Archive for 2019
Analyzing Confessions of Judgment
March 4, 2019Platzer, Swergold, Levine, Goldberg, Katz & Jaslow, LLP (“Platzer”) has built one of the leading Merchant Cash Advance practices in New York City. With years of experience handling traditional lending transactions, Platzer has expanded its representation to Merchant Cash Advance Companies (“MCA”) in all aspects of their business cycles, including Participation Agreements, Assets Utilization, Transactional related matters and litigation.
In the course of representing some of its MCA clients within the State of New York, Platzer has identified a potential issue in certain counties within New York State that are denying entry of Confessions of Judgment (“COJs”), notwithstanding language that has been contractually agreed upon and explicitly sets forth that the Confession of Judgment “may be entered in any and all counties with in the State of New York”, when the defendant is a non-resident.
The following is not a legal opinion but is our preliminary analysis:
It is Platzer’s position that New York Civil Practice Law and Rules (“CPLR”) 3218(a)(1) provides that when the defendant is a “non-resident” that judgment by confession may be entered in “the county in which entry is authorized.” Further, CPLR 3218(b) allows entry of judgment by confession as to a non-resident“ with the clerk of the county designated in the affidavit.” Platzer respectfully argued to the subject county that its jurisdiction is within the scope of authorization of “all counties” in the State of New York, and that the defendant “authorized” entry of judgment in the subject County, as contemplated by CPLR 3218(a)(1), and was also designated, as one of “all counties” in the State of New York, satisfying CPLR 3218(b), yet the Confession was denied entry.
As Platzer then noted, there is case authority for the proposition that non-resident defendants may subject themselves under CPLR § 3218 to the entry of judgment by confession in multiple counties. To Platzer’s knowledge, no Court has passed on the precise language of “all counties” or similar language. In the analogous situation where the confession of judgment executed by the non-resident defendant allowed entry in multiple but not “all” counties, Courts have routinely upheld entry of the judgment, while noting that there is no authority that would prohibit such entry under CPLR § 3218. Platzer has contended that this case law supports the notion that entry of confessions of judgment with “all counties” language is proper under CPLR § 3218.
As of March 4, 2019, Platzer is actively discussing these issues with the subject counties within the State of New York and hopes that its arguments will be persuasive based upon current New York law. Platzer is aware, however, of the state and national legislative efforts to curtail the entry of confessions of judgment and, specifically, the recent legislative proposal by Governor Andrew Cuomo to restrict entry of confessions of judgment to defendants doing business in New York and in amounts over $250,000.00. Platzer expresses no opinion as to these efforts.
Contacts:
Howard M. Jaslow
hjaslow@platzerlaw.com
Morgan S. Grossman
mgrossman@platzerlaw.com
Platzer, Swergold, Levine, Goldberg, Katz & Jaslow, LLP
475 Park Avenue South, 18th Floor
New York, New York 10016
Telephone: (212) 593-3000 ext. 248
Facsimile: (212) 593-0353
Affirm Partners with Walmart for Payments
February 28, 2019Walmart customers can now pay for items using credit from Affirm, the online consumer lender announced yesterday. Walmart customers can find out how much they qualify for online and then make online or in-store purchases with in three, six or twelve monthly installments. A credit decision is made in real time and does not affect the customer’s credit score, according to Affirm.
“Walmart serves millions and has become a leader in the retail landscape with its commitment to help shoppers ‘save money and live better,’ which closely mirrors our own mission to ‘improve lives’ with our products,” said Max Levchin, founder and CEO at Affirm, as well as a founder of PayPal. “I’m looking forward to introducing Walmart customers to a modern and innovative way to buy the things they need.”
Affirm is now available as a payment option on Walmart purchases ranging from $150 to $2,000. This is not Walmart’s first foray into financing. In fact, in July of last year, Walmart entered into an exclusive partnership with Capital One to issue a Walmart credit card. But Elizabeth Allin, Vice President of Communications at Affirm, said that this partnership is the first point-of-sale loan product partnership for Walmart.
“They’ve really embraced e-commerce and the evolution of digital and mobile,” Allin said of Walmart, which has been the biggest retailer in the world for years.
