Archive for 2020

United Capital Source CEO Jared Weitz Discusses The State of Small Business Finance

September 24, 2020
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Jared Weitz, the CEO of United Capital Source, recently sat down (virtually) for an interview with me to discuss the state of small business finance. During it, Weitz makes an alarming prediction, that pandemic related events will lead to 50% of all restaurants permanently closing. You can watch our full talk below:


Amid Pandemic, Small Businesses Pivot to Sell Personal Protective Equipment

September 23, 2020
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This story appeared in deBanked’s Jul/Aug 2020 magazine issue. To receive copies in print, SUBSCRIBE FREE

PPE SalesA number of small businesses—including those in the merchant cash advance industry—faced with little or no way to make money for months—have pivoted to selling personal protective equipment.

It’s no wonder businesses across the U.S. have shifted gears. With the pandemic raging, and consumers and businesses trying to return to some sort of normalcy, there’s high demand for these products, causing even businesses that previously had no connection to them to spring into action.

“It’s not my forte; I had to pivot just to make sure I could stay afloat before things turned around,” says John DiCanio, founding partner of Direct Merchant Funding in Bethpage, N.Y.

This past spring, at a time when everything in the MCA business stopped, he heard from a merchant in the medical supply field that masks were becoming very important. The merchant connected him to a contact in Hong Kong from whom he was able to buy hospital-grade and non-medical grade masks and sell them to local hospitals, local businesses and others.

DiCanio says he did it for a short time only—two months—which was enough to tide him over under his
regular business started coming back. Mask-making is still a big business and a lot of people are still doing it, but he prefers to stick to merchant cash advance, which he’s been doing for around 15 years. He says business has picked up enough that he no longer has the need to do anything on the side—and he hopes it stays that way.

Many funding industry participants are still selling these types of products, but it’s somewhat of a hush-hush business. Not everyone wants to talk about it for any number of reasons, including embarrassment and fear of looking weak to customers and business connections. Even so, small businesses that pivoted say they are doing the best they can to stay afloat—and there’s no shame in that.

Kat Rosati, founder of Apparel Booster in Riverside, Calif., a product development agency for luxury and socially conscious brands, began hand-sewing masks to help support her business that had been hit-hard by the pandemic.

She has manufacturing partners all over the world, and production was at a standstill for her various products. She couldn’t import fabric needed for the company’s various projects and a lot of production partners were forced to close. Luckily, she had a connection to a fabric mill in Pennsylvania that focuses on antimicrobial products that was willing to provide her with material.

“IT HASN’T BEEN SUPER PROFITABLE, BUT IT’S DEFINITELY HELPED KEEP THE BUSINESS ALIVE”



She hired temporary workers to help her make masks, which she’s producing at a rate of about 150 a week. She sells them to consumers and small businesses. The revenue has helped defray overhead expenses, among other things. “It hasn’t been super profitable, but it’s definitely helped keep the business alive,” she says.

She had to furlough her four-person team because she can’t afford to pay them without regular client work coming in. Her husband, who works in the restaurant industry, was also furloughed. So whatever money she can bring in, helps. “I’m watching small business owners around me that haven’t made any kind of pivot close left and right,” she says. “The fact that I can keep mine alive makes it worth it for me.”

To be sure, small businesses pivot for all sorts of reasons, and it’s not always because they are struggling. Francis Perdue, a publicist and business consultant in Birmingham, Ala., began selling PPE products including gloves, kn95 masks, surgical masks, customizable cloth masks, child and adult-sized shields, suits, gowns and the Xenon Fever Defense machine which uses AI technology to measure skin temperature and detect potential fever. She says she saw a need for these types of products in local schools as well as in hospitals and clinics in predominantly black neighborhoods. She is still consulting, but doing this as a side gig while the need persists.

“I’M WATCHING SMALL BUSINESS OWNERS AROUND ME THAT HAVEN’T MADE ANY KIND OF PIVOT CLOSE LEFT AND RIGHT”


Another example is MORGAN Li, a retail and hospitality manufacturer in Chicago Heights, Ill. The company identified the need and opportunity to help businesses remain open or reopen to customers while abiding by new recommendations to support public health. Thus, the company began producing customized social distancing materials including sneeze guards, safety shields, signage and floor graphics for various businesses to remind employees and customers to comply with social distancing requirements, according to a spokeswoman.

PPE

More recently, Andy Rosenband, the company’s chief executive, saw another opportunity to help communities prepare for another critical stage—reopening schools. He created a line of personal protective equipment that specifically addresses the challenge of social distancing in schools to keep students, teachers and staff safe.

For some small businesses, the shift is likely to be a permanent one.

JB Herrera, founder of Perceptive Insights a San Diego-based small and medium business consulting and mentoring company, says his firm was growing, but PPE products offer the ability to create a broader impact and are likely to be more profitable than merely a consulting business.

He has clients in China and back in December when things were starting to get bad there, he realized that the problem could spread massively to the U.S., and if it did, 80 percent or more of businesses would be negatively impacted, in his estimation. Using his business expertise regarding supply chains and pre-existing and new contacts, his company shifted gears to introduce in March a line of FDA-registered products designed to create and maintain safe environments. The products include commercial and personal cleaning solutions, masks, light technology disinfectants, air filtration, and personal sanitizing kits.

