Archive for 2020
President Trump officially signed the economic relief package Sunday night. While the House, President, and Senate can’t agree on the checks individual Americans will get from Uncle Sam, $284 billion for PPP is on the way.
In preparation, Lendio, an online loan marketplace that facilitated $8 billion in PPP funds over the summer, has already opened the application floodgates. But when is the bill landing?
“The SBA has ten days from the time it was signed into law, January sixth, when they have to give guidance,” Lendio CEO Brock Blake said. “Then, they have some time after that they’ll open it up, my guess is that it will likely go live somewhere between the 10th to 15th.”
Firms, start your funding engines; the money is coming in about two weeks. And Blake said that with the demand for capital this high—the funds would go quick.
“My guess is that it will be two to three weeks, maybe a little longer,” Blake said. “One of the reasons it will last a little bit longer is because they reduced the loan maximum size from ten million to two million. As a result, two to three weeks or more like, you know, three or four.”
Lawmakers initiated limits to the high end this time around to halt concerns that “small business” bailout money was going to larger sized firms. That isn’t the only change for what some say could be the final round of government stimulus.
“I like what they’ve done this time around, addressing some of the key issues, first of which allowing borrowers to have a second turn on PPP loans,” Blake said. “This pandemic has lasted longer than anyone expected, and there’s a lot of restrictions on these business owners.”
The first time around, the Fed handed out forgivable funds based on two and a half months of payroll, and that went real quick, Blake said. For a firm to meet the criteria for a second loan, they have to prove they have a 25% reduction in revenue from 2019 to 2020.
Blake said he was excited that the new aid is granting industries especially hard hit, like restaurants and hotels, to get larger loans “three and a half time instead of two and a half times.” Blake’s favorite part of the new program is incentivizing lenders to serve genuine smaller businesses, where last time they were not.
“Last time, so many of the smallest small businesses were at a disadvantage because we all know lenders prioritize the largest loan sizes first,” Blake said. “They left the smallest of small business out.”
Lendio and fintech lenders focused on this underserved market of small businesses last time, Blake said. After advocating on behalf of small borrowers, Blake said there are incentives for lenders to give to the underserved and actually make money.
“Thankfully, in this new PPP program, they created a new incentive package for loans smaller than $50,000,” Blake said. “That makes these smaller loans a priority, instead of put toward the back of the list.”
DeBanked’s Top 10 most read stories of 2020 all involved the Payment Protection Program (PPP). It was by far the hottest topic in small business financial services for the year. As a result, we consolidated our most read stories into FIVE categories and this is what our readers consumed most in 2020!
The Payroll Protection Program saga boiled down to one major question early on in the pandemic: Who, if anybody, would be able to lend the money out on the government’s behalf? PPP Lender Requirements was the most read story on deBanked in 2020, followed by the world being curious to find out who was the biggest PPP lender. On April 22, deBanked was the first to spread the story that Ready Capital (Knight Capital‘s parent company) was the largest PPP lender in the US for Round 1.
2. NY’s Disclosure Bill
The biggest non-PPP story of the year was a bill passed in New York that was signed by the governor at Midnight on Christmas Eve. SB 5470, which some have dubbed “The Small Business Truth in Lending Act,” is slated to completely overhaul the non-bank small business lending market in the state. The bill was passed by the legislature in July.
It’s difficult to overstate how much of a rollercoaster it was for the stalwart fintech lender in 2020. OnDeck started the year with optimism, announcing a NASCAR sponsorship in March just as the company’s stock suddenly plummeted by 30%. By the time summer rolled around, the company was no longer engaged in non-PPP lending activities and was battling in a fight for its life with its creditors. In July, OnDeck was acquired by Enova, which led to shareholder lawsuits over the terms and disclosures tied to the deal. Somehow, by year-end, OnDeck managed to pull itself back together, thanks to its new parent company. It successfully originated $148M worth of loans in Q3.
Wow, just wow.
The impact of Covid was a close 4th on deBanked’s top read list. In March, deBanked published a writeup of How Small Business Funders [Were] Reacting, an interesting glimpse into the pandemic as it was just unfolding. At that time, attitudes ranged from confidence in being prepared to being convinced it was time to shut everything down. One notable takeaway from the commentary is that nobody surmised that the situation would persist for the entire rest of the year.
Capify CEO David Goldin made an early bold prediction, however. “I would not be surprised if we learn in the next few weeks that the President of the United States has it,” he said in an interview with deBanked in mid-March. President Trump was diagnosed with Covid-19 less than six months later on October 6th.
Three scandals were a near-tie for views in 2020 so we’re revisiting them all here.
