MJ Capital Funding investors holding out hope that a return to business as usual could be in the cards for the company accused of being a ponzi scheme, might find that outcome a little less likely.
The Receiver has agreed to auction off all of the assets at the company’s Pompano Beach offices on September 28, and everything must go, from the 60″ TV to the garbage cans to the houseplant.
Such powers afforded to the Receiver, a law firm partner named Corali Lopez-Castro, also gives her the ability to enter into binding legal agreements on behalf of the company, the latest ones being Consent Agreements with the SEC. In doing this, the two MJ companies (MJ Capital Funding, LLC and MJ Taxes and More Inc.), have agreed to disgorge of “ill-gotten gains,” accept a civil penalty, and be permanently restrained from continuing its former business. Such an arrangement is standard fare when companies are thrust into forced Receiverships like this one. The Receiver’s job will be to collect as much money as possible so that it can be distributed to afflicted investors.
The MJ Capital Funding Website has also been shut down. It now forwards to law firm Kozyak, Tropin, Throckmorton. Regular updates on the case are available for free at: https://kttlaw.com/mjcapital/.
The consent orders do not apply to former CEO Johanna M. Garcia individually, who lost control of the company and ability to act on the company’s behalf when it was placed into Receivership.
An astounding 3,160 people have signaled their support for Garcia in this case. That’s the number of signatures on the online petition for her located on change.org.
“Our goal with this petition is to get those funds unfrozen as soon as possible,” it says. “This is Johanna’s desire as well proving once again Johanna’s unwavering support for us and in building a strong team and community. Johanna has helped countless amounts of people and charities with the work she does local and worldwide.”
Last week, Ready Capital Corporation announced another company record for small 7(a) loan closings in the $10,000 to $350,000 range. Originating 55 such loans in April, the company attributed its success to the use of LenderAI by iBusiness Funding LLC, a subsidiary of Ready Capital.
LenderAI is a technology platform comprised with an easy-to-use suite of tools, according to the company. iBusiness Funding says their “approach to funding is based on automation, backed up by hyper-current and relevant data.” The LenderAI self service lending origination software includes no implementation fees, free instant setup, digital borrower application, digital documentation, all while being E-Train automated and SOC II compliant.
“Our core mission when expanding the SBA small loan program was to help the smallest businesses, making affordable lending available to support economic development and underserved communities,” said Justin Levy, President of Ready Capital Small Balance Lending. “LenderAI has enabled our 7(a) small loan products. The technology platform allows us to process loans for smaller businesses, who have fewer capital options, by digitizing their documents and inputs, giving them access to capital while allowing them to stay focused on their businesses.”
With iBusiness Funding’s LenderAI system, Ready Capital’s Small Loan Lending program funding has increased from 84 loans in 2021 to over 150 loans in the first four months of this year. iBusiness focuses on specific criteria for its borrowers including likelihood of success, engagement, and background/credit.
“We believe our LenderAI technology has drastically improved document collection and processing, streamlining both the borrower and lender experience,” stated Katy Forte Seybold, iBusiness Funding Chief of Staff and Head of Strategy, in a press release. “There’s little risk to trying it out, with bank level security, flexible core platform integrations and, for a limited time, it’s free to try with no implementation fees.”
Shopify Capital originated $346.7M in MCAs and business loans in Q1, the company announced. That included merchants in the US, UK, and Canada. Though it was a 12% increase over the same period last year, the figure puts them virtually on par with originations in 2021 if the following three quarters hold steady.
Shopify was one of the only online lenders whose origination volume substantially increased during covid. Most experienced significant drops but have since dramatically recovered.
“The hundreds of thousands of businesses that shifted their business to Shopify during the pandemic and stayed with us since can now take advantage of our powerful retail point-of-sale offering for a unified view of their sales online and offline,” said Shopify CEO Harley Finkelstein during the Q1 earnings call. “Shopify has been developing the world’s best point-of-sale retail software for years, and it’s now at the point where all merchants who came to Shopify during the pandemic can leverage it.”
An auctioneer is being introduced into the MJ Capital saga to auction off surrendered personal property related to the scheme. Given how large the alleged ponzi was ($200M+), the value of the personal property at stake hardly reaches the same level of excess.
