Archive for 2020
7/17 Update: OnDeck Still Negotiating Workouts With Creditors
July 17, 2020This morning, OnDeck disclosed that it was still actively engaged in securing workout arrangements with its creditors.
For its corporate debt facility, OnDeck’s lenders consented to an additional two week extension on the increased monthly principal repayments that OnDeck is required to pay as a result of the company’s covid-impacted portfolio triggering a rapid payout event. The circumstances mean that OnDeck has to make millions of dollars in loan payments but temporary workouts like these are enabling the company to slow them down.
OnDeck’s asset-backed revolving debt facility, meanwhile, has been spared the consequences of a borrowing base deficiency under a renewed agreement to suspend any designation of such to at least through August 18th.
Clearbanc Launches Valuation Service for Founders
July 16, 2020
Today Clearbanc, the Toronto-based alternative finance company, has launched its latest service, Valuation, allowing founders to gauge their company’s value. Being an extension to Clearbanc’s platform, the service will be free to everyone and promises an estimation within 24 hours that can be checked weekly.
Valuation also offers three options to founders upon receiving their company’s value: the chance to access capital via Clearbanc’s funding channels, connect with investors in order to raise an equity round, and investigate possible acquisition opportunities. For the last two of these options, Clearbanc makes introductions to a selection of venture capital investors that have connected with the program.
As per the requirements, founders will have to connect a selection of private data points. Their business accounts, payment processor, accounting platform, and their admin account will all be required. As well as this, public data is also used to arrive at a valuation, basing the estimations on information specific to the company as well as the industry it is in.
“We think this could be as revolutionary as what Credit Karma did when they launched free credit scores for everyone and gave consumers access to their own information,” explained Clearbanc CEO Michele Romanow. “We’re really excited about this as it represents our first non-capital launch, and we think that it’s part of a much bigger vision of how we help founders win in this environment.”
Maxim Commercial Capital Funds Deals in 30 States During 2Q 2020
July 16, 2020Maxim Commercial Capital is pleased to report it funded hard asset-secured financings for small and mid-sized businesses (SMBs) in 30 states across the United States during the second quarter of 2020. After pivoting quickly in March to safer-at-home working conditions for its 30+ team members, Maxim experienced a steady increase in applications from equipment brokers and vendors for their borrowers with challenged credit. Maxim lends $10,000 to $3,000,000 to SMBs nationwide secured by heavy equipment and real estate to facilitate asset purchases, working capital and to refinance expensive short term debt.
“Maxim was founded during the Great Recession of 2008,” noted Behzad Kianmahd, Chairman and CEO. “We are applying our experiences gained during that time to overcome today’s extraordinary economic challenges and long term uncertainty caused by the COVID-19 pandemic. We have reaffirmed our commitment to finance SMBs, which are the backbone of our economy, refreshed our underwriting standards, and are continually improving our infrastructure by investing in technology and communication tools for the benefit of our customers, vendors, brokers and team members.”
During the second quarter, Maxim received numerous applications from business owners with strong credit but negative cash flow due to the economic downturn. Funded transactions for such borrowers included $95,000 secured by a 2019 Mack GR64F Tri-Axle Dump Truck for a growing landscaping company in New Jersey; $42,500 for a seasoned contractor’s purchase of a 2014 Caterpillar 312E Hydraulic Excavator; and, $29,000 to enable a business started up by seasoned contractors to purchase a 2020 Reinert ZR Concrete Pump.
Buyers of used class 8 trucks faced numerous challenges during the second quarter, ranging from lenders shutting down without warning to closed DMVs. Maxim successfully funded deals across the country, including $26,500 for a California-based long-haul truck owner-operator to purchase a 2017 Volvo 780; $20,800 for an Ohio-based transportation company to purchase a 2017 Freightliner Cascadia; and, $23,000 for a Texas-based owner-operator to purchase a 2016 Freightliner Cascadia to replace a truck with mechanical issues.
“We are humbled and encouraged by our team’s commitment to positively impact our customers’ future success, and by our customers’ continuous effort to make tough but rational decisions to stay in business during these difficult times,” commented Michael Kianmahd, Executive Vice President. “Based on our experience over the past few months, we are confident that SMBs across the nation will contribute substantially to the nation’s recovery from the biggest economic shock since The Great Depression.”
