition or investment opportunity can range in annual sales size from US$25M to as large as multi-hundred million dollar sales companies located in the USA. We have interest in direct sales/MLM companies with annual revenues of US$10M or greater located outside the continental boundaries of the USA. These American and non-American buyers are either currently operating MLM entities or are the investment arm of non-USA based MLM operating companies, all of which have a long and “in-depth” operating knowledge of the industry and are anxious to expand their businesses into the USA, Canada, Latin America and/or Asia. The buyers or investors are prepared to purchase 100% of any entity or are prepared to partner with a seller that wishes to maintain some equity ownership and a management role. Our buyers will require at least 51% equity ownership.
(5) Nutritional Products
- (A) Manufacturers (third party): We are seeking third party nutritional products manufacturers of tablets, capsules, powders, gels, and liquids. There is a particular interest to acquire a liquids manufacturer at this time. The targeted companies should possess the appropriate industry certifications and conform to recent government-imposed manufacturing processing requirements. The targeted companies will have annual sales of US$15M or larger.
- (B) Branded Nutritional Products: Sold via retail chains, direct through mail order or online. The more ‘direct’ the sale method of delivery, the stronger the interest from our buyer.
(6) Food
- (A) Hispanic Food Suppliers: Our client is an acquirer of North American-based manufacturing and distribution companies offering Hispanic foods and related items to the wholesale or retail marketplace. The candidate will have a known brand name and an obvious presence in the Hispanic community and a recognized name or product to the Hispanic food buyer.
- (B) Restaurant Chains: A currently operating restaurant team is seeking restaurant chains with annual sales of US$50M or more and EBITDA of US$5M or more. The target chain could be an independent restaurant concept, a franchisor, or a franchisee. Minority Recaps/and or Growth Equity will also be considered.
- (C) Branded Food companies: We represent a financial buyer of ‘branded’ food companies. The targeted candidate will have annual sales sufficient to generate an EBIT of US$10M or greater. The food offering can be across a wide spectrum of food offerings and will be considered a national brand.
(7) Aerospace/Defense:
- (A) We have multiple buyers seeking aerospace and defense operating companies that will range in annual sales size from US$20M to US$250M. The ideal candidate will currently be a supplier of materials and/or parts to the aerospace after-market, manufacturer of such parts and supplies, a provider to the aerospace/defense industry and/or engaged in a business relationship within the industry that allows it to participate in any of the ongoing support and/or replacement vendor positions in this after-market sector.
- (B) In addition to our above targets, we represent a US$200M sales company, privately-owned, seeking an aerospace manufacturer. Tight tolerance machining and/ or the manufacturing of aerospace/defense parts are the two areas of interest. Turnarounds and under-performing companies will be considered. The preferred size target is an entity generating revenue of US$25M to US$250M.
- (C) We represent a buyer of “Type Certificates” of established aircraft. These airplane types are currently in operation but not in production and range from piston propeller, turbo propeller and/or jet engine type aircraft.
- (D) Security Companies: We are seeking businesses that offer services to the military or law enforcement markets associated with intelligence gathering, manufacturers of security equipment, service companies that are engaged in the guarding and maintaining of premises, sea-going security in the area of anti-piracy and other related services.
- (E) Hand Gun, Rifle and Shotgun Manufacturers: We are seeking USA and/or Western European hand-held weapons manufacturers. There is a particular interest on the part of the buyer in a manufacturer that is currently supplying its weapons to the military and/or law enforcement communities.
The financing of ‘gun’ or related companies in today’s banking marketplace is most challenging. Finn & Co. is in a position to offer short and long term credits as well as growth capital to gun industry-related operating, profitable companies. If you or your clients are in need of working capital or acquisition capital, we would be most pleased to work with you.
- (F) A&D, Medical Products or Photonics Industries: Our Client is seeking a USA-based manufacturing operation in the highly regulated aforementioned industries. Acquisition opportunities with annual sales/revenues of up to US$100M and EBIT of US$10M are the size range of our client’s investment interest.
