ENOVA






Headlines

11/30/2020Enova appoints new chief accountant
11/07/2020Enova to repurchase $50M of its stock
10/13/2020Enova completes acquisition of OnDeck
10/08/2020OnDeck / Enova merger approved
09/11/2020Enova adds Linda Johnson Rice to Board



Stories

Enova Appoints James J. Lee to Chief Accounting Officer

November 30, 2020
Article by:

Enova International announced the appointment of James J Lee to the position of Chief Accounting Officer. The new role went into effect on November 23rd.

Lee was previously the Controller of Life & Health of Kemper Corporation.

OnDeck Originated $148M in Loans in Q3, is Moving Full Speed Ahead Under Enova

October 27, 2020
Article by:

OnDeck NYSEOnDeck more than doubled its Q2 loan volume, according to statements made on Enova’s latest quarterly earnings call. OnDeck originated $148M in Q3 versus the $66M in originated in Q2.

For frame of reference, this is still down significantly from the $618M that the company originated in Q4 2019, well before covid became a factor.

But expect the numbers to ramp up.

“We have basically all of our marketing channels turned on across consumer and small business [lending],” said David Fisher, Enova’s CEO.

“OnDeck is probably a little bit ahead of where we are on the Enova side. We were a little bit more cautious in our re-acceleration of our lending kind of going into the 3rd quarter but we are totally comfortable with that decision. If the biggest mistake we make during all of covid is waiting an extra 60 days to re-accelerate lending, we think that’s a great position to be in. We think that extra conservatism makes sense and with the rate that we’re re-accelerating lending, it won’t hurt that much in the long run.”

And apparently demand and credit quality are looking quite normal, despite covid, according to Fisher.

“On the small business side, the makeup of the demand is surprisingly similar to a year ago. You would expect so many differences given what the economy has been through but there’s actually very very few. It’s pretty broad based. Credit quality look really really strong. If anything it’s stronger- I think it’s the stronger businesses that are trying to borrow at this point that are trying to lean into covid, not the ones that are just trying to survive so if anything on the demand there is a slight improvement on credit quality in small business.”

OnDeck’s annualized quarterly net charge-off rate for the third quarter was 23% and its 15 day+ delinquency rate decreased from 40% at June 30th to 27% at September 30th.

Enova reported monster quarterly earnings of $94M. CEO David Fisher and CFO Steve Cunningham said it was a record-breaking quarter for profitability.

Enova Posts $94M Profit for Q3

October 27, 2020
Article by:

Enova, the international lending conglomerate that recently acquired OnDeck, reported a Q3 profit of $93.67M, bringing the company to over $147M in profit for the year so far.

“We are pleased to report strong earnings as the credit quality of the portfolio continued to improve during the third quarter,” said David Fisher, Enova’s CEO in an official announcement. “Encouraged by the better than expected portfolio performance and the stable and predictable credit risk seen in our testing, we thoughtfully began reaccelerating lending in the third quarter.”

Speaking about OnDeck, Fisher said that “OnDeck experienced growth in originations, improving credit quality and solid profitability. Our integration plans and recognition of the expected synergies and financial benefits of the transaction remain on track. With the combination of Enova’s and OnDeck’s complementary, market-leading businesses and our extensive experience navigating changes in the operating environment, we believe we are well positioned to grow profitably and drive long-term shareholder value.”

OnDeck / Enova Merger Overwhelmingly Approved by Shareholders

October 8, 2020
Article by:

The drama surrounding what OnDeck allegedly did or did not disclose to shareholders about the Enova merger presumably came to an end on Wednesday. 38 million voting shares approved the deal while less than half a million voted against it.

However, shareholders sent a message by voting against “the compensation that may be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the merger.”

OnDeck has said that the merger is expected to be completed in the fourth quarter of 2020.

Following Nine Lawsuits, OnDeck Discloses Supplementary Details Behind Planned Enova Merger

September 28, 2020
Article by:
Noah Breslow OnDeck CEO at LendIt
Above: OnDeck CEO Noah Breslow speaks at LendIt in 2016

After OnDeck announced its planned merger with Enova, it was sued nine different times (See here and here) by shareholders that accused the company’s Board of Directors that they had failed to disclose material information about the deal.

OnDeck formally responded on Monday, September 28th, wherein they disclosed that plaintiffs in all of those actions had agreed to dismiss their claims in light of the release of this supplemental information:

The Company and Enova believe that the claims asserted in the Actions are without merit and that no supplemental disclosures are required under applicable law. However, in an effort to put the claims that were or could have been asserted to rest, to avoid nuisance, minimize costs and avoid potential transaction delays, and without admitting any liability or wrongdoing, the Company has determined to voluntarily supplement the Proxy Statement/Prospectus as described in this Current Report on Form 8-K to address claims asserted in the Actions, and the plaintiffs in the Actions have agreed to voluntarily dismiss the Actions in light of, among other things, this supplemental disclosure. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality of any of the disclosures set forth herein. To the contrary, the Company and the other defendants specifically deny all allegations in the Actions that any additional disclosure was or is required and expressly maintain that, to the extent applicable, they have complied with their respective legal obligations.