About Maxim Commercial Capital
Maxim Commercial Capital helps small and mid-sized business owners seize opportunity by providing financing in amounts up to $3,000,000 secured by heavy equipment and real estate. Maxim facilitates equipment purchases, provides working capital and refinances debt for companies across all industries located nationwide. Through Maxim’s tailored financing programs, businesses unlock capital tied up in underleveraged assets, often replacing expensive short-term debt and daily repayment working capital loans with longer term capital. As a leading provider of transportation equipment finance, Maxim funds up to 75% of the acquisition cost of class 8 and class 6 trucks, trailers and reefers for owner-operators and small businesses. Learn more at www.maximcc.com or by calling 877.776.2946.
The Shakeup’s Impact on Stock Prices
July 15, 2020
The Underwriter’s Song of 2020
July 15, 2020
It was just a day in February when my broker sent a deal
I remember feeling ordinary because COVID wasn’t real
Another ruse, just more fake news, I went and pulled the credit
A sterling score, I said please send more, but the broker said forget it
The lender just next door to you, he offered to pay me double
Plus they need less docs for their wider box, saving me the trouble
It was on that day that I said “hey!” I’m sick of being small
I called that broker back and swore I would fund them all
So he sent the files, several piles, of paper good and bad
And I did what I should not have, so the broker would not be mad
Hot damn my port was a big ‘ol fort of terrifying risk
But I checked deBanked’s top funders and we were up there on the list
I pulled up my chair, said a prayer, “so long as things remain”
On an upward track, in the black, there won’t be any pain
But then came March and things looked dark, I couldn’t believe my eyes
They said stay indoors and close your stores, we’re really sorry guys
America is shutting down, we hope you were prepared
If you were very careful then you’ll probably be spared
Of course I freaked when our financials leaked, I tried to rationalize
That we had to fund those files to compete with the other guys
It was no no no and then fund fund fund, I tell you it was grand
I made my case on Daily Funder but the contents got me banned
It wasn’t me, it was the broker you see, it all started with a deal
His spiel about getting double, turns out it wasn’t real
So jolly hot damn, I’m in a jam, of the sort that’s budgetary
How I wish, nay I pray! That it was February
“People are Starting to Come Out of Their Caves”: How 2M7 got through the lockdown
July 13, 2020
For 2M7, the Toronto-based alternative funding company, the concept of a global economic shutdown was far-fetched. January and February of 2020 had been some of their best months in business yet. But, like every company, 2M7 was forced to reckon with the unreckonable and feel the effects of an economic lockdown.
“In terms of client onboarding and funding volume, in terms of collecting volume, and in terms of any metric you would look at, [January and February] were two very strong months,” CEO Avi Bernstein explained in a call. “And then in March, I don’t want to say we slammed on the brakes, but in the first or second week of March we basically just said, ‘you know what, we just need to really change the focus of what we’re doing.”
Saying that they were a week or two ahead of the curve, Bernstein notes that in the leadup to the shutdown their customers had already been asking for deferred or reduced payments. And with anxiety and concern in the air, 2M7 changed course and moved from focusing on bringing in new customers and increasing collections, they “hunkered down” and worked exclusively on the needs of existing clients.
“We funded throughout very minimally … and really our main effort was to get in touch with all our existing merchants and see how they were being affected, if they needed a payment plan, or if they needed a little bit more capital to tide them over. And we adjusted each one on an ongoing basis as we kind of floated through the panic of the lockdown to the waiting time to when we really started to reopen. … And you know, the ones that were still operating in the kind of environment that they were operating, if they had any additional expenses, they had additional requirements for capital.”
This approach lasted up until mid-June, around the time that the Canadian economy began to reopen. Lasting all of three months, this halting was not without victims as 2M7 had to furlough a number of staff members, many of whom were on the sales team that had reduced responsibilities during this time. Since then though, these employees have been brought back in, new customers have been brought on, and 2M7 has returned to its offices.