Even before the pandemic, the PPE market was worth several billion, he says, and that’s likely to grow exponentially over the next five to 10 years. So much so, that he expects the new business line to represent 90 percent of his revenue for the next three years—at least.

“Even after the spike goes away, it’s still going to be a profitable business in its own right,” he says.

Mnuchin and Powell Defend Pandemic Aid Programs, Say Congress Needs to Agree Before They Can Give out More Money

September 23, 2020
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Capitol BuildingYesterday, Treasury Secretary Steven Mnuchin and Federal Reserve chair Jerome Powell testified on the COVID response before the House Financial Services Committee.

They championed the largest stimulus package in the Nations’s history and said the economy was recovering well.

Mnuchin advocated for bipartisan support of targeted forgivable loans- a second PPP loan for businesses still losing revenue, funded by either a new stimulus, reusing the $130 billion still leftover, or reallocating $200 billion from the Main Street Lending program. Of course, all of that is up to Congress, he said.

“I think there’s broad bipartisan support for extending the PPP in businesses that have had revenue drops for a second check,” Mnuchin said.

Chair of the committee, Maxine Waters D-CA, led the questioning. She asked for removing the loan minimum, and noting the slow economic activity; she said 32% of renters could not pay their bills at the beginning of Sept. Other charges, like the possibility of a second wave, were leveled toward the executives.

In response to questions to the Main Street Lending Program (MSLP,) they argued the program was not designed as a stimulus but as a “backstop” and liquidity to already present loan markets.

This might explain why last month, the Congressional Oversite Committee investigated the MSLP because of its low adoption rate and found many problems. 

To date, less than $2 billion of loans are “in the pipeline” out of the $600 billion allocated in April. The program is designed with non-forgivable loans supplied by 509 traditional FDIC insured lenders, at a minimum of $250,000. The majority of these lenders are not accepting new customers, unlike PPP loans facilitated by more than 5,000 lenders to mostly new clients- including fintech firms.

The Fed already lowered the minimum down from $1 million, but after questioning whether it could be lowered to under $100,000, Powell said there was very little demand for loans under $100,000. In response to Representative Andy Barr R-KY, about how the program could be improved to service smaller businesses, Powell responded that the program wasn’t created for that.

“The limit now is $250,000, and we have very little demand below a million, as I told the chair a while back,” Powell said. “We’re not seeing demand for very small loans. And that’s really because the nature of the facility and the things you’ve got to do to qualify, it tends to be larger sized businesses.”

The SBA reported findings from the third round of PPP on Aug 10th. The organization found that loans under $50k were the largest category issued. 68% of the 5,212,128 PPP loans were under $50k, and 87% were under $250k. 

As Fintech Accelerates in Canada, Smarter Loans Expands

September 22, 2020
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smarter.loansSmarter Loans, a Canadian loan comparison site, announced they are expanding their services to new categories- including “Everyday Banking, Insurance, Investing Money Transfers, and Debt relief.”

The additions are part of the Smarter Loans’ mission to become the go-to place for Canada’s online financial options. Founders Vlad Sherbatov and Rafael Rositsan founded the company to bring together information on the top financial companies all in one place. They started with information on personal and business financing but have expanded to auto loans, mortgages, equipment financing, and information on all kinds of financial products.

“We wanted to bring additional financial services and products that people can now access online,” Vlad Sherbatov, the president said. “And to do that, we partnered with some of the leading companies that offer these financial services.”

Vlad Sherbatov Smarter Loans
Above: Smarter Loans President Vlad Shebatov speaks at deBanked CONNECT Toronto 2019

The addition is the latest resource for their 40,000 monthly user base, who access a database of top banks, credit unions, and innovative fintech leaders. Rafael Rositsan, the CEO, said as a trusted industry voice, the firm is adding this new info to update consumers on new opportunities firms provide.

“There’s a rise of companies that are now offering innovative products online,” Rositsan said. “Canadians might not be aware of some of the services that are out there.”

Sherbatov said that Canadians have been gravitating toward conducting business on the go at an accelerated rate this year. The firm listened to the customer base and learned they’re not going online for just financing.

“Entrepreneurs are running their businesses online,” Sherbatov said. “People that used to just shop for household items online are now looking for ways to handle investments and everyday financial errands because the old way of doing things is not available.”

He said that many areas of the financial space have evolved. Customers can obtain life insurance, get a line of credit, and a bank account funded in less than 24 hours, all from the comfort of their home.

“This move is to both bring more services relevant to our existing user base that use Smarter Loans,” Sherbatov said. “But also for all Canadians that are looking for these types of products. We want Smarter Loans to be the go-to place for them to learn about [these offerings], and to learn about the companies behind these products.”

Smarter Loans Expands into Banking, Insurance, Investing, Money Transfers and Debt Relief Solutions

September 22, 2020
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Smarter Loans LogoSmarter Loans – Canada’s largest loan comparison website – is excited to announce their expansion into new financial categories that include: Everyday Banking, Insurance, Investing, Money Transfers, and Debt Relief.

