Dec 2, 2016 / Piscataway, NJ – An old name in the industry is now a new kid on the block with wholesale. Total Merchant Resources in Piscataway, NJ announced today that it is finished with a first round of funding and has secured $20 million in private equity. This new designation allows TMR to quickly and easily service ISO’s from coast to coast via its wholesale funding division, TMRNOW.
“We are thrilled to open our very successful funding platform to the entire industry. In addition, TMR is now perfectly positioned to do business in California since we are one of the few in this space to obtain a California lending license.” said TMR Co-Founder and CEO Jason Reddish.
Reddish and co-founder Val Pinkhasov, who were featured on CNBC’s ‘Shark Tank’, were among the very first business lenders to enter this space. They are a respected name in the industry and, thanks to their major prime time TV appearance, have brought attention to this underutilized model for businesses to obtain working capital.
“Funding on the retail side all these years, we understand where funders have failed in the past and being that our money is completely private, we have no one to answer to in regards to underwriting. We create our own programs and common sense pricing. We look forward to being a name that ISO’s can trust on every level and making common sense, in house decisions” says Val Pinkhasov President of TMR.
Both Reddish and Pinkhasov have several decades of finance experience and have helped thousands of businesses achieve their goals. They are now excited, in a properly regulated fashion, to do so in on the wholesale side. Please visit TMRNOW.COM for more information.
For more information call Gary Lane (212) 220 9872.
Piscataway, N.J. – October 17th 2016 – Total Merchant Resources, a Piscataway based business funder and a veteran in the merchant cash advance space, has obtained their California Lending License to capitalize on providing businesses with working capital in the Nation’s most populous state. This new designation allows TMR to quickly and easily extend money to small and medium sized business throughout the Golden State.
“We are thrilled to have access to this very important market. In addition, TMR is now perfectly positioned to do business in California as we await the imminent and necessary regulation of the industry,” said TMR Co-Founder and CEO Jason Reddish.
Reddish and co-founder and CFO Val Pinkhasov, who were recently featured on CNBC’s ‘Shark Tank’, were among the very first business lenders to enter this space. They are a respected name in the industry and thanks to their major prime time TV appearance, have brought attention to this underutilized model for businesses to obtain working capital.
For more information contact Gary Lane, Director of Business Development at (212) 220-9872.
In case you haven’t noticed, it’s been an interesting few months for alternative finance. The below timeline is an expanded version of what appears in the print version of our Nov/Dec magazine issue.
9/27 Able Lending secured $100 million in debt financing
9/30 The FTC won a judgement of $1.3 billion against payday loan kingpin Scott Tucker, its largest ever award through litigation
10/11 The United States Court of Appeals for The District of Columbia ruled the CFPB’s organizational structure unconstitutional. To remedy, the agency will either have to convert its one-person directorship to a multi-member commission or the director will have to report to the President of the United States. The CFPB is appealing the decision.
10/13 Affirm secured $100 million in debt financing
- CircleBack Lending was reported to have ceased lending operations
- Goldman Sachs unveiled its new online consumer lending division, Marcus
10/20 CommonBond secured a $168 million securitization deal
10/24 Bizfi announced that John Donovan had joined the company as CEO. Donovan was the COO of Lending Club from 2007 to 2012.