“As the Canadian economy started reopening and wrapping up even a little bit earlier than we were, we worked with provinces that were already more advanced in the opening stages. Saskatchewan, Nova Scotia, New Brunswick, Newfoundland, they were doing better in terms of reopening and they were ahead of us. … We were able to work with them in terms of ramping up. Now as the economy’s kicking into gear, we’re seeing more and more demand from businesses and we’ve started feeling our how much of their client base is still in existence, how much of their market is still in existence; whether it be manufacturing or transportation, or whatever it is.”
Looking ahead, Bernstein is cautiously optimistic, believing the worst is behind them but that there is still a ways to go for the Canadian market that has shown resilience in that last four months. Explaining that he think the shutdown won’t lead to any great reset of the Canadian market, the CEO thinks that it will instead act as a catalyst for events that were already in motion: debt-laden companies will struggle and possibly perish.
But beyond that, Bernstein is feeling positive about the future, saying that “people are starting to come out of their caves, and slowly but surely businesses are starting to reopen and invest. A lot of businesses are hiring back their employees. So that’s good news for Canada and good news for small businesses in the Canadian marketplace. … I feel like we’re going to come out okay.”
Layoffs At Ondeck
July 10, 2020
OnDeck issued a round of layoffs this week, new former employees report.
One said that the company had “made changes needed to navigate these unprecedented times.” The layoffs were announced on Wednesday and appear to span both the company’s New York and Denver offices.
Ironically, when deBanked sent an email to OnDeck’s head of corporate communications to obtain a comment on the news, the message was returned with an auto response that said that he too was no longer with the company.
Companies On PPP List Claim to Have Received No PPP Money
July 9, 2020
On Monday the SBA released a list of all the companies who received Paycheck Protection Program loans to the amount of $150,000 and over. Detailing company names, locations, industry, reported jobs supported, as well as the range of the loan received, the list highlights roughly 660,000 loans, or 15% of the total loans issued by the SBA.
Showing off a minority of businesses who were in the upper tier of amounts received, there are some recognizable names in there. Kanye West’s Yeezy clothes company; a number of high-profile and high-cost law firms; a selection of well-known startups; and, in a stroke of irony, the Ayn Rand Institute, a libertarian think tank which received between $350,000 and $1 million, all make appearances.
Hours after the information’s release, companies began disputing the SBA, saying that they didn’t receive funding despite appearing on the list. Bird, an electric scooter rental startup that was founded in 2017 is one of these.
“Bird was erroneously listed as a company that filed for a PPP loan,” a statement on the issue said. “We did not apply for nor did we receive a PPP loan. We decided as a company not to file an application as we did not want to divert critical funding from small and local businesses.”
This assertion was then followed up by Bird CEO Travis VanderZanden on Twitter, saying that “Bird spoke with Citi early on, but decided not to apply for PPP b/c the money was more deserved by small and local businesses. Citi will confirm this. … It looks like Citi started an application while they waited for our decision on whether to formally apply. We discussed internally and told Citi we didn’t want to apply via email on April 23rd. They confirmed that the temp app was cancelled that evening and never submitted.”
Similarly, venture capital fund Index Ventures claims that it was falsely included in the list. In a tweet, the fund stated that “earlier today, there was an erroneous entry that Index Ventures applied for a PPP loan. We can confirm that Index Ventures did not apply for a PPP loan at any point. Our legal team is looking into why our name is listed and looking to correct it ASAP.” There has yet to be a follow-up statement.
And then, in an odder turn of events, a 72-year-old woman from Millwaukee told CNBC that she had been listed as having received between $5 and $10 million. Geraldine Brimley claims that she actually applied for a PPP loan for her mail delivery company of over $9,000 and received close to $2,300. Asked about the amount the SBA listed her as receiving, she joked saying “I could use it.”
With Brimley having applied through Radius, Bird through Citibank, and Index Ventures claiming to have not applied at all, it seems there were flaws in multiple banks’ processes. If these allegations prove to be true, and these businesses were falsely listed, then it is yet to be clarified where exactly the listed funds are.
Whether they remain with the bank, were deposited in an incorrect account, or if there are cases of fraud to be considered and investigated is yet to be announced. But with the possibility of millions in SBA funds having been miscounted, the $521 billion that is said to have been handed out to PPP applicants may have to be reconsidered and recalculated.
