Archive for 2018
Finitive Appoints Neil Wolfson to Board
December 10, 2018
Finitive announced today that it has appointed Neil Wolfson to its Board of Directors. Wolfson also serves on the Board of Directors at OnDeck.
“Finitive has established an innovative platform to provide institutional investors with direct access to alternative lending investments,” said Wolfson. “Finitive’s platform brings further transparency to this asset class.”
According to an April 2018 deBanked story, Finitive was founded in August 2017 and has two kinds of clients: institutional investors and alternative lending companies. Back in April, the company had only four alternative lender clients. Today, they have eight.
“We are very selective [with our lending clients],” Finitive founder and Executive Chairman told deBanked. “We are not a list service.”
Wolfson spent the last decade as President and Chief Investment Officer of SF Capital Group, a private investment group for high net worth families. There, he invested in over 30 direct debt and equity investments in emerging technology companies with a focus on FinTech companies.
Prior to this, Wolfson spent five years as Chief Investment Officer and President of Wilmington Trust Investment Management, a $40 billion investment management firm, and before that, he was the National Partner in charge of KPMG’s Investment Consulting Practice, representing over $100 billion of assets.
“Neil’s experience investing in global technology companies, coupled with a deep understanding of alternative lending markets, makes him an ideal fit for Finitive’s board,” said Barlow.
Finitive is based in New York and has more than 10 employees.
Trump Administration Criticizes Postal Banking Concept
December 9, 2018
Earlier this week, a Trump administration report diminished the idea of having the United States Postal Service take on the role of a bank.
“Given the USPS’s narrow expertise and capital limitations, expanding into sectors where the USPS does not have a comparative advantage or where balance sheet risk might arise, such as postal banking, should not be pursued,” the report states.
This argument – that the USPS has no experience in banking – is the same that many banks presented when the idea was introduced in a 2015 report from the Office of the Inspector General. According to a June 2017 story in Tearsheet, a financial publication, those in favor of the idea of postal banking think that it could be a way for millions of unbanked or underbanked Americans to gain access to financial services. It could also create a new revenue stream for the perennially unprofitable USPS. (The USPS reported a net loss of $3.9 billion in fiscal year 2018, its 12th straight year of net losses.)
To those opposed to the idea, this would place a burden on an already struggling system, and would be unprofitable. While postal banking has the support of a number of high-ranking democrats, including Senator Elizabeth Warren of Massachusetts and Senator Kirsten Gillibrand of New York, postal bank has a surprising opponent: the National Council of Postal Credit Union (NCPCU).
According to a story in the Credit Union Journal, NCPCU board chair and CEO of Signature Federal Credit Union Becca Cuddy said, “Any new competition in the financial field is a threat to postal credit unions.” She suggested that a better strategy might be for third parties – possibly including banks – to partner with postal credit unions or the NCPCU “rather than try to reinvent the wheel.”
It is worth noting that postal banking did exist in the U.S. from 1911 to 1966. And according to the Pew Charitable Trusts, there are currently over 1.6 billion postal bank accounts, many in developed economies such as Japan, Brazil, France and Switzerland.
Small Business Optimism Is Up for 2019
December 7, 2018
American small businesses plan to finish 2018 with a bang, according to the fall 2018 Bank of America Business Advantage Small Business Owner Report. And they’re optimistic about the year ahead.
In the report, based on a semiannual survey of 1,000 small business owners across the country, 80% of entrepreneurs say they are confident that their 2018 year-end revenue will exceed that of 2017. And several business growth indicators are also up year-over-year, such as revenue expectations and expansion and hiring plans.
Projecting into 2019, 57% of business owners believe their revenue will increase (compared to 51% in fall 2017), 67% plan to expand (compared to 59% in fall 2017) and 27% plan to hire, compared to 16% in fall 2017. Significantly, 15% intend to apply for a loan, versus 8% in fall 2017.
Separately, according to the latest quarterly Wells Fargo/Gallup Small Business Index, optimism among small business owners increased substantially over the last quarter. The quarter, according to the index, received a score of 129, which is 11 points higher than last quarter’s score of 118, and apparently the highest in the survey’s 15 year history.