- Expansion Capital Group announced new management team. Vincent Ney, the company’s majority shareholder became the CEO
- Lendio raised $20 million through a new equity round led by Comcast Ventures and Stereo Capital
- Lending Club announced its foray into the $1 trillion auto refinancing market
- Cross River Bank raised $28 million in equity led by Boston-based investment firm Battery Ventures along with Silicon Valley venture capital firms Andreessen Horowitz and Ribbit Capital
- Square beat earnings estimates and extended $208 million through 35,000 loans in Q3
- OnDeck announced earnings, continued use of balance sheet to fund loans and extended $613 million in Q3
- Independent merchant cash advance training course goes live, allowing brokers and underwriters to earn a certificate
11/4 SEC concluded its investigation into Lending Club
11/7 Lending Club announced earnings and a deal to sell $1.3 billion worth of loans to a National Bank of Canada subsidiary
11/8 CFG Merchant Solutions secured a $4 million revolving line of credit
11/9 Donald Trump became the President-Elect
- Fintech leader Peter Thiel joins the executive committee of Trump’s transition team
- Kabbage appointed Amala Duggirala as Chief Technology Officer and Rama Rao as Chief Data Officer
11/14 Prosper’s CEO Aaron Vermut, stepped down
- UK-based p2p lender Zopa applied for a banking license
- Small business lender Dealstruck reportedly ceases lending operations
- Former Lending Club CEO revealed to be launching a new rival, Credify
- LiftForward secured a $100 million credit facility
- Prosper filed their Q3 10-Q, revealing that they only originated $311.8 million in loans for the quarter compared to $445 million in Q2
- The IRS sent a broad request to Coinbase, the nation’s largest bitcoin exchange, as part of a hunt for tax evaders
- PeerStreet raised a $15 million Series A funding round led by Andreessen Horowitz
11/18 P2Bi raised $7.7 million in venture financing
11/22 LendIt announced the first ever industry awards event
11/29 Three C-level executives at CAN Capital are placed on a leave of absence after the company identified assets that were not performing as expected
- Total Merchant Resources secures $20 million in private equity, launches wholesale funding division
- Bitcoin-based P2P lending platform BitLendingClub shuts down
- OCC announces they are moving forward with a special purpose national charter for fintech companies
12/8 Former CEO and co-founder of World Wrestling Entertainment tapped to run Small Business Administration
12/9 OnDeck announced new $200 million revolving credit facility with Credit Suisse
12/12 Knight Capital Funding announced new Chief Data Scientist
12/13 Fifth Third Bank is reported to buy a stake in franchise marketplace lender ApplePie Capital
12/14 BlueVine raised $49 million in Series D funding
- Swift Capital named Tim Naughton as Chief Legal Officer
- John MacIlwaine, Lending Club’s Chief Technology officer, submitted his resignation to the company to pursue another opportunity
12/16 CAN Capital is reported to have laid off more than 100 employees
As the year draws to a close sending everyone into a dizzying holiday frenzy, funders are prepared to fire on all cylinders to fuel their retail customers with cash.
The last quarter is crunch time for funders alike, who start preparing months in advance — designing new products, marketing and selling them. deBanked spoke to a few to find out what business looks like at this time of the year and what’s in store for 2017.
For some, Christmas comes in August
At South Dakota-based Expansion Capital Group, the holiday prep started as early as August. “We think demand is going to be very strong and to accommodate for it, we started 60 days early,” said Marc Helman, director of strategic partnerships. The company launched four new products in August for a wide spectrum of borrowers — longer term products for existing customers and starter offers for new companies and those with challenged credit.
Since the demand peak is cyclical, most funders who have been around a while have the drill down to a science. For NYC-based funder Hunter Caroline, demand spikes up close to the tax extension period, in September and October. “We sit down with our marketing team, see which clients ramp up this time of the year and focus our sales efforts in that direction,” said Cody Roth, managing partner at Hunter Caroline. During the holiday season the company turns its attention to customers in mom and pop retail, restaurants, liquor stores and gift stores in small towns.
“We weigh a lot into seasonal businesses and have certain hybrid programs,” Roth said. “We collect a little bit more during the busy season and keep it down during the slow time.” For this year specifically, the two-year-old firm is pushing invoice factoring, purchase order financing and unsecured loan products apart from its usual business loan offering of up to $4 million for 24 months.
Plan, pilot, pivot
Q4 is also the time when companies plan and strategize for the year ahead. And for loan marketplace Bizfi, a lot of changes are in the offing. The company appointed John Donovan, a 30-year veteran in the payments and alternative finance industry as its new CEO. And while on track to approach nearly $600 million of fundings this year, Bizfi also decided to cut ties with some non-performing ISOs to increase efficiency. “We just told around a hundred sales offices we could not do business with them anymore to use resources for our own funding channels that have better conversion rates,” said Stephen Sheinbaum, founder and president of Bizfi.
