Articles by Anaya Vance
deBanked CONNECT marked its return to San Diego at the Wyndham Bayside Hotel directly across from the waterfront on N Harbor Drive, a prime location accompanied by many museums, restaurants, and a calming view of North San Diego Bay. The timing of the event paired perfectly with the Miramar Air Show, Hispanic Heritage Weekend, Adams Avenue Street Fair and other festivities taking place that weekend.
deBanked’s Chief Editor, Sean Murray opened the event by noting that California’s Commercial Financing Disclosure Bill thankfully didn’t cause the world to end. He also highlighted that California is the industry’s third-largest market, following Miami and New York. To his surprise, many attendees were experiencing a deBanked event for the first time.
Justin Thompson, CRO at National Funding, said that prior to deBanked’s expansion to the locale in 2018/2019 that most of the events there had to do with merchant processing, SBA loans, or equipment financing and that the 2019 show set the tone for more events to be brought out to the Southern California.
“It was great, I think it was appropriate to have something out here on the West Coast – probably in terms of the count of brokers is more on the East Coast –there’s also some pretty large brokers on the West Coast and I think it was real good opportunity to have everybody here on the West Coast that maybe couldn’t have gone to the East Coast to do stuff,” said Thompson. “There’s some new faces and some new opportunities to meet the people and build new relationships.”
deBanked CONNECT San Diego showcased tech demos from Ocrolus, Onxy IQ, and Dragin. Guest speaker Tye Hanna, CEO of Titan Asset Management, touched on what MCA portfolios are worth and how to value them. And Brock Blake, CEO of Lendio, drew in a large crowd discussing tech platforms that have entered the lending space and the necessity of innovation.
The panels began with the ‘Legal and Regulatory Developments’ with David Austin, Marshall Goldberg, and Scott Pearson and concluded with ‘Navigating the New Normal’ featuring Patrick Manning, Benjamin Flowers, Josh Jones, and Shelley Shivers.
At the end, attendees gathered on the outdoor terrace to unwind and continue the networking. The sunset met guests exactly as it began, a beautiful way to conclude the day. deBanked CONNECT Miami was also announced and set to be for January 11, 2024.
“The first quarter was actually kind of slow, like abnormally slow,” said Daniel Dias, founder of Small Business Lending Source, a brokerage based in San Diego. “We came off actually a record-breaking year last year. First quarter this year turned out slow and then it was kind of weird. Maybe it was owners who are hesitant to see what’s going on because there’s a lot of uncertainty in the market.”
Dias says things changed dramatically in Q2, however, to the point of setting yet again a new record. And the momentum only continued into Q3.
“This quarter is actually turning out really well,” he said.
It’s also going really well for Greenbox Capital, a small business funding company based in Miami.
“Q3 has been our best quarter this year,” said Jordan Fein, Greenbox’s CEO. “We positioned the company well over the last 8 months, ready for whatever the economy throws our way. We are running lean and growing again.”
Greenbox began to tighten its credit policies late last year, according to Fein and by continuing this strategy into 2023, it has allowed the company to evolve. “Our momentum has been building ever since we tightened credit and refined our spending in Q4 2022,” Fein said.
Optimism is also in the air at The LCF Group, a small business funding company based on Long Island. “Navigating Q3 and approaching Q4, we anticipate our positive trajectory to continue given the consistent demand from merchants,” said Andy Parker, LCF’s CEO. “Despite certain sectors of the economy facing challenges and the appearance of recession indicators, we’ve adapted our underwriting to reflect these conditions without any major tightening of our guidelines.”
LCF recently announced that it had acquired key strategic assets from Reliant Funding.
IDIQ is no stranger to recognition. A leader in identity theft protection, the company has earned a spot on the Inc. 5000 list for four consecutive years. Founded in 2009, IDIQ began its journey with a handful of employees in a Southern California home before expanding to an office building in Temecula, CA. The Temecula location grew to seven buildings, opening additional offices in Illinois, Florida, and Arizona, along with hubs in Texas and New York.
“Yes, we’ve grown rapidly,” said Bryan Sullivan, Chief Operating and Financial Officer at IDIQ. “We’ve hired more than 150 employees in the last three years to facilitate our business growth. We currently have about 250 employees.”
According to Sullivan, the COVID-19 pandemic catalyzed two significant trends that contributed to IDIQ’s growth. First, there was a spike in online scams and identity theft. Second, there was an increase in consumer finance transactions, including credit card use, home purchases, and refinances.
