Articles by Anaya Vance
“I believe that a merchant might be better off going to a broker so the broker can make available to the merchant several different offers,” said Pooja Nene, Broker Relations Manager at Balboa Capital. “And if they’re doing what they need to do correctly and if they’re really consulting the merchant correctly, I think that they would be providing the best offers to the merchant based on their needs.”
It’s the age-old question, are merchants better served by using a broker or going direct? Opinions vary and are usually colored by what role one has in the process.
“The advantages of working with a broker is it saves the merchants a lot of time, and in some cases saves them money in fees,” said Randy Guerrier, Senior Funding Executive at Banana Exchange, a company that provides capital to MCA providers. Guerrier’s vantage point makes him less biased. “A lot of brokers do have a lot of preexisting relationships and wholesale rates that they could get with their relationships,” he said.
Matthew Washington, Founder & CEO of Moneywell GRP, says there’s a bit more nuance to the whole thing.
“The reality is that when the merchants go direct with lenders, they’re essentially dealing with the lender’s broker shop, right?” he explained. “Any lender that gets directly contacted by a merchant usually gives them off to their sales team, which [is also able] to send [them] off to other lenders.”
Washington, whose company is a funder, was an advocate for what brokers can accomplish for their clients especially since he relies entirely on them for business. He emphasized that his company is one that doesn’t have a direct sales team to handle any direct inquiries.
“All my business comes from my ISO channel,” he explained. “So when I approve a deal, it’s up to me and the broker to win it if there’s competition, but if I declined the deal, my brokers take that deal to another lender that has an appetite for that particular scenario.”
“[Lenders] may not have the staff available to form that relationship with a merchant,” said Pooja Nene of Balboa about the debate on broker vs. direct. She also cautioned that sidestepping a broker in the process might not translate into an increased likelihood of approval.
“If it’s the first round of funding, if it’s their first loan schedule, we don’t know who this merchant is, and we may feel a little bit more comfortable with that file coming through the broker and the broker discussing the terms with the merchant,” she said.
Guerrier of Banana Exchange said, “It always comes down to working with the right type of broker, right? It comes down to the person that answers the phone that’s working with you, whether it’s at a big company or small company, I like to look at things from the individual working with the right people.”
And finding the “right people” isn’t automatic because they still have to be found, and once they’re found the lender has to decide if the customer is also right for them. Speaking about that in relation to all the economic uncertainty, Washington of Moneywell GRP said that a funding company should stick to what they’re comfortable with and not “chase deals” that they wouldn’t normally fund.
“But, also [on being found], I would market the heck out of my company and make sure that everyone in the world knows what I do, my product line, my branding, my logo, and make sure that anyone that is looking for capital that they know ‘hey, this company is always popping up,’ and I’d make sure that I stand out,” Washington said.
It’s called Quillt, a low-code tool that allows companies to integrate with several third-party services to either pull in datasets or act on data.
Quiltt says their tool detracts the need for companies to hire costly engineers to integrate their services one at a time. In doing this it allows for data to be accessed instantly by “abstracting away” the need for any organization to integrate with services one at a time and “right the business logic” required to each individual service into a single integration.
“So, with us, regardless of who’s in your data stack, we can essentially have a backend that processes all that information so you can focus on whatever your core focus is at the end of the day, as opposed to repetitive data, plumbing, and infrastructure,” said Mark Bechhofer, Cofounder & COO.
The low code aspect of it is modules with just a couple lines of code that anyone can paste into their application and embed a frontend experience. Startup companies that are looking to build in fintech with small teams and little funding could also seek assistance through Quiltt, according to Bechhofer. It could even be a bank or a credit union that wants to focus on their core competency and not worry about adding commoditized feature sets that their competitors already have.
“We are issuing cards and processing transactions, we are really doing the data intelligence around money,” said Bechhofer.
Before Covid, Bechhofer and business partner Ruben Izmailyan were selling a white label suite of DFM apps to banks and credit unions. The two business partners were often asked how they had built this backend infrastructure to take in data from “disparate sources” and combine it, analyze it, standardize it and make sense of it.
“We realized that was actually a much larger market with potentially a much larger play. And so we kind of ripped apart our old application into what I call like a Lego box and fintech infrastructure, and pivoted the company into what it is today,” said Bechhofer.
Driven by the mission of bringing financial wellness to as many people as possible, the team at Quiltt is excited about the possibilities ahead.
“We think that providing this new abstraction layer of technology will empower many new types of fintech builders and essentially give license to folks who maybe aren’t full time data scientists or engineers without worrying about hiring expensive teams. We’re really excited about what people might build on our platform that we haven’t even envisioned,” Bechhofer said.
LendingTree helped Linda get a “lenda.” Former SNL star Molly Shannon, playing Linda, explains to waitress, Brenda, how hassle-free finding a personal loan through LendingTree was for her. The newly released commercial uses assonance to get viewers to understand how easy it is to get the best possible loan. In the commercial, Brenda is under the impression that LendingTree is only for “big spendas” but learns that they will find her a lender despite the circumstances.
Another “Linda lenda” commercial is featured on LendingTree’s home page where Linda tells her niece how they assisted her on a home loan as well. The objective is get viewers to understand how getting a loan can be just as effortless for them as it was for Linda.
Lendio recently achieved SOC 2 compliance. Short for Service Organization Control 2 and pronounced “sock two,” the voluntary designation for Lendio, which focuses on data security, is not commonly sought by its peers.
