Archive for 2020
Sen. Rubio: PPP Application For Fintech Lenders Expected This Week
April 6, 2020Update: 4/8/20 The PPP Application for Fintech Lenders is Here
Senator Marco Rubio tweeted on Saturday that he expects the US Treasury Department to release a separate PPP application for non-bank lenders early this week. The Treasury and SBA have previously issued guidance on the minimum criteria a fintech lender would have to meet to be eligible, leading to confusion when the official application released a day later omitted any mention of fintech lending.
The rollout has not been perfect. One challenge facing fintech lenders is the supply of capital as the loans must be issued from their own balance sheet and held on their books for at least 7 weeks until they can be purchased by the federal government. Rubio said that we will need a defined purchase mechanism for such a transfer to take place to assist not only fintech lenders but also community banks.
The good news is multiple FinTechs including @PayPal & other online lenders are ready,able & willing to process #PPPloans for them & anyone else.But they need @USTreasury to release application for nonbank lenders to become certified.
I expect that very early next week. 5/13
— Marco Rubio (@marcorubio) April 4, 2020
#paytoday Small Business Coalition Formed in Response to Coronavirus
April 3, 2020
This week a cohort of businesses announced the formation of the #paytoday coalition, a union whose purpose is to promote the swift repayment of any receivables due to small businesses. The group, made up by Fundbox, SmallBizDaily, Womply, among others, was formed in the aftermath of covid-19’s rapid spread across the United States.
The coalition was the result of both conversations between the members about the fate of small businesses as well as long-term research, Fundbox Chief Market Office Leslie Olsen told deBanked.
“We’ve been working on it for a couple of weeks, but it’s really based on some pretty deep research that we’ve done over the years, and more recently last year, that exposed this issue that businesses have of paying each other, where there are typically a large number of outstanding receivables in the market at any given day,” Olsen explained.
According to Olsen and the #paytoday campaign, there is currently $900 billion in outstanding receivables owed to small businesses. This mass of unpaid money combined with the pressures of the coronavirus and the info gleamed from their research, such as the stat that nearly 40% of small businesses have 30 days or less worth of cash available, are what’s motivating the group to act.
Currently the collective is running campaigns to get the word out and encourage those who owe small businesses money to pay them. Beyond that, #paytoday hopes to grow in coalition size and eventually branch out with larger partners.
“In our social campaigns, we’re inviting businesses like Target and Walmart, the Fortune 100 and 50, to see if they will join us as well as smaller businesses,” Tim Donovan, a spokesperson for Fundbox noted. “If you think about large enterprises and how many vendors they deal with on a regular basis, it could be thousands. So we’re trying to think about how we can create the biggest impact by having these bigger enterprises join the movement.”
PPP Lender Requirements
April 3, 2020Update: The PPP Lender Application is HERE
The elusive application to apply for PPP lender-approved status is expected to become available sometime on Friday. In the meantime, the SBA has published the requirements that a financing provider will have to meet to be eligible for approval. Federally insured depository institutions are already approved so these bullet points apply mainly to non-bank financing providers and online lenders.
- Must already originate, maintain, and service business loans or other commercial financial receivables and participation interests
- Have already been in compliance with the Bank Secrecy Act since at least February 25, 2019
- Have already originated, maintained, and serviced more than $50 million worth of business loans or other commercial financial receivables during a consecutive 12 month period in the past 36 months, or is a service provider to any insured depository institution that has a contract to support such institution’s lending activities in accordance with 12 U.S.C. Section 1867(c) and is in good standing with the appropriate Federal banking agency.
