Chief Product Officer Michele Tucci said the platform uses 50,000 data points of mobile phone activity to predict a prospective borrower’s debt capabilities. CredoLab serves the 1.7 billion “credit-invisible” customers across the globe that may have some credit history, but not enough for a score, let alone a prime score.
“We do this in real-time: in less than a second a lender anywhere in the world, receives a credit score from Credolab,” Tucci said. “We don’t know the identity of the user; it’s only known to the bank or the lender, not to Credolab.”
CredoLab anonymously collects thousands of mobile data points, uses that data to create behavioral models, and then derives a credit score. The data can be anything- from the type of apps a user downloads, to the number of calendar events created- even the amount of texts the user sends. Is the user a gambler, a gamer, does the user use a work email during the week, and how many calendar events they schedule- all go into the predictive model.
“Some of these micro behavioral patterns could be the type of files being downloaded. Is it mostly music, or is it PDFs- or the percentage of photos taken in the week prior to the loan application that are selfies,” Tucci said. “So these are all indications that we collect and find a correlation we compare and analyze about 1.3 million micro behavioral patterns.”
Tucci said the CredoLab platform offers unmatched speed and predictability for customers’ future credit habits. He said Credolab helps lenders save money because they can better predict how their borrowers will act. Borrowers benefit by the program: Tucci argued that if lenders can better expect how they will be repaid, they tend to lend more.
The team built the platform for the world’s risk managers, whom Tucci knows constantly worry about the health of their transactions.
“Our CEO and founder Peter Bartek has more than 20 years of experience managing risk,” Tucci said. “So he feels the pain of the CROs out there, and our solution is built to address the very specific needs of chief risk officers.”
To explain the CredoLab platform’s accuracy, Tucci used a data metric called the Gini coefficient, a number between 0 and 1 that identifies to which category a request belongs. In this case, the GINI is used to classify borrowers as creditworthy or unworthy based on their mobile data.
“Zero is like flipping a coin; you have a 50/50 chance of getting the decision right. Basically no predictability,” Tucci said. “A GINI of one is like my wife; she’s always right. You know exactly what outcome to expect every single time.”
CredoLab’s platform has a predictive power of 0.6. Tucci cited World Bank economist David Mckenzie, who found for each decimal increase in GINI, there is a 1% cost savings from a risk point of view.
Par Funding’s attorneys at Fox Rothschild filed a strong response with the Court over the apparent actions taken by the Receiver to lock out its employees and suspend ACH debits, the docket shows.
“On the afternoon of July 28, the SEC advised that Mr. Stumphauzer (the appointed receiver) would cause the immediate dismissal of all the employees of the businesses and that no employees of the business would be permitted to enter the premises – leading to over 100 employees being barred from the business premises for the last week despite the fact that thousands of merchants around the country rely on ongoing communication with CBSG to ensure the ongoing viability of their business operations.”
“To date, not a dollar has been taken in by the Receiver to pay investors, and they have not been paid. The Receiver’s and SEC’s actions are ruining a business with excellent fundamentals and a strong financial base and essentially putting it into an ineffective liquidation causing huge financial losses. In taking this course of action against a fully operational business, the key fact that has been lost by the SEC, is that their actions are going to unilaterally lead to massive investor defaults.”
Par’s attorneys are expected to file a more comprehensive opposition by the end of the week.
deBanked did not reach out to any party for comment given the unlikelihood that any would be shared on pending litigation.
Nearly three months on from the beginning of the United States’ lockdown, the alternative finance industry is starting to feel a recovery. As states look to ease lockdowns, businesses seek to start back up, and offices are reopening, an element of normalcy, if it can be called that, appears to be returning. deBanked reached out to a number of businesses in the industry to find out how they were plotting their recovery, as well as what they thought of the future for the space and the American economy.
One such company was Everest Business Funding. After experiencing a strong start to 2020 in January and February, covid-19 and the economic shutdown that accompanied it came as a shock to Everest, CEO Scott Crocket explained.