The holiday season is arguably one of the busiest times of the year for merchants, but it doesn’t have to be so for funders. Jason Reddish, CEO of New Jersey-based Total Merchant Resources advises all his clients to take the money when they don’t need it, asking clients to borrow early, put away the money and by November, have the capital pay for itself through the peak season. “The oldest problem with credit is that you get as much as you want when you don’t need it,” Reddish remarked. “You have access to cheap and the most flexible money when you don’t need it.”
The company tries to structure deals that way for some of its retail clients who see high holiday demand.“We see a pretty big spike going into the holidays and then there is a holiday hangover where they are absorbing all the money they borrowed,” Reddish remarked. “Until the hangover wears off in February and we get busy again.”
All things considered, funders are on their marks for the holiday. Will it be bright for them?
Total Merchant Resources CEO Jason Reddish talked all things lending on AM 1490 in Cleveland, Ohio recently, including much about the alternative business financing industry. Have a listen below:
Reddish was also kind enough to give a shout out to deBanked at about 9 and a half minutes in.
Reddish and his business partner Val Pinkhasov made a splash in the industry after their appearance on ABC’s Shark Tank in 2013.
Barbara Corcoran, co-founder of The Corcoran Group and famous Shark Tank investor, has teamed up with small business lender OnDeck to support entrepreneurs through a contest. Three winners will be chosen for a $10,000 prize and they’ll also get to meet Barbara Corcoran.
Contest applicants are asked to enter what they would spend the $10,000 on to grow their business. The deadline to enter is December 2nd, 2015.
The partnership is significant because it marks yet another time that a Shark has crossed paths with online business lenders. Just one year ago, Kevin O’Leary became a spokesperson for IOU Financial.
— Kevin O'Leary (@kevinolearytv) October 2, 2014
Also around that time, Kevin Harrington, an original Shark Tank investor before Mark Cuban or Lori Greiner, co-founded his own small business lending marketplace, Ventury Capital. Straight out of the OnDeck or merchant cash advance playbook, Ventury’s FAQ says their system “deducts a fixed, daily payment directly from your business bank account each business day.”
Watch Kevin Harrington explain his company here:
Of course there was the time that a merchant cash advance company (Total Merchant Resources) actually went on Shark Tank and pitched the sharks…
It seems that the show and the real world have a lot in common.
One gauge of the commercial excitement over legal weed, medical marijuana and cannabis’s byproducts could be witnessed at the Las Vegas Convention Center in early December where the Marijuana Business Conference & Expo was overflowing with 31,523 attendees.
Appealing to that audience—roughly the population of Juneau, Alaska—were more than 1,300 exhibitors who hailed from 79 different countries and touted products and services as varied as advancements in crop cultivation, medicinal breakthroughs, and innovative consumer products like marijuana-laden pastry.
That’s some 30% more than the 1,000 vendors who packed into the Central Hall in 2018 and about double the 678 who were showing off their wares in the smaller North Hall two years ago, reports Chris Day, vice president for external relations at Denver-based Marijuana Business Daily, which follows the cannabis industry and sponsored the Las Vegas trade show.
“In December, 2019,” Day declares, “we did not have to turn people away because we expanded. We had enough room for exhibitors but we needed both halls.” Unable to resist a boast, he adds: “We’ve been the fastest-growing trade show in the country three years running.”
One face in the December crowd was seasoned financial broker Scott Jordan, the Denver-based managing director of the Alternative Finance Network. He was occupying a booth accompanied by two attractive female models in fetching T-shirts emblazoned with the message: “How much would you borrow at zero percent?”
The young ladies’ arresting appearance and the message worked to the extent that “it got people talking,” Jordan says. As for the zero-interest rate, it’s not exactly free money. “I’ve got a product that puts together a line of credit,” he explains, “and after they receive the line of credit, it charges them a fee.”
