Articles by deBanked Staff
Wintrust Expands Accounts Receivables Financing
December 17, 2018Today, Wintrust announced the creation of Wintrust Receivables Finance, an expansion of the company’s asset-based lending group, according to a story in Monitor Daily. This translates to the addition of a specialized team focused on accounts receivables financing to middle market companies, with revenues between $10 million and $300 million.
“We think this team is a great expansion to our current services,” said Edward J. Wehmer, Founder and CEO of the Chicago-based regional bank. “Wintrust Receivables Finance makes our asset-based lending even more robust and competitive.”
Business That Left Merchant Cash Advance Companies Hanging is Under FBI Investigation
December 16, 2018
In 2017, several judgments were issued in the New York Supreme Court against one Michael Willhoit, a resident and business owner in Springfield, Missouri. No lawsuits were filed, Willhoit had merely confessed judgment to nearly a half million dollars collectively.
By the following summer, a visitor would come knocking on the door of Willhoit’s fully-customized multimillion dollar safari-themed home, dubbed “The African Queen.” It was the FBI. He was under investigation for bank fraud.
According to the Springfield News-Leader, Willhoit’s wife told an investigator that her husband’s exotic car business was gone. But if so, several banks want to know where $4.25 million in unpaid loans went and what happened to the 33 vehicles that Willhoit had given them paperwork for. The banks, who sparked the FBI investigation, sued, and by November Willhoit’s wife filed for bankruptcy. Among her listed possessions were
- Two roaring lion masks
- Two 7-foot tall hand-carved wooden tusks
- An eight-legged genuine impala horn zebra-hide chair
- A 15-foot African warrior statue
- A 3,000-pound (approximately) bronze rhino
- Four gazelle taxidermy mounts
- A baboon, full-body mount
A youtube video tour of the home shows even more exotic paraphernalia. Realtor.com described the residence, which went on the market in July for $8.9 million, as a trophy showcase of African art. Willhoit told a News-Leader reporter in 2016 that he spent $3 million renovating the property including $400,000 for a 900-square-foot wood floor and $300,000 for landscaping.
More recently, News-Leader reported that Willhoit is the target of a federal grand jury investigation. In one of the bank lawsuits filed against him, Willhoit’s defense is reportedly that it’s the bank’s fault.
Defunct MCA Company Tried to Escape Signed Confession of Judgment
December 13, 2018
When a Florida-based merchant cash advance company, World Global Financing (WGF), declared bankruptcy this past May, it entered into a binding settlement agreement with its largest creditor, a hedge fund known as Eaglewood.
There was a caveat.
Eaglewood required that WGF sign a Confession of Judgment (COJ) as part of the agreement that would afford Eaglewood the right to file and obtain a judgment without further litigation if WGF breached the settlement. On August 3, that’s exactly what happened. After WGF failed to make the stipulated payments to Eaglewood, the COJ was filed in the New York Supreme Court so as to obtain a nearly $6 million judgment against WGF and company founder Cyril Eskenazi.
While it can be virtually impossible to invalidate a COJ, the courthouse Clerk nonetheless refused to enter it because of alleged technical defects, one of which involved WGF’s use of an out-of-state notary to witness a New York State affidavit.
“The alleged Affidavit of Confession of Judgment upon which Eaglewood’s request for a Judgment by Confession stands like a house of cards is no affidavit at all under New York law, and cannot be used in a New York litigation,” WGF’s attorney argued.
The absurdity of the argument was not lost on Eaglewood because the notary WGF challenged on technical grounds was the notary that WGF and its counsel had themselves chosen and approved. Eaglewood called the charade of contesting the validity of one’s own affidavit signed in the presence of counsel, utterly frivolous and a fraud upon the Court.
Defects or not, the judge concurred with Eaglewood because WGF had irrevocably and unconditionally agreed to the entry of judgment if they breached the settlement agreement in the first place, which they did, rendering the alleged technical errors with the COJ itself a moot point.
The COJ was therefore deemed valid and the judge ordered the Clerk to enter the judgment.
On Nov 29, a judgment for $5,866,477 was entered against WGF and Eskenazi. The index # is 651489/2018 in the New York Supreme Court.
Subprime Lending to Increase in 2019
December 12, 2018
Subprime loans are expected to increase in 2019, according to data from TransUnion. The data from a November 2018 report shows that Outstanding Unsecured US Personal Loan Balances have been increasing since 2013, and the increase was most dramatic from 2017 to 2018, jumping 18% from Q3 2017 to $132.4 billion in Q3 2018. The TransUnion data was also presented in a graph in a Quartz story today. According to a TransUnion projection, the total of unsecured personal US loan debt will grow by 20% next year, to roughly $156 billion in Q3 2019.
The last three months of 2018 will be one of the biggest quarters ever for consumer loan origination, according to Jason Laky, TransUnion’s consumer-lending business lead.
“A lot of it is being driven by non-prime and subprime originations,” Laky said.
At the Money 20/20 Conference in October, David Kimball and Ken Rees, the respective CEOs of Prosper and Elevate, were asked if they were concerned about a potential recession. Kimball said that Prosper, which provides loans to prime customers, has begun underwriting more conservatively. Meanwhile, Rees said that Elevate, which serves subprime customers, isn’t very concerned.