OnDeck first re-explained its background situation leading up to the Enova deal:

Starting in April 2020, OnDeck management commenced a review of potential financing options to secure additional liquidity and potentially replace the Corporate Line Facility and began contacting potential sources of alternative financing, including mezzanine debt. OnDeck contacted, or was contacted by, more than ten potential sources of mezzanine or alternative financing, and received pricing indications from four sources. The interest rates offered by those alternative financing sources ranged from 1-month LIBOR plus 900 basis points to 1,700 basis points (in addition to an upfront fee) and all but one required a significantly dilutive equity component. The one proposal that did not include an equity component was at an interest rate of 1-month LIBOR plus 1,400 basis points to 1,700 basis points. Based on the initial term sheets proposed, OnDeck engaged in negotiations with each of the four potential sources of alternative financing. As these negotiations progressed and COVID-19’s impact on the macro economy and OnDeck’s loan portfolio intensified, two of the four potential sources of alternative financing ceased to actively participate in negotiations. Discussions with the final two potential sources of alternative financing remained ongoing through the time that OnDeck and Enova entered into the merger agreement. Throughout the Process, OnDeck management reported the status of such negotiations on a frequent and ongoing basis to the OnDeck Board for its deliberation in the context of OnDeck’s standalone plan, and the OnDeck Board considered the significant uncertainty of being able to reach agreement on alternative financing in its decision to enter into the merger agreement.

Of particular contention in the deal were OnDeck’s financial projections, prepared to estimate OnDeck’s trajectory as an independent entity. Shareholders complained that there were two sets of books and that they only got to see one. The other set, dubbed Scenario 1, had been used to shop OnDeck around to other suitors. OnDeck published both sets in their supplemental materials on Monday.

Originally Disclosed Projections
OnDeck Projections

Newly Revealed Scenario 1 Projections
Scenario 1 - OnDeck Projections

The difference is stark. Originally disclosed to shareholders was a projected cumulative net loss of $20.4 million through the end of 2024. The other set of projections, Scenario 1, state a cumulative net income of $33.5 million over the same time period, a difference of over $50 million.

The original predicted a 2021 net loss of $19.4 million while Scenario 1 predicted a net income of $14.3 million.

One reason offered for selecting the less optimistic of the two is that OnDeck’s management determined that loan originations were trending below both sets of projections as of July 12th. OnDeck announced the Enova deal about two weeks later.

Shareholders will cast their votes on the merger on October 7th. OnDeck’s Board “unanimously recommends” that they vote in favor of the proposed merger with Enova.

Additional Lawsuits Filed Against OnDeck Directors Over Enova Deal

September 14, 2020
Article by:

At least three federal lawsuits have been filed against the directors of OnDeck relating to the announcement that the company is being acquired by Enova. These suits allege securities act violations with regards to how the technical aspects of the deal were disclosed while the initially reported action in the Delaware Court of Chancery alleged a breach of fiduciary duty.

The federal securities lawsuits are:

Daniel Senteno v. On Deck Capital, Inc. et al – Case 1:20-cv-01179-MN
Eric Sabatini (on behalf of a class) v On Deck Capital, Inc et al – Case 1:20-cv-01166-MN
Mohamed Aboubih v On Deck Capital, Inc. et al – Case 1:20-cv-07319-Vm

OnDeck Directors Sued in Class Action For Allegedly Withholding “Material Information” From Shareholders To Make Enova Deal Happen

September 8, 2020
Article by:

NASCAR - Black and WhiteAn OnDeck shareholder is asking the Delaware Court of Chancery to halt the sale of the company to Enova until OnDeck discloses allegedly material information that would appear to put the landmark deal in an entirely new light.

On September 4, Conrad Doaty filed a class action lawsuit against Noah Breslow, Daniel S. Henson, Chandra Dhandapani, Bruce P. Nolop, Manolo Sánchez, Jane J. Thompson, Ronald F. Verni, and Neil E. Wolfson for breaching their fiduciary duties owed to the public shareholders of OnDeck.

According to Doaty, the Enova offer of $90 million ($82 million stock, $8 million in cash) was not even the best bid that OnDeck received but he alleges that OnDeck’s directors and executives took it because they were individually offered “exorbitant personal compensation” including “millions of dollars in severance packages, accelerated stock options, performance awards, golden parachutes and other deal devices to sweeten the offer.”

Doaty makes reference to other bids for OnDeck with specifics including two all-cash offers, one that valued OnDeck at between $100 million and $125 million and one that valued it at between $80 million and $110 million. He says that no explanation for their rejection was disclosed.

Doaty also alleges that OnDeck relied on two sets of financial projections to evaluate a sale of the company, one for all prospective bidders (that projected a quick economic recovery) and another set that was used only for Enova (that projected a slow economic recovery). Doaty’s point is that Enova’s valuation was based on less optimistic data and that OnDeck did not publicly disclose to shareholders the more optimistic version that all the other prospective buyers of the company got to see.