(8) Oil and Gas
- (A) Service and Support Companies: We are seeking North American-based oil and gas industry service and support companies. The targeted prospect might offer a service for ‘on-shore’ or ‘off-shore’ drillers, maintenance of wells, work-over and stimulation of wells, transportation and security management. The targeted company could be solely domestic or international in its operations. Our clients have a decided interest in targeted acquisitions that represent what would be defined as the larger participants in the industry, in short ‘the bigger the better’.
- (B) Large Oil and Gas proven properties seeking a sale or requiring large capital investment. These properties will be domestic locales with proven oil and/or gas reserves that can be currently producing or not. The buyer/investor will entertain the outright purchase of the property or a joint venture with the current owners.
(9) Trailer Manufacturers and Distributors: We are seeking manufacturers and/or distributors of ‘open and closed’ commercial trailers that would traditionally be pulled by a pickup or SUV and used in a wide variety of activities, both for commercial and private family purposes. Our client has a present interest in acquiring additional closed box trailer manufacturers or large distributors.
(10) Water Treatment Companies: Manufacturers of water treatment equipment, new technologies for the purification of water, and companies offering deliveries of commercial water supplies. All water related opportunities entertained.
(11) Consumer Products, Consumer Durables, Retail or Retail Services: We have a buyer of companies in the aforementioned sectors (logistics, e-commerce, etc.). The minimum required EBITDA is US$3M.
(12) Risk-based Consulting Services: Our client is a platform entity engaged as a provider of risk-based consulting services including – Internal Audit, IT Audit, Information Security, Corporate Governance and Regulatory Compliance. Our client would like to grow their business with the acquisition of similar type functioning companies both domestic and international.
Family Related Operating Companies:
Tethys Corporation: a holding company that has as its investment criteria the acquisition and/or investment in the aerospace/defense/medical or medical service industries. Tethys will also entertain ‘control’ investments in security companies and/or service companies servicing the military, diplomatic or international work-place.
Blue Steel Ventures, www.bluesteelventures.com. This ‘alternative’ wholesale funder of the Merchant Cash Advance (MCA) industry is a provider of senior debt, sub-debt and equity investments to established operators of merchant cash advance providers. Blue Steel Ventures will entertain loans and investments of US$2M to US$30M or more subject to the specifics of the MCA applicant.
Board Assignments:
Members of the Finn & Co organization currently sit on Boards of Directors or finance committees of various commercial and non-profit companies and/or organizations. We particularly wish to expand our assignments of Directors and Members of the Board of commercial companies here in the USA. We are prepared to entertain appointments to private or public corporations, located anywhere in the USA. Any inquiries or suggestions that you might wish to offer would be warmly received.
We would be most pleased to hear from you concerning your interest and needs for any of our consulting services, capital raising or M&A activities listed in this communication. We look forward to hearing from you.
Sincerely yours,
Kenneth R. Finn
Chairman
Finn & Company, Inc.
Kenneth R. Finn
Finn & Co., Inc.
Merchant Bankers
5776-D Lindero Canyon Road, #382
Westlake Village, CA 91362
(818) 219-3097(818) 219-3097
krfinn2001@yahoo.com
Wyoming Location
4350 Fallen Leaf Lane
Jackson, WY 83001
(307) 203-2556(307) 203-2556
krfinn2001@yahoo.com
Banks Set Sights on Small Business Loans Under $100,000
December 13, 2017BOSTON – One of the oldest lenders in the nation had a hand in developing technology intended to enable banks to win back the small business loan market from alternative lenders.
A tech incubator at Boston-based Eastern Bank, founded in 1818, has spun off Numerated Growth Technologies Inc., a startup that developed an online platform designed to identify and contact small businesses eligible for loans of up to $100,000.
Numerated Growth, which was founded in March, developed its tech in Eastern Labs and has generated about $100 million of volume since 2015. The model, which features real-time approval, is based on the tact banks first took with pre-approved credit cards in the 1990s, Numerated CEO Dan O’Malley told deBanked.
“We’re just taking the same rules and applying them here,” he said. “And by the way, that’s what customers want.”
Numerated Growth, which employs 26 workers, came out of stealth mode in May with a $9 million seed funding.