Sullivan recalled one case in particular: “We had a member who received an alert that two companies, not accounts but companies, had been opened in a different state by an identity thief using their name and personal information and had applied for business loans,” said Sullivan. “We alerted the member to the fraud and helped them get the bogus companies eliminated.”
“Without these alerts it might have taken years for the victim to find out about the identity theft and bogus companies and loans in their name,” Sullivan explained. “And, once found out, it would take months if not years to recover their identity and credit and cost thousands of dollars in lost wages and other costs.”
An IDIQ customer can be pretty much anybody since they now have several brands. IdentityIQ, which focuses on identity theft and credit monitoring is their flagship. The others include MyScoreIQ, Resident-Link, Countrywide Pre-Paid Legal Services, and Credit & Debt.
In the small business finance industry, IDIQ is used several ways. In one example, brokers can offer merchants access to their credit reports and in turn use that data to help them figure out the best path to pursue for funding.
“Our strategy has been to continually expand our product offerings,” he said. “Adding features and benefits that protect and educate consumers as well as improve their financial wellness and help them meet their financial goals.”
“Industries with stable, recurring revenue models, like healthcare and essential services, often show strong repayment history due to consistent demand,” said Michelle Melo, Chief Revenue Officer at Westwood Funding. Melo, who’s been at Westwood for more than four years has seen a lot of deals come through the door and has gotten a feel for numerous industries. Over time, experiences like hers, have led to a general consensus about what business types make for good funding customers and why.
For Ken Peng, Director of Business Development & Marketing at Elevate Funding, he said of medical and healthcare related businesses that “I think the combination of being an essential service and traditionally having higher profit margins has allowed this industry to perform well from a repayment standpoint.”
Melo at Westwood said the technology industry has also performed well, while Michael Gaura, who works alongside Peng at Elevate, named an industry that’s challenging, trucking. Gaura, a Director of Financial Planning and Analysis, said that when it comes to trucking, “historically they have had challenges such as driver shortages, driver retention, and equipment maintenance making them a higher risk of repayment.”
“As of recently, [the trucking industry has] seen an increase in challenges of operational costs increases (fuel and insurance premiums), Economic & Supply Chain Issues, and increased competition, which has placed a further strain on their industry,” Gaura added.
Abe Klugmann, the COO and Head of Sales at YM Ventures, also had feelings about the state of the trucking industry, saying that it’s a “disaster.” “Construction is also very very challenging right now because of the economy,” he added. Unsurprisingly, like the others, he saw strength in the healthcare industry, saying that home healthcare businesses were among the most resilient. “It’s a pretty good industry, it works out pretty well when you find those types of companies,” he said.
In this current environment, small business finance companies are proceeding cautiously.
“In 2022, the company’s turndown rate stood at 8%, but it has surged to 12% this year,” said David Miles, VP and Director of Credit for Eastern Funding. Eastern Funding primarily serves coin laundromats, grocery stores, and car washes but also operates two subsidiaries that focus on assets like commercial vehicles & tow trucks and fitness & wellness equipment. While Miles said that loan volume has remained strong, the percentage of transactions being turned down has increased.
“…I think that’s fairly indicative of the market or the environment that we’re currently in, which is high interest rates,” said Miles. “You have consumers that are carrying a lot of debt and it’s somewhat of a precursor to a potential downturn or recession.”
The circumstances are being felt all across the lending spectrum. According to a recent consumer lending study from the Federal Reserve, the overall rejection rate for credit applicants was 21.8% in June, the highest level in five years. That study looked primarily at mortgages, credit cards, and auto loans.
But in the commercial universe where Eastern Funding operates, the sentiment seems to be matching the shift in the numbers. On a recent quarterly earnings call, for example, Lightspeed CFO Asha Bakshani said of their MCA program, “There’s tons of demand. We’re just taking our time intentionally given the macro.” On unsecured business loans, Enova CEO David Fisher recently said that “we’re just not convinced the risk/reward is there right now, again, given the uncertainty in the economy, an extra few percentages of origination growth for us this year is pretty inconsequential.” Both Lightspeed and Enova are also still experiencing strong volume despite the conservative approach.
“We’ve definitely seen credit quality go down compared to prior years but that’s the main challenge,” said Miles of Eastern Funding. “And we want to make sure that especially in this environment, that we continue to make good loans, we make loans that don’t go to collections, that don’t go to work-out, and we don’t experience any losses across any of the three divisions.”
One challenge of being cautious, however, is communicating the situation to potential customers who may still be stuck in the mindset of 1-2 years ago.