Loan underwriting requirements
- Confirm receipt of borrower certifications contained in Paycheck Protection Program Application form issued by the Administration;
- Confirm receipt of information demonstrating that a borrower had employees for whom the borrower paid salaries and payroll taxes on or around February 15, 2020;
- Confirm the dollar amount of average monthly payroll costs for the preceding calendar year by reviewing the payroll documentation submitted with the borrower’s application; and
- Follow applicable Bank Secrecy Act requirements
Notes from the SBA:
Entities that are not presently subject to the requirements of the Bank Secrecy Act, should, prior to engaging in PPP lending activities, including making PPP loans to either new or existing customers who are eligible borrowers under the PPP, establish an anti-money laundering (AML) compliance program equivalent to that of a comparable federally regulated institution. Depending upon the comparable federally regulated institution, such a program may include a customer identification program (CIP), which includes identifying and verifying their PPP borrowers’ identities (including e.g., date of birth, address, and taxpayer identification number), and, if that PPP borrower is a company, following any applicable beneficial ownership information collection requirements. Alternatively, if available, entities may rely on the CIP of a federally insured depository institution or federally insured credit union with an established CIP as part of its AML program. In either instance, entities should also understand the nature and purpose of their PPP customer relationships to develop customer risk profiles. Such entities will also generally have to identify and report certain suspicious activity to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). If such entities have questions with regard to meeting these requirements, they should contact the FinCEN Regulatory Support Section at FRC@fincen.gov. In addition, FinCEN has created a COVID-19-specific contact channel, via a specific drop-down category, for entities to communicate to FinCEN COVID-19-related concerns while adhering to their BSA obligations. Entities that wish to communicate such COVID-19-related concerns to FinCEN should go to www.FinCEN.gov, click on “Need Assistance,” and select “COVID19” in the subject drop-down list.
Each lender’s underwriting obligation under the PPP is limited to the items above and reviewing the “Paycheck Protection Application Form.” Borrowers must submit such documentation as is necessary to establish eligibility such as payroll processor records, payroll tax filings, or Form 1099-MISC, or income and expenses from a sole proprietorship. For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.
The lender does not need to conduct any verification if the borrower submits documentation supporting its request for loan forgiveness and attests that it has accurately verified the payments for eligible costs. The Administrator will hold harmless any lender that relies on such borrower documents and attestation from a borrower. The Administrator, in consultation with the Secretary, has determined that lender reliance on a borrower’s required documents and attestation is necessary and appropriate in light of section 1106(h) of the Act, which prohibits the Administrator from taking an enforcement action or imposing penalties if the lender has received a borrower attestation.
Lenders will need to complete this form with each loan.
Borrowers must complete this form.
Fundry Supports Jersey City Small Businesses and Local Police Departments in Response to Crisis
April 2, 2020Fundry, a small business finance provider, is helping to feed police officers in Jersey City. A tweet sent out by the City of Jersey City twitter account said that the company is buying meals at local small businesses to provide to police stations every day for the next 2 weeks.
Amelia’s Bistro, described as a modern American restaurant and bar in the Paulus Hook section of JC, was pictured making a delivery to the Eastern District on Thursday as part of the Fundry donation.
Nasan Ishak of @AmeliasBistroJC delivers lunch to @JCPoliceDept East District. With a donation from YellowStone Capital & @FundryC, meals will be provided to stations each day for 2 weeks. This supports our #JCFrontline responders and restaurants across #JerseyCity. #JCresponds pic.twitter.com/OpIkip2IDx
— City of Jersey City (@JerseyCity) April 2, 2020
Independent Community Bankers Express Doubt PPP Can Be Rolled Out As Is
April 2, 2020Update: The interest rate has increased to 1%.
The nation’s voice for community banks, the Independent Community Bankers of America, penned a letter to Treasury Secretary Mnuchin and SBA Administrator Carranza yesterday to urge them to make immediate changes to the planned PPP program slated to be rolled out tomorrow.
“We strongly recommend that you make changes to the guidelines before the Program goes live so that it will work as intended by Congress,” the letter states.
It goes on to explain that the proposed .5% interest rate is below the break-even cost for a bank and should be raised to 4% to allow them to break even. Further, that the loan terms of 2 years should be extended to 10 years to alleviate the hardship the short duration will create for small businesses, and that the restrictions on the use of the loan proceeds be amended.