Now 57 years old, the retail giant is pursuing partnerships with financial organizations to facilitate access to customer credit. But back in 2006, Walmart set its sights on bringing these lending operations in house, by becoming bank. Using a controversial statute, it attempted to get a charter to become an ILC bank. Met with strong opposition from banks and other opponents, Walmart backed down.
Square Capital On Pace to Overtake OnDeck in Small Business Lending
February 28, 2019OnDeck’s annual loan origination volume has more than doubled since 2014, from $1.2 billion to $2.5 billion, allowing them to retain the top spot in deBanked’s small business funder rankings. But Square Capital, the small business lending division of Square, has grown by 16x since 2014. In the course of 5 years, they’ve gone from being a footnote compared to OnDeck to a fierce rival that is rapidly closing the gap in loan volume.
Square’s secret is the ability to generate loan volume at virtually no cost because the product is merely an add-on to their payments-first business. And that’s a problem for OnDeck, because Square has a lot of money to spend on marketing its payments business. More than $400 million a year to be precise. OnDeck, meanwhile, only spent $44 million last year on sales and marketing.
With OnDeck being outspent by a factor of 10, there is a likelihood that Square will overtake OnDeck in the business loan market within the next two years.
And Square’s strength is the ecosystem it’s building. On the Q4 earnings call, company CEO Jack Dorsey said, “I believe the ecosystem is extremely sticky, because it builds durable relationships. If we’re just focused on providing payments in the Register, certainly, there are so many other competitors out there. But when people come in for payments in the Register and then they use [our] payroll for their restaurant and they use Caviar and are really getting offers from Square Capital, it’s really hard to find that mix anywhere else and that builds durability.”
The Art of Moving The Deal – When it becomes too high risk for you
February 27, 2019OakNorth, a small and medium sized business lender and online bank, has mastered a strategy to avoid merchants from defaulting 100% of the time, according to a story published in Quartz. The strategy: tell the merchants at risk of defaulting to refinance their loans at a competitor.
“We’ve said [to merchants], ‘Go renegotiate with another bank and refinance,’” OakNorth co-founder Joel Perlman said at the Finovate Europe conference in London on February 14, according to the Quartz story. “And they’ve gone and refinanced and then a few months later they’ve gone into default.”
Perlman’s phrasing may sound a little harsh, but the practice of moving at-risk merchants to another funder is really not uncommon. In fact, it seems like a fairly common and well-understood concept.
CEO of Accord Business Funding Adam Beebe said that brokers will contact Accord when their merchant is up for renewal. And if Accord knows it can’t continue to fund the merchant – either because it has missed payments or because it has become overburdened with other debt – the broker will shop that undesirable merchant elsewhere.
The merchant goes to a new funder and Accord is pleased to be rid of the merchant and not have it default on Accord’s balance sheet. Beebe notes, however, that the new funder is made aware of the merchant’s financial situation and is able to handle the higher risk. Transparency, he says, is important, particularly in a scenario like this.
Similarly, Heather Francis, CEO of Elevate Funding, said that she is more than happy for an ISO to move a stacking and defaulting merchant away from Elevate, as long as Elevate gets paid. Elevate only funds first position and Francis said they make it very clear to merchants that stacking (taking on additional funding from other sources before satisfying an existing contract) is not allowed.
“If a merchant is stacking, that’s not someone we want to work with,” Francis said. “And if the [new] funder understands the high risk, then is fine.”
As long as nothing is being hidden from the new funder, then it seems this practice is just an element of how funding works.
From the broker side, Rob Addison, Managing Member of Sentra Funding, an ISO, said that when a funder knows it will not be renewing one of his merchants, they will ask him to take the merchant away.
Addison said that some funders are so eager to get rid of defaulting merchants that they will offer deals like reducing the merchant’s balance just to get the merchant away from them.
It may not sound nice to jettison a defaulting merchant, but if a funder can avoid a merchant defaulting on its dime, then in many cases, it will.
“We try to move a financially distressed merchant from from, say, an MCA to a longer term loan,” Addison said. “If they haven’t been stacked, they have options. If they have, it’s harder. But if they have something, like commercial property or equipment, there’s usually a [a funder] willing to step in.”
