Archive for 2021
Your Merchant Might Be Eligible For More Free Money
July 27, 2021
For businesses that have held on into 2021, it’s possible that even more free money might still be available. The SBA’s Shuttered Venue Operators Grant, rolled out in April, was received by the general public with a collective meh, but eligible businesses can get a grant equal to 45% of their entire gross earned annual revenue in 2019. That’s nearly half a company’s annual revenue given to them for free.
Eligible entities include:
- Live venue operators or promoters
- Theatrical producers
- Live performing arts organization operators
- Museum operators
- Motion picture theater operators (including owners)
- Talent representatives
More than 10,000 businesses have already been funded a total of $7.5 billion through the program, despite an initial rocky rollout. Another $8.5 billion still remains available to apply for.
Lenders and brokers eager to provide value to their small business customers might want to consider sending them the application link.
“After making improvements to the Shuttered Venue Operators Grant program, the SBA is now delivering money quickly, efficiently and fairly to highly-impacted small businesses and venue operators that are critical to America’s cultural fabric and local economies,” SBA Administrator Isabel Casillas Guzman said. “When I began my tenure at the SBA, this first-of-its-kind SVOG program was not where I wanted it to be. I’m proud that, thanks to the hard work and dedication of our talented team, we have turned the ship around. America’s small businesses can rest assured that the SBA will continue to work around the clock to provide the relief that is needed to revitalize local economies and build back better from the pandemic and economic crisis.”
Update on PAR Funding Case
July 27, 2021
Little has changed in the PAR Funding case since the last update. PAR’s assets are being handily liquidated by the Receiver while the defendants maintain that the Receiver intentionally destroyed a well-run business. Most recently, the defendants have asked the judge to “discharge” the Receiver.
It has been a year since the Philadelphia-based company was suddenly shuttered as word of an SEC case filed under seal became public. Attorneys for the SEC took issue with the way PAR kept its books and how it marketed itself to potential investors. From the start, the defendants strongly disagreed with the plaintiff’s assertions. After an independent Receiver was appointed, the judge has repeatedly deferred to his assessments and PAR’s business has been systematically dismantled in the process.
Anyone can access the ongoing court battle on the Receivership’s official website.
And The Best Online Bank is… LendingClub?
July 25, 2021
The online lending community that once offered borrowers the opportunity to “bypass the banks and get better rates” is now technically the best online bank. Radius Bank, awarded best online bank of 2020, fully merged itself into LendingClub this month following the acquisition earlier this year. Radius bank’s website now points to bank.lendingclub.com.
It may be a bit jarring to those who remember Lending Club as a peer-to-peer lending platform, to see the FDIC-insurance guaranty at the bottom alongside offerings like a checking account. Bankrate.com added LendingClub to its rankings this weekend. It gives the company a score of 4.3, a good number of notches below the top score held by Ally Bank at 4.9.
LendingClub is just one of several fintech lenders that are fully transitioning to banks. Square flexed its new banking status starting this month, while Kabbage, under the American Express umbrella, has been pushing business checking accounts pretty hard.
deBanked TV Surpasses 400 Helpful Videos on Small Business Finance and Fintech
July 23, 2021
deBanked TV surpassed 400 total videos this week in its free library of content. More than 40 such videos contain basic tutorials and terminology definitions for folks in the SMB lending and MCA industries.
“The content is highly focused,” deBanked President Sean Murray said. “It’s small business lending, real estate, MCA, etc. There’s content for newbies and seasoned veterans aimed at brokers, lenders, and more.”
deBanked has produced more than a dozen original videos as part of an industry docu-series that began in 2020.
Murray also airs live on deBanked TV every Monday and Wednesday at 12:15pm ET where he discusses industry news and offers informative advice.
Should Small Business Lenders Weigh Risk of Applicants Getting Prosecuted for PPP Fraud?
July 23, 2021
As law enforcement officers and prosecutors gradually move on from fake businesses that got PPP in favor of real ones that lied to get more PPP funds than they should have, non-PPP loan underwriters may be forced to grapple with a new question: Is the merchant at risk of PPP fraud prosecution?
Alarm bells have already been sounded by Experian for a different reason, one that warned commercial fintech lenders that the mere receipt of PPP funds should not be considered enough to confer legitimacy on a loan applicant.
But what if everything checks out and the business is legitimate? PPP could come back to adversely affect the performance of the loan if the applicant is later prosecuted or forced to give back all or a portion of the PPP funds. A recent roundup by the Department of Justice, for example, resulted in 22 individuals being charged for PPP related fraud. More than a dozen actual businesses were ensnared by it, with the litany of charges including things “false statements to a federally insured financial institution.”