“It’s difficult to imagine an exogenous event outside of our control that could more squarely impact an industry like this,” Crockett stated. “I mean, after all, we provide capital to small and medium-sized businesses all across the United States, all 50 states, every type of small business you can imagine. And we’re cruising along, we had a record 2019, we’re off to a great start with January, February, even the beginning of March … and we really saw it come on in the third week of March, the week that started with Monday the 16th. It started as a kind of a trickle in, but by the end of the week it was more of a tidal wave in terms of the number of small businesses in our portfolio that were calling in looking for some type of relief as a result of what was happening.”
Crockett said that they paused all new funding the following week, out of concern for the company’s ability to generate business while there was a national economic shutdown in place. Since then however, Everest has been slowly getting back to what it was, with employees now returning to the office in waves and discussions being had over when exactly to start funding again, be it late June or early July.
Another firm that halted its funding operations was the New York-based PIRS Capital. Similarly, it was mid-March when the pressure was first felt, and PIRS didn’t return to funding until May 15th. PIRS COO Andrew Mallinger chalked this up to the company’s lack of reliance on automated underwriting processes, saying that although “the industry was leaning towards automatic funding and all these models and 20-second approvals, we weren’t fully invested in that yet. So it was good to see that the old-school approach is back and working again, interfacing with these brokers and really understanding their deals and what they’re bringing to the table.”
Mallinger is also confident going into the rest of 2020. Saying that while the company is maintaining a cautiously optimistic outlook, PIRS is working off the assumption that there will eventually be growth this year and that it is set to continue working from home for however long that may be, on the basis that New York may be one of the last states to return to offices.
Also looking forward is Velocity Group USA’s Trace Feinstein, who believes there will tough times ahead for many in the industry, but who also holds that there are opportunities for those who can make it through.
“Anyone who can weather this storm is going to come out 10 times better than they did going in.” The Chief Syndication Officer said in a call. “It’s an adjustment for our economy, it’s an adjustment for our country, and I think it’s an adjustment for our industry on top of that. So there’s a lot of different changes and things are going to be happening, but I think it’s going to be very good for the ones who make it out of it.”
Feinstein, who said that most of Velocity’s workers are back in its offices, noted that it approached underwriting during the pandemic with thoroughness. Daily underwriting meetings entailed going through each state, looking at what was happening there with infection rates, and discussing how various industries could be affected.
Reporting that applications following the lockdown were actually cleaner than before, with average credit scores going up to be between 650 and 750, Feinstein explained that he pushed underwriters to rely on common sense rather than overthinking their decisions and to treat these deals like they would any MCA application.
And while many funders have struggled through the lockdown period, another part of the industry, collection agencies, have been doing well after an initially tough stretch.
Shawn Smith of Minneapolis’ Dedicated Commercial Recovery has claimed to have grown the company’s portfolio by 100% in 60 days despite a particularly trying period in mid-April. Explaining that the company was two weeks away from having to bring in strict measures to keep things going, Dedicated began getting calls again just in time, with its clients mostly phoning in about MCA deals.
Looking ahead, Smith is anticipating a busy summer and fall as businesses, funders, and the courts come back, but he is worried about a second wave and the alternative finance industry not putting in the precautions needed to stave off the economic impacts this next time around.
“Anyone can lend out a lot of money or put out a lot of money on the street, but your ability to get it back is going to be very important, and you want the fire extinguisher in place before the house is on fire … what you’re seeing in the MCA industry is because it’s just not as aged as the equipment leasing and banking industries … the MCA companies just didn’t have 20-30 year veterans in collections and legal … we’re so concerned with how to write more deals and get more money out there, and not about how to get it back and not about having strong enough underwriting standards and things like that. So when it got stress tested, the pain came back real quick.”
Likewise, Kearns Brinen & Monaghan’s Mark LeFevre claimed that after having a rocky road during the earlier stages of the pandemic and switching to a “plan B” for the year, the collections company is optimistic about going forward. Having weathered what may be the worst stretch without having had to furlough or lay-off anyone, KBM now has brought most of its workers back after a reworking of the office space. A pre-return fumigation, sneeze guards, and temperature-taking upon re-entry to the office building have all been employed after KBM’s employees asked to return to the workplace.
