Anaya Vance was a reporter for deBanked.
Success On the Last Day? It’s Really About What Happens All Month
August 7, 2023
There isn’t a more chaotic time in this industry than the last day of the month. Brokers on the front line scramble to close deals to hit their sales targets while funders provide vital support from the backend.
Paul Boxer, COO of Merchant Marketplace calls the last working day “the most insane day of the month.” Boxer told deBanked “… for us we know that on the funding side to make our investors and syndicators happy it’s a very crucial integral day that we’re all hands on deck to do whatever we can to make sure as many deals get funded as possible.”
Among the secrets to a successful end-of-month performance, however, is operating efficiently throughout the month, several sources opined. For Moe Braun, the Senior Director of Business Development at Rocket Capital, he said that means communicating with ISOs about what deals they’d really want to see get closed and funded so that their ISOs are spending their time pursuing the right files all along. Braun himself even sets his own daily and weekly goals to maximize efficiency.
“I think the easiest way to avoid the pressures are to kind of granulate those quotas, instead of monthly, as granular as you can get,” said Braun, “So weekly, daily; when I come into the office every day, I know what I want to get done that day. And then if I get it done that day, I try to focus on how I did and copy that for the next day. And same goes for my week, I look at the end of the week on Fridays, I say ‘hey, was this a good week? Was this a bad week? What went well, how can I do that again next week? And what went wrong and how can I correct that for next week?’”
For Russell Kimyagarov, the Founder and CEO of Fratello Capital, he says they’re constantly tuned into their CRM, tracking deals that receive pre-approvals and identifying follow-ups needed.
“We also have meetings once a week with the staff, with the team, to make sure if there’s anything that we could do better that we’re discussing it and implementing it to close more files and stay in touch with the ISOs a little better,” Kimyagarov said.
“In our CRM, we do track how many submissions a day from which broker,” said Boxer of Merchant Marketplace. “How many offers? Then the breakdown between submissions to offers to contracts out. Why it did or didn’t fund. To the ones that didn’t fund, what happened? Did they get funded somewhere else? Did the merchant just start ghosting the broker? Did it die for other reasons?”
Even for Boxer who knows what the last day of a month is like, he affirmed that there is a bigger picture to it all.
“I think that in this business there are other ways to focus your business, a lot of it’s based on like mentioning quotas and numbers, for us it’s really about relationships,” Boxer said.
Leveraging ChatGPT for Maximum Productivity
July 28, 2023
“…It’s just been pretty impressive how we have this technology that came out that has literally changed everything, and it was almost overnight,” said Kareem Jernigan, CFO at Leasing Associates Inc.
Earlier this week the Black Equipment Finance Network (BEFN) hosted a webinar titled ‘Leveraging ChatGPT for Maximum Productivity’ for the equipment finance space. The panelists were Cheryl Tibbs, George Parker, and Kareem Jernigan.
Jernigan is already using ChatGPT in his daily work life. In one example, he said that he commonly uses it to analyze and find errors in spreadsheets. In another, he’s saving a lot of the time he normally spent on writing.
“…I also run HR, and so I have to craft communications and/or policies,” he said, “so, when you think of crafting a policy or a communication that you have to send out, before ChatGPT that would be something that would take 4 or 5 hours to do. […] That task today I could get that done in 30 minutes.”
Meanwhile, George Parker, Co-CEO at VenSource Capital, said “You can use ChatGPT with training staff. You can develop training material. You can give tests and quizzes. You can design training programs with time as an element, it can do all of that. You can even design courses with ChatGPT. You can tell ChatGPT to come up with a time frame for learning each part of a subject.”
Parker added that ChatGPT can be used for brainstorming, articles, planning, meeting content, customer service responses, and more.
Even in the finer details of equipment financing itself, the panelists said that ChatGPT can produce credit assessment profiles and analysis, analyze and summarize financial data, and scrutinize contracts,
Of course, all of this only works if one understands what to put in and takes the care to evaluate what comes out. It’s all about the proper “prompt.” One example offered of a prompt that wouldn’t work is: “teach me credit analysis.” Something like that would be too vague and would result in a response that was too broad. Part of the reason there are panels and webinars about ChatGPT to begin with is so the industry can learn how to leverage it for maximum productivity.