“Most significantly, is that it is not pressing time to sell,” Doaty says. “The company was not facing imminent financial collapse or financial ruin.” He continues by pointing out that the company had $150 million of cash on hand and that it had successfully navigated workouts with its creditors over issues caused by the pandemic.

“Yet as a result of the frantic and unreasonable timing of the sale, the consideration offered for OnDeck is woefully inadequate.”

In addition to “exorbitant personal compensation” promised to the Board members, Doaty argues that a cheap price benefits parties who sat on both sides of the transaction, namely Dimensional Fund Advisors LP, BlackRock, Inc., and Renaissance Technologies, LLC, all of whom are said to hold greater than 5% beneficial ownership interest in both OnDeck and Enova. None of them are named as defendants.

“…even if the exchange ratio is unfair,” Doaty argues, “those institutional investors will still benefit from seeing their positions in Enova benefitted. Non-insider stockholders, on the other hand, will not be parties to the benefit.”

The law firm representing the plaintiff in Delaware is Cooch and Taylor, P.A.
Case ID #: 2020-0763 in the Delaware Court of Chancery.

You can download the full complaint here.

As an aside, deBanked mused two days prior to the filing of this lawsuit that the sales price of OnDeck was so low that early OnDeck shareholders stand to recover less of their investment as a result of this deal than investors in a rival company that was placed in a court-ordered receivership by the SEC.

Enova & OnDeck: Behind The Biggest Deal of 2020

July 29, 2020
Article by:

enovaEnova CEO David Fisher kicked off his company’s 2nd quarter earnings call on Tuesday and one could tell from the pitch in his voice that he was excited. And why shouldn’t he be? Despite the catastrophe that gripped the nation over the months of April, May and June, Enova still manages to report a consolidated net PROFIT of $48 million.

But that’s not even it. After a long introduction about a major acquisition, a rather familiar voice is asked to deliver some prepared remarks.

“Thanks David, I am equally excited…”

It’s Noah Breslow, the CEO of OnDeck. Less than an hour earlier it was revealed that Enova had bought 100% of OnDeck’s outstanding shares for $90 million in a deal paid for almost entirely with stock. And now suddenly he’s here on this call talking about how great it is that the companies are combining forces.

“Following an extensive review of our strategic options, we believe this is the right path forward for our customers, employees, and shareholders,” Breslow says.

That OnDeck has been acquired is no surprise. The devastating impact of COVID in Q1 reveals weaknesses in the company’s business model and the share price drops by 80% from the period of February to July. This all while two of their competitors in the small business lending space, Square and PayPal, experience enormous gains of more than 40%.

OnDeckIn May, Forbes reported grim news, that OnDeck is being shopped around in “what amounts to a fire sale.”

The rumor creates further despair in an industry that is preoccupied with survival. If this can happen to OnDeck, then…?

The truth is, OnDeck’s momentum had stalled long before COVID. The company walked away from a sale to Wonga in 2012 that had valued them at $250 million and they went on to have a successful IPO in 2014 at a value of $1.32 billion on the selling point that they were a tech company.

But by mid-February of this year, the company’s market cap is down to less than $250 million, turning the clock backwards by about eight years. After losing the partnership with Chase in 2019, OnDeck seemed to have lost its swagger and direction. They planned to pursue a bank charter and do a stock buyback. Then the news pretty much stops.

COVID happens and it hits them hard. The company stopped lending entirely, although they still recorded originations of $66 million in Q2.

As a standalone entity, OnDeck’s upside had greatly diminished. Getting back to where it was pre-COVID may not have been an entirely enticing prospect for investors. Its market cap recently plummeted to less than $50 million and so by the time the Enova price of $90 million is announced, it sounds almost generous. (Knight Capital sold for $27.8M in November).

Enova says that the acquisition increases their concentration in small business lending from 15% to 60%. That puts consumer lending, their historical core business, now in the minority. This is not by accident. On the earnings call, Enova executives say that they believe that “there will be strong demand for capital from small businesses as the economy begins to open back up.” They even believe the opportunity is better than the consumer lending market right now, particularly from a regulatory perspective, they say. Therefore it makes sense to “double down or triple down” on the small business side, they contend.

Enova’s small business lending business was largely spared by COVID. Unlike OnDeck’s brutal Q1, Enova had reported something “very much manageable” thanks to not having “large exposures to entertainment, hospitality and restaurants.”

“Our portfolio has been extremely stable,” Enova says on the call. With the acquisition of OnDeck, the company appears to be gearing up for the opportunity they believe awaits in small business lending right around the corner.

Enova On Their Small Business Lending Exposure

April 30, 2020
Article by:

Enova’s exposure to the small business lending crisis is limited, the company said during its earnings call yesterday. The Business Backer and Headway Capital are two of the international consumer lending company’s small business lending divisions.

In terms of their overall loan book, small business loans only make up a percentage worth in the teens. “It’s very much manageable for us,” CEO David Fisher said. Fisher also said that they did not have large exposures to entertainment, hospitality and restaurants in their small business loan portfolio and were well diversified.

