Articles by deBanked Staff
What IOU Financial Revealed in its Earnings Statement
April 29, 20172016 was a weird year for online lenders and IOU Financial, who lends to small businesses, fared no differently. Loan origination volume for the year was $107.5 million, down 26.5% from 2015. Revenues were up due to the company retaining more of their loans on balance sheet but losses were up as well.
Here are the most interesting statistics we found:
- 93% of their loan volume came from brokers
- 15% of merchants in their portfolio were classified as specialty trade contractors and home building renovation
- 14% of merchants in their portfolio are based in Florida (more than New York and New Jersey combined)
- Their borrowers have been in business for an average of 11.4 years
- Their average loan size is $69,695
- Their average loan term is 12 months
- They sold $60.8 million of loan receivables in 2016, down from $137.3 million in 2015
- The company has loaned $415 million to small businesses since inception
- The company had 53 full-time employees at year-end
IOU Financial is the only lender that deBanked is tracking whose stock is down year-to-date. At close on Friday, company shares were down more than 28% for the year.
Nulook Capital Bankruptcy Envelops PSC
April 27, 2017Nulook Capital was not the only casualty of its April 4th Chapter 11 bankruptcy filing. On Wednesday, April 26th, a federal judge in a separate action issued an order aimed at one of Nulook’s alleged creditors, PSC. PSC is also a Long Island-based company engaged in the merchant cash advance business.
In the order, the Honorable Arthur D. Spatt appointed a receiver for International Professional Services Inc. dba PSC and PSC Financial, granting him exclusive dominion and control over all of their assets, books, records and business affairs.
PSC was originally listed as a creditor in the Nulook bankruptcy with $400,000 owed. Another creditor however, GWG MCA Capital, Inc., argued that PSC had interfered with its first position lien and taken possession of its collateral. Alas, in the suit that GWG brought, the court found the full extent of their arguments compelling enough to appoint a receiver over PSC.
Rough Year? Market Tells Different Story for Alternative Lenders So Far
April 25, 2017
A decent day for OnDeck’s stock on Tuesday was enough to place the company’s share price in positive territory year-to-date, where just about every other public online lender finds themselves as well. According to the new deBanked Tracker, Square is up more than 33% on the year and Yirendai up 19%. Even Lending Club, whose stock is still miles below their IPO price is still up more than 12% in 2017.
Meanwhile, Elevate just only went public earlier this month, singlehandedly putting an end to the drought of fintech IPOs. They’re already up 33% from their $6.50 IPO price.
On the publicly traded fund side, Ranger Direct Lending’s YTD struggles stem mainly from their exposure to Argon Credit who is going through bankruptcy. Ranger invested in the Princeton Alternative Income fund who had invested in Argon.
While the deBanked Tracker shows Canadian-listed IOU Financial as significantly underperforming their lending peers, very little volume of the stock trades on a daily basis. A major shareholder of the company however, FinTech Ventures LLLP, shed more than half their holdings of the company last week. As that amounted to nearly 10% of all of IOU’s outstanding shares, the company had to file a document announcing the move.
As an aside, the S&P 500 was up 6.69% YTD by market close on Tuesday and Bitcoin, which doesn’t get as much attention anymore, is up nearly 22% over the same time period.
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The deBanked Tracker is still in beta and for now is automatically updated once per day after markets close in the US.
FinTech Ventures Fund, LLLP Sheds More Than Half of its Shares in IOU Financial
April 22, 2017FinTech Ventures Fund, LLLP (“FinTech”), a major shareholder of IOU Financial, shed more than half of its holdings in the Canadian-listed company last week. The 7 million shares sold represented nearly 10% of IOU’s outstanding common shares.
According to a statement:
FinTech will review and monitor its options and alternatives with respect to additional acquisitions of Common Shares in light of all relevant factors from time to time, including general market conditions, prevailing market prices for the Common Shares, the business and prospects of IOU and alternative investment opportunities available to FinTech.
Catching Up With Marketplace Lending – A Timeline
April 20, 20172/17
- Prospa, an online small business lender based in Australia, was valued at $235M (AUD) in a $25M capital raise
- Square announced funding $248 million worth of business loans in Q4 2016
2/21 A Massachusetts state court vacated a merchant cash advance COJ
2/24 SoFi raised $500M in a financing round led by Silver Lake Partners that reportedly gave SoFi a $4.3B valuation
2/27 Prosper Marketplace closed a loan purchase agreement with a consortium of lenders for up to $5 billion of loans that has a provision that also enables the lenders to buy up to 35% of the company
2/28 BlueVine secured a warehouse line of up to $75M from Fortress
3/1 Lendio launched a new franchise program, allowing local offices around the country to become Lendio franchisees
3/3 Citing Madden v Midland, Colorado regulator brought a federal lawsuit against Marlette Funding for violating the state’s usury cap
3/5 Two trade associations, the Innovative Lending Platform Association (ILPA) and the Coalition for Responsible Business Finance (CRBF), joined forces. The merged company will continue to be known as ILPA
3/6 Upstart raised $32.5M
3/7
- It’s reported that former CAN Capital CFO Aman Verjee is now the COO of 500 Startups
- Kabbage priced a $525M securitization. It was oversubscribed
3/9 Citing Madden v Midland, Colorado regulator brought a federal lawsuit against Avant for violating the state’s usury cap
3/13
- Melvin Chasen, the founder of Rewards Network (originally Transmedia Network, Inc.) passed away. He was 88.