As a broker, Jordan does the spade work of poring through a cannabis business’s financial statements and business model before he tees up a deal—typically between $250,000 and $750,000—to “a cadre” of 35 lenders in 10 states. He’ll ascertain whether the best funding option should be structured as equipment leasing, a working-capital loan, a revolving line of credit, project financing, or a real estate loan.
One recent cannabis deal that Jordan midwifed involved a “post-revenue, pre-profitability” manufacturing and processing company headquartered in Colorado. The financing, which closed in April, 2019, involved a pair of four-year term loans: one for $400,000 to refinance existing machinery, and a second for an additional $500,000 to acquire new laboratory equipment. Both credits carried interest rates in the “mid-teens,” he says, and were secured by the equipment.
Once the debt financing was in place, the manufacturing operation was “fully functioning,” Jordan reports, paving the way for the company to raise $30 million in venture capital financing. Jordan argues that “even if they pay a 10-20 percent interest rate, it’s better to preserve equity and finance through a normal type of loan. If you need an extraction machine or packaging equipment,” he adds, “why give up equity if you can finance it through debt?”
Jordan’s reasoning appears to sit well with clients and funders alike. Since 2014, he has brokered 85 transactions worth $33 million. He reckons that two out of three deals that he takes to funders meet with success. “My best year was 2015 because there were only a few competitors and I was the only guy on the block,” he says.
As the country steadily decriminalizes and legalizes pot, however, early market entrants like Jordan no longer have the cannabis business all to themselves. Thirteen states have legalized recreational marijuana for adults. These include California, Colorado, Oregon, Washington and Nevada in the West; Illinois and Michigan in the Midwest; and Massachusetts, Vermont and Maine in the East. Hawaii and Alaska permit it and, if you’re over 21, you can legally grow, smoke or ingest weed in the District of Columbia, but it cannot be sold commercially.
An additional 24 states have approved medical marijuana. While research on cannabis’s medicinal properties remains thin—largely because of objections by federal law enforcement—it is being prescribed for a range of maladies, including cancer, glaucoma, epilepsy, Crohn’s Disease, multiple sclerosis, nausea, and pain. [“The marijuana plant contains more than 100 different chemicals called cannabinoids,” according to WebMD. “Each one has a different effect on the body. Delta-9- tetrahydrocannabinol (THC) and cannabidiol (CBD) are the main chemicals used in medicine. THC also produces the ‘high’ people feel when they smoke marijuana or eat foods containing it.”]
Industry data assembled by MJBizDaily reflects both the broad acceptance of legal cannabis use and its increasing commercial popularity. U.S. revenues from legal weed and its byproducts are expected to clear $16.4 billion this year, a 40% growth rate over the $11.75 billion in estimated revenues for 2019. The legal cannabis industry now employs about 200,000 persons in the U.S., about the same number as flight attendants (120,000) and veterinarians (80,00) combined.
For more evidence that the cannabis market is hot look no further than the state of Illinois, where recreational marijuana went on sale Jan. 1, 2020. The Prairie State’s governor also pardoned some 11,000 citizens with criminal records for possession and the sale of low levels of marijuana.
“We’re showing that sales were close to $3.2 million on the first day of 2020,” says MJBiz’s Day. “Illinois is the big story right now,” he adds. “Anytime a new state opens up in the market, you’re seeing enormous pent-up demand and enthusiasm.”
Even as the cannabis industry takes giant strides toward public acceptance, the plant continues to face hostility from the U.S. federal government, which has criminalized its use for 80 years. Marijuana remains classified by the Drug Enforcement Agency as a Schedule 1 drug, keeping company with heroin, LSD and Ecstasy.
That designation has also made it hard for the cannabis industry to engage in simple financial transactions, much less obtain financing. “Despite the majority of states’ having adopted cannabis regimes of some kind, federal law prevents banks from banking cannabis businesses,” Joanne Sherwood, president and chief executive at Citywide Banks, a $2.3 billion-asset bank headquartered in Denver, testified to Congress last summer. “The Controlled Substances Act,” added Sherwood, who is chair of the Colorado Bankers Association, “classifies cannabis as an illegal drug and prohibits its use for any purpose. For banks, that means that any person or business that derives revenue from a cannabis firm is violating federal law and consequently putting their own access to banking services at risk.”