Small business owner survey respondents said positive business financials are largely the cause for their optimism. Eighty percent of respondents rated their financial situation as “very good” or “somewhat good,” while 84% said they expect their financial situation to be “very good” or “somewhat good” in the coming year. A record 55% of business owners reported increases in revenue, with 62% anticipating revenue increases in 2019. In addition, 74% said they had good cash flow in the past 12 months, and 78% said they expect their businesses to have good cash flow over the next year.
Small business owners are not without challenges. Hiring and staff retention issues were among the top concerns for small business owners, according to both reports. According to the Bank of America report, in 2018, turnover affected 24% of all small businesses, with 11% losing 10% or more of their workforce. For business owners who sought to hire new employees, 50% said the tightening labor market had a direct impact on their ability to find and hire qualified candidates. According to the Wells Fargo report, 18% of survey respondents said hiring and retaining staff was their top challenge.
SBFA Announces Support for The Small Business Fairness Act
December 7, 2018The Small Business Finance Association (SBFA) today announced support for S.3717, The Small Business Fairness Act introduced by Senator Sherrod Brown (D-OH) and Senator Marco Rubio (R-FL). The bill would provide the Federal Trade Commission more clarity to protect small business owners from being forced to sign a “confession of judgment” before obtaining financing. A “confession of judgment” requires a small business owner to waive certain rights in court before obtaining financing and, in some cases, allows the lender to seize the owner’s assets if there is a default.
“This is a bad practice that must be eliminated,” said Jeremy Brown, chairman of RapidAdvance and SBFA. “Unfortunately, certain small business financing providers are misusing “confessions of judgment.” We firmly support any legislation that will provide small businesses protection from the misuse of this practice. If a small business we fund runs into trouble, we believe they should be treated fairly and deserve our commitment to help resolve the issue in a manner that is professional and respectful.”
SBFA is a non-profit advocacy organization dedicated to ensuring Main Street small businesses have access to the capital they need to grow and strengthen the economy. SBFA’s mission is to educate policymakers and regulators about the technology-driven platforms emerging in the small business lending market and how our member companies bridge the small business capital gap using innovative financing solutions. The organization is supported by companies committed to promoting small business owners’ access to fair and responsible capital.
“Our core values are centered on providing fair and responsible financing for small businesses,” said Steve Denis, executive director of SBFA. “Small business owners are the backbone of the American economy and we should empower them with as many tools as possible to grow and create jobs. We look forward to working with Senator Brown and Rubio to eliminate the abuse of the “confession of judgment” and expand the role of responsible lenders nationally.”
In 2016, SBFA released best practices for the alternative finance industry to help better protect small businesses as they seek funding online. SBFA’s best practices are centered on four principles—transparency, responsibility, fairness, and security. As the industry’s leading trade association, the best practices have been agreed to by every member company and exist to give small business owners confidence in their financing decisions. These principles provide them a better understanding of what to expect from responsible alternative finance companies, which includes fully disclosing all terms and costs and ensuring the products SBFA companies offer are in the best interest of the small business customer.
The Small Business Finance Association (SBFA) is a not-for-profit 501(c)6 trade association representing organizations that provide alternative financing solutions to small businesses.
Factoring Still Slow to Modernize, Say Industry Leaders
December 6, 2018
“There were no factoring companies online when we started [in 2013],” said Eyal Lifshitz, CEO of BlueVine.
That may be true. Lifshitz has become a thought leader in the factoring world, known for creating a company, BlueVine, that introduced an online-only factoring product. When deBanked asked Lifshitz yesterday if he saw other factoring companies embracing technology, he was reluctant to speak about competitors. But he said, “We’re not seeing as much movement from traditional factoring companies…there have been some attempts of traditional factoring companies to move in [the technology] direction, but we haven’t seen something major happening.”
A leading U.S. factor attorney who asked not to be named, echoed this sentiment, albeit more forcefully.
