Articles by deBanked Staff
The Employee Suing SoFi Only Worked There for Three Months
August 15, 2017On Monday, several news outlets reported that a former employee of SoFi was suing for wrongful termination after he not only reported sexual harassment in the workplace, but also exposed an internal loan cancellation scheme designed to pad the bonuses of certain employees.
According to the complaint, which you can read for yourself here, plaintiff Brandon Charles learned of the loan scheme within 2 weeks of being hired and was fired only 3 months later in June of this year.
According to The New York Times, Charles’ attorney said he expects to bring another lawsuit, a class action, against SoFi next week for broad mistreatment of employees.
These events come just as SoFi had started teasing about a possible IPO in the near future.
You can read Brandon Charles’ complaint here and reach your own conclusions.
Catching Up With Marketplace Lending – A Timeline
August 13, 20175/17 – Funding Circle surpassed Zopa in cumulative lending to become the UK’s biggest marketplace lender
5/18 – Breakout Capital announced appointment of Douglas J. Lanzo as EVP and General Counsel
5/22 – The New York State legislature held a joint hearing on online lending
5/25
- OnDeck had the maturity date of its $100M credit facility extended
- China Rapid Finance reported Q1 net revenue of $10.5M
- Prosper Marketplace closed $495 securitization transaction
- SoFi co-founder Dan Macklin announced his departure from the company
5/31 – IOU Financial reported Q1 results, had $1M loss on $4.3M in revenue and lent (CAD) $22.1M
6/2 – Zopa began allowing investors to sell loans that have previously been in arrears
New York State legislators proposed the formation of an online lending task force
6/6 – deBanked and Bryant Park Capital published their Q1 confidence index in which industry CEOs scored their confidence in the continued success of the MCA and small business lending industry at 73.8%, the lowest level since the survey started in Q4 2015. It peaked at 91.7% in Q1 2016.
6/8 – Amazon surpassed $3 billion in loans made to small businesses since their lending program launched
6/9 – RealtyMogul announced that they had exited the residential fix-and-flip market
6/12 – The US Treasury published a report that called for the repeal of Section 1071 of Dodd Frank
6/13
- SoFi applied for a bank charter, specifically an Industrial Loan Company charter
- Lendio announced a pilot agreement with Comcast business
6/14 – Patch of Land expanded its debt facility from $10M to $30M
6/19 – Goldman Sachs’ online lender Marcus surpassed $1 billion in loans made since inception
6/20 – Former Lending Club CFO Carrie Dolan joined Metromile, an insurance company, as CFO LendingTree acquired MagnifyMoney
6/21 – Pearl Capital secured $15M in financing from Chatham Capital Management
6/27
- Square Capital announced that it will pilot a consumer loan program
- Former RapidAdvance CFO Rajesh Rao became the CFO at Beyond Finance, Inc.
6/29
- Funding Circle hired Joanna Karger as US Head of Capital Markets and Richard Stephenson as US Chief Compliance Officer
- Pave suspended lending operations
- Ron Suber, president of Prosper Marketplace, announced that he was stepping down from the company
- The SEC announced that all companies will now be able to submit draft IPO registrations confidentially, a perk previously only reserved for businesses designated as “emerging growth companies” under the JOBS Act.
6/30
- PayPal Holdings Inc announced that it had invested in LendUp
- Yellowstone Capital announced that they had funded $47 million to small businesses in the month of June
7/3 – Funding Circle announced that Sean Glithero had joined the company as its new global CFO
7/5 – Lending Club appointed Ken Denman to its Board of Directors
7/6
- CAN Capital announced that they had been recapitalized and were resuming funding operations
- Orchard Platform and Experian announced a strategic collaboration on data
7/7
- CFPB announced that it was extending the deadline of its small business lending RFI from July 14th to September 14th
7/10
- China Rapid Finance announced that they had made 20 million cumulative loans since inception
- CFPB announced new arbitration rule that effectively bans class action waivers from consumer finance contracts
- Former OnDeck VP of External Affairs and Associate General Counsel Daniel Gorfine, was appointed by the Consumer Future Trading Commission to be Director of LabCFTC and Chief and Innovation Officer
7/11
- dv01 and Upgrade (Former Lending Club CEO Renaud Laplanche’s new company) announced a strategic reporting partnership
- PayPal hired former Amazon executive Mark Britto to lead its lending business
- Fora Financial expanded its credit facility led by AloStar
See previous timelines:
4/6/17 – 5/16/17
2/17/17 – 4/5/17
12/16/16 – 2/16/17
9/27/16 – 12/16/16
Damage From the Nulook Capital Bankruptcy Shows Up In GWGH Earnings
August 10, 2017In April, we reported that Nulook Capital, a boutique merchant cash advance funder on Long Island had declared Chapter 11. The move was seemingly a response to a lawsuit filed against them by a secured creditor, GWG MCA, a subsidiary of publicly traded financial services company GWG Holdings Inc. (NASDAQ: GWGH).