And despite the herculean efforts by the cannabis industry to soften its image, obtaining financing from traditional sources like pension funds, insurance companies and university endowments remains a daunting proposition as well, says David Traylor, senior managing director at Golden Eagle Partners. His four-person, boutique investment fund, which makes equity investments in up-and-coming cannabis companies, relies on wealthy individuals and family offices for the bulk of its funds.
“Capital is hard to come by for this industry,” Traylor says. “From day one, most venture capitalists have been staying out of it. It’s still illegal in many states and their limited partners are endowments like Harvard and Yale, which see marijuana as the antithesis of education.”
Sarah Sanger, chief financial officer at Oak Investment Funds, a real estate investment firm based in Oakland, says: “There’s a great deal of economic activity in California but it’s stymied by the lack of financing and difficulty with changing regulations. It provides an opportunity for really expensive debt from private investors willing to do due diligence.”
That absence of establishment financing has opened up a plethora of opportunities for alternative funders, and not just in agriculture and plant cultivation. While agriculture represents the bedrock of the industry there is no downstream product, of course, without the cannabis leaf— growing and harvesting cannabis is just one stage of the industry’s life cycle.
MJBiz’s Day notes, for example, that that the legal cannabis industry is regulated for safety, so growers must show that “the flower has no molds or contaminants.” That means that crops are subject to rigorous testing and decontamination, which requires both materials and expertise. To process the leaf and develop “infused products” by extracting cannabis-based oils entails the purchase and deployment of costly technology. Packaging and labeling along with tracking systems that, Day says, “are stricter than in other places” are also key components of the farm-to-market supply chain.
Meanwhile, in an ongoing effort to appeal to a fresh cohort of customers, Jordan notes, the cannabis industry continues to develop innovative uses for the plant. “There are so many applications and new products that keep appearing, like ice cream with marijuana, vaporizers, inhalers, and syrup,” he says. “Now, there are mints—something I hadn’t seen before—and different ways to ingest the product and get high and not look like a druggie.”
Jordan Fein, chief executive at Greenbox Capital in Miami, says his firm prefers to fund downstream companies selling cannabis products. “We do agricultural lending but it’s less attractive and harder to qualify the business. It’s not as tangible as a retail business which will have a website and product reviews. The same goes for edibles.”
Recent Greenbox Capital deals in 2019, Fein says, included one with merchant cash advances of $80,000 and $60,000 in growth capital to a Colorado dispensary. The operation put the money to work adding two retail outlets during the year, he says, bringing to four its total number of storefronts. In addition to cannabis flower, the dispensary sells “edibles, tinctures, lotions, and wax concentrates,” Fein reports. Both short term cash advances require regular ACH payments.
Greenbox Capital also made a $135,000 cash advance to a cannabis-testing laboratory in Southern California in August, 2019 for the purchase of sophisticated equipment. The company, he says, is doing $140,000-a-month in revenue and cashflow is strong and on the rise.
“Greenbox is always interested in higher risk deals,” Fein says, noting that banking services remain off limits to legal cannabis firms. “But we fund them for the same reason we fund lawyers and auto sales—things that most others will not do. There’s nothing wrong with risk,” he adds, “as long as you clearly assign a proper value to the deal and price to it.”
Steve Sheinbaum, a New York broker and chief executive at Circadian Funding, has unabashedly climbed aboard the cannabis bandwagon. “The market is exploding and it’s attractive to lenders because it’s a product people can put their hands on,” he says. “If I’m dealing with a grower, I can leverage real estate and usually there’s equipment. If they’re producing, there’s inventory and I can look at the income statement to see what kind of cash flow the business is generating.”
