Articles by deBanked Staff
B2B Finance at deBanked
July 5, 2024
When Broker Fair first debuted in 2018, the keynote speaker was none other than Ryan Serhant, then a fast rising New York City real estate broker and star of Bravo’s Million Dollar Listing. Today he’s got his own Netflix Series called Owning Manhattan.
“After selling real estate for 12 years, I decided to start my own company,” Serhant says in the trailer for the first episode, “and if you can’t sell, you can’t be here.”
That New York hustle attitude was the connecting link for why Broker Fair chose him despite the broker audience being largely engaged in small business financial services at the time. But since then the small business finance broker community has become increasingly diversified in its product offerings and real estate is frequently one of the assets on the menu.
“People will be surprised how many clients have real estate, not just a [primary home], but they own just a small multifamily down the road that they never touched or tapped into,” said Julio Sencion, Principal at Alta Financial, in a recent interview with deBanked.
Companies like World Business Lenders figured that out a long time ago while still more discovered the business during the covid recovery, leading deBanked to produce a video miniseries about real estate investing in the summer of 2021. The guests ranged from real estate influencer Ralph DiBugnara to NestSeekers International’s Chief Economist Erin Sykes to a couple of old fashioned guys named Danny and Bruce who started investing in real estate across New Jersey long ago.
deBanked also interviewed house-flipper turned real estate tech CEO Andrew Luong of Doorvest, did a deep dive as to why real estate was becoming the side hustle of choice in the industry, and even bought real land using the blockchain for the purpose of a story.
Equipment financing has also taken off, leading deBanked to produce the first ever sales reality series named Equipping The Dream in 2022.
That’s been complemented by regular coverage and even sitdown interviews from Andrew Carman, Steve Geller, and George A. Parker.
deBanked’s Sean Murray has previously presented at the International Factoring Association’s (IFA) Fintech educational event, been a guest on the Coleman Report run by renowned SBA expert Bob Coleman, and moderated panels separately for the New York Institute of Credit and the Alternative Finance Bar Association.
Murray was also the host and producer of the industry’s first ever Broker Battle which took placed in Miami Beach this past January.
deBanked is also affiliated with the largest online small business finance community in the US, DailyFunder, and has produced nearly two dozen events since 2017.
“Back in 2018, there was a question that Serhant posed on stage to the Broker Fair audience to make sure he understood where they were coming from,” Murray said. “‘You guys are all B2B right?’ he said, and I think his characterization was spot on, because B2B is pretty much what we’ve been all along.”
deBanked is collaborating with the Small Business Finance Association on the B2B Finance Expo that’s taking place in Las Vegas on September 23-24. For info, visit: https://www.b2bfinexpo.com
Smart Business Funding Prevails in Trademark Lawsuit
July 3, 2024Smart Business Funding, the trademark owned by Collins Cash Inc, has officially survived a trademark infringement challenge brought by BillFloat Inc dba SmartBiz. Both companies began using their respective marks a decade ago and the two even had a partnership referral agreement at one point. However, in 2020, SmartBiz sent Smart Business Funding a Cease & Desist letter on the basis that it was allegedly infringing on its mark and causing confusion in the market. While they are both engaged in small business financing, each offers different products. SmartBiz eventually filed a lawsuit.
After the original trial went in favor of Smart Business Funding, the decision was re-examined on appeal. There, the United States Court of Appeals for the Ninth Circuit affirmed the original ruling. The Smart Business Funding mark does not infringe upon SmartBiz.
When the Bank Gets Hacked
July 1, 2024Before you point your finger at someone for backdooring your deals, consider another possibility, that some technology in the deal flow chain could be compromised, whether it’s yours, theirs, or some backend that nobody suspects could be hacked. One such modern example is Evolve Bank and Trust, which had 33 terabytes of data stolen and then leaked on the internet.
Evolve is big in the fintech world to the point where Fintech reporter Jason Mikula determined that customers at more than a dozen onboarded fintechs also had their info stolen, including at Yotta, Copper, Yieldstreet, Juno, Dave, BrightSide, SoLo Funds, ChangEd, Mercury, MainVest, Fund That Flip, Nomad, Bitfinex, Rho, and more. Other firms like Mercury, Bilt, Affirm, and Wise notified its users that their info may have also been breached in connection with the hack.
Via Mikula’s Fintech Business Weekly:
“Info security professionals who have accessed and begun examining the data in order to take necessary steps to mitigate risk have suggested that Evolve’s Azure tenant was compromised, allowing the hackers to make copies of most or all of the bank’s virtual machines, including those running its website, SFTP, SQL server, as well as information from its core banking system, which is said to be Jack Henry’s jXchange — which potentially could include Evolve’s credentials for accessing Federal Reserve systems.”
Evolve was hit with an enforcement action by the Federal Reserve last month, before revealing that it had been hacked.
“This was a ransomware attack by the criminal organization, LockBit,” Evolve said in a statement on its website. “They appear to have gained access to our systems when an employee inadvertently clicked on a malicious internet link. There is no evidence that the criminals accessed any customer funds, but it appears they did access and download customer information from our databases and a file share during periods in February and May.”
Evolve has 26 offices across 10 states, though its full service brick and mortar branches are only located in Arkansas and Tennessee.
Underwriters and brokers should be extra vigilant in verifying that apps and bank statements, particularly those that are customers of Evolve, originated from the applicant and through the means that they remembered.