“It’s painful how little change there has been among factors,” the lawyer said. “They have been comfortable for far too long.”
When asked if BlueVine is the only company in the factoring space that is technologically advanced, he said there is one other that comes to mind, and that is LSQ, based in Maitland, FL.
“They’ve always been ahead of the curve and early adopters of technology,” he said of LSQ. “They’re just more quiet about it than BlueVine.”
BlueVine very much identifies itself as a technology company first, according to Lifshitz.
“We started on day 1 as being 100 percent online, so it’s a different approach. A different DNA,” Lifshitz said.
While BlueVine started in 2013 offering only a factoring product, the company later introduced a line of credit product which now accounts for a little more than half of its business. Lifshitz noted that the flexibility of the line of credit product is very appealing to many of their clients.
With factoring, the customer can only get as much money as the customer has invoices for. But with the line of credit, the customer can get funds – up to $250,000 – advanced to them as they need it. So, increasingly, it’s the companies looking for amounts greater that $250,000 that will opt for BlueVine’s factoring product, Lifshitz said.
At the Money 20/20 conference at the end of October of this year, Lifshitz said that BlueVine will launch a third product in 2019, and possibly a fourth as well.
“We are focused on products that are hard to do,” Lifshitz said. “The magic is how to take a product that is complex to deliver from an underwriting standpoint, from an infrastructure standpoint, and from an automation standpoint, and deliver it to our small business customer in an [easy] way.”
Senate Bill Introduced to Ban Confession of Judgments Nationwide
December 6, 2018
Senators Sherrod Brown and Marco Rubio have called for a nationwide ban on Confessions of Judgment in response to the Bloomberg Businessweek series published last month. The bill, which would amend the Truth in Lending Act, may be named the Small Business Lending Fairness Act.
You can download the bill here
Though Businessweek has been successful in pressuring regulators to conduct inquiries into several merchant cash advance companies and the New York City marshals, authors Zachary Mider and Zeke Faux have remained notably silent on the gaping holes in their narrative. Questions posed to each reporter have yet to receive any responses.
deBanked researched the accuracy of Businessweek’s findings only to determine that two of the purported victim’s stories were not credible. In one case, a business owner that was said to have been “wiped out,” was bragging about his new luxury race car on facebook while public records revealed he was still paying himself six figures a year from the allegedly defunct company that had more than $700,000 running through its bank accounts. In another case, a victim that claimed to be selling off household furniture to buy food after a run-in with a predatory lender, turned out to be a multimillionaire TV station owner.
OnDeck Expands Canadian Business with Merger
December 5, 2018
OnDeck announced today that it has entered into an agreement to merge its Toronto-based Canadian business with Evolocity Financial Group (Evolocity), an online small business funder headquartered in Montreal. OnDeck will have majority ownership of Evolocity and the combined entity will be rebranded as OnDeck Canada.
“The combination of OnDeck’s Canadian operations with Evolocity will create a leading online platform for small business financing throughout Canada and represents a significant investment in the Canadian market,” said Noah Breslow, Chairman and CEO of OnDeck. “There is an enormous need among underserved Canadian small businesses to access capital quickly and easily online.“
According to the announcement, “the transaction will combine the direct sales, operations, and local underwriting expertise of the Evolocity team with the marketing and business development capabilities of the OnDeck team.”
As part of the merger, Neil Wechsler, who is the CEO of Evolocity, will become the CEO of OnDeck Canada. And the management team will include Evolocity co-founders David Souaid as Chief Revenue Officer and Harley Greenspoon as Chief Operating Officer. OnDeck Canada will be governed by a Board of Directors chaired by Breslow and composed of existing OnDeck and Evolocity management.
Currently, OnDeck offers a variety of loans up to $500,000 and lines of credit up to $100,000. Evolocity offers small business loans and an MCA product, from $10,000 to $300,000. deBanked inquired with OnDeck to see if OnDeck Canada will retain the MCA product from Evolocity, but has yet to hear back. Since OnDeck entered the Canadian market in 2014, it has originated over CAD $200 million in online small business loans there. Evolocity has provided over CAD $240 million of financing to Canadian small businesses since 2010.