The ICBA also expressed frustration with the lack of detail afforded to documentation required as well as to the uncertainty of how and when the SBA will reimburse them for losses.
StreetShares Posts Another Loss
April 2, 2020Sales and Marketing Expenses declined dramatically for StreetShares for the six-month period ending December 31, 2019, according to the company’s latest SEC filing, but the company’s payroll expense still wildly exceeded revenue, putting them yet again into deep net loss territory.
StreetShares recorded total operating revenues of $2.43M, payroll expenses of $3.49M, and a net loss of $5.18M for the period.
The company’s accumulating losses over time has translated into a stockholder deficit of $35.2M. This reporting period is pre-COVID-19 but the company disclosed that future financial results may be adversely affected by the virus.
The company also borrowed $3M in the form of a convertible promissory note issued to an investor.
Only 16.81% of loans on the StreetShares platform were funded by institutional investors for the period. Retail investors, the largest segment by far, funded 70.63%.
Cybersecurity in the Time of a Pandemic
April 2, 2020
Earlier this month the FBI released a statement warning against increased instances of cybersecurity attacks on businesses and individuals during the coronavirus pandemic.
Among the Bureau’s recommendations was the suggestion to be wary of any links purporting to offer coronavirus cures, preventative equipment like N95 masks, or instant access to a stimulus package. As well as this, the statement noted that Americans can expect to see fraudulent activity from emails requesting money for charity, emergency relief, and notifying readers of airline carrier refunds. Instructing Americans to “always use good cyber hygiene and security measures,” the FBI urged computer users to be watchful.
Such warnings proved all the more relevant this week as the World Health Organization announced that it had been a target of an unsuccessful hack. Believed to be an attempt to steal information relating to the coronavirus that has not yet been released, the attacks highlights the high price that data or knowledge commands in modern life, but especially in a pandemic.
Speaking to Gene Reich, CEO of the SMB-focused IT services and cybersecurity firm Point, he explained that many hackers will strike while the iron is hot during a pandemic and seek to make money while business owners are stressed and many workers are using personal computers for professional actions.
“We’ll have more vulnerabilities because typically someone’s home computer is not well maintained or taken care of like a corporate device,” Reich explained. “There’s also a slew of new phishing emails around coronavirus that are happening. And I think there’s going to be an uptick of people taking advantage of a time where some businesses are at a disadvantage.”
The CEO warned that emails aren’t the only medium people need to be cautious of, as many phishing attempts come as phone calls. “A lot of times we talk about computers and tools, but I think that people will also be called and told, ‘Hey, this is the government, to get your stimulus package, press one,’ and then somehow they get their bank information.”
This is an example of what Reich describes as ‘social engineering,’ where someone is deceived into providing access to a network to a hacker, and that hacker may remain within that network for the short term or longer, waiting to target information or funds.
While Reich advises computer users to do the usual things of practicing caution with email attachments, links, and requests for personal information, he also mentioned one tactic that has seen complete success: shuttering the business. “Of course, there are some businesses who, unfortunately, shut the doors until further notice, and in an odd way, those people are protected, because they’re not using computers.”
What’s The Future For Commercial Real Estate? An Expert Weighs In
April 1, 2020
Jonathan Wasserstrum is the Founder & CEO of SquareFoot
Over recent weeks, all of us have had some adjusting to do with their work setups. Office spaces suddenly, seemingly overnight, became unsafe places to be, in the wake of a global pandemic. For some workers, this shift to work-from-home operations was a win. And companies that had made similar moves away from traditional office spaces looked on and said, “What were you waiting for?” I witnessed all of this chatter happening over the past month, in the shadows of an ongoing health scare that terrifies us all. However, I believe that the noise around office spaces going away is misguided and shortsighted. The truth of the matter is this: Commercial office building landlords, on the other side of this scare, will have to grapple with putting back together the pieces, and will definitely be rethinking how and who they lease to. Yet, this will not be the end of the industry as we’ve known it. Here’s why:
I’ve tried my best, as the owner of a growing business, to keep everything together for myself, my team, my clients, my investors, and more. We’ve done a good job at it, too. But if I’m being honest, not everything is perfect. Far from all is the same. And I have a new set of concerns that have emerged over the couple of weeks we’ve been working remote. It’s impossible, even for the most valiant and virtuous teams, to replicate the same successes they have seen in the past. Well-intentioned workers are producing less. The uncertainty of the economic climate contributes a mitigating factor. New business isn’t walking in the front door the way that it was not long ago. While this experiment began with enthusiasm for many getting to work in their pajamas and to play with their dog during the day, the conversation has quickly turned into a growing collective desire to get back to the way things were. As a result, a reliable office space separate from your home has become arguably more desirable than ever.
