Articles by deBanked Staff
ISO Alleged to Have Forged a Confession of Judgment
November 6, 2017
Underwriters, keep your eyes on the notary stamps.
A lawsuit filed in the New York Supreme Court last week by a merchant cash advance company against an ISO and several co-defendants, alleges that an ISO was partially responsible for damages when a merchant defaulted.
And they make a compelling argument. In this case where a Confession of Judgment (COJ) was required to approve the deal, the merchant, who defaulted within 30 days of being funded, claims to have never signed one, despite the ISO having delivered a signed one to the funder.
Well then who signed it?
Upon inspection, the notary stamp on the COJ belonged to a notary in Nassau County, NY, where the contract logically would’ve been notarized. But the merchant is based in Florida and claims to have been in Florida at the time the COJ was allegedly signed.
So who would’ve been in Nassau County that day?
According to the funder, it was the ISO, since the ISO is based on Long Island and the ISO is the one that delivered the signed COJ to them.
These are just the allegations at this point, of course, since the defendants have not even yet had a chance to respond.
The complaint, however, adds another twist, that after the ISO got the deal funded, they then referred it to a debt settlement company, who assisted the merchant in defaulting.
As you might imagine, the debt settlement company is a named co-defendant.
The case is filed under Index Number: 656692/2017 in the New York Supreme Court. You can view the entire complaint here.
StreetShares Reports $6.2M Loss For Fiscal Year 2017
October 31, 2017StreetShares, the veteran-run small business lender, continued to post sizable losses, according to their June 30th fiscal year-end financial statements. The company had a $6,193,154 loss on only $2,168,067 in revenue. While StreetShares has generated significant buzz for their particular focus on military-owned small businesses, the lender only made 751 loans in the 12-month period and there is no requirement that the businesses they lend to actually be military-owned.
The company spent more on payroll and payroll taxes alone ($3,258,960) than they earned in revenue. They had 32 full-time employees and 1 part-time employee as of June 30th.
“As an early stage, venture-funded company that is not yet profitable, we rely heavily on capital investments to fund our operations,” the company wrote in their annual report. “Based on our current financial situation, it is likely we will require additional capital within the next twelve months beyond our currently anticipated amounts to fund the operations of the Company.”
The chart plotting their loan performances by grade below is from their annual report:
Their loan amounts typically range from $2,000 to $150,000 and require weekly payments for anywhere from 3 months to 3 years.
Even though the company spent nearly triple on marketing in this fiscal year ($1,727,478) versus the previous year ($579,331), revenue only doubled.
StreetShares plans to raise additional capital towards the end of this year through a Series B Round.
Update: PayPal Acquired Swift Capital for $183M
October 30, 2017According to a filing with the SEC, PayPal acquired Swift Capital for $183 million.
We completed the acquisition of Swift Financial Corporation (“Swift Financial”) in September 2017 by acquiring all of the outstanding shares for a total purchase price of approximately $183 million. We acquired Swift Financial to enable us to enhance our underwriting capabilities and strengthen our business financing offerings, helping us to deepen relationships with our existing merchants and expand services to new merchants. The allocation of purchase consideration resulted in approximately $44 million of technology and customer-related intangible assets with an estimated useful life of 1 to 3 years, $173 million of merchant receivables, net liabilities of approximately $139 million and initial goodwill of approximately $105 million, which is attributable to the workforce of Swift Financial and the synergies expected to arise from the acquisition. We do not expect goodwill to be deductible for income tax purposes. The gross contractual merchant receivables acquired are approximately $213 million. Management estimates that the cash collected will approximate the contractual amounts of merchant receivables. The allocation of the purchase price for this acquisition has been prepared on a preliminary basis and changes to the allocation to certain assets, liabilities and tax estimates may occur as additional information becomes available.
Source: http://files.shareholder.com/downloads/AMDA-4BS3R8/5480917220x0xS1633917-17-171/1633917/filing.pdf
Watch the House Subcommittee Hearing on Fintech and Online Small Business Lending
October 26, 2017deBanked streamed the small business subcommitte hearing that took place at 10AM EST in Room 2360 of the Rayburn House Office Building on October 26th. If it’s not loading below, you can watch it at: House Small Committee website.
Kate Fisher, a partner at law firm Hudson Cook, testified on behalf of the Commercial Finance Coalition. As described in her prepared written testimony, “CFC member companies offer fair and innovative alternatives to bank term loans and have stepped in to provide capital to small businesses when larger, traditional banks stopped providing such financing. CFC member companies primarily offer Merchant Cash Advance (‘MCA’) factoring products. An MCA allows small businesses to access funds for, as an example, a seasonal inventory surge or to replace an unexpected major equipment failure. CFC members provide financing between $10,000 and $500,000 to qualified small businesses.”
Her written testimony can be accessed HERE.