Canadians nationwide use Smarter Loans to find the most innovative financial products and services in the country, compare their options, and make smarter financial decisions. Launched in 2016, Smarter Loans today works with over 80 of the top financial brands in Canada, including banks, credit unions, alternative lenders, financial services and innovative FinTech companies that are leading the digital transformation in the Canadian financial sector.

The expansion is another step by Smarter Loans in helping Canadians access more financial products online.

We believe that Smarter Loans is at the forefront in the evolution of how people want and expect to shop for financial products. There is a big shift towards buying online and companies that are setup to transact and sell their services on the Internet are winning. We work hard to seek out top financial brands and are really excited that Smarter Loans visitors can now find even financial solutions on our site. (Rafael)

It’s a great experience when a person can send money overseas, get life insurance, and open a savings account all from the comfort of their home or on their mobile device. Our mission is to highlight all of the great and reputable companies that offer Canadians that experience. (Vlad)

Smarter Loans has responded to the growing demand for digital financial products and services in Canada by securing working relationships with leading brands that offer financial services online, including chequing and savings accounts, investing solutions, insurance for personal and commercial coverage, international money transfers, debt relief and credit solutions.

The new categories are available to all new and existing Smarter Loans members, everywhere in Canada.

The new categories will help even more Canadians save time and money, and discover great companies that can help them with various financial needs, entirely online.

If you are a financial brand and are interested in discussing partnership opportunities please get in touch with Smarter Loans at: info@smarter.loans.

OLA CEO Mary Jackson: Colorado True Lender Bad for Borrowers

September 21, 2020
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ColoradoLast month, the Colorado Attorney General’s office announced a settlement with Avant and Marlette Funding, setting a precedent for how “true lender” cases will be handled. The fintech lenders and their partners are free to lend in the state, subject to a lot of restrictions, as long as they stick below the 36% APR level.

Some touted the decision as a safeguard for fintech bank partnerships. Still, many, like those represented in the Online Lenders Alliance (OLA)- saw misplaced regulation that harms borrowers more than it helps.

Mary Jackson, CEO of OLA, said that while well-meaning, the 36% rule arbitrarily limits the ability for non-prime credit customers to get a loan at all. The limit draws an arbitrary line in the sand, based on an outdated centuries-old lending system, and doesn’t describe loans that last shorter than a year very well, Jackson said.

“What it did was drive out all the lenders,” Jackson said. “Non-prime consumers have fewer choices. They have to go and be subject to fraud or more unscrupulous lenders, or they have to go back to overdraft as another option.”

Jackson represents a group of lenders that offer online services, which regularly partner with banks to provide loans nationwide at higher APR rates than some states allow. Jackson said these are not fintech “rent-a-bank” cases to skirt state regulations, but natural partnerships that enable larger institutions to gain the tech and talent of leading tech companies to reach a greater customer base.

“Big banks cannot keep up with the technology that fintech providers have developed,” Jackson said. “A key US bank has a lot of data scientists that they employ, but if you’re a regional or smaller bank, you don’t have that capability: it’s nearly impossible to drive an IT team as a banker.”

Mary Jackson
Mary Jackson, CEO, Online Lenders Alliance

Jackson said that when her firm Cash America, that offered storefront cash advances, was bought by online lender CashNetUSA, she saw the differences between in-person transactions and the IT teams necessary for online lending. “It’s like two different worlds, two different ways of looking at something.”

“Our lenders are sophisticated like Enova, Elevate, CURO, Access Financial,” Jackson said. “These are companies that employ hundreds of data scientists that compete for jobs with Google in Chicago and a small regional bank can’t keep up.”

Fintech talent is helping to reach the 42% of Americans that have non-prime credit scores- FICO scores below 680, according to the Domestic Policy Caucus. 

Jackson said these customers, many of whom can pay for loans, have almost no options. Jackson sees many of her partner companies offering a “pathway to prime” service, empowering customers to rehabilitate their credit.

“Most of these people are non-banking customers, these folks have damaged or thin file credit,” Jackson said. “Most banks don’t service that customer, except for overdraft- a 35$ fee for lack of money in their account- I think bankers want to be able to offer longer-term installment loans.”

Jackson said research backs up her claims, pointing to a 2018 US Treasury report that discussed how banks would have to rely on fintech partnerships to innovate and drive product change. That’s what is finally happening, Jackson said. 

She also pointed to a 2017 study into the effects of the 2006 Military Lending Act. The act intended to protect military families from lending products with an APR above 36%. The study out of West Point found that the limit only hurt military members, some of which lost their security clearances when their credit fell too low. 

“We find virtually no statistically or economically significant evidence of any adverse effects of payday lending access on credit and labor outcomes. In a few cases, we find suggestive evidence of the positive impacts of access. For example, our second survey suggests that a 1 standard deviation increase in the fraction of time spent in a payday loan access state decreases the probability of being involuntarily separated from the Army by 10%”

Not only was there no harm done, but the paper argues on behalf of payday lending as a healthy way to maintain the credit necessary to keep a military job.

She sees similarities in the legal fight over the creation of interstate credit card laws in the 50s and 60s, saying it used to be the case that consumers had to use a texas-based or California based card. The country had to decide how interstate credit worked then, and with the induction of new technology to loans today, the same question is being asked.

