|03/17/2021||On Covid: "Florida got it right"|
|12/07/2020||SoFi exploring an IPO|
|09/27/2020||Florida enters Phase 3, bars packed|
|09/04/2020||Florida man bought $700k boat with PPP|
|07/03/2020||Prashant Fuloria promoted to CEO of Fundbox|
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Greenbox Capital was the victor of a major lawsuit argued before Florida’s Third District Court of Appeal that conclusively established the legality of merchant cash advances in the state.
When asked for comment, Greenbox Capital® CEO Jordan Fein said:
“It’s been a long, arduous, and expensive battle over the last few years proving in a court of law that a Merchant Cash Advance is not a loan. Today, we celebrate a win for all Merchant Cash Advance companies in Florida and the entire United States who are dedicated to funding small businesses through ethical practices. Our hard work and commitment to helping small businesses grow was validated and we are thrilled with the final decision of the District Court of Appeal.”
The decision in Florida echoes a similiar opinion reached in New York in 2018.
Big news in the State of Florida. The Third District Court of Appeal entered its order on January 6th to decide the fate of Craton Entertainment, LLC, et al., v Merchant Capital Group, LLC, et al..
Merchant Capital Group, LLC dba Greenbox Capital sued Craton in December 2016 over a default in a Purchase and Sale of Future Receivables transaction. In turn, Craton responded with various defenses and counterclaims that asserted the underlying transaction was really an unenforceable usurious loan.
The Circuit Court for Miami-Dade County sided with Greenbox in August 2019. The defendants appealed.
The District Court of Appeal decided the matter conclusively on January 6, holding that the original ruling was affirmed on the basis that:
- The transaction is not indicative of a loan where repayment obligation is not absolute but rather contingent or dependent upon the success of the underlying venture
- that the transactions in which a portion of the investment is at speculative risk are excluded from the usury statutes
- when the principal sum lent or any part of it is placed in hazard, the lender may lawfully require, in return for the risk, as large a sum as may be reasonable, provided it is done in good faith.
The lawyers representing Appellee Greenbox Capital were Henderson, Franklin, Starnes & Holt, P.A., William Boltrek III, Shannon M. Puopolo and Douglas B. Szabo.
You should contact an attorney to discuss the implications of this ruling. Merchant Cash Advance contracts are not all the same.
This ruling is similar to a ruling in New York that was made in 2018.
When Prashant Fuloria joined Fundbox as Chief Operations Officer in 2016, the San Franciscan firm was a three-year-old startup with less than eighty employees. By the time Fuloria moved into the office of CEO this July, the small business credit and invoice financing company had grown exponentially, with more than $430 million in raised capital to date and triple the number of employees.
At the height of the pandemic, many firms halted funding or shuttered their doors for good. Meanwhile Fundbox kept lending, and outperformed the market, Fuloria said.
“It’s become very clear to us that we have greatly outperformed the market,” Fuloria said. “In terms of delivering value to customers, and also in terms of our business performance.”
In the toughest weeks of the pandemic, he said that Fundbox’s loan delinquency rose to 8-9%, up from a “low single-digit number” pre-pandemic. In comparison, the industry standard according to Fuloria, was a delinquency rate of 30-40%, including from larger firms and more traditional lenders like big banks.
“I think we’ve performed extremely well during COVID; the numbers just validate the investment we’ve made, especially in data,” Fuloria said. “That puts us in a very good position because a number of folks have exited the market and the need, the demand has not gone away.”
The number one thing you can do to perform well in a recession is to have a strong business going into it, Fuloria explained. Fundbox attributes part of its strength to its data. Nearly a fourth of Fundbox’s capital goes toward data assets, Fuloria said.
“If you add it all up, we’ve invested a little over $100 million in our data asset,” Fuloria said. “It’s a big investment for anybody- particularly a big investment for a mid-sized company.”
Fuloria said this money goes toward collecting customer information, which is processed by in-house tech and a talented team of engineers who can turn data into valuable information for serving SMBs.