True Story: I Cold Called a Merchant
February 25, 2019While visiting the office of Excel Capital in Manhattan on a reporting assignment, I saw a few open desks. They weren’t exactly empty, just available. There were phones, headsets, and computers all set up, just waiting for a salesperson to sit down and plug in. I pictured the salespeople I’ve previously profiled, smiling & dialing, as they say, contacting small businesses and delivering their best pitch. And for a moment, I imagined it was myself in one of those chairs. A funny thought perhaps if you’ve gotten to know me, but it’s not an uncommon curiosity for a reporter to try and channel a source’s mindset.
Excel CEO Chad Otar obviously caught that flashing glimmer in my eyes, because the next thing I knew he invited me to sit down and make a call myself, a completely cold one… to a merchant.
My instinct was to just observe, but the journalist in me unconsciously accepted the invitation. Before I knew what I was getting myself into, I was sitting at Chad’s desk in the CEO chair, reviewing sales scripts that were handed to me. I read two of them and realized that they were fairly different in tone. The first said something like “I’m calling from the back office and it appears that you once had an interest in funding. I’m checking to see if you still do.” The other one was far more direct. It explained a special offer to prospective clients and it finished with a question, “What are you seeking capital for?”
![Excel Capital Management](https://debanked.com/wp-content/uploads/2019/02/excelcapmanagement.jpg)
Chad recommended the more direct route, the one I liked more as well. I didn’t like the idea of being in a “back office.” It sounds so distant, so non-urgent. And from my understanding, a sales call should sound urgent, without being too aggressive either. I knew I had to strike the right balance. I looked at the bolder script and practiced reading it a few times out loud. The script started with “Hello, my name is [John Doe.]” But I thought, “I think ‘hello’ is too formal. ‘Hi’ works better for me.” And I also thought that using just my first name might be more familiar and less intimidating than my full name. So I decided to just use my first name. Note that when introducing myself on the phone at deBanked, I always use my full name because I aim to be very intimidating. I’m totally kidding!
Back to my first EVER cold call. After rehearsing the script a few times and letting everyone around me know that this was my first cold call and a really big deal for me, I picked up the phone and I started to dial. “Hello, this is Kathy” a voice beamed from the other end of the phone. I said “Hi Kathy” and I started to read the script. Then I stopped. For a moment, it was just silent. She didn’t hang up! YES! She also didn’t curse at me or ask that I not call her back again. She didn’t even politely excuse herself. Instead, she asked a few clarifying questions.
“Where are you calling from?”
I could answer that! Except that I made a slight mistake. I called the company Excel Credit, instead of the correct Excel Capital. A subtle enough error, I thought, so I chose not to acknowledge it. And since I’ve been writing about companies like Excel Capital for a little while now, I felt comfortable enough to provide a brief sentence to this woman about what Excel Capital does. “We offer funding to small businesses throughout the US,” I said. I thought this would be a good opportunity to correct my earlier error, so I slipped in “we’re also known as Excel Capital.” That could have sounded shady. But I don’t think she heard it that way.
“How did you find us?” she asked.
“Wow,” I thought. “This is turning into a real conversation!” I didn’t know how her info had been obtained, so I just said “I get lists from my boss and I don’t know exactly how this list was obtained.”
Chad said something to me about previous funding, so I then added: “We got this list of businesses that have previously been funded.”
At this point, I thought to myself “Why don’t you ask a question now?” So I went down to the next question on the script sheet and I asked in a “just happen to be curious” way: “Is there a certain amount that you need?”
“That would be the owner who would know about that,” Kathy said.
Uh-oh. I wasn’t even on the phone with the owner. I wasn’t speaking to the decision maker. But for my first cold call ever, I felt pretty good about it. I gave Kathy Excel’s number and yes, my full name, and I feel like I helped warm up this potential client. They could call back and say that they (Me!) spoke with Kathy. My first cold call wasn’t so bad, and honestly, I’m kind of ready to make 200 more! Just kidding.
Deal Flow in the Heartland — From Mississippi and Beyond
February 23, 2019The political, cultural and economic abyss that separates the heartland from the coasts seems to grow deeper and wider with each passing day, and trying to reconcile the disparities can feel nearly hopeless. But differences among geographic locations aren’t nearly so well-defined or as troubling in the alternative small-business funding industry. What’s more, business opportunities can arise when localities differ.