“Our customers are always living in a recession, so they know how to work with it,” Rees said.
The Quartz story predicts that payday lending, which competes with online subprime lenders, will also increase given that the CFPB has stopped aggressively trying to curtail these storefront businesses.
“The CFPB leadership changed and made very clear statements to the market that they’re going to have a lighter touch on regulations, especially subprime regulation,” Laky said.
Cross River Bank Raises $100 Million
December 11, 2018Cross River Bank, which provides banking services to fintech companies, announced last week the completion of a funding round of roughly $100 million. This was comprised of a $75 million equity investment from KKR, along with capital from Andreessen Horowitz, Battery Ventures, Rabbit Capital, and funding from new investors CredEase and Lion Tree. This adds to a $28 million raise a little over two years ago.
Cross River, which originated more than $5 billion in loans as of the end of August 2018, has developed partnerships with fintech leaders to build fully compliant and integrated products within the lending marketplace and payment processing spaces. They have about 15 lending platform partners, including fintech clients Affirm, Best Egg, RocketLoans, Coinbase and TransferWise.
According to the announcement, this new capital will be used to allow Cross River to continue building a complete banking platform where fintech companies can leverage best-in-class banking technology coupled with compliance.
“Cross River offers solutions to fintech companies by giving them access to a full suite of banking solutions and services in a single, fully compliant and innovative platform, making it an increasingly attractive and valuable franchise in a dynamic marketplace,” said Dan Pietrzak, Member and Co-Head of Private Credit at KKR, Cross River’s leading investor.
According to its website, Cross River was named “most innovative bank” by LendIt in 2017 and 2018. Founded in 2008, the Fort Lee, NJ, business-oriented bank has more than 180 employees.
Commercial Finance Coalition to Host Open House in NYC
December 11, 2018The Commercial Finance Coalition, an industry trade group, is hosting an open house for current and prospective members on December 18 in New York City. It’s at the Park Avenue Tavern from 6pm to 8pm. If you are interested in attending, please contact Mary Donohue at mdonohue@polariswdc.com.
Finitive Appoints Neil Wolfson to Board
December 10, 2018
Finitive announced today that it has appointed Neil Wolfson to its Board of Directors. Wolfson also serves on the Board of Directors at OnDeck.
“Finitive has established an innovative platform to provide institutional investors with direct access to alternative lending investments,” said Wolfson. “Finitive’s platform brings further transparency to this asset class.”
According to an April 2018 deBanked story, Finitive was founded in August 2017 and has two kinds of clients: institutional investors and alternative lending companies. Back in April, the company had only four alternative lender clients. Today, they have eight.
“We are very selective [with our lending clients],” Finitive founder and Executive Chairman told deBanked. “We are not a list service.”
Wolfson spent the last decade as President and Chief Investment Officer of SF Capital Group, a private investment group for high net worth families. There, he invested in over 30 direct debt and equity investments in emerging technology companies with a focus on FinTech companies.
Prior to this, Wolfson spent five years as Chief Investment Officer and President of Wilmington Trust Investment Management, a $40 billion investment management firm, and before that, he was the National Partner in charge of KPMG’s Investment Consulting Practice, representing over $100 billion of assets.
“Neil’s experience investing in global technology companies, coupled with a deep understanding of alternative lending markets, makes him an ideal fit for Finitive’s board,” said Barlow.
Finitive is based in New York and has more than 10 employees.
Small Business Optimism Is Up for 2019
December 7, 2018
American small businesses plan to finish 2018 with a bang, according to the fall 2018 Bank of America Business Advantage Small Business Owner Report. And they’re optimistic about the year ahead.
In the report, based on a semiannual survey of 1,000 small business owners across the country, 80% of entrepreneurs say they are confident that their 2018 year-end revenue will exceed that of 2017. And several business growth indicators are also up year-over-year, such as revenue expectations and expansion and hiring plans.
Projecting into 2019, 57% of business owners believe their revenue will increase (compared to 51% in fall 2017), 67% plan to expand (compared to 59% in fall 2017) and 27% plan to hire, compared to 16% in fall 2017. Significantly, 15% intend to apply for a loan, versus 8% in fall 2017.
Separately, according to the latest quarterly Wells Fargo/Gallup Small Business Index, optimism among small business owners increased substantially over the last quarter. The quarter, according to the index, received a score of 129, which is 11 points higher than last quarter’s score of 118, and apparently the highest in the survey’s 15 year history.
Small business owner survey respondents said positive business financials are largely the cause for their optimism. Eighty percent of respondents rated their financial situation as “very good” or “somewhat good,” while 84% said they expect their financial situation to be “very good” or “somewhat good” in the coming year. A record 55% of business owners reported increases in revenue, with 62% anticipating revenue increases in 2019. In addition, 74% said they had good cash flow in the past 12 months, and 78% said they expect their businesses to have good cash flow over the next year.
Small business owners are not without challenges. Hiring and staff retention issues were among the top concerns for small business owners, according to both reports. According to the Bank of America report, in 2018, turnover affected 24% of all small businesses, with 11% losing 10% or more of their workforce. For business owners who sought to hire new employees, 50% said the tightening labor market had a direct impact on their ability to find and hire qualified candidates. According to the Wells Fargo report, 18% of survey respondents said hiring and retaining staff was their top challenge.