The inventory so far only includes:
- 1 2018 Mercedes Benz CLA 250
- 8 Watches (6 Rolex, 1 Michelle, 1 Gucci)
- 1 Gucci Backpack
- 2 Purses (Luis Vuitton and Christian Dior)
- 1 Louis Vuitton Bag
- 3 rings
- 1 pair of earrings
Additional property could be added, court records indicate. The date, time, and location of the auction has not yet been decided.
Shopify Capital originated $324M in Q4 2021, bringing the full-year total to $1.39B. That figure represents a massive increase over the company’s previous originations record of $794M in 2020.
During the quarterly earnings call, Shopify CFO Amy Shapero listed Shopify Capital among the divisions that drove revenue growth for the company in 2021.
“As merchants build momentum, inventory and marketing needs to grow alongside it,” said Shopify CEO Harley Finkelstein. “And this is where Shopify Capital comes in, offering merchants the funding they need to expand their business.”
Total originations came in just shy of the numbers that rival OnDeck reported a week earlier. OnDeck originated $1.76B in funding to small businesses in 2021.
As the Department of Labor survey reported sky high inflation this week, the 7.5 percent rate is starting to impact the small business financing industry. With things like gas, food, electric, and oil leading the way in rising costs, merchants are requesting more capital, or none at all — as inflation continues to rise.
“I read that 45% of small businesses say they have dealt with inflation by taking out a loan over the past year,” said Ronald Curiel, Business Development Manager at Advantage Capital Funding. “Small businesses are the backbone of the U.S economy and a lot of businesses are relying more and more on small business financing to get them through times of high inflation.”
Small businesses have been forced to raise prices in many areas. Delis are adding surcharges to bacon, lunch deals are disappearing from pizza parlors, and delivery minimums are being raised. According to Curiel, the need for financing has gone hand-in-hand with the rise in inflation.
With payroll costs at a two-decade high and prices of goods going up seemingly exponentially, capital providers might be able to leverage this to fund merchants who haven’t raised their prices or expanded in order to keep up. The challenge is that if inflation keeps rising, businesses will certainly need to put those funds to good use.
Inflation has even hit the equipment financing sector too, with merchants holding whatever cash they have left in hopes of prices of machinery coming down. “We have seen an increase in clients putting off Equipment purchases until the prices of equipment come back down to realistic prices,” said Josh Feinberg, CEO of Everlasting Capital.
“[Merchants] are saying they have seen the prices increase between 20 and 40 percent, which impacts our ability to help business owners scale.”
Members of New Jersey’s state legislature are trying for a fifth year in a row to advance a commercial financing APR disclosure bill. Senate Bill 819 was introduced on January 18th. Senate Majority Whip Troy Singleton (D) is the primary sponsor.
Similar to what was just introduced in the Virginia legislature, the bill is mainly aimed at “sales-based financing.”
“Sales-based financing means a transaction that is repaid by the recipient to the provider, over time and as a percentage of sales or revenue, in which the payment amount may increase or decrease according to the volume of sales made or revenue received by the recipient. ‘Sales-based financing’ includes a true-up mechanism where the financing is repaid as a fixed payment but provides for a reconciliation process that adjusts the payment to an amount that is a percentage of sales or revenue.”
Rob Frohwein, who served as the CEO of Kabbage for more than a decade, has left the company. A post he published on social media revealed that his last day was December 17th.
“I didn’t make a big deal – the company has always been about our customers & our employees – and never about any person,” Frohwein said about the quiet exit.
The move is not altogether unsurprising. American Express acquired Kabbage in August 2020 after covid heavily disrupted its small business financing business. Amex first reintroduced Kabbage as a checking account brand and only just recently resurrected its funding operations.
That re-emergence was the catalyst to move, according to Frohwein.
“Why now? Lots of blah blah blahs but it’s the right time,” he wrote. “We’ve relaunched our products with Amex. Now, it’s time to fully devote myself to being an entrepreneur once again.”
Frohwein has kept busy on the side as an advisor & investor in SentiLink, the vice chair of StimLabs, and the CEO of Drum Technologies, Inc, according to his profile, but he apparently has even more plans in the works.
“So what now? Well, I’m pretty excited for what is next. Keep a lookout!”
The benign salutation may actually be a nod to what his next venture is. We’ll see…
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