Archive for 2018
IOU Partners with FINSYNC to Fuel Growth
November 27, 2018
Montreal-based IOU Financial announced yesterday that it is partnering with FINSYNC in an effort to improve their customers’ experience and broaden access to new customers. FINSYNC is a cash flow management software and platform that allows businesses to collect income, pay bills, process payroll, automate accounting, and access financing through FINSYNC’s Lending Network.
“FINSYNC’s innovative cash flow management solution helps business owners better assess the opportunity to access working capital based on past and projected cash flow,” said Christophe Choquart, VP of Strategic Partnerships at IOU Financial. “This is a totally new way to [support] growing businesses.”
FINSYNC provides almost all financing-related services except for the actual financing. According to its website, FINSYNC has partnerships with a number of other alternative funders, including OnDeck, Breakout Capital, BFS Capital and The Business Backer.
“This partnership greatly enhances the convenience of applying for working capital,” said Robert Gloer, President and COO of IOU Financial. “It gives merchants insight into what a cash infusion would look like [before they take out a loan.”
Through this partnership, IOU Financial’s marketing efforts will introduce potential merchants to FINSYNC’s payment, payroll and accounting services, while FINSYNC will offer IOU Financial an enhanced user experience, according to IOU Financial CEO Philip Marleau. He said that, for now, neither company is exchanging money with one another. It is purely a mutually beneficial partnership.
IOU Financial offers business loans of up to $300,000 to small business merchants in the U.S. and Canada. The company, which is traded publicly on the Toronto Stock Exchange, had a strong third quarter, with $36.1 million in originations, an 85% increase from the prior year. The lender’s average loan is $100,000 with a 12 month term, although they do offer terms up to 18 months.
Founded in 2009 by Gloer and CEO Phil Marleau, the company also has an office in Atlanta and has a total of about 40 employees.
SBA Loans Increase Slightly in 2018
November 26, 2018SBA total loan volume exceeded $30 billion with more than 72,000 approved loans for FY18 (October 1, 2017 through September 30, 2018), according to the SBA. The total volume is about the same as last year and there were approximately 4,000 more SBA loans issued this year compared to FY17.
Of the 72,000 SBA loans approved this year, 60,353 of them were 7(a) loans, totaling $25.37 billion. And 5,874 of the loans were 504 loans, totaling over $4.75 billion. This year, the SBA launched the 25-year Debenture, which offers an additional 60 months of financing at a fixed rate for small businesses. Since its introduction in April, over 1,000 debentures had been sold in FY18.
“The 25-year Debenture is designed to help free up cash flow and offer fixed rates in a rising interest rate environment for 504 borrowers and we are pleased to see over $1 billion has been disbursed in less than six months,” Associate Administrator for SBA’s Office of Capital Access William Manger said.
In FY18, there was notable growth in the SBA’s Microloan and Community Advantage Programs. In particular, over 5,000 loans were approved for over $72 million in the Microloan program and over 1,000 loans were approved for over $150 million in the SBA Community Advantage program.
Study Shows Small Business Loan Demand Highest Since 2012
November 26, 2018
A study released today reveals that American small businesses are eager to take business loans, with 48% planning to take out a loan in the next year, the highest level of demand since 2012. The study, called “Gimme Credit: Faster, Simpler, Safer Credit Main Street America,” was conducted by PayNet, which provides small business credit data, and Raddon, a research provider to financial institutions.
According to the study, almost 65% of small businesses anticipate an increase in sales, the highest percentage in over 14 years. And 43% of small businesses have overall confidence in the economy.
“Small businesses are in full-on growth mode,” said PayNet President William Phelan. “They’re looking to banking partners for reasonable capital infusions, but are discouraged by slow reviews, impersonal processes and denials. This creates a huge opportunity for nimble community banks, credit unions, and alternative lenders to fill the void.”
Already, some larger banks like Chase and PNC have partnered with OnDeck’s ODX to enhance speed and fill this void.
Still, small business loan demand is often met with uncertainty from banks that remain wary of lending to small businesses in the wake of the financial crisis, according to the study. But Bill Handel, Chief Economist at Raddon, believes that lenders can change their ways, while still being fiscally responsible.