First the lay of the land: Members of the alt finance community agree that funders and brokers are concentrated in just a few geographic locales—Greater New York City, Southern California and South Florida. Those three areas probably generate more than 75 percent of the industry’s volume, according to Jared Weitz, CEO of United Capital Source and one of three co-chairs of the broker council recently formed by the Small Business Finance Association (SBFA).
Sorting out how the industry differs in various regions can prove challenging. The Internet is erasing regional quirks and alleviating the need for physical proximity, says Steve Denis, SBFA executive director. What’s more, every ISO and funder develops a slightly different way of doing business regardless of location, he notes.
However, to a great degree it’s a matter of tweaking a single general outline for navigating the industry no matter where the office or client is based. That’s partially because many members of the industry conduct business in every state or nearly every state.
![Sioux Falls, SD](https://debanked.com/wp-content/uploads/2018/09/100720586_M.jpg)
That said, old-fashioned, small-town ethics can sometimes seem closer to the surface in shops operating far from the coasts. “We’re focused on the values of our organization—like doing what we say we’re going to do, maintains Tim Mages, chief financial officer at Expansion Capital Group, a funder and broker based in Sioux Falls, S.D. “Some of that maybe comes from the Midwest culture or upbringing.”
Outside the major population centers, the industry occasionally seems a little more “laid-back.” In a light-hearted example of a relaxed heartland approach to the alt funding business, Lance Stevens, an attorney who’s a co-founder of Brandon, Miss.-based TransMark Funding, claims he can underwrite a deal while driving his golf cart and listening to Bon Jovi—all while maintaining his under 5 handicap.
Everything can seem a little more slow in the heartland, where people have time to stop and say hello to strangers, says Weitz. “Some folks are like, ‘Hey, my mailbox is three miles from my house, I check my mail once a week. I do not email. I do not fax,’ ” he observes. “It’s a nice change.”
Interactions are often more informal between the coasts. “Being in the Midwest we don’t use a lot of the lingo and terminology from this space, such as ‘stacking,’” says Austin Moss, a managing partner at Strategic Capital in Overland Park, Kan. That lack of jargon may be good or bad, he admits, but instead the staff speaks in a more general, even “holistic,” financial language.
Then there’s the occasional need for the human touch in the heartland. Deals there are sometimes sealed in person, with an office-park conference room substituting for the community bank building on the town square where merchant used to take out loans. “It’s not a widespread trend, but a handful of the ISOs we do business with actually do face-to-face solicitation,” says Mike Ballases, CEO of Houston-based Accord Business Funding.
In line with that mini-trend, an ISO based in Southern California operates a Texas office that specializes in face-to-face encounters, according to Aldo Castro, Accord’s former vice president of sales and marketing. “It’s rather meaningful here,” he says of using the practice in Texas. “You get on the road and shake a hand. They put a face to a name.”
![Overland Park, Kansas](https://debanked.com/wp-content/uploads/2019/02/83415260_S.jpg)
The process can work in reverse, too. A few of the larger local companies seeking funding from Strategic Capital make the journey to the broker-funder’s Overland Park, Kan., offices, Moss says. Bankers who serve as referral partners also like the opportunity to meet in person, he observes.
The personal encounters often strike Moss as “refreshing,” he admits. That’s because the vast majority of the company’s deals occur online and by phone and fax—all without ever seeing the client in person.
Although the desire for personal contact arises from time to time, most heartland deals don’t hinge upon it. “It’s not a big number, but we see it,” Ballases says of face-to-face meetings. “Could it be the wave of the future? Absolutely not.”
Moreover, for some in the industry, the need for face-to-face discussions barely registers. It’s just not about meeting in person, according to Mages. Instead, he cites the importance of other factors. “Speed, convenience and service are the key differentiators, and that’s all driven by data and analytics,” he declares. Partnerships also drive the company’s business, he notes.
Luck outweighs geography, too, in Mages’ view. “It’s more an issue of right place, right time,” he contends. Deals occur primarily when funders manage to attract business owners’ attention at exactly the time when capital’s needed, he contends.
Besides, lots of people tend to think in wide-ranging ways these days instead of in narrow, provincial modes, Mages continues. At Expansion Capital Group, he notes, executives have differing points of view because they come from commercial banking, investment banking, the Small Business Administration lending program and the credit card industry.