O’Malley, Eastern Bank’s former chief digital officer, said Numerated is now selling the platform to other banks but declined to disclose the specific number. The cost per bank depends on the number of loans being processed, he said.
The average business loan is $40,000 and they can be approved and funded within five minutes of the business completing the online agreement.
Numerated Growth’s real-time platform could be considered loan origination software on steroids. But such software essentially enables a bank to enter an applicant’s information into a digitized system to assist in the approval process. Alternative lending startups have been improving on that model for several years. Competitors in that space include nCino Inc., Decision Lender (Teledata Communications), PerfectLO and defi solutions, LoanCirrus.
But loan origination software is very crowded and startups are constantly launching to reduce the time it takes to approve a loan without increasing the number of defaults.
“Banks need to do things that are counter to each other,” David O’Connell, a senior analyst for the Boston-based Aite Group LLC, told deBanked. “There’s a need to do a fast money transaction, but doing it diligently without making any bad loans.”
Combining the marketing and approval process is a credible approach because it keeps them on the same page in terms of targeting the most likely prospects. As a result, the number of “false positives” is lower, O’Connell said.
Instead of developing their own small business loan platforms, some banks are referring borderline borrowers to alternative lenders. But that can cause problems for the bank if the customer service doesn’t measure up to the bank’s standards and customers associate shoddy service with the entity that referred them, O’Connell said.
The best option is to develop in house. “Banks need to go as deep into the alternative lending market as they can with their own infrastructure and brand,” he said.
Because of its low value compared with other types of bank business, small business loan origination is one of the last remaining areas of banking to be targeted with innovation. “There’s not a huge price point,” said Kevin Tweddle, executive vice president for innovation and technology at the Independent Community Bankers of America.
Loan origination startups are trying to make such deals worth the bother. Yet the best tools tend to be developed by banking industry people because they understand the regulatory restrictions and integration factors, he said.
The goal of loan tech tools is two-pronged: make the approval process more efficient and make it convenient for borrowers. And so far, no software developer has risen above all the others to capture majority market share, Tweddle told deBanked.
“It’s just too early; there’s too many of them still coming out,” he said. “We’re in the early innings of a nine-inning game.”
Market metrics
Banks can’t afford to ignore the demand for alternative lending tools.
In May, the University of Chicago’s Polsky Center for Entrepreneurship and Innovation reported that the alternative finance market slowed but continued to grow during 2016 in the United States, Canada, Latin America and the Caribbean. The market’s value reached $35.2 billion — a 23 percent increase compared with 2015.
More than 200,000 businesses used online alternative funding sources during 2016. In the United States, marketplace and peer-to-peer consumer lending accounted for the largest share of market volume with $21 billion in the U.S. last year, a 17 percent increase. Balance sheet business lending was the second-largest model in the U.S. with $6 billion originated, the report found.
In Latin America and the Caribbean, marketplace and peer-to-peer business lending was the largest alternative finance segment with $188.5 million last year, a 239 percent rise versus 2015.
The same principles fueling the car-sharing business are being applied to peer-to-peer lending. As a result, adoption is growing as people view the credibility of peer lenders on an equal level of traditional experts, said David Wong, senior director of the innovation and acceleration lab at the Chicago-based CME Group Inc.
“Whether P2P markets reach or exceed the size of the incumbent market platforms (ala Uber and Airbnb), or not, they are driving rapid innovation and new dimensions of competition across industries,” he said.
Early adoption
Industry observers agree that small business loans haven’t seen enough innovation from the banking industry because of its size compared with commercial lending and real estate deals. As a result, it has a long way to go to shorten the time it takes for approvals and improving the customer experience, O’Connell said.
“Banks that fail to embrace automation for their commercial lending lines of business will lose the valuable relationships, loan outstandings, and fee-based income abundant in the commercial and industrial market,” he said.
After the 2009 global financial crisis, bank regulations tightened and data sets were required to be available and analytics-ready, providing another compelling need for commercial loan origination systems, O’Connell said.
