Merchant Cash Advance's Big Day - The David Goldin Story
The Small Business Finance Association (SBFA) has finally released their long awaited best practices guide. The four overarching principles are transparency, responsibility, fairness and security.
Unlike other organizations that have called for APR disclosures, the SBFA believes that the total dollar cost of the transaction is the most important way to achieve that goal. It’s also because the organization’s core members are engaged in a form of factoring most often referred to as merchant cash advances. Those transactions don’t have interest or interest rates and thus no way to ascribe an APR.
As part of the announcement, SBFA VP and RapidAdvance Chairman Jeremy Brown said, “Small business owners are a powerful constituency and we want to give them the utmost confidence in the alternative finance industry. These best practices are our way to prove to small businesses that our industry will consistently offer transparent, fair, and responsible choices to meet their needs.”
The timing could not be better. Earlier this morning, Stephen Denis, the executive director of the SBFA, testified in an Illinois State Senate hearing to protest a controversial bill that would effectively outlaw nonbank business lending under $250,000.
Among the bill’s strangest rules, is the restriction on monthly loan payments to being no more than 50% of a business’s net income, which would cause all businesses breaking even or reporting a loss to be prohibited from obtaining a loan from a nonbank or nonprofit source by law.
The Small Business Finance Association (“SBFA”) will soon publicly unveil a set of guiding industry principles, deBanked has learned, and they’ll fall under four broad categories that espouse transparency, responsibility, fair dealings and security.
Transparency will not just be about the disclosure of fees but also likely about the disclosure of process, methodology, and application rejection, among others.
The principles of fair dealings are unlikely to touch on pricing or costs. Instead they will be about a commitment to being truthful and fair in dealings with small businesses. That is sure to include marketing materials that are clear and understandable, an area that will undoubtedly extend out to the brokers they work with, if any.
While responsibility will speak to the notion of being a legally compliant good citizen when it comes to dealing with customers, security will be more than just the use of an SSL Certificate to access the website. Verifying the business’s legitimacy and confirming the owner’s identity are high on the list of a secure process, deBanked has learned.
SBFA members already adhere to a set of standards and have since the group was formed eight years ago. Their new white paper will serve to codify them in a way that others can adopt and conduct themselves to accordingly.
The white paper will be the first major achievement of the organization since Stephen Denis came on as the executive director in mid-December. Denis is the former deputy staff director of the U.S. House Committee on Small Business.
“The goal is to start from scratch and take a look at everything the association is doing,” Denis said in deBanked’s previous magazine issue, “and to really build this out to a robust group that represents the interests of small businesses.”
In another interview conducted for that story, SBFA president and founder David Goldin explained that he had been troubled by misconceptions over the industry’s prices. “Most people don’t understand the economics of our business,” he said.
The SBFA also plans to revamp their website in the near future.
WASHINGTON–(BUSINESS WIRE)–The Small Business Finance Association (SFBA) announced today the hiring of Stephen Denis as its executive director. Denis was formerly the Deputy Staff Director of the House Committee on Small Business and brings over 12 years of public policy experience to the SBFA.
“The innovative companies that are disrupting the way small businesses access capital are creating opportunities for economic growth,” said Denis. “Traditional finance is changing out of necessity for small businesses and SBFA’s mission is to be the voice of the alternative financing industry for small businesses and establishing industry best practices and education.”
The Small Business Finance Association represents companies that offer alternative financing options to small businesses and provides guidance through establishing industry best practices, education and risk monitoring tools. The alternative finance industry has experienced dramatic change and explosive growth in recent years, prompting the need for a strong presence in Washington to protect a vital lending resource for small businesses.
“We felt it was time to bring on an experienced Capitol Hill veteran to make SBFA the leading voice for alternative small business finance in Washington,” said incoming President of SBFA and Chief Executive Officer of Capify, David Goldin. “It is time to come together as an industry to ensure we have a strong and unified voice on behalf of the small businesses we serve.”
“It’s no secret that access to capital is a top challenge for small businesses. SBFA is working to ensure that there are options available to these businesses that contribute to the vibrancy and health of the American economy,” said Vice-President of SBFA and Chairman of Rapid Advance, Jeremy Brown.
The Small Business Finance Association (SBFA) is a not-for-profit 501(c)(6) trade association representing organizations that provide alternative financing solutions to small businesses. SBFA (formerly known as NAMAA) provides guidance and helps to influence and shape the small business alternative financing industry through leadership, education and risk monitoring tools. For more information, visit http://www.sbfassociation.org
Small Business Finance Association
Steve Denis, 202-213-9506
North American Merchant Advance Association (NAMAA) Announces New Name – Small Business Finance Association (SBFA)April 14, 2015
New York, NY, (April 14, 2015) – The North American Merchant Advance Association (NAMAA), a 501c non-profit industry association that provides guidance and helps influence and shape the small business alternative financing industry through best practices, leadership, education and risk monitoring tools, announced today the changing of its name to Small Business Finance Association (“SBFA”).