In that bankruptcy, a merchant cash advance marketplace known as PSC also filed a claim against Nulook Capital to the tune of $400,000 in outstanding debt. In a sudden twist, however, a court saw enough evidence to believe that Nulook and PSC had an interwined relationship that jeopardized GWG MCA’s collateral, and ordered that PSC, who was supposed to just be a creditor with a secured claim, be put into receivership.
While the battle between all of the parties is still playing out in court, GWG Holdings Inc. disclosed the damage in their latest quarterly earnings report.
The secured loan to Nulook Capital LLC had an outstanding balance of $2,060,000 and a loan loss reserve of $1,478,000 at June 30, 2017. We deem fair value to be the estimated collectible value on each loan or advance made from GWG MCA. Where we estimate the collectible amount to be less than the outstanding balance, we record a reserve for the difference. We recorded an impairment charge of $870,000 for the quarter ended June 30, 2017.
Also notable in the earnings statement is that GWG MCA funds merchants directly. The company booked $133,583 in revenues attributed to MCAs in Q2. The amount was negligible compared to their core life insurance business. Their stock is up more than 30% YTD.
Funding Circle Rebrands
August 10, 2017Funding Circle is ditching their old circular logo with arrows in favor of a more modern purple logo. The website has also undergone a redesign as well.
On the new website, the company states that they are “revolutionising a broken system” and emphasize that “we believe in those made to do more.”
In a recent interview with deBanked, Sam Hodges, a co-founder and U.S. managing director of Funding Circle said, “We are focused on building a world-class technology platform that can handle millions of transactions daily and deliver a best-in-class customer experience for borrowers and investors,” Hodges told deBanked.
On Bloomberg: Watch Lending Club CEO Scott Sanborn Talk Q2
August 9, 2017On Bloomberg, Lending Club CEO Scott Sanborn said that banks were a critical piece of their platform. In Q2, 44% of all originations were funded by banks. Watch below:
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Has OnDeck Turned The Corner?
August 7, 2017
OnDeck’s loan origination volume declined by approximately 20% in the second quarter to $464.4 million but more importantly the company only recorded a GAAP net loss of $1.5 million. That’s down from the $11.1 million loss recorded in Q1 and in line with the company’s plan to achieve profitability in the second half of the year. OnDeck predicts that sequential originations growth will resume in Q3.
OnDeck also announced that it has expanded its collaboration with JPMorgan Chase for up to four years to provide the underlying technology supporting Chase’s online lending solution to its small business customers, according to the release. “Chase plans to continue to refine the offering, including expanding access and enhancing features throughout next year.” The image at right is from their Q2 earnings presentation demonstrating the front-end collaboration.
The company has also implemented stricter underwriting standards which includes lower loan amounts, shorter loan terms and stronger credit metrics.
Sales and marketing expenses actually increased from $14.8 million in Q1 to $15.3 million in Q2 but that was inclusive of $1.4 million in severance charges. The high cost of marketing is consistent with anecdotal reports obtained by deBanked regarding market saturation. Just recently, a small business owner told us in an interview that she has received so many mailed advertisements for working capital that she has a pile of them that’s now four inches thick.
OnDeck recorded a significantly higher charge-off percentage in Q2 at 18.5% up from 14.9%, which the company partially attributed to a contracting portfolio. However, the raw dollar amount grew substantially as well. The 15+ day delinquency ration dropped from 7.8% in Q1 to 7.2% in Q2
During the Q&A session of the earnings call, CEO Noah Breslow said he believed the company was positioned well to gain some market share due to the shakeout occurring in the industry.
Square Capital Funded $318M in Q2
August 3, 2017Square’s small business lending arm, Square Capital, issued 49,000 business loans for a total of $318 million in Q2, according to their earnings report. That’s a quarter-over-quarter increase of 26.7% and slightly more than half the loan volume that their rival OnDeck originated in Q1. That statistic is significant because Square is a payment processor first and a lender second while OnDeck is only a lender.
Square had a net loss of $16 million in the second quarter on $552 million in revenue. The stock price has nearly doubled year-to-date, according to the deBanked Tracker.
32% of Square Capital users say they are using the funds to purchase equipment or open a new store. 31% say they are using it to purchase inventory while 23% say it’s to fund day-to-day general & administrative expenses and marketing expenses.
In December 2016, deBanked received a $35,000 loan from Square, the experience of which was detailed in the Jan/Feb Magazine issue.
Yellowstone Capital Originated $45M in Funding in July
August 1, 2017NJ-based Yellowstone Capital originated $45 million in funding for small businesses last month, according to a company email obtained by deBanked. Two sales reps alone funded 170 deals and 139 deals respectively for a combined $7.45 million.
The monthly volume was only $2 million shy of the $47 million originated in June.