The majority of Jackson’s clients offer products above the 36% limit, in the 100 to 175% APR range. She said that looks high, but consumers are looking at it on a monthly basis, and most of them pay it off early.

“These fintech partnerships allow the bank to offer one rate to everybody across the United States,” Jackson said. “We feel that really adds more democracy to credit, making sure that those who’ve been left out of banking have a shot at it.”

Stavvy Co-Founder Kosta Ligris on Navigating Real Estate Loans in a Contact-less world

September 18, 2020
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contract signingHow does real estate loan signing work in a contactless world? One company offers a solution.

Stavvy, a platform that empowers businesses and lenders to close real estate loans digitally, has seen a dramatic change in their business landscape since the launch of their E-signing platform in March.

“Over the course of literally a couple of weeks, [states] realized that they had to empower people to be able to do business as usual, despite what was going on,” Co-Founder Kosta Ligris said. “We were able to put all the necessary tools in one platform to empower these title companies, law firms, notaries to have identity solutions when we went live in March.”

Right when the platform came live, contactless signing became a necessity. Kosta Ligris, a co-founder of Stavvy, said his team worked hard to include emergency digital notarization options in states that had not allowed it yet before. The market went from about 20 states with legalized digital signing to 48 that had legalized or created a temporary law.

Stavvy also reached out to engineers and employees who were losing their jobs during the first wave and picked up new hires while many firms were downsizing.

“The pandemic is a once in a lifecycle opportunity,” Kosta said. “I hope that we don’t see anything that resembles COVID again. But this opportunity has given us the chance to get in front of people that we otherwise would not have been able to hire.”

Unlike competitors, Stavvy does not get involved in signing or notarizing themselves, but instead offer a digital platform for both lenders, signers, and state compliance checking. The platform is somewhat like the Uber app Ligris said- they don’t bring a car to you, but they give you a digital way to connect to people who can pick you up.

In many states, especially in New York and New Jersey, complete digital signing is still not allowed. Instead, Stavvy encrypts film of the “wet signing” -ink pen on a document- and sends the encrypted data and other identification guarantees in a live “Zoom-like experience” to the county registry.

Stavvy LogoLigris said Stavvy is very passionate about empowering both lenders and signers. As an MIT entrepreneurship resident who looks at student companies and ideas every year, he knows about barriers to entry. He said one such barrier to digitalized innovation is a simple fear of change.

“Change in and of itself is always frustrating and scary, but it doesn’t necessarily mean that it’s bad,” Ligris said. “In so many industries where people regard technology, they look at it as this is the next thing that’s going to take my job away from me.”

That’s the concept Stavvy is fighting- that digital innovation is not automating away livelihood, but further connecting people. Ligris said that the one thing technology could not replace: broker buyer relationships.

“When it comes down to making one of the largest financial decisions of their life, they want a trusted professional,” Ligris said. “If we’re going to provide the technology, we want to empower the stakeholders that know best to be more efficient and better at what they do.”

Square Makes Jeopardy’s Daily Double

September 17, 2020
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“What is Square?”

That was the right question to the answer read by Jeopardy host Alex Trebek during an episode that aired this week. Contestant “Beth” hit a Daily Double and waged $2,000 to try and take the lead over “David” and “Joe.”

Square employees reacted on twitter by pointing out that the quoted transaction cost was a little out of date, but mostly took the honorable mention in stride.

NYC Taxi Drivers Protest, deBanked Reporter Goes For a Ride

September 17, 2020
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Johny Fernandez Green CabOn Thursday, NYC taxi drivers shut down the Brooklyn Bridge to formally protest the financing costs tied to their taxi medallions, the certificate that allows them to operate in the five boroughs. Tensions over “Medallion loans” have been bubbling over since last year when it was revealed that many borrowers had signed a Confession of Judgment to obtain their loan, which basically waived their right to settle any disputes with their lender in court should they be unable to make the payments. Since then, COVID has completely devastated an already suffering industry…

“Before it was good, we could make $100-$150 a day,” said Mohammad Ashref, a local Brooklyn taxi driver in a video interview with deBanked reporter Johny Fernandez. “Now it’s very hard to survive, we work very hard to make 60, 70, or $80 a day, but what can I do? I have to make a living. We have no other choice.”

NYC Taxi InterviewAshref technically drives a green cab, different from the yellow cabs that were protesting on the bridge in that they’re not permitted to accept street-hails throughout most of Manhattan. Green taxis also operate through a permit rather than a medallion, a still relatively new concept that was first rolled out in 2013 to facilitate ride-hailing in the outer boroughs where yellow cabs did not spend much time.

In the interview with Fernandez, Ashref pointed out that the success of the taxi business is intertwined with the restaurant industry. Many riders in the boroughs depend on cabs to take them to restaurants or night clubs, but with the complete ban on indoor dining still in effect within city limits, that need has mostly dried up.

According to the NYC Taxi & Limousine Commission, yellow and green cabs were making as little as $314 and $210 a week respectively during the peak period of the shutdowns. In a 40 hour week, these amount to a fraction of the $15/hour local minimum wage and that’s even before factoring in driver costs like a vehicle lease, loan payments, insurance, and more.

NYC Taxi Chart

deBanked has been exploring several areas of the New York City economy over the last few months. For instance in July, reporter Johny Fernandez looked into how the pandemic was affecting a street performer in Times Square that was dressed as Batman.

