Archive for 2017
Bizfi Layoff Tally
July 17, 2017According to labor records, Bizfi gave a 90-day layoff notice to 74 employees on May 15th. Less than a month later on June 12th, the company gave notice to another 43 employee, bringing the total to 117.
Those layoffs are scheduled to take place on August 13th and September 10th accordingly.
Beneficiary of NAB/TMS Deal Could Be Rapid Capital Funding
July 14, 2017
Square is not alone in offering working capital to their payment processing customers. Troy,MI-based North American Bancard (NAB) has been offering their customers merchant cash advances through a Troy-based subsidiary known as Capital For Merchants (CFM) for more than 10 years. And after seeing the growth of that segment, NAB went out and acquired Miami,FL-based Rapid Capital Funding (RCF) in late 2014.
Now, NAB has become even bigger by acquiring Total Merchant Services to make them the seventh largest payment processor in North America. The new combined company, which will operate under the NAB name, will rival Square in annual processing volume.
One beneficiary of the deal could be RCF, who merged with CFM earlier this year. RCF has historically had a sizable direct sales operation that facilitated financing for all merchants, regardless of whether or not they processed payments with NAB. That continued until recently when they reportedly pivoted towards focusing more of their new origination efforts on NAB’s (and now combined with TMS’s) 350,000+ merchants.
RCF was founded nearly 10 years ago. They acquired Anaheim,CA-based rival American Finance Solutions in the fall of 2014, right before joining the NAB family.
Need Leads This Summer?
July 13, 2017
I am often asked for referrals on things like lead sources. Fortunately our website already has quick cheat sheets on who to call for your everyday merchant cash advance and business lending needs. Below is a link to a few of them:
Accountants and auditors familiar with the industry
Industry attorneys – it’s pretty common for a firm to have an area of focus so they’re already categorized
Conferences we’re attending in 2017
Past digital issues of our magazine
I hope you find this helpful!
The CFPB is Asking The Wrong Questions, Bank President Says
July 13, 2017David Ludwig, the Bismarck branch president of Security First Bank of North Dakota, responded to the CFPB’s small business lending RFI earlier this week. In his written comment, he points out the futility of examining race, gender and ethnicity to judge how a lender is approving business loans. These data points are what the CFPB is hoping to gather pursuant to Section 1071 of Dodd-Frank to examine potential discrimination.
“The bureau appears to only want to know the applicants’ income, sex, race, amount of request and if the loan was approved or not,” he wrote. “Some people have less education, less ability, less equity and not so good credit history. These are not sex or race issues.”
Ludwig says there is no place for discrimination in lending and that if the CFPB was really interested in attributes about business owners that may be impacting their approvals, they should be asking about the owners’ work history, education, equity in the business, loan purpose and other related questions.
Fintech Remains Loyal to Prosper & Suber
July 10, 2017
When deBanked reached out to fintech market participants for comment on Ron Suber’s sudden departure as Prosper’s president, the responses were the same — ‘anything for Ron.’ Dubbed the Godfather of fintech, Suber might deserve superhero status given the recapitalization that he and the Vermuts led half a decade ago to save Prosper Marketplace. That type of rescue inspires the kind of loyalty that investors and other fintech participants are displaying not only for Suber but also the Prosper brand.
“Ron is an incredible business partner. His word is always good. He doesn’t overpromise, and he always follows through. We were honored to work with a guy like that,” said Matt O’Malley, co-founder and president of Looking Glass Investments, which has been investing on the Prosper platform since 2008.
Perhaps he has never seen him overpromise but in recent weeks he and many other investors on the Prosper platform did observe an overstatement of returns. O’Malley calls it a forgivable mistake.
“In my view, it is our responsibility to track our returns. Prosper provides an extremely robust data set. We have the ability to calculate our returns daily,” said O’Malley, pointing to a nascent fintech market that is still evolving. “This asset class is new. If you compare it to investing in stocks and bonds, it’s in its infancy. When preparing returns, it’s very challenging to determine what they are,” he said.
Looking Glass has been investing in individual loans on the Prosper platform since before Suber’s time and has watched as the former Wells Fargo executive has transformed the peer-to-peer lender to welcome institutional investors.
“He didn’t have to let us stay on the platform. They could have chosen to replace the little guy. But that isn’t how he does business. He knew the investment banks and [other] banks would get involved, however he knew there was enough room for everyone,” said O’Malley.
That day is here, evidenced by Prosper’s previously announced deal with a consortium of institutional investors to purchase $5 billion worth of loans via the Prosper platform over the next couple of years.
FT Partners was the lead advisor on that deal.
“When they needed capital they could have chosen anybody to help. We were excited to be the chosen one to help them on the deal. It was one of fintech’s largest deals and certainly the largest of its kind,” said Steve McLaughlin, founder of FT Partners.
McLaughlin went on to explain the unique circumstances surrounding the transaction, including a lack of diversification tied to Prosper’s capital sources, which he added was a learning experience not only for the peer-to-peer lender but for all of fintech.
“They were focused on getting capital from hedge funds in a steady stream. When the capital markets had a blip, lots of that capital backed away. It was an unprecedented thing to go out and get a $5 billion forward agreement from a series of investors. “There was nothing cookie cutter about it,” said McLaughlin.