“Small businesses,” Fuloria said, “they have the complexity of enterprises but the scale of consumers.”
Coming from twenty years of tech and product managerial experience at firms like Google, Facebook, and Yahoo, Fuloria knows a thing or two about scale. He said he found his roots at Google, working when it was just a small team- by the time he left six and a half years later, Google had 35,000 employees.
When it came to joining Fundbox in 2016, Fuloria said he was attracted by the company’s mission, the talented team there, and how in just three years, the small firm had demonstrated how it could help SMBs.
“Fundbox as a company said ‘We are a financial services platform that is powering the small business economy with new credit and payment solutions,'” Fuloria said. “And that mission was very strong: it made sense to me, and it resonated with me.”
Earlier this month, LendingTree published results from a survey they conducted about consumer spending on Valentine’s Day.
The main takeaway is that men are planning to spend almost two and a half times more than what their significant others (of either gender) expect them to spend. So there might be some nice surprises today! On average, according to this survey, men plan to spend $95 today for their significant others, while women plan to spend $41. Also according to this survey, those who are engaged plan to spend $92 on their significant other, people in the dating stage of relationships plan to spend $88, and married people plan on spending $57. (The average for men is increased by spending based on generation.)
Regardless, Director of Personal Loans at LendingTree, Michael Funderburk, said that these amorous expenses are typically not large enough to show any spike in consumer borrowing. Small business borrowing, however, is a different story. As might be expected, there is a noticeable spike in borrowing from florists, among other small businesses that cater to the holiday.
Chad Otar, CEO of New York-based Excel Capital, a small business funder, said that they always fund more florists, chocolate shops and gift shops leading up to Valentine’s Day because these merchants need additional money to buy more inventory. Excel’s team of a little under 20 includes an in-house sales team that Otar said markets to these kinds of businesses in the weeks before Valentine’s Day.
The larger Reliant Funding, which has a sales team of about 100 people, makes an active marketing push before Valentine’s Day to reach more than 13,000 U.S. florists in its database, according to its Chief Marketing Officer Steve Kietz.
“Our business with these firms increases before Valentine’s Day and Mother’s Day,” Kietz said. “We see lots of repeat business from those firms as they stock up for peak season. [And] we increase our mail and digital marketing activities to sync with when florists will be most responsive.”
Houston-based Accord Funding, doesn’t have an in-house sales team. Still, its CEO, Adam Beebe, said that while they don’t track submissions by merchant category, they do underwrite florists with seasonality in mind.
A debt settlement company being sued by Itria Ventures in Miami-Dade County, FL was asked to prove its claim that it has managed over $1.5 billion in total debt, court records show. That company, Corporate Debt Advisors (CDA), advertises that it provides debt relief for small business owners.
CDA responded to Itria’s request on June 29th with information relating to just two employees, Tony Shea and John Philbin, who combined through their previous experience have purportedly managed $1,584,000,000 of debt.
Not mentioned in their response is that each individual is prohibited from engaging in debt settlement services with Florida consumers where Corporate Debt Advisors is located.
According to the Office of the Attorney General, both Shea and Philbin previously and independently settled with the State after being investigated for running questionable debt settlement businesses. (See here and here)
In the lawsuit filed against CDA by Itria, it’s alleged that CDA is advising merchants to commit fraud by moving money owed to Itria to a new secret hidden bank account at a local bank in Florida where it will be out of reach from Itria.
This is not the first time Corporate Debt Advisors has been sued. In early July, a competitor to Itria, High Speed Capital, petitioned a New York court to turn over funds it believes CDA has in its possession for unlawful budget planning services rendered to a Florida-based business.
The Florida Office of the Attorney General was granted a temporary injunction against CashCall, Inc. The Attorney General’s action was based on alleged violations by CashCall of Florida’s Deceptive and Unfair Trade Practices Act related to loans CashCall had issued to Florida residents that charged rates in excess of Florida’s usury law. The injunction required CashCall to pay all loan proceeds it received during the pendency of the underlying litigation into the court registry and to establish a reserve of one million dollars. CashCall appealed to the Court of Appeals.