“The industry is changing literally day to day,” explained the President and CEO. “Some of the laws that are passed by the House and by the Senate are changing quicker than I’ve ever seen. I’ve just never seen it before. But I think it’s for the better and we’re starting to see the comeback of the economy, the stock market, employment. The unemployment numbers are really good and, in my opinion, [the numbers will] continue to go down from what we’re seeing in our industry.”
Henry J. “Trae” Wieniewitz, III was charged by the SEC on Monday for his role in allegedly selling unregistered securities in two companies, 1 Global Capital (the now defunct merchant cash advance provider) and Woodbridge Group of Companies (a purported real estate lending business revealed to be a $1.2 billion ponzi scheme).
“Wieniewitz and Wieniewitz Financial raised more than $11.4 million and reaped approximately $500,000 in commissions from unlawful sales of Woodbridge securities, and raised more than $53 million and obtained approximately $3 million in commissions from unlawful sales of 1 Global securities,” the SEC stated.
Wieniewitz was not a registered broker-dealer nor associated with a registered broker-dealer.
A settlement was announced simultaneously. “Wieniewitz and Wieniewitz Financial settled the SEC’s charges as to liability without admitting or denying the allegations, and agreed to be subject to injunctions, with the court to determine the amounts of disgorgement, interest, and penalties at a later date,” an SEC statement said.
Separately, the owner of Woodbridge and two former directors of the company were recently charged criminally.
No criminal charges have been brought to date in the 1 Global Capital saga. That could change. 1 Global Capital revealed in 2018 that it was being investigated by the US Attorney’s office. That along with the SEC investigation prompted the company to file for bankruptcy. The SEC subsequently brought civil charges.
Documents filed in the SEC case against 1 Global’s former owner, Carl Ruderman, have since revealed that at least one former employee had been approached by the FBI about the operations of 1 Global.
Last month, it appeared Ruderman and the SEC were heading towards a settlement.
One notable fact about 1 Global Capital is that the company participated in the largest merchant cash advance in history at $40 million. That transaction has become a point of significant controversy and litigation. The recipient of those funds, a conglomerate of car dealerships in California, have shut their doors.
Amazon has joined PayPal, OnDeck, Kabbage, and Square as being among the largest online small business lenders. On Tuesday, Amazon revealed that it had made more than $1 billion in small business loans to US-based merchants in 2018. Amazon says the capital is used to build inventory and support their Amazon stores.
By selling on Amazon, “SMBs do not need to invest in a physical store or the costs of customer discovery, acquisition, and driving customer traffic to their branded websites,” the company says. Small and medium-sized businesses selling in Amazon’s stores now account for 58 percent of Amazon’s sales. More than 200,000 SMBs exceeded $100,000 in sales on Amazon in 2018 and more than 25,000 surpassed $1 million.
|Company Name||2018 Originations||2017||2016||2015||2014|
|Funding Circle (USA only)||$792,000,000||$514,000,000||$281,000,000|
Great Neck, NY, August 20, 2018 – United Capital Source has been selected to service the BizBloom portfolio. BizBloom, a NY-based small business financing brokerage that launched in 2015, recently underwent a management change. The company’s president, Thomas Costa, has stepped down.
Costa is also no longer involved with a related business, Accredited Business Solutions, LLC (ABS), which does merchant processing.
“We are happy to use our resources to manage BizBloom’s book,” United Capital Source CEO Jared Weitz said. “It’s something our team is really good at. Our in-house CRM and technology enables us to take on the additional work seamlessly, Our employees are all industry veterans and best of breed.”
Weitz was also recently selected to co-chair the Broker Council of the Small Business Finance Association.
ABOUT UNITED CAPITAL SOURCE:
United Capital Source is a leading small business funding organization headquartered in New York. Thousands of small businesses throughout America rely on the small business loans, business lines of credit, merchant cash advances, working capital loans, credit card factoring, accounts receivable loans, SBA loans, and Equipment financing placed by United Capital Source. Companies with credit challenges unsuitable for traditional bank lending work with United Capital Source for faster funding approvals, reducing financing costs and increasing business funding choices. Our delighted customers are across industries from aviation, construction, dentistry, franchises, healthcare, manufacturing, communications, real estate, retail, and wholesalers. For more information, visitUnitedCapitalSource.com or call 855.933.8638. Visit the United Capital blog on our website and follow United Capital Source on Twitter, LinkedIn and Facebook.