At the same time, people tend to take an increasingly cosmopolitan approach to their jobs, according to Mages. He notes that executives at his company maintain contacts across the continent, often forged in earlier chapters of their careers.
Meanwhile, well-trained employees can use a phone call to gather the details they need and establish a consultative relationship without a thought for geography or the need for face-to-face meetings, Mages says.
However, geography can indeed play a role at least once in a while. In a few cases merchants prefer a funder with an address across town or at least in the home state. Sometimes business owners and referral partners choose local brokers or funders simply because their names sound familiar.
Strategic Capital, for example, does more business at home than anywhere else, Moss says. The company’s headquarters is in the portion of greater Kansas City that spills over from Missouri into the state of Kansas, making the location convenient to a major population center.
But despite the massive size of greater Kansas City, Strategic Capital remains the only alternative small-business funding option in the area—there just aren’t any other local providers, Moss says. It’s not like New York, where banks and merchants can choose from among many brokers and funders, he says.
That trend toward being the only game in town or one of just a few can hold true for most companies in the heartland, Moss maintains. A broker or funder based in Denver, for example, would probably have higher volume there than anywhere else, he notes.
Several reasons explain that geographic bias, Moss continues. “The employees live there and have contacts, and we’re part of the local associations and chambers,” he notes. “We work with just about all the banks in the area, and everyone knows who we are.” The company also handles local government bonds and local construction projects, he says.
Mages offers a different perspective. Only a few small-business owners in South Dakota choose Expansion Capital Group because they prefer dealing with a Midwestern company or because they’ve seen local press coverage or heard Expansion’s recruiting ads on the radio, he maintains.
![Houston, TX](https://debanked.com/wp-content/uploads/2019/02/98423205_S.jpg)
Hometown, home state or regional preferences aside, executives at Accord emphasize the importance of the small-town approach of knowing their customers as well possible. For Ballases—the Accord chairman who started the company with Adam Beebe, who now serves as CEO—that means combining personal and impersonal approaches to underwriting.
Ballases views funders and brokers as falling into three categories. Some choose a personal, hands-on approach and don’t rely upon algorithms. A second category emphasizes automation. A third blends the personal and the automated. His organization falls into the latter, he says
For Accord, the personal comes into play because of what Ballases has learned in his decades in the banking business. He knows margins and growth rates in his applicants’ industries, and those factors aren’t often incorporated into algorithms, he says.
In fact, commercial banks have failed to learn to evaluate small businesses on their true merits, Ballases continues. Banks tend to underwrite small businesses, which he defines as those in need of $100,000 or less, by using a “skinnyed-down” version of how they underwrite big companies, which they base on general financial information. Instead, he counts on discipline, data and his 50 years of experience in commercial banking to evaluate a merchant on an individual basis.
![Pearl Street Historic District in Brandon, MS](https://debanked.com/wp-content/uploads/2019/02/PearlStreetHistoricDistrict-1024x682.jpg)
At another company, TransMark Funding, Stevens and his partner draw upon legal and small-business experience to evaluate potential customers’ creditworthiness. “That causes us to focus on an applicant’s business model and their sustainability, which may boil down to personalities,” Stevens says. Transmark combines those factors with “a little bit of credit metrics” to come to decisions on applications.
The company’s mix of objective and subjective reasoning differs starkly from the thought process at most coastal funders, Stevens says. While his company gives most of the weight to the subjective and just a bit to the objective, big-city competitors tend to do the exact opposite, he says.
Of the last five MCA deals that Transmark funded, the merchants averaged 12 checks returned for insufficient funds per month, Stevens says, noting that he can make that statement “with a straight face.” Sometimes it’s been as high as 35 NSF checks per month for successful applicants. “Those people would not even get into the parking lot of a bank and would not get through the door of any MCA funder who’s using any sort of reasonable metrics,” he adds.
An anecdote helps explain the thinking. Suppose a restaurant has been operating for several years in a town of 50,000 and has amassed 2,200 “likes” on its Facebook page, Stevens suggests. “I’m in,” he exclaims, noting that it would take compellingly negative numbers to convince him that the business won’t survive if he helps it obtains capital to improve its positioning in its market.