In its review, the Court explained that “[a]s a matter of law, in order to obtain a temporary injunction the Attorney General must demonstrate that ‘it has a clear legal right’ to the injunction…” and that “the viability of the Attorney General’s action is dependent on its ability to avoid the choice of law provision in the loan agreements.” The provisions provided that the loans at issue would be governed under the laws of Cheyenne River Sioux Tribe which permitted the rates charged.
The Attorney General argued that the choice of law provision was unenforceable because it violated Florida’s strong public policy against usury. CashCall disagreed. It countered that Florida had no such policy against usury and the provision should be upheld.
CashCall’s argument prevailed. The appellate court cited two cases where the Florida Supreme Court had declined to apply the public policy exception to set aside a choice of law provision in a usury context. In those cases, the Supreme Court held that Florida has no strong public policy against usury as long as there is a reasonable relationship between the chosen jurisdiction and the transaction.
The Court of Appeals highlighted that the Attorney General had essentially agreed with this finding during the lower court proceedings. The Court quoted a portion of the Attorney General’s statement:
Hey, that money you’re getting from Floridians, let’s put it into the Court Registry until we can hear your Motion to Dismiss from all of your hundreds of attorneys and we can talk about hundreds of years’ worth of tribal authority. And you know what, they might win. There’s good case law I think as Brian said on both sides. It is an interesting argument. But I would like to ask the Court to focus on what we asked for and are we entitled to it.
Based on the Attorney General’s statement and Supreme Court precedent, the Court of Appeals found that the Attorney General had failed to demonstrate a clear right to the injunction and reversed the lower court’s decision.
Cashcall, Inc. v. Office of the AG, 2015 Fla. App. LEXIS 11559 (Fla. Dist. Ct. App. 2d Dist. July 31, 2015)
The first merchant cash advance enthusiast ended up the richest man in the history of the world. Jakob Fugger was the cash king of Europe 500 years ago, and his climb to wealth indirectly caused the Protestant Reformation. One of the pivotal events in western history, the Reformation led to the eventual “fad” of democratic representational government— all because some guy bought the future receivables of a silver mine.
In Jakob Fugger the Rich, historian Jakob Strieder writes the Fugger enterprise began as one of the upstart merchant families of the Renaissance. The Fuggers were traders and cloth merchants from Augsburg, Germany. They created a network of aristocratic clients, furnishing weddings and parties through trading warehouses in modern-day Venice, Florence, and Austria. Jakob Fugger I lent some money around, but when Jakob Fugger II joined the family shipping warehouse in Venice, he looked for a better return on capital.
According to International Business History: A Contextual and Case Approach, Fugger entered an agreement to supply some cash- 23,627 Florins to a silver mine owned by Archduke Siegmund in 1487.
Siegmund had plenty of silver laying around for collateral; he just needed cash for the day-to-day. It was a collateral-backed loan, common today: if he couldn’t pay it back, the Fuggers would get paid in silver. The transaction worked so well that a year later, Siegmund reapplied, this time in a revolutionary way. Siegmund would get 150,000 florins, and the Fuggers would get paid the future receivables of the silver mine: unrefined and cheap future silver for cash now.
The problem, written by historian Greg Steinmetz in The Richest Man Who Ever Lived, was the Church. Any interest-based transaction was specifically outlawed, though there were hundreds of lenders during this era. The line from Luke 6:35, “Lend and expect nothing in return,” was taken by the Church to mean an outright ban on usury, defined as the demand for any interest at all.
Even savings accounts were considered sinful, but Venetians ignored these rules as they preferred making money to pleasing God, entombed in the motto “First Venetians, then Christians.” Fugger began accepting deposits like a bank to his clients, with a 5% return to investors.
But convicted usurers could be excommunicated and denied a Christian burial, a nightmare for a capitalist who relied on a Christian network. Fugger did not worry about punishment or the apparent sin of money lending, but as he became a fixture in European society, his reputation became increasingly vulnerable.