The alternative small business lender that is arguably offering the longest terms with the lowest rates has secured a $100 Million Series F Round, according to an announcement on Wednesday.
With the round led by Accel, the strong sign of confidence contradicts the sentiment felt by many in the US about their business model. In the last few months, several of Funding Circle’s US competitors have suspended operations, shut their doors, or integrated into other companies. Most of the questions we’ve received lately have centered around “who’s next to fall?” not “who’s next to raise $100 million?”
So what’s going on here?
Imagine in an alternate universe that the US government was using Funding Circle’s platform to fund millions of dollars to small businesses, that the US Treasury Secretary was publicly cheering them on, and that they sat on Capitol Hill drawing up new laws that would regulate their industry in a way that would help them succeed, would you bet on them to win?
That alternate universe exists and it’s called the United Kingdom. It’s also Funding Circle’s primary market. Just last week the UK government lent Funding Circle another £40 million on top of the previous £60 million to lend to small businesses amid credit concerns related to Brexit and it’s only one example of how cozy government relations are over there.
Chancellor of the Exchequer (the US Treasury Secretary equivalent), Philip Hammond, said: “Funding Circle has become a real success story for British Fintech and news that it has attracted £80 million (US $100 mil) of investment is further evidence of the growing importance of this industry. This is another vote of confidence in a UK firm that plays an important role in our economy – helping businesses to grow and create jobs.”
And in a TV interview with Bloomberg, Funding Circle co-founder James Meekings said that the company is working with the government to help draft the regulations that they would have to abide by. Sounds like a nice arrangement.
The UK is still their biggest market but part of their $100 million funding round will be used to further develop their US business, Meekings said on Bloomberg. To date, the company has raised $375 million. Less than two years ago, their private market valuation was $1 billion, more than twice OnDeck’s current market cap. Funding Circle’s valuation in this round was not disclosed.
Funding Circle’s global loan volume these days rivals OnDeck’s. £400 million was lent by Funding Circle in Q4 versus $613 million lent by OnDeck in Q3, setting up the possibility that the former could surpass the latter in volume this year.
Funding Circle’s publicly traded SME Income Fund has also held up pretty well over the last year:
Shortly after announcing their funding round, a trade group they co-founded in the US, the Marketplace Lending Association, welcomed 11 new members. Might Funding Circle eventually gain the same favor in the US that they’ve nurtured in the UK? Would you bet on them?
Strategic Funding Source Increases Borrowing Capacity to $90 Million with New Revolving Credit Facility Led by CapitalSourceJuly 15, 2015
Strategic Funding Source, Inc., a leading provider of direct financing to small and midsize businesses, today announced that it has closed on a $90 million revolving credit facility. Led by CapitalSource, a division of Pacific Western Bank, the loan agreement includes continued participation from East West Bank and the addition of BankUnited to the lending group.
“Gaining access to the capital needed to grow continues to be an issue for many of America’s hard working small business owners and our industry plays a crucial role in addressing that need,” said Andrew Reiser, Chairman and Chief Executive Officer, Strategic Funding Source. “With the support of our outstanding bank partners we have now more than doubled our borrowing capacity. Coupled with the $110 million line of equity financing we secured from Pine Brook in August 2014, we are poised to significantly expand our footprint in the robust and evolving small business lending space.”
Strategic Funding Source provides loans and cash advances to small businesses by combining advanced technology and insight based on years of experience as small business owners and financial industry experts. The company works directly with small business owners to identify their capital requirements and creates flexible, tailored financing options that suit their individual business models.
About Strategic Funding Source, Inc.
Strategic Funding Source finances the future of small businesses utilizing advanced technology and human insight. Established in 2006, the Company is headquartered in New York City and maintains regional offices in Virginia, Washington state, and Florida. Strategic Funding Source has served thousands of small business clients across the U.S. and Australia. Visit www.sfscapital.com to learn more about the Company, its financing products and partnership opportunities.