“Defaults […] have not increased anywhere near as much as we would have expected. Lots of payment deferrals and modifications, but with the PPP checks coming in and states opening back up, we are somewhat encouraged that we haven’t seen very high levels of default yet.”

Enova reported a consolidated Q1 net income of $5.7M.

Enova’s Small Business Division Garner’s Limelight in Q2

August 16, 2019
Article by:

enovaLate last month, Enova released its second quarter report for 2019. Generally bearing positive news, the report asserts that the company is in a good position due to increasing demand, growth in various areas, and reductions in financing costs.

Total revenue is up from Q2 2018, rising 13% from $253 million to $286 million, just as net income has risen from $18 million to $25 million.

“We are pleased to report another quarter of solid financial results that exceeded our expectations on both the top and bottom line,” said Enova CEO David Fisher in the earnings call. “Our strong financial performance was driven by solid demand, stable credit, and efficient marketing spend. We continue to demonstrate our ability to produce sustainable and profitable growth and our second quarter results further validate this balanced approach.”

Speaking more specifically about which divisions of Enova have excelled, Fisher highlighted the small business sector, which is composed of Headway Capital and The Business Backer. “NetCredit and our small business financing products were the primary growth drivers during Q2, with domestic revenue up 19% year over year … Our products are clearly gaining traction with customers, resulting in originations increasing 140% year over year, and small business now represents 12% of our book at the end of Q2.”

Jim Granat, Enova’s Head of Small Business Financing, chalked such gains up to “having a great team, a good strategy, and a great company behind us that has the ability to invest in the analytics, tech, and people.” The strategy he speaks of is titled ‘Faster and Easier,’ a modus operandi began by him after his arrival to the company in 2018. It is data-driven and involves incorporating certain individual operations of Headway and Business Backer, and streamlining these processes so that the brands overlap for particular actions. Implemented with the belief that “doing it internally would lead to speed and ease externally,” ‘Faster and Easier’ appears to be working, if one takes Fisher’s comments and the report as affirmation.

“We’ve been working really hard and hopefully the results of that show in the fruits of these efforts,” said Granat. “We are just in the beginning of what we can accomplish, these projects take a while and we are incredibly excited about the second half of 2019, let alone 2020 and beyond.”

Enova Small Business Hires Two Industry Veterans to Lead ISO Partnerships

June 14, 2019
Article by:

Investment in ISO partnership leaders will help Enova Small Business deliver faster and easier funding

CHICAGO (June 14, 2019) — Enova Small Business, a leading provider of loans and financing to growth-minded small businesses in the U.S., announced today that Justin Friedman and Jay Shaw have joined Enova Small Business as senior sales executive and senior manager of partner management, respectively. In their roles, Friedman and Shaw will be responsible for managing ISO relationships for Enova Small Business subsidiaries Headway Capital and The Business Backer, reporting to head of Enova Small Business, Jim Granat.

The hire of Friedman and Shaw comes at a time of rapid growth for Enova Small Business, as Q1 small business originations increased 58 percent year-over-year.

“At Enova Small Business, we are focused on delivering a faster and easier funding process for our customers, and we’re excited to welcome Justin and Jay to help drive our continued growth,” said Granat. “Both Justin and Jay are highly regarded in the small business funding community, and they bring a wealth of knowledge and experience to the team that will benefit our partners and our customers,” said Granat.

Friedman joins Enova from Libertas Funding, where he served as head of strategy. Prior to that, he led partnerships account management at OnDeck. Shaw joins Enova Small Business from funder Quick Bridge Funding, where he served in a variety of roles, including Chief Compliance Officer and, most recently, director of account management and syndication.

Friedman and Shaw will manage ISO relationships for the Eastern U.S. and the Western U.S., respectively.

About Enova Small Business
Enova Small Business includes Enova International’s two small business brands, Headway Capital and The Business Backer.

Headway Capital offers a True Line of Credit up to $100,000 to U.S. small businesses looking for flexible, fast funding. Headway Capital serves small businesses of all sizes and across industries with everyday revolving access, transparent terms and no prepayment penalty. Small businesses can select bi-weekly or monthly payments and can determine the repayment timeline that works best for them, from 12 months to two years.

The Business Backer extends relationship-based funding solutions to small businesses in need of cash flow management and believes that by replacing distrust with trust and by valuing relationships over automation, they are building a better way where small business owners can trust the financing process and easily access the best solutions. The Business Backer is proud to offer its customers competitive rates, fast funding, and a quick and simple approval process. Small business owners walk away with a solid understanding of what’s available to them based on their situation and can quickly determine the best next step in their journey to getting funded.

Former Lendio Executive Leaves for Enova/The Business Backer

August 8, 2018
Article by:

Jim GranatEnova announced last week that Jim Granat has joined the company as its Head of Small Business Financing. This will include oversight of Enova’s small business brands: Headway Capital, which provides lines of credit to small business, and The Business Backer, which provides merchant cash advances, among other products.