SOC 2 is defined by American Institute of Certified Public Accountants (AICPA) guidelines and issued by outside auditors. The AICPA itself is an association that provides educational guidance materials, develops and grades the Uniform CPA Examination, and monitors and enforces compliance within the profession.
“We focus on small and medium sized business owners and their businesses,” said Ethan Hanson, SVP, General Counsel at Lendio, “and they benefit because they know they’re dealing with a company that is secure and takes their information seriously and handles that information with care.”
The process in obtaining this certification takes months of preparation and covers data security, data privacy, HR and accounting functions, making this an all-encompassing certification.
“The process is you engage with an audit party, they come in, and they review all of your policies, all of your systems, how our database is set up and the framework that you have and ensure that all those policies cover our business operations, and that they are also in line with the standards of the AICPA,” said Hanson.
Founded in 2020, the expense management platform Jeeves, recently won the Small-Medium Sized Business Lender Award from the Canadian Lenders’ Association. Jeeves is a Y-combinator company providing financial services internationally, and with their recent success the company has been able to operate in 24 countries.
“I think the number one thing that all of us at Jeeves would agree on is that we intently listen to our clients, we understand that we try to understand the pain points and therefore try to match those pain points or client demands to work with our skill sets,” said William Lam, Jeeves General Manager of North America.
Lam oversees the market activities for the US and Canada. An expense management platform, which the company labels its product as, is essentially a platform used to track expenses. Compared to platforms like QuickBooks, Jeeves integrates with the software rather than competes against it.
“We focus on providing financial services, not accounting software, for international startups and fast-growing companies. We are excited to continue to enhance the Jeeves platform and integrate with more accounting software in the near future,” said Lam.
According to the Dictionary, the term Jeeves is defined as a butler or valet which resonates with the behavior that the company tries to model.
“We want to remind ourselves, that we need to be providing the type of services and products that our clients need, and nothing beats a happy client. And therefore, we came up with that name, Jeeves, and that’s the mode of writing that our CEO and founder has been living on a daily basis with the rest of his team,” said Lam.
During Covid many businesses suffered tremendously in Canada, but for Jeeves it helped the company to grow and expand.
“For us as a company, as a FinTech company, that aspires to provide financial services globally, I think the pandemic fueled growth, and we’re experiencing like 900% growth since our Series B,” he said.
For loans, Jeeves focuses on corporate card solutions which upon approval allows clients to get funds in 48 hours and can be paid back in 12 monthly payments.
“So specifically, we launched our growth capital products as of just last month in June. Growth capital is a non-diluted revenue-based financing that’s very suitable for a lot of SaaS businesses specifically, and the clients are able to get the loans,” said Lam.
Lam believes there is still a lot of work to be done to complete the vision of becoming a global finance company with hopes of launching in more countries, more products, and more news to share.
“We service a lot of the small businesses as far as like unicorns, or unicorn startups, we’re very proud of the achievement so far. But I think that this is just the beginning,” he said.
“I think what’s really important is just the same for our businesses and any business, is being able to make sure that as things change, you’re updating and changing what you’re doing,” said Seth Broman, Chief Revenue Officer at Yardline.
With the constant changes in the economy, inflation being on the rise, and a rumored recession, businesses providing financing are analyzing whether or not their customers will be able to withstand challenging times ahead.
“For us a big factor is the increased costs of being able to source goods from overseas, for example, the challenges around getting those goods in a timely fashion,” said Broman. “That’s the first thing we saw. And then similarly, in the e-commerce space, you’re seeing brands that aren’t able to sell at the same level as they were beforehand.”
Like Broman, John Celifarco, a Managing Partner at Horizon Funding Group, acknowledges that inflation is directly affecting his customers.
“It’s definitely going to have an effect on the industry as a whole in terms of our clients, I’d say it’s going to affect certain ones more than others, depending upon how their business is structured, and what type of relationship they have with their customers,” said Celifarco.
And with recent concerns for a recession, Celifarco believes this won’t affect a client’s willingness to borrow but rather the ability to get them approved.
“Having seen this in the past, there have been times where the economy has slowed or there’s been a recession, and the customers still want money, but because of the trouble the businesses are having it’s a lot harder to get people approved on the lending side,” said Celifarco.
Not being able to access credit for customers is also an area of concern for Luis Hernandez, CEO of CapLadder.
“There are going to be more cash constraints in a recession. Obviously, funding companies won’t want to take on certain risks so they’ll obviously be more careful on how they disperse those funds just to make sure they’re getting paid back,” said Hernandez.
Hernandez suggests companies should limit hiring and expenses to better weather the storm.
“With the recession looming, and pretty much it is going in this direction, the best practices right now are what’s always been tried, which is, hold on to your reserves. Cash is definitely better in your pocket than out there,” he said.
Another alleged SBA fraud scheme has met its end after eight defendants were recently charged in the Eastern District of Pennsylvania. The group netted $7 million in Paycheck Protection Program loans, Economic Injury Disaster Loans, and pre-pandemic Small Business Administration loans. Defendants Frank Hamilton, Michael Jones, Tina Chen, Kenny Tran, Tim Park, Peter An, Joseph Greco, and Edwin Bonilla are all California residents.
Specifically for PPP loans, the conspirators allegedly created transactions designed to give the appearance that the funds were being used for payroll. However, the companies had no payroll and no business activities. As part of the scheme, they allegedly created fake bank statements and false tax documents to prove legitimacy. The defendants are being charged with conspiracy to commit wire fraud and face up to 20 years in prison if convicted.