The vignette illustrates that a business can do well in the community despite the merchant’s financial difficulties, Stevens says. However, the story doesn’t mean Facebook becomes the only determining factor, he continues. Positive factors for success include good location and marketing, he notes.
The principals at many companies funded by TransMark have credit scores in the low 500’s, Stevens continues. “That’s tough,” he says, “because they’re going to have a lot of history of not living up to their financial obligations.” But if someone with that credit score has personally guaranteed a lease on a storefront for the next two years, they may be unlikely to abandon the business. A big bank might look upon that merchant as insufficiently nimble because of the lease, but TransMark takes the opposite view, he says.
Even if a store, restaurant or contractor is “circling the drain” and about to shut down, TransMark may simply believe the owner has the character to make the business work. “Given our minute default rate, we’re right most of the time,” Stevens maintains, adding that banks see applicants as customers, and TransMark sees them as partners.
The business model requires peering into the future to see how the merchants will look after using perhaps $25,000 in capital to make improvements and while dealing with 18 percent holdback for the next six months, Stevens observes. “If they look strong, I need to fund them,” he says of the company’s prognostications.
To find ISOs who appreciate the TransMark model, the company seeks out purveyors of credit card merchant services, Stevens says. They encounter those merchant-services providers at trade shows and through “some general poking around,” he notes.
The merchant-services people often have long-standing relationships with merchants and thus can feed information into the TransMark way of viewing deals. “Tell me what it looks like when you walk into their store at 11 a.m.,” Stevens says to illustrate the kind of conversation he has with ISOs. “How is their signage?”
Besides understanding clients, it also pays to understand markets, and proximity can help with the latter, according to Ballases and Castro in Houston. “We have an affinity for Texas,” Castro says.
Many of the businesses based in Texas are vendors to people—like mechanics who fix cars or restaurants that feed people—not vendors to businesses, Ballases notes. Vendors who cater to people are better candidates for merchant cash advances than business-to-business companies are, he maintains.
![Loan Star State](https://debanked.com/wp-content/uploads/2019/02/LoanStarState.png)
“It’s just a huge state,” Castro declares. “We’ve got a thousand new residents moving to Texas every day.” Nearly 10 percent of the nation’s small businesses operate in The Lone Star State, he notes.
“There’s a convergence of the population growth, a low tax rate, low regulations, low cost of running a small business relative to national levels, and a great small-business environment,” Castro says of the Texas scene. “In addition, the healthcare industry is exploding here, and there are the ancillary businesses to healthcare.”
Meanwhile, the state’s Hispanic entrepreneurs remain under-served by alt funding ISOs, which presents a great untapped opportunity, Castro maintains. Funders who cater to those Hispanic merchants will find them loyal, he predicts. In Texas alone, Hispanic consumers spend half a billion dollars annually, he says.
To capitalize on that burgeoning market, Accord has assembled a team that can help Anglo ISOs bridge the cultural and linguistic gap, Castro says. “We do that every day,” he maintains. “We’re jumping on the phone with merchants and helping them get the funding they need to support the growth of their operations.” Those conversations with merchants do not put Accord in competition with ISOs, Castro notes. Accord does not maintain an inside sales staff and does all of its business through ISOs, he says.
Only a few of those ISOs are based in Texas, according to Ballases. Most of Accord’s ISOs operate from offices in the Northeast, with many in the other common geographic spots of South Florida and Southern California, he says. So that makes Accord a national company despite its emphasis on Texas, Ballases says.
Accord’s experience at home, combined with nationwide contacts in the industry, have convinced the company’s leadership that too many brokers remain unaware of the opportunities in Texas.
That’s why Accord is producing ads, videos, infographics, blogs and social media posts to alert those coastal ISOs to opportunities in Texas. The company even offers a tab called “FundTEX” on its website. “We’re getting the word out,” Castro says of the company’s effort to publicize his state.
Besides operating in areas sometimes overlooked on the coasts, heartland brokers and funders sometimes have to reinvent the industry almost from scratch. Brokers can find themselves teaching the business to potential investors outside the Big Three geographic locations, Moss says. In New York, investors already know the industry and use that familiarity to evaluate brokers, he says.