Please Send Four Months Bank Statements
July 20, 2023
At some point in time the industry decided that the most recent four months bank statements constituted a solid baseline to understand a business’ financial picture. So deeply rooted is this precise number of statements that certain states like California now require that underwriters collect a minimum of four months statements to calculate a business’ average monthly historical sales. Curiously, there’s also a maximum. California does not want funders using more than twelve months of historical data in their calculations.
“The current four bank statements just give us a general idea of how the current position and standing with the business is, if they’re paying their proper overheads and their expenses,” said Ken Tsang, the Head Underwriter and VP at Fundkite. “And more of a general idea of what revenue they’re making right now…”
For deeper underwriting, however, he said they may ask for more, a common trend in the industry.
Gary Jules, Underwriter at Power Capital, also asserted that they rely on four statements as a baseline.
“If it’s a seasonal business, we may ask for more [statements],” Jules said. “Basically, we just want to see get a general broad picture of how much the business is generating a month.”
For Jason Hausle, who does Sales and Business Development at Quikstone Capital Solutions, the requirement is only two months bank statements but they also need six months worth of merchant processing statements because they specialize in split-funding. Although the merchant processing statements give them a feel for historical revenue figures, they find value in the bank statements for other reasons.
“We like to use the bank statements,” said Hausle, “the two most recent just to make sure there’s no other positions or liens that would pose risk for underwriting.”
Requests for statements industry-wide generally seem to top out at twelve months. Indeed, states like California limit funding providers to using a maximum of twelve months data in their monthly historical average sale calculations.
Tsang at Fundkite expressed that a limit of twelve is generally enough anyway.
“I would say, to an extent, yes, anything exceeding 12 months might be an issue because after all, we have to keep our business relationship with our ISO partners and with the merchant in general,” said Tsang. “We don’t want to create any issue where it becomes excess–pretty much excessive, and it might create any issues with our relationships…”
It Says “AI Powered” But Does It Matter?
July 6, 2023
It’s tempting to accept that if the internet claims something is AI-operated, then it must be, but AI is being held to an entirely new standard in 2023, thanks to the introduction of ChatGPT. That means everyone needs to be prepared to examine whether or not something is actual AI or if the use of AI is even integral toward achieving a goal.
“I think [it’s] a really important thing for people to do right now is to look at how they evaluate the AI marketing promise because there’s an opportunity now that people are capitalizing on to just launch with the name AI, that they’re using it, but not really, or they’re not doing anything you need,” said Robert Burke Jr., Founder and CEO of Sobo, a company that matches businesses with consultants. Burke says that one way to try and distinguish fact from fiction is to ask questions about the company’s AI team, their data strategy, and patents they might have, if any.
Jason Feimster, Founder of Moonshine Capital, said that a more fundamental question should be asked first, whether or not the use AI of really makes a difference to achieving the objective. “What is it that you want to achieve,” said Feimster. “Do you want to get funded? Can I fund you? Yes. That’s the only question that matters. Now, if I claim that I can get you funding through AI, and you care about how they work, we’re muddying the water, you’re still not closer to getting funded.”
At the same time, one shouldn’t hesitate to at least experiment with the technology. Jared Schulman, CEO at Lendica, says that “There are probably some small, idiosyncratic risks to interacting with AI but largely speaking, it’s a really exciting time. I think it’s right to be curious and to try, and some really great things are going to come from it.”
Meanwhile, Burke at Sobo said “I think this is the key to remember that AI is not a magic wand that instantly solves all your problems and challenges. It’s a tool that when it’s used properly, can provide benefits. But it also comes with its own challenges and limitations because it is such early stages.”
CLFP Rolls Out in Australia
June 27, 2023
The US-based Certified Lease & Finance Professional (CLFP) designation is finally being rolled out in Australia. Fifteen Australian professionals are currently going through the program, according to Reid Raykovich, CEO of the CLFP Foundation. The launch, which was slowed down by covid, is the result of years of collaboration between two organizations, the CLFP Foundation in the US and the Commercial Asset & Finance Brokers Association (CAFBA) in Australia.
