Articles by deBanked Staff
North Carolina is the latest in a series of states to introduce a commercial financing disclosure bill.
The “Small Business Truth in Financing Act” introduced on May 11th, would cover business loans, factoring, and merchant cash advances.
The language was copy and pasted from bills elsewhere, like the recent one in Connecticut. The “double dipping” term is noticeably absent from this one, however.
The North Carolina bill was introduced by Rep James D. Gailliard (D). If it succeeds in moving forward, it’s written to go into effect on May 1, 2022.
The FTC suffered a huge blow when the US Supreme Court revoked its presumed authority to seek restitution under Section 13(b) of the FTC Act, so much so that a pending lawsuit it had against RCG Advances, LLC, appeared to be in mortal danger.
On Tuesday, however, attorneys for the FTC informed the Court that it intended to file an amended complaint that would seek civil penalties for violations of Section 521 of the Gramm-Leach-Bliley Act.
According to the FTC, “The Gramm-Leach-Bliley Act requires financial institutions – companies that offer consumers financial products or services like loans, financial or investment advice, or insurance – to explain their information-sharing practices to their customers and to safeguard sensitive data.”
Section 521 prohibits the obtaining of customer information by false pretenses.
An amended complaint has not yet been filed. It bears watching if Gramm-Leach-Bliley becomes a viable alternative avenue that the FTC relies upon following the loss of its most potent tool.
Square Capital originated 78,000 small business loans in Q1 for a total of $392M. That figure does not include PPP lending, which comprised of 57,000 loans for a total of $531 million.
“After pausing flex loan offers from early March to late July of 2020, we have been measured in our ongoing ramp of offers to sellers,” Square said. “Revenue from Square Capital was down on a year-over-year basis due to a lower mix of flex loans during the quarter.”
Square Capital originated slightly under $1 billion in 2020, down from the $2.3 billion in 2019.
OnDeck CEO Noah Breslow announced that as of April 30th, he had left OnDeck. He wrote the following in a May 6th post on LinkedIn:
“It is hard to believe, after a nearly 14 year run, that last Friday was my final day as an OnDecker. Working to build OnDeck with our incredible team, our partners, our board members and investors, and of course, our small business customers was the greatest professional experience I’ve had, and I am eternally grateful for the efforts of everyone involved in the company over so many years. I am proud of everything we accomplished together – pioneering the online lending industry, delivering nearly $14 billion dollars to small businesses, building a trusted brand and phenomenal culture, and achieving numerous industry firsts along the way.
I am especially proud of the way our team and our leaders handled themselves last year under the pressure of COVID. We worked together to navigate a very challenging situation, and I’ll never forget the teamwork and collaboration under stress that allowed us to land the company safely and become part of Enova – a transaction that I firmly believe was the right thing to do for the company’s stakeholders.”
Though Breslow was not the founder of OnDeck, he was one of its earliest employees and he later steered the company as its chief executive up through and past the point of it going public on the NYSE. In 2020, OnDeck was acquired by Enova.
Breslow updated his LinkedIn profile to say that as of May, he is now an “Operator in Residence” for Bain Capital Ventures.
Bain Capital Ventures posted a lengthy welcome to Breslow on Medium immediately after.
“Noah joins BCV this week as an operating partner, and we couldn’t be more delighted,” wrote Matt Harris, partner at Bain Capital Ventures. “You can reach him at email@example.com with your next amazing idea.”
Breslow followed it with another post on LinkedIn:
“So, what’s next? Well, those who know me know I am passionate about the craft of entrepreneurship, and I have served as an angel investor and informal advisor to many startups and founders over the years.
After the OnDeck acquisition closed, Matt Harris, a longtime close friend and early OnDeck investor, reached out to me to chat about what might be next. Matt is a special person, and a renowned fintech investor – in fact, Matt was responsible for getting me into OnDeck 14 years ago, and that worked out pretty well! So, when he floated the idea of joining him at Bain Capital Ventures to do this type of work more formally, I was all ears.
I knew I wanted to spend some time working with innovative startups and exploring some new technology areas before diving into my next big thing – after all, it might last another 14 years! So, I am thrilled to announce I am joining Bain Capital Ventures as an operating partner – working with our portfolio CEOs and helping the firm invest in fintech and tech companies across all stages. Excited for what’s next!”