Fugger needed the laws to be changed, or at least relaxed, or his lending business was in trouble. In 1515, he wrote a letter to Pope Leo X and funded a debate in the St. Petronius Basilica in Bologna. The debate ran for five hours, a back and forth of philosophy, scripture, and rampant crowd heckling. In the end, it was declared a tie, but Pope Leo X that year signed a papal “bull” reforming the concept of usury.
Originally, the Church pointed to the philosopher Aristotle’s model for determining what was okay to charge for and what wasn’t. Aristotle had said that charging someone for a cow because it produced milk was fine, but money was a dead thing and unfair to profit from.
A silver mine produced silver and as such paying cash for the future proceeds of the mine had allowed Fugger to more or less carry on his business. It wasn’t called merchant cash advance back then but he applied that model wherever he could. Not everyone in need of money had a business, however, and it was critical that he be allowed to charge interest when circumstances called for it.
More than a millennium after Aristotle, Pope Leo X found that risk and labor involved with safeguarding capital made money lending a living thing. As long as a loan involved labor, cost, or risk, it was in the clear. This opened a flood of church-legal lending: Fugger’s lobbying paid off with a fortune.
Jakob Fugger was off to the races and he greatly expanded his financial services business. Historian Dennis McCarthy found that the Fugger family grew their war chest nine times over in the next seventeen years, a gain of 927%. Their funding efforts bought a trading empire, and they entered into agreements with nobles that placed entire countries as collateral.
McCarthy wrote: That was one of the problems with the Fugger model- “how does one take possession of Austria or France or Spain when its rulers default or lag behind debt repayment schedules?”
After gaining the good faith to lend in the Church’s eyes, the papacy itself became a Fugger customer. Positions in the Church were inseparable from social and political power, and the only way to get a place on the totem pole was by paying for a title. Just as the richest silver mine owners didn’t have the cash to pay for lunch- so did wealthy aristocrats need capital to afford positions in the cloth.
By the time Martin Luther “nailed” his 95 theses to the door of a church in 1517, he was rallying against the Fugger funding family and its stranglehold on the Roman Catholic Church.
It all came down to an in-house promotion. Albert Brandenburg brought a whole new meaning to the concept of “moneychangers in the temple.” A German Archbishop of Magdeburg, Brandenburg was promoted to Elector of Mainz: the second in command of the Holy Roman Empire. Unfortunately, he had to pony up 21,000 ducats to pay the Roman Curia (the Church’s admin)- for the title. Naturally, he didn’t have the cash, and the Fuggers stepped in.
Brandenburg got a loan on interest. To pay it back, he also paid Pope Leo X for the right to sell indulgences. Indulgences were contracts the church sold to forgive sins, allowing believers to purchase their way out of purgatory and into heaven. A fresh round of indulgences was printed to fund the construction of St. Peter’s Basilica, and Brandenburg was entrusted to sell them in 1517. (Their sale was later banned by the Church in 1567).
The sale of indulgences interlinked the Church with Fugger, and solidified Luther’s desire to maintain the Faith through an alternate system. Luther’s complaints spawned the Reformation, and his followers and independent revolutionaries like John Calvin would bring the rise of Protestantism, the Church of England, and ultimately what historian Alec Ryrie wrote as the foundation of modern mercantilism.
“I’m saying that there are some specific parts of modern life that derive directly from the Protestant Reformation. We couldn’t have these features if it hadn’t happened.” Ryrie said. “That combination of free inquiry, democracy, and limited government is pretty much what makes up liberal, market democracies. It runs the modern world.”
To this day, no one is sure of the extent of the Fugger fortune. Historian Mark Häberlein found that Fugger struck a deal with Augsburg Tax authorities in 1516: he agreed to pay an annual lump sum on the condition that his family’s true wealth would never be revealed. He died in 1525.
To get an idea of the extent of his wealth, we can base calculations on the cost of butchering a pig in 1522 (yes, that’s a real metric.) It cost one Gulden, a new coin minted in 1500 to butcher a hog. The German coin contained about the same amount of gold as a Florin.