“Prior to partnering with the CLFP Foundation, CAFBA looked at offering specific commercial finance courses through Australian tertiary institutions,” CAFBA said, “however, after discussions it was felt that it would take too long to commence, would not provide content control and would not have recognition outside the tertiary institution. There are many advantages in being part of an internationally recognised accreditation that is industry specific.”
After an initial meeting between the two organizations in 2015, CAFBA CEO David Gill travelled to the US two years later to participate in the CLFP training and examination. Thus kicked off the plan to bring the CLFP designation to Australia and the partnership was officially announced in March 2022. The Handbook, training, and exam are all based on the same framework that was established in the US. However, certain areas had to be modified to ensure it was relevant and consistent with the Australian structure.
Australia isn’t the only country targeted for program expansion. The aim is to make the CLFP the preeminent credential throughout the world.
“We are also working with the Canadian Finance and Leasing Association (CFLA) to make the designation available in Canada as well,” said Reid Raykovich. “Last year, I announced the initiation of the designation in Prince Edward Island, Eastern Canada. There have been discussions with other countries as well, but nothing official yet.”
Is AI Coming for the Industry’s Jobs?
June 9, 2023
“Let’s be honest, a lot of this AI to me is like a Black Mirror episode,” said Erica Gilerman, General Counsel at Triton Recovery Group. “It was something that three years ago when you’re first watching Black Mirror, you’re like, ‘Wow, that’s amazing,’ and suddenly it’s here.”
The most talked-about technology lately has been AI. The fast-paced, easy, and accessible tools that AI is giving life to have the rest of the world questioning how necessary humans will be for many business functions.
“I think anyone who says that jobs won’t be lost because of AI is not being honest,” said Shawn Smith, CEO at Dedicated Financial GBC, a commercial recovery firm.
Companies that are built straight from AI won’t have to cut back on hiring, Smith explained, but he believes that once more businesses begin integrating AI, the need for more people won’t be there.
“I think what you’re going to see more of is AI being leveraged instead of hiring more people,” said Smith. “They will be able to grow without needing to hire more and reallocate people to doing more of the connection piece and allow AI to do the process piece.”
Gilerman, at Triton, a firm that also does commercial recovery, believes that some roles cannot be fully replaced by AI.
“Will it fully replace people,” said Gilerman. “I don’t see that happening anytime soon, especially in our space.” An example she offered is the necessity of having humans oversee what an AI is doing when it comes to underwriting to make sure it’s not getting it wrong. She also thinks that AI could be useful in automating mundane tasks.
“And not in a way that is bad, but more so of busy work versus truly being able to delve deeper into what we need to get done and getting it done faster,” she said, “which is what I really think AI is going to assist us in, getting everything done faster.”
“Everybody used to type everything with a typewriter,” said Shmulik Fishman, CEO of Argyle, a fintech company that focuses on employment and income verification, “And when computers came out, there was a huge worry that everybody that was a typist, all those jobs would be eliminated, and that the office would have this huge decrease in the number of people inside of it. The exact opposite thing happened.”
This outcome could happen all over again.
“Humans have a really amazing ability to leverage tools to make their day better, and to graduate themselves to working on more important things that tools or computers cannot do for them,” Fishman said. “And I think a ton of that’s going to happen with AI as well.”
When Your Competitors Do Wrong, Do Right
June 1, 2023
“…no matter what industry you’re in there’s always going to be bad apples, and you kind of have to see which way they’re coming from,” said Heather Francis, CEO at Elevate Funding.
Competition within this industry will always exist, fueling the drive of professionals in the field. But how can one compete with a competitor who is actively deceiving the merchant? Furthermore, how can one advise that client to exercise due diligence without appearing to display dishonest intentions? Transparency has become a rising issue separating those in the field for the right reasons from those who are not.
“Companies should be dedicated to conducting their business consistent with the highest standards of ethics and integrity,” said Laura M. Marolla, VP ISO Relations at World Business Lenders (WBL). “We have an obligation to our colleagues, customers, business partners and investors, as well as the communities in which we operate to be honest and forthright in all our business practices and interactions.”