“With the alternative financing industry growing exponentially into a multi-billion dollar industry, we felt it was time for the trade association to evolve with it and open itself up to all types of small business alternative financing providers hence the name change to Small Business Finance Association. This industry trade association has been the voice of small business alternative lenders for over eight years and we look forward to evolving as the alternative financing industry rapidly expands each year. We look forward to opening up our membership base to even more members that share the same best practice principals of our current membership base.”, says David Goldin, President of the SBFA
The SBFA plans on releasing an updated version of its best practices and as the largest trade association for small business alternative finance providers, the association welcomes opportunities from the press and organizations looking for information on the industry.
“NAMAA started primarily as an association of merchant cash advance providers and has evolved into an association for all types of small business alternative financing – particularly those providers of business loans. SBFA will continue to be the leading voice for this industry and we look forward to the association evolving with our industry.”says Jeremy Brown, Vice-President of the SBFA.
For companies that provide alternative financing solutions to small businesses looking for more information about becoming a member of SBFA, please visit http://www.sbfassociation.org.
About Small Business Finance Association (SBFA)
The Small Business Finance Association (SBFA) is a not-for-profit 501c trade association representing organizations that provide alternative financing solutions to small businesses. SBFA (formerly known as NAMAA) provides guidance and helps to influence and shape the small business alternative financing industry through leadership, education and risk monitoring tools. For more information, visit http://www.sbfassociation.org.
Almost seven years ago exactly, the North American Merchant Advance Association announced their presence. As of today, they are now officially the Small Business Finance Association (SBFA). Back then, a release dated April 15, 2008 stated:
The North American Merchant Advance Association, Inc. (NAMAA) has recently been created to represent merchant cash advance providers and to promote competition and efficiency throughout the merchant advance industry. NAMAA’s members will have the opportunity to share industry education and professional development, ethical standards and best practices guidelines, the development of industry relevant products and services, and the engagement in regulatory and legislative advocacy.
Of the ten original members, a handful are no longer operating. NAMAA’s membership in 2008 arguably encompassed the entirety of the merchant cash advance industry sans AdvanceMe (now named CAN Capital). Today, the SBFA website currently lists seventeen members. The organization has clearly grown but it pales in comparison to the size of the industry in 2015.
Internal data indicates that there are well over one hundred direct providers of merchant cash advance. Several hundred more are ISOs/brokers that co-invest in merchant cash advance transactions (Strategic Funding Source has had more than 200). And there are more than one thousand ISO/brokers that resell the product nationwide.
On this basis alone, less than two percent of industry providers and resellers are members of the trade organization. Granted, the seventeen member companies likely make up at least 15% of the industry’s funding volume. Member company Merchant Cash and Capital for example, announced just last month that they had funded $1 billion since inception.
Some have viewed the organization’s membership as overly exclusive and resistant to change. A seasoned veteran of an ISO that wished to remain anonymous said prior to the organization’s announced changes that, “NAMAA served a purpose for a long time but as the industry has changed, they have not.”
Ironically, Goldin’s statement in today’s release couldn’t be any more well timed. “With the alternative financing industry growing exponentially into a multi-billion dollar industry, we felt it was time for the trade association to evolve with it and open itself up to all types of small business alternative financing providers hence the name change to Small Business Finance Association,” he said.
The shift clearly acknowledges the true dynamic of the industry’s growth, that it’s not all merchant cash advance anymore.
SBFA Vice President Jeremy Brown is quoted in the release as saying, “NAMAA started primarily as an association of merchant cash advance providers and has evolved into an association for all types of small business alternative financing – particularly those providers of business loans.”
But with lenders added to the mix of potential constitutents, is the SBFA a little light? The SBFA will now represent less than 1% of the companies selling or reselling merchant cash advances and business loans. In growing membership however, patience may perhaps be a virtue.
Jared Weitz, CEO of United Capital Source, said, “NAMAA is a beneficial association in the industry and should be choosy with who they let in.” As a broker, his company has historically not been eligible for membership.
Similarly, Chad Otar, Managing Partner of Excel Capital Management, whose company has also not been historically eligible for membership, said, “The aim of NAMAA is to help out our audience to understand and remember the information we stand for as funders and ISOs.”
Otar’s point belies a troubling trend, that many players in this industry disagree about what it is they stand for.