Brendan Ross & Direct Lending Investments – Brendan Ross, the former CEO of a very popular fintech lending hedge fund, was indicted on August 11th. Federal officials including the SEC, say that Ross defrauded investors while managing more than $1 billion in assets. Ross’s “unwinding” began in 2019 when he suddenly resigned from the firm and wrongdoing was alleged.
Jonathan Braun – Jon Braun, made infamous by a Bloomberg Businessweek profile, checked into FCI Otisville earlier this year after having been sentenced the previous May for drug related offenses. Braun resurfaced in the news this summer when the FTC announced civil charges against him for alleged acts related to a company named Richmond Capital Group, LLC. The New York State Attorney General filed its own charges against Braun and affiliates at the same time.
Par Funding – A financial services firm based in Philadelphia generated major headlines this year after the SEC filed a lawsuit against the company that ultimately resulted in it being placed in receivership. A series of stunts and accidents got the SEC’s case off to a rocky start, but the likelihood of Par ever restarting its business has diminished to almost nothing.
Merrrrry Christmas. New York Governor Andrew Cuomo reportedly signed SB 5470 into law late last night, a bill that forever changes and complicates nearly all forms of small business financing in the state.
The law gives regulatory enforcement authority to New York’s Department of Financial Services, requires APR disclosures on contracts where one can’t be mathematically calculated, and mandates that customers be told if there is any “double dipping” going on. And that’s just the beginning of what it contains.
A coalition of small business capital providers fiercely opposed the language of the bill. Steve Denis, executive director of the Small Business Finance Association, wrote in an op-ed that “the lack of cogency and lazy approach to this legislation is a disservice to the hard-working entrepreneurs who continue to open their businesses while facing daily economic uncertainty.”
The bill was also opposed by fintech lenders like PayPal.
Proponents of the bill celebrated the news on social media in the early morning hours of Christmas Eve.
Ryan Metcalf at Funding Circle, a company not even based in New York that moved all of its tech jobs out of the US to the UK this summer, wrote on LinkedIn that the bill will “save New York #smallbiz between $369 million and $1.75 billion annually.” Funding Circle, as a member of the Responsible Business Lending Coalition (RBLC), was heavily engaged in the advocacy process.
Several of RBLC’s members have already ceased small business lending in the US, some permanently.
Unique circumstances also exist at an ally of the RBLC, the Innovative Lending Platform Association (ILPA), which Funding Circle is also a member of. Two out of the 11 members were acquired before the bill could even be signed, Kabbage and OnDeck.
NY State Assemblyman Ken Zebrowski and State Senator Kevin Thomas, who sponsored the bill, cheered the signing of it.
“Thanks to Governor Cuomo for signing our Small Business Truth in Lending Act,” Zebrowski tweeted. “Extremely proud to have worked with many to establish the most comprehensive small business disclosure law in the nation. With the pandemic surging on, small biz owners need these critical protections now.”
“The signing of the New York State Small Business Truth in Lending Act is a victory for New York’s small business owners,” Thomas wrote on twitter. “Thank you for signing New York’s first-ever small business lending transparency bill into law.”
“I think that the companies and organizations that support this legislation don’t fully understand what’s actually in the bill,” SBFA’s Steve Denis said to deBanked in August. “[…] They have no problem pounding the table and taking credit for its passage, but I guess they don’t realize it will subject them and the rest of the alternative finance industry to massive liability, massive fines—upwards of billions of dollars worth of fines.”
And yet Senator Thomas tweeted, “This will help a lot of small businesses trying to get back on their feet during this pandemic.”
It is unclear, of course, who they expect to provide such capital now to do this.
Congress finally passed a new stimulus bill.
The aid package calls for $600 payments to American adults and $284 billion for the second round of PPP, with some amended rules.
Following its passage, President Trump called the bill “a disgrace” and voiced that individuals should be receiving much more, as much as $2,000 in stimulus. He is refusing to sign it unless changes are made.
“It’s called the Covid relief bill but it has almost nothing to do with Covid,” Trump said.
And yet the passed deal was considered a watershed moment for congressional leaders. After standing in the way of a stimulus of more than $500 billion and refusing to sign a House-passed $3 trillion aid package this summer, Senate Majority Leader Mitch McConnell spoke Monday with a message: help is finally on the way.
“Moments ago, the four leaders of the senate and the house finalized an agreement,” McConnell said. “A package of nearly $900 billion, it is packed with target policies to help struggling Americans who have already waited entirely too long.”
McConnell said that around $500 billion of the package was reused money from stimulus spending allocated earlier this year, that was never used.
The stimulus also extends unemployment benefits for another 11 weeks and adds a $300/week unemployment bonus. .