- The New York State Assembly rejected the Governor’s proposal to grant the Department of Financial Services (DFS) regulatory authority over any online lender doing business in the state
3/15
- The New York State Senate also rejected the proposal to further regulate lending
- The OCC published a manual on how it will evaluate charter applications from fintech companies
- The New York DFS published a statement rejecting the OCC’s plans
- The WSJ reported that Marlette Funding was cutting nearly 1/5th of its workforce
3/16 WebBank announced that it had a net income of $29.2M for 2016 and that it had a market valuation of $319.4M
3/20 Prosper Marketplace announced that it had originated $2.2B in loans in 2016, down from $3.7B in 2015, and had a net loss of $119M.
3/21 It’s reported that Kabbage will set up its European headquarters in Ireland
3/22 OnDeck expanded its credit facility with Deutsche Bank by $52M to a total of up to $214M
3/27 IOU Financial wins Gold Stevie Award for Best Use of Technology in Customer Service
3/30 In Advance Capital announced that they had secured access to an additional $50M
4/5
- Budget passes in New York. Proposed lending legislation was not included in it.
- Kabbage surpasses $3 billion funded to small businesses
See previous timelines:
12/16/16 – 2/16/17
9/27/16 – 12/16/16
Nulook Capital Has Filed Chapter 11
April 13, 2017NY-based merchant cash advance funding company Nulook Capital filed for Chapter 11 on April 4th, according to court records. They listed more than $2.6 million in creditor claims. The largest among them was a secured claim for $2 million by a specialty finance company.
Two other creditors in the bankruptcy proceeding are also involved in the merchant cash advance industry.
The voluntary petition was filed in the Eastern District of New York in the United States Bankruptcy Court.
Sneak Peek at the Mar/Apr 2017 Issue of deBanked
April 11, 2017
In the March/April 2017 issue of deBanked magazine, we delve into the industry’s latest trend, the push back towards traditional banking. The featured story is titled accordingly as “Re-Banked” and our many sources lay out a compelling narrative. Our cover, a sketch of a young tech CEO shedding the hoodie to reveal the suit-and-tie attire of a banker underneath, was one of several pieces of art we commissioned for this issue.
And for you brokers out there, we’ve got something really special, the inside scoop on the latest way that reps are winning deals. Today’s broker is hanging up the phone and texting merchants instead and the merchants are responding in kind. Phone calls and emails are going the way of the fax machine when it comes to gathering documents and pitching offers. The lesson we learned from the several people we interviewed is that when merchants want to know what’s next, send a text.
There’s more of course, so if you haven’t already subscribed to our free print magazine, make sure you do so here. This issue has already printed and shipped so you’ll be getting it very soon.
We hope you enjoy it!
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Lending Club to Beta Hardship Plans for Borrowers (and Protect Returns for Investors)
April 5, 2017Lending Club wants to make it easier to accommodate borrowers facing hardship and in the process potentially protect the investor from unnecessary losses. A full explanation of the program was sent out to Lending Club investors on Wednesday, the full text of which we’ve pasted below:
At Lending Club, we are committed to improving experiences for both borrowers and investors. We’re excited to announce that after a beta test, we will begin offering hardship plans to borrowers effective May 4, 2017. Hardship plans allow borrowers to temporarily make interest-only payments to accommodate an unexpected life event. As part of this change we are also making additional data fields related to these plans available for investors.
Lending Club continuously looks to put lending industry best practices to work. Hardship plans are commonly offered to borrowers in the lending industry because they allow borrowers time to adjust to a life event (like a medical emergency, temporary job loss, unexpected car or home repairs, death in the family, or other events). Hardship plans are in accordance with commercially reasonable efforts to service and collect on loans, as well as with our prospectus, which provides us flexibility to work with a borrower to structure a new payment plan if needed.
Our hardship plan program specifically targets borrowers who are more likely to return to repaying their loan. Under the plan, borrowers are allowed to temporarily make interest-only payments for a period of 3 months to accommodate an unexpected life event. After 3 months, regular payment terms and obligations resume. Only borrowers who fulfill specific characteristics (such as a demonstrated history of repayment) and who claim a hardship will be offered plans. Importantly, borrowers’ loans must be either current or between 1 and 30 days past due to qualify for a hardship plan.
We believe the hardship program will work to protect investor returns as borrowers whose loans may otherwise progress to charge-off status have the opportunity to make interim payments and some portion may revert to current status.
Finally, we are adding 15 new data attributes of borrowers who utilize hardship plans to investor reports and the API. The fields will only apply for hardship plans offered as of May 4, 2017 and going forward. You can find more information on these new data fields here.
Offering hardship plans is both consistent with our values – doing the right thing by borrowers while they’re getting back on their feet – and helps to protect investor returns. We will potentially look to expand to different types of hardship plans in the future as we gain further insight into borrower behavior and continue to listen to customer feedback.
Please feel free to reach out with any questions – we welcome your feedback.
Best regards,
The Lending Club Team