Enova acquired The Business Backer in 2015 for $27 million and retained its president and co-founder, Jim Salters – until recently. An Enova representative confirmed that Salters no longer works at the company. As Head of Small Business Financing, Granat will be assuming at least part of Salters’ role. An Enova representative also said that Granat will be relocating from the Salt Lake City area to Chicago, where Enova has its headquarters.

Granat comes to Enova as the departing president of Lendio, a sizable funder that has been growing and establishing new regional offices throughout the U.S. Prior to his role as Lendio President, just one step below co-founder and CEO Brock Blake, Granat was Chief Operating Officer at Lendio as of 2014.

Enova is a global financial products company. The Business Backer and Headway Capital operate under the Enova umbrella, but as distinct brands. In addition to merchant cash advance, The Business Backer offers term loans from $5,000 to $350,000, SBA loans, factoring, equipment financing, commercial real loans up to $75 million and business lines of credit up to $150,000.

Enova started in 2003 as Check Giant LLC. After several name changes and acquisitions, the company now has more than 1,100 employees and operates internationally. The company went public on the New York Stock Exchange in 2014 and trades as ENVA.

Enova’s Small Business Financing Originations Drop

July 30, 2018
Article by:

Enova CEO David Fisher revealed last week that their small business financing operations had declined. “Our small business financing portfolio represented 8% of our total loan book at the end of Q2,” Fisher said on the July 26th earnings call. “We are remaining cautious on this space as the market rationalizes. As a result, our loan portfolio contracted 10% year-over-year and originations were down 23% year-over-year.”

Enova owns two small business financing subsidiaries, Headway Capital and The Business Backer.

While no official announcement has been made, Jim Salters, founder of The Business Backer, updated his LinkedIn profile to reflect that as of last month, he is no longer CEO of the company.

Enova’s TBB Did $15M in Merchant Cash Advance Revenue in 2017

March 12, 2018
Article by:

International online lending conglomerate, Enova, generated $843.7 million in revenue last year, according to their recent annual report. More than $15 million came from merchant cash advances (MCAs) made through The Business Backer (TBB), a small business financing company they acquired in 2015. That’s down from $18.6 million in MCA revenue generated in 2016.

Though MCA revenue may be down, TBB began offering an installment small business loan product in 2017. They’re available in 10 states, according to the company.

Enova refers to MCAs as RPAs in their reports, short for Receivable Purchase Agreements. “Small businesses receive funds in exchange for a portion of the business’s future receivables at an agreed upon discount,” they state.”A small business customer who enters into a RPA commits to delivering a percentage of its receivables through ACH or wire debits or by splitting credit card receipts until all purchased receivables are delivered.” That is a textbook explanation of MCAs.

Their average “RPA” customer averages $1.5 million in annual sales and has 10 years of operating history.

Scott Cornelis Joins Enova International as Treasurer

September 28, 2017
Article by:

Scott Cornelis, the head of capital markets at BorrowersFirst, has become the Treasurer at Enova International, according to LinkedIn.

BorrowersFirst is an online consumer lender that raised a $100 million senior debt commitment from Waterfall Asset Management earlier this year.

Enova is a publicly traded online lending company that owns The Business Backer and Headway Capital.

Prior to BorrowersFirst, Cornelis was an executive director at JPMorgan’s investment bank.

How Start-Up Founder Andrew Luong Went From House Flipper to Real Estate CEO

November 19, 2020
Article by:

Andrew Luong - DoorvestAndrew Luong said it all started seven years ago in San Francisco, just out of graduate school investing in real estate with his spare time on the weekends. Today, his startup Doorvest manages more than $20 million in real estate assets.

“I wanted to look for an avenue to put the money that I had earned from my day job to work,” Luong said. “The goal was to seek out some income security, build a long-term nest egg, hopefully, some passive income to support my life.”

That avenue turned out to be real estate. Luong thinks more people should have the option to invest in the estimated $3 trillion single-family renting market, now more than ever.

A second wave of infections is sweeping across the nation, and with shutdowns looming and business growth on hold, many face a familiar question:

What can I do to make more money?

Luong believes Doorvest has an answer. The firm offers what Luong calls a Democratized way to invest in real estate, entirely online.

Customers can invest up to $100,000 on the platform. Luong and his team of real estate flipping specialists buy, refurbish, and then rent properties, paying back the rent revenue to investors. Luong said Doorvest only gets paid when the properties are profitable, and the reported average annual return on investment is 18%.

The idea came about when Luong and co-founder Justin Kasad tried to find a better way to invest.

 

“WE SEE REAL ESTATE AS A VEHICLE TO FUNNEL PEOPLE TOWARD FINANCIAL SECURITY”

 

Like his peers back in San Francisco, Luong had tried his hand trading stocks. Many of his friends had Robinhood or high yield savings accounts, and were even trading cryptocurrency- but none of those options were what they were looking for. Real estate felt like that next step, but there was a large process to go from cash investment to payday:

Doorvest activity“From identifying a mortgage to underwriting, looking through offers, ultimately an offer that sticks, then you’re figuring out how to find a mortgage financing, how to get homeowner insurance,” Luong said. “Then you’re closing on this thing, take the title, and you’re figuring out how to lease it out, how to manage your residents, and then ultimately, maintenance and bookkeeping.”