In a deBanked Magazine article, titled, Stacking: Is it Tortious Interference?, Robert Cook, Cathy Brennan, and Kate Fisher of Hudson Cook, LLP delved into the industry’s most polarizing debate, the practice of entering into a cash advance transaction or loan knowing that the merchant has one or more open cash advances or loans with a competitor. They wrote:
On one side are companies that only originate first-position deals. These companies generally include a clause in their contracts prohibiting the merchant from obtaining another merchant cash advance or loan until the company receives all of the future receivables it has purchased or is fully repaid. First-position companies view stacking as a threat to recovery of money advanced or loaned to merchants. On the other side are companies that routinely offer second or third-position deals. These companies argue that merchants with adequate cash flow to support additional advances should be free to obtain them.
Though I did not ask the SBFA directly if the practice of stacking is an immediate disqualifier for membership, the organization has long been known to advocate against it. In Year of the Broker, Goldin commented that stacking litigation is underway.
Lawyers at Hudson Cook, LLP echoed the same. “In the last several months, at least two first position companies have sued their stacking competitors, claiming that stacking constitutes tortious interference with contractual relations,” they wrote.
The lawsuits come on the heels of the International Factoring Association (IFA) ban on merchant cash advance companies, citing tortious interference as the main driver.
After meeting with board members from both associations, the decision was made to deny membership to merchant cash advance businesses. This decision was based on numerous complaints and increased scrutiny that could negatively impact the factoring industry. By distancing ourselves from the merchant cash advance industry, we hope to diminish the chance of potential legislation.
-Commercial Factor July/August 2014
With several merchant cash advance companies left high and dry by the IFA, a potential leadership void has been created.
“As every industry evolves and shapes itself, some sort of governance and guidance is always needed,” said Otar. “This guidance is something that NAMAA holds itself responsible for,” he argued.
“The question is, can they reestablish themselves as a powerful voice that demands respect?” asked an industry veteran on the condition of anonymity.
Goldin assured me that the updated version of the organization’s best practices guide will be a public document.
Industry brokers like Otar are eager to comply with an established code of conduct and play any role they can in its creation. “Most of the business driven industry-wide is brought in through various ISO channels, which are the ones responsible in presenting the product offered by the funders to the end client,” he said.
That enthusiasm may be resonating with the SBFA. Goldin communicated that they are working towards different types of memberships, hinting at the possibility that brokers might one day be extended an invitation to join.
“We are exploring different levels of membership / pricing,” Goldin wrote in an email.
For the right price, they will likely find a lot of eager applicants.
The fourth annual Alternative Finance Bar Association conference is BACK IN PERSON. This is the go-to event for and with the industry’s leading attorneys.
Mark your calendars for June 15th and June 16th in New York City and register by emailing Lindsey Rohan at firstname.lastname@example.org. Registration is subject to approval and space availability.
Two-day program includes the following panels:
The State of the Industry: Industry experts discuss pending legislation, case law and market hurdles. They have both a regulatory panel ready to discuss what’s new in Virginia, Utah, NY and California as well as a Courtroom panel ready to discuss the winning and losing case law that has come out in the past year.
Bankruptcy: The aftermath of Chicago v. Fulton, In re Shoot the Moon and other pivotal bankruptcy cases that shape industry practices.
Ethics: Challenges faced by internal counsel and ways to navigate those pressures.
Collections: Trends in the post-COJ, post-COVID era.
Employment/Labor Law: The rise of labor use outside the U.S. What challenges arise from having call centers outside the U.S. Tax implications, oversight and practical benefits/detriments. Post-COVID remote work implications. What you need to be aware of to avoid creating liabilities.
The Art of Arbitration: The importance of a carefully drafted Arbitration Clause and the pro/cons of this venue.
Thinking Ahead: What technologies and market conditions will shape the future of the industry. Broad discussion of Blockchain technology, CRM systems, cannabis and what we can imagine will shape the future of Alternative finance.
WEDNESDAY KEYNOTE: David Picon, Esq. – It is with great pride that David Picon of Proskauer Rose will be the Keynote speaker. For years the AFBA has admired his work from afar. Attendees now have an opportunity to learn directly from David what makes for an unstoppable litigator.
THURSDAY SPECIAL EVENT: AFBA Game Show Mash-Up with the Industry’s Legendary Attorneys. Special Guests you will not want to miss!
- Andrew Smith, Covington & Burlington LLP
- Brian Simon, Hollis Public Affairs
- Jamie Polon, Mavrides Moyal Packman & Sadkin, LLP
- Patrick Siegfried, Rapid Finance
- Natalie Pappas, Rapid Finance
- Keith Ellis, Expansion Capital Group
- Kate Fisher, Hudson Cook LLP
- Cathy Brennan, Hudson Cook LLP
- Blake Sims, Hudson Cook LLP
- Steve Denis, Small Business Finance Association
- Christopher R. Murray, Murray Legal PLLC
- Mark Stout, Padfield & Stout
- Shanna Kaminski, Kaminski Law Group
- Michael W. Davis, DTO Law
- John Viskocil, Fora Financial
- Gabriel Mendelberg, Mendelberg P.C.