“The business now is slow,” Batman said. “There’s so few people at this moment […] At this moment I see people scared, they don’t want pictures…”

Batman, like others in New York City, was hopeful that a return to normalcy was just around the corner.

Dwolla Introduces New Push-to-debit Platform

September 17, 2020
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DwollaDwolla, an online payments platform, released a Push-to-Debit functionality that they said will allow faster payouts to a debit card and give clients additional flexibility.

“We have been moving money for quite some time,” VP of Product Ben Schmitt said, “In doing so, we’ve learned a lot about what our customers want.”

Founded in 2008, the Dwolla team has worked to incorporate many different ways for their users to move money. They offer same day, next day, and other payment types, but said customers were always looking for ways to transfer funds faster. Now with Press-to-Debit, Dwolla offers a way to shift funds instantaneously, a product that they say fits many use cases.

“It could be the gig economy, it could be online marketplaces, but people want to move funds faster,” Schmitt said. “And I think especially during a pandemic, getting funds quickly adds a lot of value.”

Dwolla wanted to offer the platform’s simplicity with debit speed. Schmitt said the process is PCI security compliant and nearly instantaneous, though it might take up to 30 minutes.

“The value of instant payments is in getting the funds now when you need them, but there’s an emotional response,” Schmitt said. “When you see the funds hit and they’re instant- when you push a button and show up just like that, it’s fascinating.”

It works not just for debit, but prepaid cards, meaning businesses paying employees or customers don’t need a relationship with a bank to get funds transferred.

“If you’re a gig worker and do some work during the day and finished your shift, you can use an app or website and clock out,” Schmitt said. “Then a business has a record of the work performed, and say ok, here’s the agreed-upon payment and issue that to you right away.”

Peter Ribeiro, CEO of US Business Funding – Talks About Experience and Success in 2020

September 17, 2020
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I recently caught up with Peter Ribeiro, CEO of US Business Funding, based in Santa Ana, California. US Business Funding is quite well known on social media for their company culture.

I asked Ribeiro about what 2020 has been like as a broker in this wild year of 2020 and you can watch it in full below:

Puerto Rican Businesses & People Resilient In Spite of Pandemic and Challenges, Says Alvelo

September 16, 2020
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Puerto Rico flagWhile the US economy slowly opens back up to careful in-person commerce, the territory of Puerto Rico is still facing rising case numbers- So how is business in the “Island of Enchantment?”

“I don’t think there’s anything that will shake the confidence of our small business owners in Puerto Rico,” said Sonia Alvelo, CEO of Latin Financial. “Businesses and the people of Puerto Rico are the most resilient I have ever known: I know that as I am one of them.”

Alvelo, a native to the island, has won awards as a top entrepreneur of the year for her business financing partnerships in the US and Puerto Rico. She said that even as the island faces its hardest challenges, the spirit of entrepreneurship remains unbroken.

Puerto Rico has been hit by irregular misfortune in the past couple of years. Destruction from Hurricane Maria and Irma damaged the 2017 infrastructure of the island immeasurably, and the response of the US government was painfully lacking. Commerce continued with caution, seeming to rebound. Then this year, earthquakes and aftershocks punctuated January and February, foreboding the coming storm.

The pandemic was slow to reach the island; Puerto Rico was the first US state/territory to impose a quarantine, banning business and all travel March 15th. The region is a territory of the United States, so it could not directly enforce control over its borders. Recently, Puerto Rico made the news with an increasing case count.

There’s also been the troublesome search for a new governor. After a mass protest, Governor Ricardo Rosselló stepped down last year. After his successor ‘appointment’ was deemed unconstitutional by the Supreme court of Puerto Rico, Wanda Vazquez, the former Secretary of Justice, took office.

In the August primary, thousands of ballots got stuck in delivery trucks that did not move, never reached polling locations. The candidates are now petitioning for a re-vote and the counting of the votes that were cast. The courts are still deciding, so even the election is facing challenges in Puerto Rico.

Besides that, the tourism industry has been devastated. Though the early shut down saved lives, the island saw an unemployment rate of up to 23% in July alone. That could be a low estimate, considering that half of the Puerto Rican workforce hold a job in the “informal economy.” The New York Times reports that the real unemployment rate in the middle of the summer could have reached close to 40%.

Sonia Alvelo Award at the Latinas & Power Symposium
Above: Latin Financial CEO Sonia Alvelo receives the 2019 Entrepreneur of the Year Award from Connecticut Secretary of State Denise Merrill

Even so, Alvelo conveyed the enduring willpower of the Puerto Rican people, that there was still confidence things would turn around. 

Alvelo is partnered with more than 97 pharmacies in Puerto Rico as an MCA provider, as well as with gas stations and other small businesses. She said that she has been receiving calls for business financing options non-stop, on a day-to-day basis. Alvelo shared information she learned from one of her clients.

“They suffered the most at the beginning, but you know only 5-10% of pharmacies in the islands are open,” Alvelo said. “But even still, and we’re talking a hurricane, earthquakes, a pandemic, everything- I still don’t think that anything will change the confidence of business owners in PR.”