When Enova acquired OnDeck, it thought that the company’s legacy portfolio would have very little value. Now that the dust has settled, it’s become a gold mine. “We now expect to receive over $200 million of total cash from the acquired portfolio, net of securitization repayments,” said Enova CEO David Fisher in the company’s quarterly earnings call.
Enova reported that small business lending was now more than 50% of their portfolio and that they recorded originations of $322 million in small business funding in Q1.
“From an operational perspective, the integration of OnDeck is largely complete,” Fisher added. “Our three SMB products are working together as a single business, and we are on track to deliver more than the forecasted $50 million of annual cost synergies, primarily from eliminated duplicative resources as well as $15 million in run rate net revenue synergies.”
OnDeck’s lending business has also allowed the company to price a $300 million securitization debt facility, backed by OnDeck term loans and lines of credit.
“We’re pleased to report a record first quarter of profitability, driven by solid credit performance, improving originations, and disciplined expense management,” said Fisher. “We are encouraged by the recent signs of a recovery in demand and believe that our diverse product offerings, nimble machine-learning-powered credit risk management capabilities, and solid balance sheet position us well to profitably accelerate growth as the economy continues to recover.”
“The reimagined future of BFS starts now, and today I’m proud to announce that BFS Capital has become Nuula,” wrote BFS Capital CEO Mark Ruddock on LinkedIn. In a lengthy post, he explained that the company has shifted its “philosophy from solely selling loans acquired primarily from brokers, to providing a more holistic, customer-centric mobile app that entrepreneurs would find useful each and every day.”
“Nuula is a mobile application that gives small business owners instant access to critical business metrics anytime, anywhere.
It allows real-time monitoring of cash flow, personal and business credit activity, and social ratings and reviews. Small business owners know immediately if there’s an issue with their cash, credit, or reputation that requires action.
But this is just the beginning.”
“With regards to our legacy business, our team will continue to support our existing customers and partners as we transition all our services to Nuula,” he added. “Our existing customers will be the first to be offered a chance to experience Nuula. And over the next few weeks, our existing working capital customers will be able to unlock additional capital from the first of our Nuula ecosystem partners, with exciting incentives and in a way that is as seamless as possible. We expect to make that announcement soon.”
Kabbage was hardly featured in American Express’s Q1 earnings report but the recently acquired company was raised in the official call.
Kabbage is an example of how American Express plans to deepen their relationships with current customers and attract new ones by offering a range of solutions beyond the card, said company CEO Steve Squeri. “And in Q1, we began the rollout of the Kabbage platform, which includes a business checking account and working capital solutions to our small-business customers.”
Squeri also said that Kabbage will play a specific role in their post-pandemic plans.
“And you know, as we’ve talked about travel coming back, it comes back in layers. It comes back with consumer, then it’s SMB, and then it’s lodging, corporate. So it is a very different business, which is why we went and acquired Kabbage to have a digital front for these SMEs where they can not only get their card spending done but also get working capital loans, have a transaction bank account, have a merchant financing loan, have short-term loans, and things like that.”
One of cornerstone objectives is to outlaw confessions of judgment from being used in business loan transactions nationwide.
“With this bill, we are taking another step toward protecting America’s small businesses—the foundation of our economy—by preserving the right of a business to be heard in a court of law before a potential credit default,” Rubio said. “I remain committed to protecting our small businesses from predatory, out-of-state lenders, and I urge my colleagues to join me in this effort.”
“When we let financial predators harm hardworking Americans through scams like confessions of judgment, we undermine the dignity of work,” Brown said. “This bipartisan bill would protect consumers and small business owners from predatory lenders that use legal tricks to strip away their hard earned money.”
This is not the first swipe at COJs. In 2019, New York passed a law that made it illegal to file a confession of judgment against a non-New York debtor in the New York state court system. However, this does not prevent a party from using another state’s COJ and filing the COJ in that respective state.
The federal bill was previously introduced in 2018 and 2019 and failed to advance both times. The text of the bill can be found here.