With a long, dizzying list of steps, all with uncertain outcomes, it is no wonder a lot of people are put off by that risk, Luong said.

“When my good friend and co-founder Justin and I went through that long list of items, it dawned upon us that if we could deconstruct real estate investing and rebuild it in an online frictionless way, we could bring it to the masses,” Luong said. “We see real estate as a vehicle to funnel people toward financial security.”

The pair got a group of experienced real estate investors and partnered with mortgage providers and renovators to build a platform to handle all of the steps it takes to turn cash into rent income returns. Doorvest will run every step of the process, including property management, while updating investors at every step of the way.

The firm currently focuses on the Houston rental market, Luong’s long term bread-and-butter area, but plans on renting in other markets in the future.

The platform has been in the works for years, but finally launched last year and immediately had to deal with the pandemic, but Luong said Doorvest made it through so far with success.

“It was definitely an experience, back in mid-march Justin and I were like crap, I think we’re done,” Luong said. “Public equities markets were tanking; we’re a young company without a lot of cash. I think people saw the volatility of the public equities market. In that span of two weeks it went down 40% or so and I think that led a retreat towards perceived reliable asset classes.”

 

“BACK IN MID-MARCH, JUSTIN AND I WERE LIKE CRAP, I THINK WE’RE DONE”

 

To some, investing in Doorvest was perceived as more reliable than a tanking stock market, and after initial fluctuation, the firm is on the up. In his experience, Luong said the real estate market would continue to push toward suburban areas outside of major city centers as the pandemic continues.

All the while, everything is moving digital. As the company evolves, Luong is excited to offer new products to customers, using real estate as a vehicle to build a banking platform or mortgage platform to service a growing smorgasbord of online real estate options.

“We as a company made a bet three to five years out: we believe that real estate will be transacted entirely online,” Luong said. “Historically, you’d show up at a house, walk around, etc. Due to COVID, people weren’t going out, weren’t shaking hands: The adoption of technology to look at a home entirely online just became a lot more natural. Because of that, we’ve had really strong customer demand and fundraising.”

In Loving Memory of Elliot J Dabah

November 17, 2020
Article by:
Elliot Dabah
Elliot Dabah & Elliot Ashkenazie

Elliot J Dabah, CEO of NYC-based Merchants Cash Partners, LLC, recently passed away. Known throughout the merchant financing industry, friends and colleagues began collecting kind words to reflect on his life to be able to share them here.

Elliot Ashkenazie, his business partner and best friend, said “Elliot Dabah would step up and help anyone in need whether that be his own employee, another ISO, or a complete stranger on the street. He didn’t keep any secrets so he would have an advantage over others, he simply paid it forward and helped the community as a whole benefit from it. Merchants Cash Partners will work tirelessly to carry on his legacy and his values.”

“Elliot Dabah was the heartbeat of the Financial District and he was an integrated part of my life, both professional and personal,” said Gigi Russo. “Not only did Elliot and I live three blocks from each other, but I first had the privilege and pleasure of meeting him while I was working for deBanked, at CONNECT San Diego. We quickly became close friends. He truly never took advantage of our tight knit friendship. His professional support was a reflection of his character— a respectable person that respected his family, friends and business associates. Elliot wanted everyone to succeed. He believed that friends and business colleagues should support one another to build a viable network.”

Elliot Dabah and Father
Elliot Dabah and his Father Jack

Tom Dool of Power Funding, said “Of all of the offices I’ve ever visited, I can honestly say that no other partner of mine compares to Merchants Cash Partners. From the moment I met both Elliots, they were inviting. I could tell right away that they had a special bond of shared enthusiasm, honesty, generosity, thoughtful, caring people.” He adds, “Elliot [Dabah] lived life with such a genuine love for people and getting to know people, discussing higher level ideas, sharing feelings. He was one of the best and I’ll never forget him.”

“Elliot was one of the most welcoming people I had the pleasure of knowing,” says Colt Kucker of Libertas Funding, “and always tried helping out whether it be a customer, myself, or anybody in need. He was a hard worker and will truly be missed by all he came across.”

Justin Friedman of Enova SMB, described Dabah, “Smart, strategic, urgent, generous and wise are a few words to describe Elliot. He was universally popular and a known professional in our industry, which isn’t common to come by. He cared about his customers and business relationships. Elliot’s presence in alternative lending was a positive one and he will be remembered for exactly that.”

Elliot Dabah

Ben Lugassy of SOS Capital states that he was “Always smiling and enthusiastic, Elliot was the embodiment of joyful. A friend with tremendous respect and gratitude, he will always be remembered and in our prayers.”

Paul Boxer of Velocity Capital Group added, “Every-time I met Elliot he had the largest smile, always happy to talk shop and discuss the industry. He was very knowledgeable and had a wealth of information, he will surely be missed.”