“It is a strong shot in the arm to help American families weather the storm,” Senate minority leader Chuck Schumer said. “For the 20 million people that would lose unemployment benefits the day after Christmas, help is on the way.”
This round of PPP will allow a second forgiven loan to some firms and attempt to curb larger companies’ ability to take more than $2 million. Firms will be eligible for a second share of loans if they can prove a 25% reduction in business from the same quarter in 2019 and other stipulations.
Lawmakers plan to make it easier for nonprofits and local media companies to get funding and are allocating $15 billion for performance venues hit by lockdown restrictions. The stimulus will also give billions toward school aid, protecting renters from evictions, protecting gig workers, internet broadband, funding food access.
“Our purpose has always been to crush the virus,” House majority leader Nancy Policy said. “Put money in the pockets of the American people, which we do in this legislation.”
For couples who live together, forced “quality time” due to a pandemic has been considered an exciting change in the household’s dynamic, to say the least.
Trouble in paradise? Possibly, as one firm found, the amount of people inquiring about divorce loans has risen 62% in 2020, compared to last year.
If you didn’t know divorce loans were an option in the first place, Loanry, an online loan lead generator, said divorces could cost upwards of $12,000 in states like Delaware and New York, and in California up to $14,236.
Loanry looked through their loan transactions and found that not only were divorce loans higher by 68% in New York and 71% in Florida, but the wedding loan business was in trouble.
2020 has been a record year for marriages ending – and hundreds of thousands of couples being unable to hold a wedding in the first place.
According to Statista, over 2 million weddings occur every year in the US, at an average cost of $30,000. Wedding site The Knot found 93% of planned marriages were rescheduled. Loanry found 11% of planned weddings took out loans.
For those of you at home (most of you), couples are paying back $3.7 billion without even saying, “I do.”
Answering the question no one asked: what is the worst way to start a lifelong journey together?
Loanry has sets of advice to deal with the costs of both weddings and divorces, but the simplest seems to be “don’t do either.”
“Financing a wedding using a loan should be taken very seriously, and we don’t recommend it,” Ethan Taub, founder of Loanry.com, said. “Finding ways to cut costs on your wedding expenses is a far more effective alternative to avoid unnecessary debt yet still enjoy your big day.”
He went on to comment that while divorce in this stressful year is sad, make sure to research the best, most affordable option.
LendIt Fintech distributed a marketing flyer via email yesterday to its subscribers and it got us thinking about how much online fintech news people are consuming, especially in this era of 2020.
LendIt reported 65,000+ monthly page views for its LendIt Fintech News and that it had 800,000+ podcast downloads.
Meanwhile, deBanked and DailyFunder combined are recording 311,000+ in average monthly page views. Visitors are also spending 7,300 hours on our sites combined each month on average.
These figures are enormous. Thanks for reading!
During the election, we heard candidates on both sides to toss around the phrase “small businesses are the backbone of the American economy.” A staple of exhausted political rhetoric, made trite despite its truth because for many politicians it’s a talking point, not a platform. We must move from rhetoric to action. To do so, America’s political leaders need a real understanding of what small businesses need—and what they don’t.
The struggle between understanding and posturing is on display right now in Albany. While small business owners struggle to open their doors, the legislature passed a so-called “truth in lending for small business” bill that claims to provide more disclosure to business owners seeking financing. Led by Senator Kevin Thomas and Assemblyman Ken Zebrowski the bill is currently pending before Governor Cuomo. The legislators recently authored an op-ed that further demonstrates their failure to recognize that the innocuously named bill is rife with faults and lacks a competent grasp of small business issues. The critical blind spots in the bill’s design threatens billions of dollars in capital leaving New York—a failing small businesses owners can scarcely afford at such a difficult time.
Yet, rather than incentivizing finance providers to stay in New York, the legislature is focused on complex disclosures that lack real meaning or understanding to small business owners. Senator Thomas opined on the Senate floor “… the reason I introduced this bill is because people don’t use standard terminology.” Interestingly, this bill creates several new terms and metrics that would be required to be disclosed that have never been used before in finance. Terms like “double-dipping” and new confusing metrics that even the CFPB under President Obama labeled as “confusing and misleading” to consumers. This bill’s fatal flaw is that it has confused information volume with transparency, somethings a recent study proved would harm small business owners.
Even Senator Thomas acknowledged the legislation’s myriad of problems while still encouraging its passage. In his colloquy with Senator George Borrello on the Senate floor, right before he called New York small business owners “unsophisticated,” he mentioned how his bill had “many issues” that he “hoped” would be worked out before implementation. Hope is not a strategy and it won’t help small business owners obtain the financing they need to stay in businesses. Advancing legislation that would limit options for entrepreneurs working to stay in businesses during a pandemic that has crippled the New York economy represents a reprehensible failure of leadership.