Since then the rest of fintech seems to be catching on.
“FT Partners is getting a lot of attention and a lot of calls for all of the other activity we are doing in the space as well. We raised capital for Prosper and a bunch of other companies, including Earnest, GreenSky, Upstart, Kabbage and others. We get a lot of calls, and we’re doing a lot of deals in the space. It’s a lot of fun,” McLaughlin said.
Much of the success of the multi-billion dollar Prosper deal was thanks to Suber.
“A lot of people are very familiar with Ron and the Prosper story and view Prosper as a high-end institution that while having some issues on financing had a very big and long-term future. Lots of Ron’s connections from before came into play in the round,” said McLaughlin.
Now that Suber is out of the picture in an official capacity, investors have every right to be disappointed. But as McLaughlin pointed out, Suber remains a big shareholder in Prosper and the peer-to-peer lender’s greatest supporter, two things that the FT Partners founder does not expect to change.
“This is not a major blow for Prosper. They maintain Ron as a friend of the firm and as an advisor. He has great friends and colleagues at Prosper. He is not going to work for anybody else. He won’t be doing anything with any other lending companies, I don’t think. He may be able to do more good from the outside than the inside at Prosper. I think Ron will always be part of the Prosper family,” McLaughlin said.
Why Now?
If things were going so well for Suber ushering Prosper into its chapter that included expanding the role of institutions on the platform then why is he leaving now? While Suber himself was not available to answer that question, the answer seems to be that it is personal. The fintech community knows Suber for his role in advancing this new asset class but what people might not know is that he is also a husband and a father.
“I think he just feels like this is more of a personal shift,” McLaughlin said.
O’Malley’s impression was similar. Upon joining the fintech startup, Suber made it a point to get to know the Looking Glass team.
“Ron invited us to breakfast. We did this three times. I remember meeting him and thinking this guy is exactly what we need – extra bright, charismatic and he talked lovingly about his children and his wife. He even joked that marriage is like yoga – it’s harder than it looks,” O’Malley said. “My guess is they are going to spend some time together as a family. And he is going to come back bigger and better than ever.”
Meanwhile Both O’Malley and McLaughlin were familiar with Prosper before Suber came on board, and both will remain engaged with Prosper even after Suber’s departure.
“They’re terrific and we have a great relationship. If they do something, we’re definitely the banker for it,” said McLaughlin.
O’Malley’s commitment is steadfast “We will remain loyal,” he said.
Daniel Gorfine Moves On From OnDeck to CFTC
July 10, 2017Daniel Gorfine has moved on from OnDeck, according to a public announcement made by his new employer, the US Commodity Future Trading Commission (CFTC). Gorfine served as OnDeck’s VP of External Affairs and Associate General Counsel for a little over 2 and a half years.
His new job, an appointment made by Acting CFTC Chairman J. Christopher Giancarlo, will be Director of LabCFTC and Chief Innovation Officer.
According to the announcement, “Gorfine will be responsible for coordinating closely with international regulatory bodies, other US regulators, and Capitol Hill to discuss best practices around implementing digital and agile regulatory frameworks and approaches for the CFTC.”
His background in fintech is expected to help the CFTC accomplish its goal of promoting fintech innovation and fair competition.
CFPB’s New Arbitration Rule Does Not Apply to Business Loans
July 10, 2017The CFPB’s new rule to regulate arbitration clauses in consumer finance contracts does not apply to business loans, according to the agency’s fine print. Page 403 of 775 (that’s how long the rule is) includes a footnote that says:
As is explained in proposed comment 3(a)(1)(i)-1, Regulation B defines “credit” by reference to persons who meet the definition of “creditor” in Regulation B. Persons who do not regularly participate in credit decisions in the ordinary course of business, for example, are not creditors as defined by Regulation B. 12 CFR 1002.2(l). In addition, by proposing to cover only credit that is “consumer credit” under Regulation B, the Bureau was making clear that the proposal would not have applied to business loans.
Watch the video on what the CFPB’s rule is about below:
CFPB Pushes Back Small Business Lending Comment Deadline
July 7, 2017The CFPB has pushed back its small business lending comment deadline from July 14th to September 14th. The Request for Information is the first step of its initiative to monitor business loans to women and minorities, as directed by Section 1071 of Dodd-Frank.
Only 15 comments have been submitted so far, a number likely too small to even be helpful to the CFPB. Nonetheless, the comments have been overwhelmingly negative with respondents mostly asking to be exempt from the law or to repeal it.
The Director of Business Lending at a credit union for example, said that the law “puts our staff in the unenviable and unfair position of making an assessment of a borrower’s ethnicity when this information is not provided as if often the choice.” Between that and the cost burden of compliance, he also said his credit union is seriously considering the discontinuance of all small business lending going forward.
The total and complete discontinuance of small business lending is probably not what legislators wanted when they wrote the law.
Prior to that, the Puerto Rico Bankers Association questioned the value of spending big bucks to collect data on minorities when 99% of Puerto Rico’s residents are legally classified as minorities. “The potential complexity and cost of compliance with the minority-owned businesses data collection and reporting requirements of Section 704(B), will impose on our banks an unintended and unreasonable burden,” they said in their public comment.