The CFC’s Spring Fly-in was covered back in June when the group met with 26 members of Congress and senior staff. The group was reportedly back in Washington again this week to educate members of the House Small Business Committee about MCAs and alternative finance. We will provide more information as it becomes available.
deBanked Chief Editor to Speak at IFA Fintech Class in Las Vegas
October 25, 2017deBanked President and Chief Editor Sean Murray will be speaking at an International Factoring Association (IFA) event on Thursday, October 26th at Planet Hollywood in Las Vegas. The event is a two-day class for factors on how to successfully compete against the world of fintech. This is the second year that the class has been offered.
The IFA was founded in 1999 to assist the commercial factoring community. Information on the event can be found on the IFA’s website.
The Top Small Business Funders By Revenue
October 23, 2017The below chart ranks several companies in the non-bank small business financing space by revenue over the last 5 years. The data is primarily drawn from reports submitted to the Inc. 5000 list, public earnings statements, or published media reports. It is not comprehensive. Companies for which no data is publicly available are excluded.
| Company | 2016 | 2015 | 2014 | 2013 | 2012 |
| Square1 | $1,708,721,000 | $1,267,118,000 | $850,192,000 | $552,433,000 | $203,449,000 |
| OnDeck2 | $291,300,000 | $254,700,000 | $158,100,000 | $65,200,000 | $25,600,000 |
| Kabbage3 | $171,784,000 | $97,461,712 | $40,193,000 | ||
| Swift Capital4 | $88,600,000 | $51,400,000 | $27,540,900 | $11,703,500 | |
| National Funding | $75,693,096 | $59,075,878 | $39,048,959 | $26,707,000 | $18,643,813 |
| Reliant Funding5 | $51,946,472 | $11,294,044 | $9,723,924 | $5,968,009 | $2,096,324 |
| Fora Financial6 | $41,590,720 | $33,974,000 | $26,932,581 | $18,418,300 | |
| Forward Financing | $28,305,078 | ||||
| Gibraltar Business Capital | $15,984,688 | ||||
| Tax Guard | $9,886,365 | $8,197,755 | $5,142,739 | $4,354,787 | |
| United Capital Source | $8,465,260 | $3,917,193 | |||
| Blue Bridge Financial | $6,569,714 | $5,470,564 | |||
| Lighter Capital | $6,364,417 | $4,364,907 | |||
| Fast Capital 360 | $6,264,924 | ||||
| US Business Funding | $5,794,936 | ||||
| Cashbloom | $5,404,123 | $4,804,112 | $3,941,819 | $3,823,893 | $2,555,140 |
| Fund&Grow | $4,082,130 | ||||
| Nav | $2,663,344 | ||||
| Priority Funding Solutions | $2,599,931 | ||||
| StreetShares | $647,119 | $239,593 | |||
| CAN Capital7 | $213,402,616 | $269,852,762 | $215,503,978 | $151,606,959 | |
| Bizfi8 | $79,886,000 | $51,475,000 | $38,715,312 | ||
| Quick Bridge Funding | $48,856,909 | $44,603,626 | |||
| Funding Circle Holdings9 | $39,411,279 | $20,100,000 | $8,100,000 | ||
| Capify10 | $37,860,596 | $41,119,291 | |||
| Credibly11 | $26,265,198 | $14,603,213 | $7,013,359 | ||
| Envision Capital Group | $21,034,113 | $19,432,205 | $12,071,976 | $11,173,853 | |
| Capital Advance Solutions | $4,856,377 | ||||
| Channel Partners Capital | $2,207,927 | $4,013,608 | $3,673,990 | $2,208,488 | |
| Bankers Healthcare Group | $93,825,129 | $61,332,289 | |||
| Strada Capital | $8,765,600 | ||||
| Direct Capital | $432,780,164 | $329,350,716 | |||
| Snap Advances | $21,946,000 | ||||
| American Finance Solutions12 | $5,871,832 | $6,359,078 | |||
| The Business Backer13 | $19,593,171 | $11,205,755 | $9,615,062 |
1Square (SQ) went public in 2015
2OnDeck (ONDK) went public in 2014
3Kabbage received a $1.25B+ private market valuation in August 2017
4Swift Capital was acquired by PayPal (PYPL) in August 2017
5Reliant Funding was acquired by a PE firm in 2014
6Fora Financial was acquired by a PE firm in 2015
7CAN Capital ceased funding operations in December 2016 but resumed in July 2017
8Bizfi wound down in 2017. Credibly secured the servicing rights of their portfolio
9Funding Circle’s primary market is the UK
10Capify’s US operations were wound down in early 2017 and their operations were integrated with Strategic Funding Source. Capify’s international companies are still operating
11Credibly received a significant equity investment from a PE firm in 2015
12American Finance Solutions was acquired by Rapid Capital Funding in 2014, who was then immediately acquired by North American Bancard
13The Business Backer was acquired by Enova (ENVA) in 2015
House Small Business Committee to Hold Hearing on Online Lending
October 22, 2017On Thursday, October 26th, a House subcommittee on Economic Growth, Tax and Capital Access will be holding a hearing about online lending’s role in improving small business capital access.