“Our focus is on making sure that the people that do have credit authority, that they’re well aware of the environment that we’re currently in, and that there is enhanced risk just to do with the macroeconomic environment that we’re operating in,” Miles said.
“Yellow Corp. has been grappling with issues for some time,” said Shari Lipski, Principal at ECS Financial Services.
The trucking industry was taken by surprise recently with the abrupt closure of that very company, Yellow Corp. Having generated $5.2B in revenue just in 2022 alone, Yellow was so large that chances are if one saw a 500 HP Peterbilt Model 579 truck cruising down a highway or interstate in the last year that it was one of theirs. After nearly a century of moving industrial, commercial, and retail goods throughout the U.S., the company declared bankruptcy on August 6, leaving thousands without jobs.
“It was a shock to me personally, but a bigger shock might come when details come out about what really happened,” said Tamara McCourt, Co-Founder at Huddle Business Capital.
Yellow had been facing recent battles with union workers and had been the recipient of an unusual bailout deal during the pandemic in 2020. At the time, the company received a special $700 million loan from the Treasury Department as pandemic relief and in return the Treasury took a 29.6% ownership stake in the company in the form of common stock, a deal that the Congressional Oversight Committee later argued should not have happened.
While the world waits to see how this will unravel, one immediate effect might be the delay of trucks entering the resale market, McCourt noted. The reduced equipment demand by Yellow could also result in an increase in available inventory and may even drive prices down, she added.
“First, the trucks owned by Yellow might be held up for some time, but they eventually will hit the market for resell,” said McCourt. “The large influx of inventory might impact current prices by lowering them and stimulate buying by existing transportation companies.”
Lipski, of ECS Financial Services, added that the demand for consumer and corporate carriers has not disappeared and that the trucks and drivers themselves still exist. What happens next is not just a matter of what happens to the trucks but about what happens to the drivers.
Meanwhile, the impact of Yellow’s bankruptcy on future lending terms in the transportation industry may be minimal, however. “Right now, we are already experiencing the strictest lending to the transportation industry that I can recall in over 30 years,” said McCourt, when asked about this. “Not sure that this in itself will further restrict lending.”
In the U.S., 8.4 million people work in the trucking industry, of which 3.5 million are truck drivers. Following the recent bankruptcy, 30,000 truck drivers have been laid off and will now be seeking employment.
“I like cold brew coffee with an extra 3 shots of espresso and 2 packets of stevia to get the day started,” said Brin Richardson, Sales Development Team Lead at Banana Exchange.
Everyone has their own unique routine that helps them power through the workday. For some, it might be caffeine.
“I think coffee, for me personally, it definitely gives me the energy I need in the morning,” said Nicolette DiAntonio, Head of ISO Relations at Lexington Capital Holdings. “First thing when I wake up I put the pot of coffee on at home. I get to work I make my second cup…”
From there it’s another 1-2 cups throughout the day for her, which she said is still less than what the company CEO drinks. “It boosts my energy, my productivity and everything like that,” she said.
“I’m like an every hour on the hour type of guy,” said Frankie DiAntonio, the CEO at Lexington Capital Holdings. “Typically, like 6,7,8,9 o’clock and then I’m going for the rest of the day. And then I might have one more in the afternoon to get me through the rest.”
That’s about 5 cups a day for him on average. “Moral of the story, we love it over here,” Frankie said. “Lexington runs on coffee.”
Brandon Schadek, Director of Sales at Leads to Business said he’s definitely more productive when he has caffeine in him. “I just tend to be more alert and more on top of things but when I don’t have it, I feel like I’m lacking that extra energy.”
Unsurprisingly, coffee is his beverage of choice for that. “First thing in the morning, I have a Keurig and I use French Roast from Starbucks,” said Schadek. “That’s what I use for the coffee and then I definitely have I would say about two teaspoons of creamer, it’s caramel macchiato. […] And I have that every day to start my day.”
But caffeine isn’t for everyone. Ryan Metcalf, Head of Public Affairs for Funding Circle US, told deBanked that he really enjoys drinking Diet Coke, though not for the caffeine content of it.
“I love the taste of it. I like the coldness of it,” Metcalf said. Although Diet Coke has more caffeine than regular Coke, he feels that too much caffeine on a whole can actually impede one’s productivity rather than increase it. As such, he limits himself to two Diet Cokes per day and only enjoys them between the hours of noon and five pm.
“The king of all Diet Cokes is a fountain Diet Coke from McDonald’s,” Metcalf said. “There is nothing better.”