“THAT WAS THE BEST EXPERIENCE, WHEN THEY GOT THE PPP FUNDS”

Alvelo is standing right next to Puerto Rican business owners, talking to them through their increasing needs during this time, she said. Latin Financial facilitated almost $2 million in PPP loans and $2 million in EIDL loans in the US and PR. 

“That was the best experience- when they got the PPP funds,” Alvelo said. “They were crying over the phone; it was incredible.”

Brendan Lynch, Alvelo’s fiancé and business partner, said that the program had a rough rollout. It was unclear how long the Fed money would last, but PPP ended up working well for Puerto Rican businesses. He even saw BlueVine begin funding Loans in PR for the first time.

“One of our finders here in the US was approved for the program, and we were able to use their online platform,” Lynch said. “And normally they don’t really fund in Puerto Rico, but they did allow Puerto Rican businesses to apply for funding; which is great because they had the technology to make it so simple and quick.”

Lynch said Latin Financial was sure to share links to a PPP loan application with every client to make sure aid funds were as accessible as possible.

“Businesses are probably still down-scaled somewhere between 60 to 70% of their total revenue,” Lynch said. “they’re still working shorthanded with less people in the office, and regulations on how many people you can have in your business are making it harder.”

Alvelo and Lynch are no strangers to environmental forces affecting their plans- the pair were planning on getting married in PR in 2017 before the hurricanes hit. 

Puerto Rico“We started actually looking [for a venue] again, and then COVID happened,” Alvelo said. “Clients were going to be invited and are always asking how they can help, just like when everything happened with COVID, the pharmacies all got together, and said if you need this let us know. Businesses are really working together because they know that they need each other.”

Maria Barzana, the owner of Farmacia Asturias, has been a longtime client of Latin Financial, one of the first dating back to 2015. Barzana went to Alvelo for help. She said the island did not feel an economic impact until this August. Businesses, including most medical offices in the country, have been closed for the past five months. Pharmacies are finally feeling it.

“At the beginning of COVID-19, we were able to manage the economic factor by invoicing refills of prescriptions and the sale of basic necessities related to COVID,” Barzana said. “Due to social distancing, the flow of clients/patients has decreased, concentrating on items necessary to combat COVID-19 and maintenance medications.”

Latin Financial is almost back to regular funding after rushing to help complete PPP and EIDL stimulus loans. Sonia Alvelo will be a panelist speaker this Sept. 24, for the annual Latinas & Power Symposium.

Upstart Welcomes Policy Head Nat Hoopes

September 15, 2020
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Upstart, an AI lending platform, welcomed longtime industry advocate Nat Hoopes to the team this week, to lead as Head of Government Policy and Regulatory affairs. Hoopes previously served as the Marketplace Lending Association executive director (MLA), where he grew the trade group and advocated on behalf of its members.

“My hope is to bring the energy that I did in growing the organization [MLA] and also just in tackling a lot of different workstreams to Upstart,” Hoopes said. “But also, deepen their ties with the DC policy community.”

Hoopes is excited to join the Upstart team and advocate for the company to state and federal legislators. Hoopes intends to address the development of two main issues as he enters his new office: facilitating better credit reporting with the help of AI, and using better credit to bring financing options to disenfranchised minority communities.

Upstart uses non-traditional data like a college education, job history, and residency to evaluate borrowers for personal loans. The company recently introduced an AI-powered Credit Decision API to deliver instant credit decisions. Upstart added auto loans to the platform in June, so the new API works with personal, student, and auto loans.

Hoopes said he and Upstart shared a similar motivation: to provide credit to people and improve financial futures, especially to people unfairly blocked from receiving credit. 

“I think because of the structural inequality that we have in our society, a lot of minority groups get really left behind and stuck in a low credit score environment,” Hoopes said. “By using more data, and using it in new ways with artificial intelligence we can really level the playing field.”

Hoopes said that he has already seen Federal regulators in the FDIC and the OCC, and the CFPB working on using AI learning in credit underwriting. He said the Fed is planning out how to help banks adopt more of these models to approve more people.

“I think that’s a key initiative,” Hoopes said. “A key area where I’ll be working for Upstart: Engaging with regulators on how to help banks get more comfortable in serving more customers,” 

While advocating for banks to use the credit capabilities of partners like Upstart, Hoopes said he would be devoted to ensuring decisions are made with equality and inclusion in mind. Hoopes will stay on as a member of the MLA board, and working in concert with his responsibilities advocating at Upstart.

“At MLA, I helped develop the diversity and inclusion strategies for our part of the fintech industry,” Hoopes said. “I’ll remain active on those issues at Upstart both collectively with other members of the industry as a member of the MLA.”

Hoopes referred to the Diversity and Inclusion strategy released by MLA last month. Board members signed off on the paper, written with the help of the National Urban Leauge. League president and CEO Marc Morial and Representative Gregory Meeks (D-NY) to create a vision of an inclusive fintech industry.

Hoopes addressed what he said was the failure of the American credit scoring system. For instance, according to Upstart’s study in 2019, 80% of Americans have never defaulted, yet only half have a prime credit score. It’s a problem he says disproportionately affects minority borrowers.

According to a Federal Reserve study, more than three times as many Black consumers (53%) and nearly two times as many Hispanic consumers (30%) as White consumers (16%) are in the lowest percentiles of credit scores.