“It’s a recurring cycle,” Handel said. “Cumbersome underwriting practices increase the likelihood that lenders are either unwilling or unable to extend favorable terms to small businesses, which in turn discourages applications. Fortunately, lenders can take steps to improve their efficiency and profitability in this area.”
What are some of these steps? The study recommends the following:
- Segment applications by loan request size and reviews by loan risk profile.
- Deploy technology to assist in preparing applications, collecting data, and analyzing the business/loan.
- Optimize procedures by leveraging industry intelligence to improve their “decision engines.”
Multimillionaire CEO Claims Predatory Lenders are Causing Him to Sell His Furniture for Food
November 22, 2018
Two months ago, a billionaire hedge-fund manager named Philip Falcone, the 377th richest person in the United States who once “put the squeeze on Goldman Sachs,” led a Virginia-based investment group to make a strategic purchase of a local Telemundo TV station in Columbus, Ohio. The seller, a company led by local businessman Richard Schilg, pocketed a lavish sum of $850,000, according to the Columbus Dispatch.
Two months later, Schilg, who is 61-years old, had become so poor and destitute that he would have to sell his furniture just to buy food. That’s what Bloomberg Businessweek says of Schilg in its purported tell-all piece about predatory lending. Though Schilg successfully negotiated a deal with a Wall Street billionaire, he apparently was outmatched and “unable to defend himself” when it came to much less sophisticated transactions at his other business, Pathmark HR, a human resources company located 15 miles outside of Columbus.
Pathmark HR is anything but small. At the end of 2017, Schilg’s company was on track to gross $20 million a year in sales. Along the way, he engaged in commercial finance transactions that required the sale of future receivables, non-loan arrangements that businesses use to fuel their growth.
They did not go as planned. Multiple financial companies obtained judgments to enforce the contracts that Pathmark HR had entered into, NY State court records confirm. Schilg told Bloomberg Businessweek that “your life is ruined by their contract.”
But if that’s the case, it stands to reason he wouldn’t enter into one again.
Pathmark HR kept applying for more of these things, industry insiders told deBanked, though the stream of judgments filed against his business from competitors offering similar products have served as a veritable red flag for underwriting departments. That would’ve created a problem for Pathmark HR if it intended to rely on that type of capital going forward.
That’s when a straw man appeared.
According to a purported (and admittedly unauthenticated) corporate resolution reviewed by deBanked, Schilg appears to have transferred his majority interest in Pathmark HR to an 82-year old minority shareholder named Robert Renzetti, who lists a small mobile home more than 1,000 miles away in Sarasota, FL as his residence.
There’s a catch. The corporate resolution (dated in 2017) says that Schilg can just buy the shares back from Renzetti in the future. Either way, several finance companies said they received applications for capital from Pathmark HR up through and including this year, with only Renzetti’s name and information included. Schilg’s is nowhere to be found.
Schilg, who Bloomberg Businessweek portrays as so poor that he’s more-or-less eating his household furniture to stay alive, is the former founder, chairman and CEO of Team America Corp, a staffing organization that grew to more than $350 million in annual sales by 1999. That’s more than $500 million at today’s value, larger than almost every single alternative funder that deBanked ranked in 2018.
Meanwhile, the only thing that separates Schilg from the sale of his TV station to a billionaire is FCC approval. Hopefully the man has enough furniture to see it through.
This is the second in a series of articles relating to a fanciful tale in Bloomberg Businessweek
Elevate Funding Strengthens Compliance and Monitor Abilities
November 21, 2018Yesterday, Elevate Funding announced that it would be using the PerformLine Platform to enhance its compliance and email monitoring abilities.
“Terminology is very important in this industry,” said Elevate Funding CEO Heather Francis.
Francis said that much of Elevate’s decision to use PerformLine is to make sure that the correct terms are being used so that the company is consistent in how it presents its MCA product, both to merchants and to referral partners.
“We’ve always been very in tuned to our image, both with our referral partners and with our merchants, and we like to make sure it’s a consistent image,” Francis said.