At the same time, we must pause to recognize that this prolonged period of working remotely has fundamentally shifted the cultural conversation around flexibility with work. My prediction therefore is that the truth will land somewhere in the middle. People at all companies may not return to work in the office five days a week, and they may not return to the same 9-to-5 schedule they had grown accustomed to, and they might not have a permanent, dedicated seat at the office in accordance with this shift, but those are growing pains that they and their managers can work through. We anticipate that things won’t immediately go back to the way they were, with employees gaining more leverage and applying more pressure than before in discussions with their company executives about giving them a more ideal process and procedure to succeed in all elements of their lives. If there’s one area of improvement that we’ve seen here in the U.S., it’s more families having dinner together on a nightly basis as a unit, with both satisfied parents home and removed from distractions. This luxury is not something people will want to lose any time soon. For their own sake, and for the sake of their families.
With more people pushing for flexibility within office policies, you’ll begin to see more company owners encouraging landlords to meet them where they are in their thinking. Already, the coworking companies had led a sizable shift in how landlords think about dividing up their spaces, and how many employees can be squeezed into one area. The next stage of this industry’s development may look something like this: It’s been rumored for many decades, but perhaps now we’ll see a rise in alternative seating patterns within offices that depend on hot-desking or hoteling to supply the ‘right’ number of seats and amount of space better-suited to the everyday needs of the company. As a business owner myself, I can say that empty seats that I know we’re paying for with every monthly rent payment can be an eyesore. You’ll rarely have a perfect count on any given day, but I know that for startups that are budget-conscious they would prefer to have one or two staffers sitting in an overflow area – on a couch or a barstool – than to have several empty desks on a regular basis. Companies must grow deliberately and thoughtfully in all aspects of their planning, and it’s about time that we take office space needs seriously in the same vein. It’s not as simple as giving 50 seats. Perhaps a company might be better off with 30 seats for its 50 employees in that given office? We see a rise in those types of conversations coming, stemming from an informal campaign from more employees seeking a more friendly work-from-home situation. The companies that offer this kind of and larger levels of flexibility could wind up being known as the more competitive places to work, especially for the category of veteran employees who have large families to think about and care for. Taking some responsibility for and giving genuine care for employee welfare is a mounting concern for many company founders.
This emphasis on flexibility will go one step further, though. Founders have never really wanted to be tied down by a long-term office lease; it was always deemed a necessity. Some landlords were already beginning to think along these lines, especially in the wake of what coworking companies have built on top of their real estate. We see that trend accelerating in 2020 and going forward. Over recent weeks, at SquareFoot, the company I own and lead, we’ve heard from more landlords than we had been working with in the past about how we can help put the right companies into their spaces, quickly. Over the past year, we’ve been leading this conversation, championing the virtues and values of flexibility for people in need first of a comfortable lease ahead of all other factors (neighborhood, view, commute, and more). We have two flexible office solutions we offer: PivotDesk, which is like airbnb for office space and pairs a host with a guest to share a space, and FLEX, which gives people the chance to get the office space they want with the lease they want. Both of these options require us to have good standing and good working relationships with landlords, but all of these variations and deviations from the norm of the traditional real estate world require first for the landlords to step up and say they recognize that the times have changed. The conversation has already changed.