- Anthony F. Giuliano, Giuliano Law P.C.
- Jeffrey S. Cianciulli, Weir Greenblatt Pierce LLP
- David Picon, Proskauer Rose
- Jonathan Nelson, Dedicated Financial GBC
- Lindsey Rohan, BasePoint Capital LLC
- Christina Grigorian, Katten; Zach Miller, Burr & Foreman
- Renata Buhkman, Delta Bridge Funding
- Vanessa Petty, Settle
- Alexis Shapiro, Forward Financing
- Jan Owens, Manatt Phelps
- Scott Pearson, Manatt Phelps
- Jesse Michael Carlson, Kapitus
- Robert Zadek, Buchalter
Day 1 – June 15
9:00am – 4:30pm: Offices of Proskauer Rose (includes light breakfast and lunch)
5:30pm – 7:30pm: Cocktails at Dear Irving
Day 2 – June 16
9:30am – 6:00pm: 15 W. 38th Street, 2nd Fl, Sinatra Room (includes light breakfast and lunch)
4:00pm: Wine & Cheese
Register soon, SPACE IS LIMITED!
deBanked is a sponsor of the event. Industry attorneys are highly encouraged to attend.
Its aim is to become an industry standard. The newly launched Certified Small Business Finance Professional (CSBFP) program will first become available at Broker Fair in New York City on December 6th.
But what’s the difference between this one and others? Steve Denis, Executive Director of the Small Business Finance Association (SBFA), says that his organization’s backing of the CSBFP makes all the difference.
“We’re the largest trade group in the space without question,” Denis said, adding that the group has about 30 members, several of which are among the largest in the country.
“It’s going to be a signal that you’re doing things the right way and want to go out of your way to show that you are doing things the right way,” Denis said.
The certification will require applicants to complete a course centered on understanding products, laws governing the industry, and compliance. The certification exam will focus on testing applicants’ ability to understand key concepts and best practices.
This course is designed to be taken in person. While it will be available at Broker Fair, Denis said that they plan to partner with other events as well.
“We’re going to focus on as many in-person training sessions as possible,” he said.
And it’s not just salespeople they’re targeting. Underwriters, collectors, support staff, and more are not only all welcome to obtain their certification, but are also encouraged.
“It’s open to anyone in the industry,” Denis said. “The more the better. […] It will send a very strong message that there is a diverse group of people that want to take a certification and take it very seriously.”
In the official announcement, it was stated that it would be more than just a stamp and that certified professionals would also be provided with “a way to connect, learn and grow beyond the initial education process.”
Denis compared the CSBFP standard to CFPs (Certified Financial Planners) in the financial advisor space.
Attendees of Broker Fair 2021 can take the course at the event at no extra charge.
Washington, D.C.— The Small Business Finance Association (SFBA) today launched a new certification for the small business finance industry. The Certified Small Business Finance Professional (CSBFP) program will bring education and accountability to all providers of alternative finance products. The certification will require applicants complete a four-section training course, abide by industry best practices, provide industry references, pass an exam and be subject to a background check. The certification will also require applicants to complete continuing education classes every two years.
“This certification is a message to our customers that we want them to feel confident they are being offered fair capital options from responsible lenders,” said Steve Denis, the executive director of SBFA. “There are countless companies offering a proliferation of products and services and we believe it’s business owners deserve the comfort of knowing they are working with a certified professional.”
The certification will require applicants to complete a course centered on understanding products, laws governing the industry and compliance. The certification exam will focus on testing applicants’ ability to understand key concepts and best practices. Those who become certified will be allowed to use CSBFP branding in their marketing materials, have access to key regulatory updates and gain entry to a networking platform that will allow them to connect to industry and legal professionals.
“Our goal is to offer a fully immersive experience for certified professionals. We don’t simply want to give them a stamp but provide them a way to connect, learn and grow beyond the initial education process. It’s in the interest of our industry to offer best-in-class professionals, but more importantly, it’s in the interest of better serving our small business customers,” said Denis.
Steve Denis 202.213.9506
small business finance association, supports the legislation as drafted but would prefer a total ban on confessions, said stephen denis, the organization’s executive director. “any company that is counting on cojs as a collection practice, they are just practicing bad underwriting,” he said. “they should be leaving the industry anyway.”, , --with assistance from david ingold and demetrios pogkas., , to contact the reporters on this story: zachary r. mider in new york at email@example.com;zeke faux in new york at firstname.lastname@example.org, , to contact the editors responsible for this story: robert friedman at email@example.com, david s. joachim, , 2019 bloomberg l.p....
small business finance association)? , , funny how the sbfa wants to institute best practices for brokers, while they have places like credibly that is potentially stacking other members. , , ma...
small business finance association supports these bills. so, if you live off commissions for seconds+ and coj's, smal...