Ken Peng of Elevate Funding recounts that Elliot, “was always great to work with. He was always very friendly and understanding when we did review any of his files. He will be missed.”

Gigi Russo, who was instrumental in putting this tribute together, further added that Elliot “treated everyone he came into contact with as a friend.” He has “a sincere, dignified, and affable reputation that will follow him after his passing. He will surely be remembered for supporting his colleagues, clients, business acquaintances, and network. The legacy Elliot has left behind is simple: Respect one another. Support one another. Honesty and hard work are necessities of success.”

Elliot Dabah and Gigi Russo
Elliot Dabah and Gigi Russo

Part of Elliot’s legacy is the company he built. Merchants Cash Partners, despite the pandemic, was so successful this year that it outgrew its office space.

“Elliot had a revolutionary style of making this industry a community,” says his partner Ashkenazie. “He referred clients and prospects alike to small firms and national firms, expecting nothing in return.”

Coincidence would have it that a photo of Elliot at a deBanked event was often used in event marketing promotions. As to how that picture came to be used so prominently, deBanked President Sean Murray said that “Elliot embodied the community we were trying to portray. A nice young business professional who radiated positive energy. Who is part of this industry? It’s guys like Elliot. That’s what we wanted everyone to know.

“Elliot totally noticed how often we were sharing his photo,” Murray said. “He told me that he thought that was pretty cool.”

Elliot Dabah

Shopify Capital Originated $252M in MCAs and Business Loans in Q3

October 29, 2020
Article by:

shopify glyphShopify Capital, the finance arm of the 2nd largest e-commerce platform in the United States, reported making $252.1M worth of merchant cash advances and loans in the 3rd quarter. This is a 79% increase over the same period last year and spans three markets, the US, UK, and Canada. It’s also a quarterly record for the company.

The figure also solidly trumped the numbers recently reported by rival OnDeck.

Shopify CFO Amy Shapero said that the company has maintained loss ratios in line with historical performance.

“Businesses need financial resources to survive and fulfill their potential especially in these uncertain times and as you heard just now capital greatly increases the value of Shopify to our merchants,” she said during the earnings call.

The Roosevelt Hotel is Closing Permanently Due to Pandemic Losses

October 13, 2020
Article by:

Roosevelt HotelAfter nearly a century of quintessential Manhatten hospitality, the Roosevelt Hotel is closing by the end of the month, sources say. A relic of classic New York that survived the Great Depression, WWII, and Broker Fair 2019, the hotel is officially shutting down for good after suffering pandemic related losses, a spokesperson said.

“Due to the current, unprecedented environment and the continued uncertain impact from COVID-19, the owners of The Roosevelt Hotel have made the difficult decision to close the hotel, and the associates were notified this week,” the Spokesperson told CNN reporters Friday. “The iconic hotel, along with most of New York City, has experienced very low demand, and as a result, the hotel will cease operations before the end of the year. There are currently no plans for the building beyond the scheduled closing.”

The hotel will be added to the growing list of staple New York City businesses that have closed as a result of COVID. The Roosevelt was named and built to honor the United States’ 26th president and it opened its doors on September 22, 1924. Constructed during Prohibition, the building began the modern trend of featuring designer store windows on the street front. 

The Roosevelt Hotel New York City - Broker Fair 2019Appearing as a backdrop for dozens of Hollywood blockbusters like Boiler Room, Malcolm X, and The Irishman, the hotel was iconic. The New Year’s Eve tradition of singing “Auld Lang Syne” was born at the Roosevelt in 1929 when Guy Lombardo and his orchestra broadcast the song live over the radio.

The building was purchased by the limited investment branch of Pakistan International Airlines (PIA) in 1999.

In July, government officials and PIA executives debated the hotel’s future, some hoping rumors that President Trump would purchase the property were true. The initial plan was to sell or renovate the city block to create office space, thought to be far more lucrative than the hotel business in 2019. Work-from-home orders threw a wrench into the cogs, and the hotel kept losing money: no one wanted the traditional New York experience during a pandemic. 

The Roosevelt Hotel - roomPosting a loss during this year has become expected of the hospitality industry. According to the Bureau of Labor Statistics, hospitality lost 7.5 million jobs due to shutdowns and travel restrictions in April. CNN reported that only half as many jobs had been added back. In September, NYC hotels were below 40% occupancy. 

The decision to ultimately close The Roosevelt might also come from trouble in PIA’s airline business. After the crash of PIA flight 8303 that killed 97 people in Havelian, Pakistan, European and US regulators banned flights from PIA for six months. After the crash, nearly one-third of airplane licenses in Pakistan were found to be fraudulent or forged, further straining the organization’s ability to recover. 

Though this may have contributed to The Roosevelt’s closure, the pandemic sealed the deal. According to a study by the American Hotel & Lodging Association, New York has 2,336 hotels statewide that have lost 43,014 jobs this year. 