Brokers and funders also have to deal with the heartland’s lack of workers with industry experience. As the lone company in the market, Strategic Capital, for example, can’t find many prospective employees with previous jobs in the business, Moss notes. “There is no OnDeck or Yellowstone or RapidAdvance down the street to provide a talent pool for hiring,” he says.
That’s good and bad, Moss maintains. New hires don’t require re-training to lose habits that don’t fit the Strategic Capital way of working. But it’s difficult to find underwriters, accountants and other prospective employees with the right background. It doesn’t work to put new salespeople on straight commission because the “ramp-up” period takes longer with employees unfamiliar with the industry, he says.
The lack of local experience sometimes prompts brokers in the heartland to tap the Big Three areas for talent. Expansion Capital Group, for example, has a business development director in New York who came from another ISO, Mages says. Besides cultivating relationships in NYC, the business development expert makes frequent trips to Southern California and South Florida.
Meanwhile, members of the industry who tire of the rapid pace on the coasts might want to consider moving inland to fill the vacant jobs, sources suggest. After all, the heartland has its advantages, according to Moss. “Most people here have houses, and the cost of living is lower than in places like New York,” he says. A spacious five-bedroom house in Kansas City might cost less than a cramped apartment in New York, he notes.
To commute to the company’s suburban office, his typical employee jumps into a car in a climate controlled attached garage, cruises for half an hour or so on roads relatively free of traffic and parks in the lot a few steps outside his office building. It’s less stressful than crowding into a subway car, he notes.
The hinterland’s not as culturally barren as some might believe, Moss continues. The public hears “Kansas City” and they think of tornadoes, cows and the Wizard of Oz, he says. But the reality includes a downtown replete with skyscrapers and pro sports, not to mention lots of tech, healthcare and aerospace companies. “It’s like a mini-Chicago,” he notes.
But a retreat from the coasts may not be in the offing. Ballases expects that the majority of ISOs will continue to concentrate on the East Coast and West Coast because that’s where population growth remains strongest and thus provides the most opportunities. “It’s a numbers game,” he observes.
Elevate Reflects on Success of Fintech in Personal Loans
February 21, 2019The unsecured personal loan market hit an all-time high in 2018, jumping 17 percent year-over-year to $138 billion, according to data from TransUnion released today and featured in a CNBC story.
“The rapid growth in consumer loans sits squarely on the shoulders of fintechs,” said Jason Laky, senior vice president and leader of TransUnion’s consumer lending line of business. “They continue to be the main driver.”
According to the data, fintech companies, like LendingClub, Prosper and Elevate, issued 38 percent of all U.S. personal loans last year, which is up from 35 percent in 2017 and just five percent in 2013. Conversely, banks’ market share for unsecured personal loans is shrinking. Traditional banks’ share of these loans is down to 28 percent from 40 percent five years ago.
Will this trend continue? The non-bank consumer lenders think so.
Credit unions are down to 21 percent from 31 percent in the time period. While their market share shrank, they still saw overall growth in total loan balances, according to Laky.
“Although regulations are starting to loosen, banks still cannot provide the kind of emergency funds that so many Americans need,” Chief Operating Officer of Elevate Credit Jason Harvison told deBanked via email.
He said that the rise of the gig economy has created near-constant income volatility for a large number of Americans and cited a recent JP Morgan Chase study that found that 41% of U.S. households experience income fluctuations of 30% or more month-to-month.
“Many consumers who need access to funds quickly in order to weather financial emergencies can’t access personal loans from banks,” Harvison said. “Online lenders can help fill this void.”
By lending to non-prime borrowers, do these lenders worry a lot about what might happen in an economic downturn?
“We’ve found in past downturns that non-prime consumers actually fare better than prime,” Harvison said. “Essentially, non-prime consumers are always living their lives in a state of “recession.” They experience income volatility, job insecurity, and a lack of access to necessary financial products. They live like this every day, and therefore know how to weather these challenges.”
New York Legislators Introduce Small Business Usury Bill
February 20, 2019Two members of the New York State legislature have introduced a bill to apply consumer usury protections to small businesses. Bill A03638, introduced by New York Assemblymembers Yuh-Line Niou and Crystal Peoples-Stokes define a small business as “one which is resident in this state, independently owned and operated, not dominant in its field and employs one hundred or less persons.”
The bill is separate from the one introduced to outlaw Confessions of Judgment in financial contracts.