Hoopes said Upstart does not collect racial data from applicants but cites a CFPB test that found Upstart’s platform increased access to credit across race and ethnicity by 23-29% while decreasing annual interest rates by 15%-17%.

University of Delaware, Other Universities Going Long on Fintech

September 15, 2020
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This story appeared in deBanked’s Jul/Aug 2020 magazine issue. To receive copies in print, SUBSCRIBE FREE

The University of Delaware recently received a $9 million tax incentive to construct a new Fintech Center on its premier Science, Technology, and Advanced Research (STAR) campus, with help from a community-building company Cinnaire. Slated for completion in 2021, the building marks yet another fintech-focused resource for higher education.

Financial technology programs have long been offered at prominent business schools such as Harvard, Stanford, and Columbia, international schools such as Oxford, and research institutions like MIT since the late 2000s. 

Now that fintech has become a long term value creator in the financial world, other institutions such as the University of Michigan, Fordham, and Delaware are excited to implement fintech opportunities on campus for undergraduate and graduate students alike.

UD FintechDiscover Bank and Cinnaire jointly funded the building, a $39 million project. According to Delaware plans, it will create a space on the Delaware STAR campus to host a new Financial Services Incubator to encourage research and collaboration between students and industry leaders.

“The FinTech building will bring together computer science, engineering and business experts in cybersecurity, human-machine learning, data analysis, and other emerging financial technologies,” said Levi Thompson, Dean of the College of Engineering. “These collaborations will allow us to provide our students with a very unique experience that prepares them to excel in the workforce. Furthermore, our Fintech discoveries will benefit people throughout Delaware and the world.”

Cinnaire is a national nonprofit that focuses on improving communities’ financial health by creating capital solutions to revitalization projects: lending funds, managing, and building housing structures. 

Funding communities is what Cinnaire does best: in this case, utilizing a New Markets Tax Credit to fund an addition to the Delaware campus.

Fordham FintechThe nearby University of Fordham at Lincoln Center has also been trending toward preparing students for a fintech world. Undergrad and graduate students pursuing an MBA through the Gabelli School have the option of a fintech concentration.

The course work not only incorporates data science and machine learning skills into the worlds of credit lending and risk management but facilitates relationships between students and a wealth of industry partners. 

Sudip Gupta, professor, and Director of the MS Quantitative Finance program, spoke about the courses’ popularity there. The program is ranked in the top 20 of its kind in the world by Risk Magazine.

He has seen a revolution in fintech in the past few years that has recently received a big push by pandemic forces, introducing the wholesale adoption of fintech techniques into traditional financial institutions.

“The fintech revolution in the industry- big data, machine learning techniques, storage capacity, and cloud computing has been going on for the last couple of years,” Gupta said. “The pandemic provided the big push to move toward that direction.”

“STUDENTS ARE INTERESTED IN LEARNING MORE ABOUT THIS KIND OF SPACE”

Gupta has been following the development of alternative credit closely, recently publishing an award-winning paper studying machine learning to create alternative consumer credit scores using mobile phone and social media data.

“The idea of my research- let’s look at people who do not have a credit history or enough traditional credit you could get from a FICO score,” Gupta said. “Using this data, it turns out they are better predictors, and better to judge than FICO, and can reach out to more people.”

Gupta is excited for the adoption of big data techniques into alternative and traditional consumer loans because it offers a win-win for consumers and institutions alike, he said. Echoing the findings of many successful alternative finance companies, Gupta said his research showed that collected data could offer better insight for lending than “stale FICO scores.”

Ross FintechUp north at the Univerisity of Michigan, Professor Robert Dittmar at the Ross School of Business heads the Fintech Initiative. He is working on adding even more fintech classes. Recently, through a partnership with PEAK, a Chicago fintech lending company, Michigan launched a fintech initiative that incorporates undergrad and grad classes, faculty research, and a fintech entrepreneurial club that connects students to industry leaders. 

Michigan Ross is adding fintech classes for a variety of reasons.

“The simplest reason: students are interested in learning more about this kind of space,” Dittmar said. “And we’re seeing more demand from the industry side for students that know more.”

For years Dittmar said tech companies and startups in silicon valley were pioneering innovations in the industry. Through talking with alumni and contacts in the industry, Michigan found that fintech has gotten to the place where there is an excellent supply of data engineers. Still, there is a demand for professionals with the financial business expertise to implement these technologies.

“What we are trying to do at Ross is fill in that gap,” Dittmar said. “what we’d like is for [students] to know enough about the technology that they can provide the insights of finance and business to the people that are doing that technical work.”

At Ross, they are organizing what will one day be like a fellowship program. The program will feature a combined learning experience: students will learn data analytic finance, apply their computing skills in credit decision making classes, and then connect with the industry in experiential learning classes.

“In the last couple of years, I have been taking students to London to work at fintech startups in the UK,” Dittmar said. “And we are hoping to expand that program so that most or all graduate students have the opportunity to participate in something like that.”

Last year Ross hosted a “Fintech Challenge” competition to design a banking service to reach customers in a “banking desert” in rural Michigan. The program is hoping to host another challenge this year, despite complications of COVID-19.