Sean Murray speaking in the Gekko Ballroom at The Roosevelt HotelWithout further congressional aid, 1,565 hotels might close: the AHLA found that 74% of overall US hotels say more layoffs are coming if the industry doesn’t get additional federal assistance. But successful talks for more aid in the House and Senate are increasingly unlikely due to this election year’s heightened partisanship.

NYC is losing yet another historical business, as the way of life and all things we have come to expect from the big apple struggle to survive. As a destination venue, The Roosevelt was also dear to deBanked. It was the home of Broker Fair 2019, where Sean Murray spoke in the same ballroom that Michel Douglas (as Gorden Gekko) made the famous “Greed is Good” speech as part of the 1987 film Wall Street. Murray made a similar speech but rewrote it to fit the industry that had gathered. “Funding small business, for lack of a better phrase, is good,” he said on stage to an audience of 700 people.

Unfortunately, it was The Roosevelt that ultimately needed funding and didn’t get it.

OLA CEO Mary Jackson: Colorado True Lender Bad for Borrowers

September 21, 2020
Article by:

ColoradoLast month, the Colorado Attorney General’s office announced a settlement with Avant and Marlette Funding, setting a precedent for how “true lender” cases will be handled. The fintech lenders and their partners are free to lend in the state, subject to a lot of restrictions, as long as they stick below the 36% APR level.

Some touted the decision as a safeguard for fintech bank partnerships. Still, many, like those represented in the Online Lenders Alliance (OLA)- saw misplaced regulation that harms borrowers more than it helps.

Mary Jackson, CEO of OLA, said that while well-meaning, the 36% rule arbitrarily limits the ability for non-prime credit customers to get a loan at all. The limit draws an arbitrary line in the sand, based on an outdated centuries-old lending system, and doesn’t describe loans that last shorter than a year very well, Jackson said.

“What it did was drive out all the lenders,” Jackson said. “Non-prime consumers have fewer choices. They have to go and be subject to fraud or more unscrupulous lenders, or they have to go back to overdraft as another option.”

Jackson represents a group of lenders that offer online services, which regularly partner with banks to provide loans nationwide at higher APR rates than some states allow. Jackson said these are not fintech “rent-a-bank” cases to skirt state regulations, but natural partnerships that enable larger institutions to gain the tech and talent of leading tech companies to reach a greater customer base.

“Big banks cannot keep up with the technology that fintech providers have developed,” Jackson said. “A key US bank has a lot of data scientists that they employ, but if you’re a regional or smaller bank, you don’t have that capability: it’s nearly impossible to drive an IT team as a banker.”

Mary Jackson
Mary Jackson, CEO, Online Lenders Alliance

Jackson said that when her firm Cash America, that offered storefront cash advances, was bought by online lender CashNetUSA, she saw the differences between in-person transactions and the IT teams necessary for online lending. “It’s like two different worlds, two different ways of looking at something.”

“Our lenders are sophisticated like Enova, Elevate, CURO, Access Financial,” Jackson said. “These are companies that employ hundreds of data scientists that compete for jobs with Google in Chicago and a small regional bank can’t keep up.”

Fintech talent is helping to reach the 42% of Americans that have non-prime credit scores- FICO scores below 680, according to the Domestic Policy Caucus. 

Jackson said these customers, many of whom can pay for loans, have almost no options. Jackson sees many of her partner companies offering a “pathway to prime” service, empowering customers to rehabilitate their credit.

“Most of these people are non-banking customers, these folks have damaged or thin file credit,” Jackson said. “Most banks don’t service that customer, except for overdraft- a 35$ fee for lack of money in their account- I think bankers want to be able to offer longer-term installment loans.”

Jackson said research backs up her claims, pointing to a 2018 US Treasury report that discussed how banks would have to rely on fintech partnerships to innovate and drive product change. That’s what is finally happening, Jackson said. 

She also pointed to a 2017 study into the effects of the 2006 Military Lending Act. The act intended to protect military families from lending products with an APR above 36%. The study out of West Point found that the limit only hurt military members, some of which lost their security clearances when their credit fell too low. 

“We find virtually no statistically or economically significant evidence of any adverse effects of payday lending access on credit and labor outcomes. In a few cases, we find suggestive evidence of the positive impacts of access. For example, our second survey suggests that a 1 standard deviation increase in the fraction of time spent in a payday loan access state decreases the probability of being involuntarily separated from the Army by 10%”

Not only was there no harm done, but the paper argues on behalf of payday lending as a healthy way to maintain the credit necessary to keep a military job.

She sees similarities in the legal fight over the creation of interstate credit card laws in the 50s and 60s, saying it used to be the case that consumers had to use a texas-based or California based card. The country had to decide how interstate credit worked then, and with the induction of new technology to loans today, the same question is being asked.

The majority of Jackson’s clients offer products above the 36% limit, in the 100 to 175% APR range. She said that looks high, but consumers are looking at it on a monthly basis, and most of them pay it off early.

“These fintech partnerships allow the bank to offer one rate to everybody across the United States,” Jackson said. “We feel that really adds more democracy to credit, making sure that those who’ve been left out of banking have a shot at it.”