No dominant players have emerged because neither traditional banks nor alternative lenders have figured out the best approach that satisfies both the lender and the customer, O’Connell said.
“Businesses don’t want money right away but they do want a quick and easy process,” he said. “My data tells me that in addition to providing underwhelming turnaround time, no particular lender has an edge over another. Nobody has it right.”
At Numerated Growth, O’Malley said the “initial wake-up call” signaling that a change was needed came in 2013 when Eastern Bank noticed solid small business customers paying off loans from alternative lenders such as On Deck Capital Inc. and LendingClub Corp. The pattern suggested that there was an unmet customer need.
Numerated Growth’s platform is designed to enable banks to proactively aggregate the data they need to identify prospective borrowers instead of requiring business owners to collect the data and present it to banks, O’Malley said.
“We’re making the banks do the work,” he said. “The same process that transformed the credit card industry will transform the financial products industry.”
deBanked Connect: Miami — SOLD OUT
December 12, 2017deBanked’s cocktail networking event on January 25th in South Beach is now SOLD OUT!
If you missed out on your chance to RSVP, you can still register for our much bigger, better, and more comprehensive event on May 14, 2018 in Brooklyn; Broker Fair 2018.
With 20 sponsors already signed on, Broker Fair is sizing up to be the biggest event in the MCA and small business lending industry of the entire year! During this exclusive full-day conference, brokers, lenders, funders and service providers alike can expect education, inspiration and opportunities to connect and grow their business. You can view our preliminary agenda here.
DON’T GET LEFT OUT. REGISTER FOR BROKER FAIR 2018 TODAY!. Got questions? E-mail: info@brokerfair.org
Judge Okays Leave to Add Additional Defendants in Kalamata Capital / Biz2Credit Lawsuit
December 12, 2017A three-year-old lawsuit pending in the New York Supreme Court has experienced a flurry of motion practice, according to the docket. The latest order issued by the Honorable Kelly O’Neill Levy granted Kalamata Capital leave to amend the complaint to include both Direct Lending Investments, LLC and Direct Lending Income Fund LP as defendants.
A key claim in this case is the allegation of tortious interference. A previous legal brief on the matter can be read here.
The case can be found in the New York Supreme Court under index number 653749/2014.
Closing Loans and MCAs — From the Bedroom to the Office
December 8, 2017
The merchant cash advance industry has gone mainstream so quickly that it has become more difficult to identify potential customers.
Market saturation and industry consolidation have caused the cost of sales leads to increase sharply. Yet a New York business loan broker is finding success by applying lead generation and online marketing strategies to merchant cash advance, or MCA, while expanding the number of services he offers prospects. Funding is just the foot in the door.
Philip Smith, founder and CEO of PJP Marketing Inc., told deBanked the MCA industry’s acceptance has made it more difficult for sales lead generators to produce profits. But expanding the number of services that independent sales organizations (ISOs) offer can offset the contraction. Smith’s life as a stay-at-home-dad, was recently featured in Innovate Long Island, a regional newspaper.
An ISO can’t just be a broker anymore. It needs to change, identify new revenue streams to excel. In doing so, a lead generator transforms itself into a business consultant that prospective customers turn to for additional services they often didn’t even know existed, Smith said.
For example, business loans and MCA is Smith’s largest business generator. But his most popular add-on services with such sales leads are credit repair and credit monitoring.
“The market is relatively easy,” Smith said. “The hard part is monetizing. The ISOs are going out of business because they refuse to monetize the other, non-cash advance leads.”
Smith, armed with a degree in business/e-business from the University of Phoenix, is also an advocate for entrepreneurs who want to work from home. It’s a viable model for lead generators because low overhead costs provide entrepreneurs an opportunity to capitalize on aggressive business strategies.
As such, Smith markets his pajama-centric business model with IWorkInMyJams.com. But he acknowledges that working from home presents its own challenges. Entrepreneurs need to be extra focused and tough to distract. No watching Dr. Phil during work hours.
Since they don’t work with more experienced managers, work-from-home entrepreneurs also need to seek their own sources of business advice and strategies. They deal with the reality that some lenders may deem them too small to do business. “Not everyone will work with you,” he said.