Together with PerformLine, Elevate Funding created a list of 500 problematic words or phrases. If these terms are used in an email – written by an Elevate Funding employee, a merchant or a referral partner – the email will get flagged and brought to the attention of Francis. Some red flag key terms include “loan,” “term,” “payback” and “free.” Regardless of who wrote the word, the Elevate Funding employee will be asked to send a clarifying follow-up email.
For example, Francis said that if a merchant sends an email that reads “What is my loan balance?” this email would be flagged and the company employee would respond, clarifying that the MCA deal is not a loan. In addition to being clear with customers and referral partners, the PerformLine service is beneficial for compliance reasons.
“In today’s regulatory environment, Elevate must stay on top of its compliance procedures not only to satisfy industry requirements but to ensure the security of sensitive data,” Francis said. “This includes all levels of interactions with our referral partners and the small business owners we service. PerformLine has provided the opportunity to review this information with speed and accuracy, so our compliance team can address any issues as they occur.”
Other funders, like GreenBox Capital, have employed monitoring capabilities not just to protect themselves from legal liability, but to protect merchant data.
Based in Gainesville, FL, Elevate Funding employs about 20 people.
LendingClub Funds $1 Billion in CLUB Certificates
November 20, 2018LendingClub announced today that it has funded $1 billion in CLUB Certificates, in just under a year since the company introduced the offering. According to its website, CLUB Certificates are “pass-through securities with CUSIP numbers backed by LendingClub prime or near prime personal loans.”
What does this mean? LendingClub was unreachable at the time, but LendAcademy researched it in December 2017 when the product was announced and indicated that the initiative was prompted by a potential investor who did not want to invest in whole loans, which can have a duration of several years. Instead, the investor wanted a security that acted like a whole loan, but had liquidity.
The result, according to LendIt, was the LendingClub CLUB Certificate, a security with an identification code that is cleared by the Depository Trust & Clearing Corporation (DTCC) and could be traded in over-the-counter markets. Furthermore, LendIt wrote in the December 2017 story that the deal that precipitated the LendingClub CLUB Certificate was “a $25 million deal that was sold to one investor and in keeping with Dodd-Frank rules LendingClub retained 5% of the deal total on their balance sheet.”
“We continue to innovate for investors and diversify our investor base,” said Valerie Kay, Chief Capital Officer of LendingClub. “By continually innovating on products, LendingClub expects to further deepen and broaden investor access in 2019 and beyond through a variety of new products and structures.”
CLUB Certificates can be seen on Bloomberg and Intex with the “CLUBC” ticker.
In the third quarter of 2018, LendingClub posted record originations of $2.9 billion, up 18% year-over-year. Founded in 2006 and headquartered in San Francisco, LendingClub offers fixed rate business loans from $5,000 to $300,000 and personal loans of up to $40,000.
Bankers Healthcare Group Expands Beyond Healthcare
November 20, 2018Bankers Healthcare Group (BHG), which provides financing solutions to healthcare professionals, announced at the end of last week that it is expanding into small business lending with a new license to offer SBA loans through its wholly-owned subsidiary, FundEx Solutions Group. Fundex is now one of only 14 non-bank lenders in the country that offers an SBA 7(a) Loan Guarantee Program, according to the company.
“We’re thrilled to announce that we’ve earned licensure as a non-bank SBA lender,” said Mark Schmidt, CEO of FundEx. “Not only is this a great opportunity for the BHG brand to grow, but it’s a terrific new option for customers who may require loan amounts or terms that are not available through BHG in order to accomplish their business goals.”
BHG, through FundEx, will now be able to provide SBA-backed loans to licensed professions in a variety of sectors including accounting, architecture, law, engineering, financial services and insurance. Loans will go up to $5 million, with terms of up to 25 years. And the loans may be used for a number of different purposes, including real estate acquisition, renovation or expansion, purchase of equipment, business acquisition or commercial debt consolidation.
“There’s market demand for larger loans and we’re excited to offer another innovative lending solution to help licensed professionals grow their own businesses,” said Al Crawford, the original founder, Chairman and CEO of BHC. “We built FundEx Solutions Group based on our tenured success in medical financing to be flexible and fast with excellent customer service.”
Founded in 2001, BHG, based in Syracuse, New York, has provided more than $3.5 billion in funding to to over 110,000 healthcare professionals.
Happy Thanksgiving
November 19, 2018