He recently brokered a $10 million loan for a licensed grower and distributor of medicinal marijuana in New England with monthly revenues of $3-$4 million. The credit bore a 17% annual percentage rate and a six-year maturity, he says. The deal was brought to Circadian by a private equity investor who was looking to grow the enterprise tenfold. The deal, which was interest-only, was secured by a second position on real estate and a lien on the borrower’s license. “The lender was comfortable with the interest-only loan,” Sheinbaum explains. “They can refinance in six years.”
In another recent deal, Circadian arranged an unsecured merchant cash advance for $300,000 to a Pacific Northwest technology company developing specialty, point-of-sale software for the cannabis industry. The firm showed monthly revenues of $300,000.
“It’s not federally permitted for cannabis firms to take payments from Visa, Mastercard or American Express,” Sheinbaum explains. “But this technology company is using debit or credit cards to pay for cryptocurrency which is stored on a prepaid card which customers can then use to purchase cannabis.”
The tech company had been struggling to find money and Sheinbaum took satisfaction in a deal announcement that went out in an e-mail to the industry. “Funding complicated deals is what gets our blood flowing,” Sheinbaum wrote. “Anyone can get a restaurant or dentist funded. No one needs help with that.”
Manny Columbie, a Miami-based senior funding manager at H&J Capital Group, an Orlando firm, reports funding agricultural and dispensary businesses in California, Colorado and Washington State. In the Evergreen State, he says, he recently provided funding to a woman who owned a marijuana-themed café connected to a cannabis dispensary. The deal went through after examining her recent bank statements and two years of federal tax returns.
“The best thing about lending to people in this industry is their ability to repay,” Columbie says. “They’re never lacking in funds.”
He provided more detail on a deal currently in the works involving a physician in Irvine, California, with an 800-plus credit score from the rating agency Experian and personal tax returns showing $2 million in annual income. The doctor, Columbie says, has been making transdermal patches infused with THC in addition to his medical practice and needs specialized equipment to lower his manufacturing costs to 55 cents per patch. The patches sell for $40-$60 apiece, Columbie says, depending on the THC content.
If the deal goes through and is approved by H&J’s credit committee, the physician would likely be extended a $350,000 loan with a 10-year maturity secured by the Chinese-manufactured equipment. Factoring in the doctor’s excellent credit and other positives, the interest rate on the credit could be as low as 5%-7%.
While the environment for legal cannabis seems to grow more favorable by the day, market participants urge funders to remain circumspect. One remaining fly in the legal cannabis ointment has been the persistence of an illegal black market. Estimates are that as much as 60% to 80% of the marijuana market in California is illicit, says Craig Behnke, an equity analyst at MJBiz.
Law-abiding businesses must also contend with overbearing regulators and high taxation. The California Department of Fee and Tax Administration recently jacked up its excise tax on cannabis to 80%, effective on Jan. 1, 2020.
And the state’s constabulary isn’t helping matters either, notes Sanger of Oak Funds. “There are going to be a lot of operators that end up being losers because of the regulatory environment,” she says. “Law enforcement is using all of its resources to make sure legitimate businesses are following the rules instead of clamping down on black market activity. That makes it harder for legitimate retailers to make money because people are still shopping in the black market.”
The recent collapse of the shares of publicly traded Canadian cannabis companies, which some blame in part on the illicit competition from the black market, also stands as a cautionary sign. Last August, the Motley Fool listed ten “Pot Stocks”—including Canopy Growth and Aurora Cannabis, both of which are listed on the New York Stock Exchange—that together lost a stunning $20 billion in market capitalization.
The drubbing that heedless investors have taken in the Canadian stocks reminds analyst Behnke of the debacle in dotcom stocks back in 2001-2002, but with a big difference. “The dotcoms were a brand-new invention and people had no idea how big the Internet companies would be,” he told deBanked. “But cannabis has been around for a thousand years. I feel like it was a shame on investors and the companies. This shouldn’t have happened.”
total merchant resources. they did a deal on shark tank. no experience with them., , i know who they are, i know they did a deal on shark tank. i just want...
total merchant resources. they did a deal on shark tank. no experience with them....
total merchant resources...