Company Acquiring Funding Circle USA Had Previously Acquired Knight Capital and Assets of Fountainhead
June 24, 2024
iBusiness Funding, LLC, which is acquiring Funding Circle’s US arm, is no stranger to the small business finance industry. That’s because the company not only acquired select assets of Fountainhead SBF LLC last year, but its parent company, Ready Capital, had also acquired Knight Capital in 2019.
Ready Capital, a non-bank SBA lender, had also been one of the largest PPP lenders in the country during the pandemic. The designation of being an SBA lender is a highlight in the acquisition of Funding Circle because it means it does not need Funding Circle’s SBLC license to do SBA loans. Funding Circle had faced hostility by members of congress earlier this year for exploring a sale of its business only after it had lobbied for and finally secured an SBLC license. Now the matter is moot.
“As the Ready Capital group already holds an SBLC license, Funding Circle has, with SBA consent, surrendered its SBLC license,” the announcement by Funding Circle said. “The transaction is expected to close by the end of June.”
It was a share purchase agreement for a total cash consideration of £33 million ($42 million) which includes all of the company’s loan portfolios.
Funding Circle CEO Lisa Jacobs said, “We are pleased to have reached an agreement with iBusiness Funding, one of the leading processors of loans to US small businesses. In iBusiness, we have found a partner that shares in our mission, and we look forward to seeing the success of the combined entity.”
Ready Capital CEO Thomas Capasse said, “We’re excited to acquire FC USA and expect the acquisition to yield meaningful revenue and earnings to the combined company in the years to come.”
Founder and CEO of iBusiness Funding LLC Justin Levy said, “We are thrilled to welcome the exceptional FC USA team to the iBusiness family. FC USA’s mission to be the largest SBA lender for loans under $500,000 aligns with our goal to support underserved borrowers, the only difference is iBusiness achieves this goal through many SBA-approved lenders in our network.”
Fintech Nexus Files for Chapter 7
June 23, 2024
As mentioned on the Fintech Nexus blog last week, the former conference company turned fintech digital media operator is shutting down. On Friday, Lendit Conference LLC DBA Lendit DBA Lendit Fintech DBA Fintech Nexus, filed for Chapter 7 bankruptcy.
Fintech Nexus ran conferences from 2013 – 2023, originally under the name LendIt. It exited the conference business last year as part of a deal with Fintech Meetup. It then focused primarily on online news.
“The website will also remain online for at least the next few months, subject to the judgment of the Chapter 7 Bankruptcy Trustee,” the company said.
SBA Direct Lending Plan Not Likely to Happen
June 19, 2024A proposal to allow the SBA to get into the direct lending business appears to have been taken off the table. Originally, the president’s FY 2025 budget plan called for the SBA to get into direct lending “to address gaps in access to small dollar lending.” However, in the budget introduced by The House Committee on Appropriations this week, the Committee added a provision that would prohibit the SBA from “creating, implementing, administering, expanding, or enforcing a direct lending program that was not already in effect on January 1, 2024.” The Committee is chaired by Republican Tom Cole.
Payoneer Funds $80M in MCAs in Q1
June 17, 2024
Payoneer, the digital payments provider that also offers working capital on e-commerce platforms like Walmart Marketplace, originated $80M in merchant cash advances in Q1, according to the company’s recent quarterly earnings report. While the company did not draw attention to this stat, it appears in its Statement of Cash Flows. Payoneer originated $299M in funding to merchants throughout all of 2023, which would put the company below Funding Circle in terms of annual funding volume.
When it comes to Walmart, Payoneer offers up to 140% of a marketplace merchant’s average monthly Walmart volume and factor rates that range from 1.015 to 1.10.
“Payoneer will collect a pre-determined portion of each Walmart payout you receive via ACH bank debit from your bank account,” the website states. “Debits typically take place within 1 business day of each payment received from Walmart.”
The program is not new. The two first announced this relationship in December 2021. At the time, a senior director at Walmart said “Affordable working capital is more important than ever to help our sellers grow their business.”
Looking at PayPal’s Business Funding Charge-Offs
June 10, 2024
When PayPal announced a sudden and dramatic pullback on its MCA and business loan operations in the third quarter of 2023, it was surprising news. For instance, the company’s net charge-off rate had been trending downward for years, coming in 7.4% at year-end 2019 right before covid and going down to 4.7% in 2021 and down to 4.5% in 2022. By June 2023, however, that number had somehow soared to 13.3% and by September was 20.4%. At the time, PayPal attributed this shift to “the expansion of acceptable risk parameters in 2022, which resulted in a decline in the overall credit quality of loans outstanding.” Because of how they calculate charge-offs, reducing originations at the same time that charge-offs were peaking made that number look a bit worse than it was. But still…
Although many funding and lending companies have complained of an increase in fraudulent applications in the immediate post-covid era, PayPal’s figures can hardly be attributed to fraud. That’s because their charge-off rate doesn’t even include losses from fraud.
PayPal’s products are very short-term so it was able to rapidly scale back its balance sheet exposure. Total merchant advances and loans outstanding, net of participation interest sold, decreased from $2.1B in Q1 2023 down to $1.2B in Q1 2024. Of the active loans, 88.7% were considered current in Q1 and 4.4% were greater than 90 days beyond their projected payment pace. With the exception of 2020 (when the % > 90 days past expected hit 12.5%), 4.4% is among the worst PayPal has experienced since 2017.