Based on those ham prices, Jim Ulvog from Ancient Finances estimated that in 2017 a single florin would be worth ~$900, and other writers have put the florin in the same range. Though the true wealth of the Fuggers may never be known, when Charles V aimed to take control of the Holy Roman Empire in 1519, the Fuggers were lending Charles 543,000 guldens to buy votes: approximately $448 million. That’s just in a single deal.
It’s been said that merchant cash advances or sales-based financing is relatively new, but it could be argued that such transactions are so old that life as we know it in the modern world only exists because a guy 500 years ago was engaged in non-loan transactions to fund businesses in a manner that was Church-compliant and wanted to expand.
While positive vaccine predictions began slowly peeking their head out of the media mess that was the fall of ’20, John McCormick and members of the Southeast Acquirers Association (SEAA) had a difficult choice to make: When could they begin planning for an in-person conference?
“It was probably October, November: we thought, okay, are we nuts, or should we do it,” McCormick said. “We just kept saying, well, it seems like we keep hearing good news about vaccines.”
With optimism, McCormick and the team slated a late May reopening. Their bet paid off. With vaccine success and viral loads down so far, things look clear for a return to normal this spring, especially for a payments conference in Bonita Springs, Florida. McCormick said the Hyatt Regency, also eager to reopen business, helped with the planning.
“They said ‘we really want you guys to have the show, we need the business,'” He said. “The location itself is beautiful. Tons of outdoor space, and it’s incorporated into the conference facility so people will really be able to break away and give a little more distance, have a one-on-one and not feel like they’re in a crowd.”
Watching a hackneyed, fazed reopening across the US, SEAA had to plan how to make people feel comfortable meeting, doing business no matter where they were from. Along with picking a venue with 26 acres of property to spread out, they decided to use a color-coated sticker system. Red for “keep your distance,” Yellow for “proceed with caution”, Green for “let’s chat,” and purple for “vaccinated.” Hotel staff will also, of course, be tested and carefully managing the food and distancing.
Their sister events company, the NEAA, had to postpone the planned April show in Philadelphia, but as we know, Florida is open for business.
McCormick is a Founder and board member of (SEAA) and has been active in the payments industry since 1995. Like many events companies, he said, SEAA held a virtual conference last year. While the presentations and education sessions were great, the in-person networking and POS demonstrations a vendor could expect from the conference hall experience were just not up to par.
This year, he said his team is focusing everything toward putting on a safe, “back-to-business with caution” show that is seeing unprecedented interest from firms and industry members excited to, well, shake hands again. If guests are still not ready to meet in person, the big presentations will be streamed to the SEAA site and built into a catalog.
So how many people are attending? McCormick said he’s not sure how many will show up to the Hyatt on May 24th but that the registration numbers ten weeks out are already better than in previous years.
“When we first started, we thought we normally get between 800 and 1,000 people, and we thought you if we can get 600, that would be a success,” McCormick said. “I’d feel great about that, and I think we’re going to hit that number. The interest is there.”
He said the interesting part is that larger firms generally involved in conferences were more cautious this year. A smaller firm with one to 20 people is more likely to say, “Okay, whoever feels comfortable, if you’ve been vaccinated, go ahead and go.” But it’s the larger companies that have called and said, look, we’d love to be there, but we have to wade through legal and manage to approve it.
Still, larger partners this year are excited to sponsor the event, happy to send support for a conference-leading the way back open. McCormick said he’d seen some innovative ways firms are trying to bring their products to the conference platform, like scannable QR codes for video demonstrations. The pandemic has brought virtual innovation, but many people, McCormick said, are excited to return to normal.
“You know, we’re getting awfully close. I really feel like we’re getting there,” McCormick said. “This is the hardest time because you feel it, you can see the light at the end of the tunnel, but if we can just hang on and be responsible for a couple more months, we’ll get there. That’s gonna be sort of the challenge: to remind people, ‘man, we’re all excited, let’s still grab a drink and keep six feet apart.'”
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