Minority-owned businesses have faced a disproportionate economic impact from the pandemic. According to the Fed, Black-owned businesses have declined by 41% since February, compared to only 17% of white owned businesses. Further, the Paycheck Protection Program (PPP), the federal government’s signature relief program for small businesses, has left significant coverage gaps: these loans reached only 20% of eligible firms in states with the highest densities of minority-owned firms, and in counties with the densest minority-owned business activity, coverage rates were typically lower than 20%. Specific to New York, only 7% of firms in the Bronx and 11% in Queens received PPP loans. Moreover, less than 10% of minority-owned businesses have a traditional banking relationship—something that was initially required to have access to the PPP.
The lack of cogency and lazy approach to this legislation is a disservice to the hard-working entrepreneurs who continue to open their businesses while facing daily economic uncertainty. Governor Cuomo has worked tirelessly to continue to provide economic relief to both businesses and consumers—removing billions in financing for small businesses will only hinder this effort. New York can do better.
Small Business Finance Association
“When the Pandemic first started, a lot of the classes we worked with just canceled, everything went downhill,” Loida Velasquez, an LA-based real estate broker, said. “But starting in June until now— everything turned around. Inventory is so low, and there are so many buyers, most houses are selling in 24 hours. I’ve never seen a market like this before.”
It’s a seller’s market like you can’t believe right now, said Velasquez, and that’s what she specializes in: running a cold-calling, door-knocking real estate firm that jumps on expired listings, revamps properties, and sells them on the open market.
After five years of rapid success, Velasquez has taken her charisma to social media, creating a series of Youtube videos to help other brokers find the success she has in the real estate world.
“When I started my real estate career, I remember trying to find videos of people sharing their experience, but most of them were men: I didn’t find many women,” Velasquez said. “So I told myself, ‘you know what, I’m going to start creating videos to put out my journey so people can see what it’s like not only as a real estate agent but as a younger woman in this business.’ And that’s how my channel started.”
Velasquez has also begun teaching online courses for brokers who need help developing their skills. She offers an all-encompassing approach, including cold calling and knocking on doors, that she said many modern brokers don’t use anymore, even though they never became any less viable.
“I knew that the old school approach of cold calling and door knocking was something that a lot of agents don’t like to do,” she said. “So if I became very good at it, I knew that I was going to become successful a little faster than someone who doesn’t incorporate that type of prospecting.”
It has set her apart, and part of why she launched online classes: her videos on real estate were so successful other agencies were telling their trainees to watch her work. Many agencies don’t offer adequate training, Velasquez said, some give out unethical advice. When newly licensed brokers find Velasquez, she said she stands out as an agent with standards and knowledge of the industry.
That knowledge comes in the form of hard-earned experience, one that includes making slip-ups along the way, something she said ocassionally still happens. It’s all part of the game, she explains. Many of her leads come in from her online networking now, but her techniques are still honed to reach out to sellers looking for a knowledgeable agent who knows the market.
“A lot of my business comes from social media, whether it’s from agents that watch me and send me referrals, or just consumers that are trying to learn what it takes to buy or sell a house,” Velasquez said. “But aside from that, I still cold call a lot of ‘for sale by owners’ and expired. Many of them still want to sell, but they had to pull their home off the market. Many of them didn’t have a good relationship with the last agent and want to find someone else who can do a better job.”
And that relationship comes in the form of Velasquez calling out of the blue, flipping the house successfully in a matter of weeks, sometimes two or three sales every month.
Things were not this easy for what outwardly looks like a charismatic, polished agent; Velasquez attests that she was quiet and anxious even to present a school project before she found her love of sales.
“I was the shyest person ever, and I was terrified of talking in group projects,” Velasquez said. “If people from my past saw me, they would never guess I would be doing public speaking events and would have never known this is what I would become.”
Velasquez was a sociology major before getting a side job as a brand ambassador, traveling to conventions and selling face to face to customers. Everything changed.
“Telling people about the product, getting paid to talk to people, helped me get myself out of my shell and comfort zone,” She said. “I don’t know why I was scared of talking to strangers, but it helped me get out there, and I switched my major to marketing.”
After she went back to get an MBA in 2015, she started making Youtube videos and found her passion. She said that with determination, anyone could get over hurdles and find success. Selling real estate is not what it looks like on TV, but Velasquez noted the hard work is worth it for the payoff.
“After the turning point, I started to see people responding ‘because of this video, I got my first listing.’ I said, if I need to get myself out of my comfort zone to help people, this is something I know I need to do,” Velasquez said. “If you stay focused and surround yourself with the right people, you’ll make it. There will be many times you will doubt yourself, and it is not like what you see on TV.”