Additional Lawsuits Filed Against OnDeck Directors Over Enova Deal

September 14, 2020
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At least three federal lawsuits have been filed against the directors of OnDeck relating to the announcement that the company is being acquired by Enova. These suits allege securities act violations with regards to how the technical aspects of the deal were disclosed while the initially reported action in the Delaware Court of Chancery alleged a breach of fiduciary duty.

The federal securities lawsuits are:

Daniel Senteno v. On Deck Capital, Inc. et al – Case 1:20-cv-01179-MN
Eric Sabatini (on behalf of a class) v On Deck Capital, Inc et al – Case 1:20-cv-01166-MN
Mohamed Aboubih v On Deck Capital, Inc. et al – Case 1:20-cv-07319-Vm

Business Loan Broker “The Tyrant” Sentenced to at Least Five Years in Prison

September 10, 2020
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The owner of a Long Island business loan brokerage convicted of orchestrating an advance fee loan scheme, was sentenced to prison this week. The judge handed Demetrios Boudourakis five to ten years and ordered him to pay a total of $880,000 in restitution to victims.

Boudourakis solicited business owners for a loan and then charged them an upfront fee when no loan was actually forthcoming. He pled guilty in June to the charge of grand larceny in the 2nd degree.

GOP Proposes PPP Skinny Bill, Vote Thursday

September 9, 2020
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Capitol BuildingOn Tuesday, Senate Republicans introduced a slimmed-down “Skinny Bill” stimulus proposal, offering $500 billion proposed aid that they believe both sides of the aisle can agree on.

The Bill will extend PPP loans into the fall with $258 billion and certain small businesses will also be able to receive a second forgivable loan. If passed, the Skinny will also reintroduce weekly unemployment benefits of $300- half the $600 CARES act benefits that ended in July.

The Senate will vote on the proposed bill Thursday afternoon. The vote will test the GOP’s cohesion, which could not garner enough support for the $1 trillion HEALS act introduced in July. To pass, the Bill will need seven Democrat votes and 60 votes overall.

If it passes, it will have to survive the Democrat-controlled house. House Majority Leader Nancy Pelosi has already spoken against the Bill, saying it is filled with Republican “poison pills” that cannot pass in the House. House Dems are calling the Bill wholly political. Senate Majority leader Mitch McConnell said that if the Bill can not pass, the GOP can demonstrate that Dems are “stonewalling” aid.

Lendini Relaxes Previously Announced Covid-Guidelines

September 9, 2020
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Bensalem, PA –September 9, 2020– Lendini is excited to announce its return to small business funding. Through superior efficiency and analysis, the company has improved the process of alternative funding from some of the brightest minds in finance, technology and analytics. With updated (temporary COVID-19) guidelines, they remain dedicated and committed to their merchants and ISOs in these unprecedented times.

Lendini works directly with you to prepare the best package for your client, whether that be a Business Cash Advance (BCA) or Merchant Cash Advance (MCA). Simply put, Lendini advances money based on the average monthly gross sales of a business or average monthly credit card sales. Money can be advanced quickly because securing assets and collateral is not required.

Get clients funded in 4 easy steps; application submission, information review, approval or denial, final review and your client is funded. Minimal documentation is required. The company must have 18 months in business with $7,500 per month in gross sales and an average daily balance of $750. We require a minimum of 5 deposits, monthly into the business bank account.

Funding Stipulations:

  • Bank login
  • Funding call with merchant

Required Documents:

  • Application
  • All 2020 business bank statements + MTD
  • Signed and dated agreement
  • Proof of business existence
  • Meets state registration requirements
  • Proof of ownership
  • Merchant interview
  • Driver’s license
  • Voided check (starter checks will not be accepted)

With $540 million dollars funded to 15,000 small businesses, Lendini offers incomparable solutions customized specifically for your client. The company prides itself in being able to offer up to $300,000 in as little as 1 business day (in most cases). Funding can be used for any business purpose you may have.

Lendini is not a bank and does not provide loans, they offer cash advances. With Lendini, business owners receive the capital they need without lengthy delays or excessive paperwork. In general, Lendini offers pre-approvals in under three hours and next day funding of approved advances. The staff provides unparalleled customer service and treats each business owner with the respect they deserve.

Fountainhead CEO Chris Hurn Speaks With deBanked About His Experience With 2020

September 9, 2020
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Chris Hurn, the CEO of Fountainhead, a national non-bank direct commercial lender based in Lake Mary-FL, recently told deBanked in an interview what his company has experienced in 2020. The company was recently ranked 1,502 on the Inc. 5000 list.

Watch the interview below:

The New Largest Merchant Cash Advance in History: $90 million +

September 9, 2020
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The largest merchant cash advance in history (at $40 million), first publicly disclosed in 2018, has been outdone. On Tuesday, the Receiver in the Par Funding SEC case revealed that its largest customer had outstanding purchased receivables of $91.3 million. The customer is an office and cleaning supply company based on Long Island. The amount is now the largest known merchant cash advance deal in history.

Par’s second largest customer had outstanding purchased receivables of $35 million.

Par’s total receivables are estimated to be $420 million. $228.8 million of it stems from just 10 customers including the two referenced above, according to a recently filed report.