Working from home also requires a entrepreneur to set office hour limits and parameters to prevent burnout, Smith said.
“Do you know when to turn it off?” he asked. “That’s my problem. I’m up until 1 o’clock in the morning because I can.”
Smith now brokers sales leads in several verticals such as credit repair, tax relief, mortgage and solar energy. He claims revenue of $1.6 million last year and plans to reach $2 million this year.
When he was just 23, Smith launched his first company, We Link You Internet Services, a business that evolved into a web hosting concern.
He later worked for New York-based Canrock Ventures to launch a search-engine optimization platform called SEOPledge that was acquired in 2013. The following year, he founded what is now called PJP Marketing to broker leads amid the rapidly rising MCA space using the digital marketing skills he’d learned from the previous positions.
In October, deBanked reported that several factors have contributed to several changes in the MCA industry, including consolidation, making it more difficult for alternative-funding business lead generators.
ISOs and brokers have gotten pickier about the types of leads they’ll accept as MCA evolves from a niche business to one that’s more commonplace. Also, a stricter application of the Telephone Consumer Protection Act (TCPA) has chilled soliciting and hamstrung the ability to connect with business owners who are prospective clients.
Last year’s LendingClub Corp. scandal ousted several senior managers, including the company’s then-CEO. Last summer, Bizfi laid off workers and sold the servicing rights to its $250 million loan portfolio to rival Credibly.
The result has been a consolidation of the alternative funding business.
“There are still roughly 75,000 business owners every week who meet the criteria for an [MCA],” California-based Lenders Marketing partner Justin Benton told deBanked. “Now instead of there being 5,000 options in the space, there are 2,000, so those 2,000 are gobbling it all up.”
David Ross, a 12-year veteran of the MCA industry and owner of Pro Leads NYC, said MCAs higher profile has been a game changer for lead generators.
“MCA is beyond saturation,” he said. “All of the merchants know about it and understand it. Now, [funders] want exclusive leads.”
Working from home is a possible option for ISOs that are wizards at online marketing. But it’s less attractive for the conventional lead generator who relies on backing from a marketing team, Ross said.
“Realistically, if you’re a broker and want to make money you have to be on someone’s floor,” he said. “You need marketing.”
Last year, a Bryant Park Capital report estimated the MCA market to be worth about $12.8 billion. It’s projected to top $15 billion this year. Smith expects the continued strong demand for MCAs regardless of all the industry consolidation and costlier lead generation.
“I think they will always be fine because they can live through the storm,” he said. “It’s now a mainstream service so more people know about it.”
Smith told Donna Drake during an appearance on the Live It Up television program that going it alone as entrepreneur takes a “do-not-quit attitude” that has served him well so far.
“Any business is pretty much a numbers game,” he said. “I live and breathe it every single day.”
Originations Since Inception
December 8, 2017After several company announcements recently, we’ve compiled a milestone chart to plot where they rank. Originations may indicate business loans or MCAs funded on balance sheet, brokered, or placed through a marketplace. These rankings are a work in progress. This chart may not include companies for which public data is not available. If you’d like your figures to be listed here, e-mail sean@debanked.com.
| Company | Origination Volume Since Inception | Year Founded |
| OnDeck | $8 Billion | 2007 |
| Kabbage | $4 Billion | 2009 |
| Yellowstone Capital | $2 Billion | 2009 |
| BFS Capital | $1.7 Billion | 2002 |
| Funding Circle | $1 Billion (US only) | 2010 |
| IOU Financial | $500 Million | |
| Lending Club | $500 Million (SMB loans only) | 2006 |
| SmartBiz Loans | > $500 Million (SBA loans) | 2009 |
| Lendio | > $500 Milllion | |
| Forward Financing | $275 Million | 2012 |
| Blue Bridge Financial | $200 Million | 2009 |
Yellowstone Capital Surpasses $2 Billion in Originations
December 8, 2017Jersey City-based Yellowstone Capital has surpassed $2 billion in originated deals. The milestone was announced Thursday evening at the company’s year-end holiday soirée.
The company was founded in 2009.