The two witnesses scheduled to testify are Kate Fisher, a partner at Hudson Cook, and William Phelan, the president and co-founder of PayNet.
deBanked will attempt to stream the hearing LIVE on our home page. It begins at 10 AM EST in the Rayburn House Office Building.
Catching Up With Online Lending – A Timeline
October 21, 20177/17
- Online lender Upgrade, launched by former Lending Club CEO Renaud Laplanche, revealed it had already hired about 100 people
- Credit risk startup James closed $2.7M funding found led by Gaël de Boissard
7/18 – Former Bizfi COO Tomo Matsuo joined iPayment as an SVP to oversee its new merchant cash advance division
7/21 – SoFi Chief Revenue Officer Michael Tannenbaum departed the company
7/27
- Lending surpassed $500M in lifetime originations
- RealtyShares acquired marketplace platform Acquire Real Estate
7/28
- Former MB Financial Bank SVP Stan Scott became VP at Gibraltar Business Capital
- Prosper Marketplace shut down its Prosper Daily (formerly BillGuard) app
7/31 – First Associates Loan Servicing announced the opening of their new 1000-seat capacity operations center in Baja California, Mexico
8/1
- Ron Suber joined Credible.com as executive vice-chairman and a member of the board of directors
- PeerStreet integrated with Personal Capital
8/2
- Lending Loop raised $2M, launched automated investment platform
- PeerIQ secured $12M in Series A round
- OnDeck partnered with Payment Source in Canada
- Bread raised $126M in equity and debt
8/3 – Kabbage secured $250M in Series F round from SoftBank Group, was valued at more than $1.25B
8/9
- Former Capital One VP Heather Tuason became Chief Product Officer at StreetShares
- PayPal acquired Swift Capital
8/10 – Coinbase raised $100M at $1.6B valuation
8/11 – Former SoFi employee raised Brandon Charles filed a lawsuit against the company alleging among other things that he witnessed sexual harassment in the workplace
8/14
- Prosper closed $500M securitization, announced $775M in Q2 loan originations, $41.4M net loss
- Bitcoin surged past $4,000
8/15 – iPayment announced the formation of its new merchant cash advance division, iPayment Capital
8/16 – Fifth Third Bank made another equity investment in ApplePie Capital, agreed to purchase loans through the company’s marketplace
8/19 – Former CFO of Credibly became president of Western Funding
8/22 – Former SoFi employees filed a lawsuit against the company over wage issues
8/23 – Ellevest raised $32.5M
8/24 – AutoFi raised $10M in Series A
8/25 – Rep. Maxine Waters called for a congressional hearing on SoFi’s bank charter application and ILC charters in general
8/29 – Snap Finance secured $100M credit facility
8/30
- IOU Financial announced Q2 originations of $26.2M (US) and a net loss of $2.08M (CAD)
- ShopKeep launched ShopKeep Capital, a merchant cash advance service
8/31 – Bizfi wound down operations, sold servicing rights to its $250M portfolio to Credibly
9/2 – Bitcoin surpassed $5,000
9/5 – Former Chief Sales Officer of OnDEck, Paul Rosen, joined CoverWallet as COO
9/6 – Square revealed that they would apply for an ILC charter, following in the footsteps of SoFi
9/7
- Former Director of External Sales at OnDeck, Jared Kogan, joined Pearl Capital as Chief Revenue Officer
- First Internet Bank announces strategic partnership with Lendeavor, Inc.
9/11
- SoFi CEO Mike Cagney announced he had resigned as board chairman and would be resigning as CEO later in the year
- Lenda raised $5.25M Series A
9/12
- Groundfloor announced $100M loan purchase agreement with Direct Access Capital
- Orchard unveiled its Deals platform
- JPMorgan CEO Jamie Dimon called Bitcoin a fraud for stupid people
9/13 – dv01 closed $5.5M Series A
9/14 – SmartBiz surpassed $500M in lifetime SBA loan originations
9/15
- Amid more negative press, SoFi CEO Mike Cagney announced he was resigning as CEO immediately
- Enova announced $25M share repurchase program
9/20 – World Business Lenders acquired strategic assets of Bizfi including the company’s brand and marketplace
9/22 – Prosper Marketplace raised $50M in a Series G round at a 70% lower valuation of $550M
See previous timelines:
5/17/17 – 7/11/17
4/6/17 – 5/16/17
2/17/17 – 4/5/17
12/16/16 – 2/16/17
9/27/16 – 12/16/16