If a business misappropriated the funds, lied to get more than they should have, lied about when the business was founded, or engaged in some other kind of misleading impropriety, that business could be a ticking time bomb for lenders.
Proactive underwriters or fintech technology could assess whether or not the PPP funds obtained by an applicant were financially realistic and that the business start date aligned with PPP requirements. A business doing $20,000 a month in sales that obtained $200,000 in PPP funds, for example, may look sustainably healthy but raise a red flag that it may not have been legitimately obtained. Underwriters should be crunching the numbers and thinking about whether or not this applicant is likely to face consequences and what that might mean for the loan if it’s approved.
This editorial is the opinion of the author.
Fraudsters May Leverage Their PPP Approvals to Get Business Loans and MCAs
July 21, 2021
A small business finance underwriter torn between approving or declining an applicant probably should not consider whether or not that business got PPP funding as evidence of the applicant’s legitimacy.
A new alert put forth by Experian claims that “greater than 75% of PPP loans originated by commercial fintech lenders were NOT run through a fraud screening and have a greater probability of containing bad actors.” Experian says that “lenders will need to be more vigilant as they assess these businesses for future offers of credit.”
Experian cites data from the FTC that shows fraud and identify theft have surged since the pandemic started, climbing to even higher levels in 2021 over 2020.
Fraudsters that successfully obtained PPP loans with altered documents, for fake businesses, or on behalf of real businesses using stolen identities, may now use those as leverage to obtain additional money, particularly through sources where the perceived consequences of being found out are low. Non-bank funders and fintech lenders are an attractive target.
Just because an applicant got a PPP loan, underwriters should not assume it has passed a fraud check.
Square Capital is Now Just a Bank Loan Product
July 20, 2021
Square Capital has been reduced to just one of several banking products under the Square Financial Services umbrella. That’s one result of Square successfully becoming a bank earlier this year.
Loans will be one product offered alongside checking accounts, savings accounts, and debit cards.
Just as before, Square’s loans will be repaid by diverting a percentage of a business’s card sales. The methodology is derived from its merchant cash advance roots, but what’s different is that a Square loan has a fixed repayment term.
“Pay it back automatically,” Square says of its loan product. “You won’t have to schedule any payments. We just ask that you meet your minimum every 60 days.”
Square has originated more than $9 billion in small business loans since inception and is one of the largest small business lenders in the country.
National Funding on Growing its Team to Prepare for the Bull Run of 2022
July 15, 2021
“We’re about people and platforms,” President of National Funding Joe Gaudio said. “PP: People and platforms, not PPP, that’s my little acronym.”
National Funding is back and looking to hire fresh talent, rebuilding their team after the pandemic rolled through the California market.
“Whether it was California or if we resided in another state, it impacted small business owners throughout the country,” Gaudio said. “Small businesses took a big impact. A significant number of customers requested temporary relief loan modifications. And that’s how the PPP program helped bridge that gap for a lot of small business owners, and get them through the pandemic.”
Gaudio said that National Funding was affected like every peer firm was by the pullback, explaining that their normal customer was looking for PPP funding, not a bridge loan. National rolled back their team by about 50%, and rolled back funding for several months. After the worst of it had passed by the end of the summer, National was back, strictly pulling the reigns but still going. Now they are hiring in every department, and Gaudio said nothing is stopping a gigantic 2022 rebound of demand. Benjamin Flowers as CTO and Luca Marseglia to the Data Science Division are just the beginning.
“We’re rescaling, we’re hiring quite a bit this year, and so these two hires are part of our rescaling: rebuilding not only the leadership team, but the rest of the organization,” Gaudio said. “We’re always looking for new high performers and contributors that that fit into our culture. Even pre-pandemic: if you’re an A-player, you’re a high performer, and you can add value, we will take a look at you, we will find room for you.”
National believes the coming year will unleash tremendous pent-up demand, Gaudio said. In the short term, the firm plans to offer intermediate financing to help SMBs handle the bumps on the way. Though there will be some supply chain, labor, and schooling/childcare problems next year, it will still be big, and National has been preparing, working at the office the whole way through.
“That’ll still continue to put somewhat of a cap on the recovery for small business owners, but we expect a big year in 2022,” Gaudio said. “We’ve embraced the hybrid model for certain functions, [but] sales and operations, underwriting: we’re 100% back in the office, and we’ve been like that since last July. It’s important to our culture to be together… I just continue to be very bullish about the future, and I think it’ll be exciting to see the continued evolution of our industry and the platforms.”