Investment in online small business lending in Canada is growing. IOU Financial, a Montreal-based small business funder that primarily funds American small businesses, told deBanked last month that they made a concerted marketing effort in the third quarter to reach Canadian small business owners. Meanwhile, Thinking Capital, a Canadian online small business funder, announced in July the launch of BillMarket, a service that provides Canadian small businesses with a credit grade (A through E), making it easier for them to get funded.
“BillMarket represents a cash flow revolution for the Canadian small business market,” said Jeff Mitelman, CEO of Thinking Capital, which has roughly 200 employees between its Toronto and Montreal offices.
According to a recent Canadian government report cited by OnDeck in its announcement today, there are 1.14 million small businesses in Canada that represent 97.9 percent of all businesses in the country. Also, small businesses employed over 8.2 million people in Canada, or 70.5 percent of the total private workforce.
Evan Marmott, founder of Canadian small business funder, Canacap, told deBanked earlier this year that unlike the saturated small business market in the U.S., the Canadian small business market is still ripe for growth. Not only this, he said that while the market is smaller in Canada, the default rates are generally lower and he found that Canadian merchants do less shopping around. He also said he has seen less fraud in Canada than in the U.S.
“For brokers, while commissions are lower, you could actually speak to business owners who are not being bombarded with calls [as they are in the U.S.] and have a much higher closing rate,” Marmott said.
Evolocity has 70 full-time employees and offices in Montreal, Vancouver and Marham, in the Toronto area. OnDeck has funded over $10 billion to small businesses and became a public company (NYSE: ONDK) in 2014. OnDeck is headquartered in New York.
“We are excited to join forces with OnDeck…to enhance our best in class digital financing solutions to small businesses across Canada,” said Wechsler, Evolocity CEO. “Additionally, this transaction will augment our data science and analytics capabilities to help deliver an unparalleled merchant experience.”
Signature Bank Partners with trueDigital
December 4, 2018
Today, Signature Bank unveiled a proprietary digital payments platform for its commercial clients, according to a statement released by the bank. The platform, called Signet, is designed to allow Signature Bank’s commercial clients to make real-time payments in U.S. dollars, every hour of the year.
“The ability to transmit funds between approved, fully vetted commercial clients of the bank at all times is very valuable, especially in light of the increasing speed and frequency at which they conduct their business,” said Joseph J. DePaolo, President and Chief Executive Officer at Signature Bank. “Signature Bank has made a commitment to invest in its technology infrastructure, and the Signet Platform is indicative of this investment,”
This commitment by a bank to embrace technology is consistent with other banks of late. Chase and PNC have partnered with OnDeck’s ODX to streamline their online lending processes and other banks have partnered with fintechs recently as well.
“The partnership between trueDigital and Signature Bank will quickly prove to be extremely beneficial and revolutionary for clients globally as they will now be afforded the opportunity to make instantaneous USD payments to one another in real-time at no cost per transaction,” said Sunil Hirani, Founder of trueDigital.
The new Signet platform uses blockchain technology and can be used to make payments across a wide variety of industries, initially focusing on power, shipping, real estate, auto and digital assets where costs, delays, operational risks and counter-party risks are significant, according to a trueDigital statement.
The platform is not designed for a very small company as transactions made on the Signet platform require a minimum account balance of $250,000. Also, the companies exchanging money must both have an account at Signature Bank.
The New York State Department of Financial Services has approved the Signet platform and deposits held on the platform are eligible for FDIC insurance, up to the legal insurable amounts defined by the FDIC.
Signature Bank is a New York-based full-service commercial bank with 30 private client offices throughout the New York metropolitan area. This year, the bank opened a full-service private client banking office in San Francisco. Signature Bank’s specialty finance subsidiary, Signature Financial, LLC, provides equipment finance and leasing. trueDigital is a New York-based fintech company that provides solutions to financial markets by utilizing blockchain-based technologies.