Funding and lending companies working with customers should be forthright about everything, from the amount the customer will receive, the total cost, and what they should expect throughout the relationship. Also they should be consistent with the terminology used so that the customer doesn’t become confused.
Francis explained that terms like “fee” could be interpreted in several different ways. Her company has developed an entire blog dedicated to terminology to help merchants weed out jargon.
“Terminology is very very important because I could understand fee to mean one thing and you could understand it to be different,” said Francis. “And that’s not transparent if we’re speaking a different language, that can be misconstrued.”
Case in point, Francis’s company Elevate offers Revenue-based financing while Marolla at WBL offers loans. On this basis alone, each company’s product works very differently.
“Ongoing education for all staff should be required, during which responsible lending practices should be emphasized and ingrained into the culture of the organization,” said Marolla. “While in the end, each merchant must take responsibility for its business decisions, informed decisions by merchants can be facilitated through transparency in disclosures and responsible business practices throughout the lending process.”
And if a competitor is not being transparent or responsible, Francis said that there is a delicate way to communicate that to the customer.
“From our team, what we do if a merchant says, ‘hey, so and so promised me X, Y, and Z,’ if there are reviews out there that show the other company can’t deliver that, we will send them the link. ‘You can see what previous customers have said, and it seems like they haven’t always been true to their word.’ We can also give the client something to look out for.”
One particular thing she said can be a red flag is if a company tells the customer at the last minute that they’re going to get a lot less than what they originally contracted for, which they have seen happen. Elevate hopes that when a customer recognizes a warning sign that they will remember Elevate’s polite manner of advising them what to have looked out for in the first place.
Francis explained it’s about making them feel free to come back to them, that there’s no hard feelings if it looks like they got a better deal. “‘If you have any questions. If you don’t feel that the person is being truthful with you, we’re happy to answer any questions, or you can bounce ideas off of us,'” is the message they try to leave them with. “We’re just trying to have a relationship so that we can curtail someone who’s lying about what they’re doing.”
Revenue-Based Financing? This Team of Entrepreneurs Learned The Trade in Argentina
May 26, 2023
Javier Alvarez Wrobel and Juan Cruz Alvarez Wrobel, brothers from Argentina, have worked in the lending business together for years. They’re even co-founders of a company that’s based in Buenos Aires.
It’s taught them a lot. While Americans fret over single digit inflation, Argentina’s rate of inflation soared past 100% earlier this year, the highest rate since it began dramatically increasing in 2018. That makes it very challenging to lend in the country.
“Due to the recent complicated economic situation, lots of lending companies in Argentina have closed,” said Javier. “I’d say there are only around 30 to 40 companies in the country doing what we do right now.”
For a population that largely also has little or no credit history, credit reports generally can’t be relied upon to approve loans at scale.
“That is why a lot of the underwriting in Argentina, when people request a loan, is made based on the cash movements on the consumers bank accounts,” said Javier.
That’s what they learned how to do. And with such a skillset as theirs, they were intrigued to learn that a similar model had taken off in the United States, one where business owners can get approved for funding based on data mostly available in their bank statements, revenue-based financing. The result was an expansion to the US and their launch of Upfunding Capital in Miami, FL in 2022. There, they teamed up with a third co-founder named Paula Sborovsky, who previously worked in Entre Ríos, a province directly north of Buenos Aires that sits along the border of Uruguay.
In the process, they’ve established a niche, a clientele mostly made up of immigrant business owners that have an Individual Tax Identification Number (ITIN) but not a social security number. The thin credit or lack of credit that may come with that is something they’re already used to.
“As we work with the Latino community, most of our clients are actually non-US citizens or at least not US born,” Javier said.
Javier said that the best and most reliable information they use for approvals is the way business owners conduct transactions on a day-to-day basis. Nevertheless, the company is pacing itself, testing out its technology and its underwriting models. Upfunding hopes to ramp up its volume in the second half of this year.
The work so far has been personally rewarding for the Upfunding team.
“It’s amazing to see,” said Javier, “for example, I got the chance to speak to a guy that is actually Argentinian living [in the US], trying to sell shoes, and seeing that we can actually offer a product for them to improve their own business that’s just starting out, for us is amazing because we are actually doing the same right now.”
