Articles by deBanked Staff
Brief: Lendio Raises $20 million for Growth Marketing
October 25, 2016
Salt Lake City-based loan marketplace Lendio raised $20 million in new funding through a round led by Comcast Ventures and Stereo Capital. Other participants included Napier Park, Blumberg Capital, Tribeca Venture Partners and North Hill Ventures, all of whom were exiting investors. Lendio plans to use the funds towards growth marketing.
“Over the past year, we’ve been busy testing new customer acquisition strategies. With this new round of capital, we now have the resources to launch these exciting new initiatives that will help us to expand our brand awareness and help small businesses find the best loan for any situation,” said Lendio CEO Brock Blake.
Lendio is a loan marketplace that has done partnerships right. The company’s three lucrative deals with American Express, GoDaddy and Staples fueled $63 million in Q3 funding. Last month, the company added Detroit-based working capital financing company Supplier Success to its platform, to improve capital access to businesses owned by minority and women owners.
“Lendio’s success securing meaningful partnerships and impressive year-over-year growth shows the company is poised to go big,” said Dave Zilberman, managing director of Comcast Ventures, who will join Lendio’s board of directors as part of the transaction.
Lending Club Bets on Auto Loan Refinance
October 25, 2016Lending Club is after a new market now – the $40 billion auto loan refinancing market.
The marketplace lender is offering loans in the range of $5,000 – $50,000 with APRs ranging from 2.49 percent to 19.99 percent for terms up to 72 months. The product, initially available only in California, will be launched nationwide in 2017.
With the auto loan debt market hovering near $1 trillion, Lending Club is after the $40 billion refinance market. The lender said that consumers pay 200 bps higher while getting their car financed through car dealers and is confident that its refinancing product, priced 1% – 3% lower than competition may save consumers an average of $1,350 over the tenure of the loan.
It hired Todd Denbo, a former Wells Fargo executive with 17 years of experience in credit card and auto loans to head the project. The company is targeting borrowers with a FICO score of 640+, who have made a minimum of three on-time payments.
CommonBond Securitizes Refinanced Student Loans Worth $168 Million
October 20, 2016Online lender for student loans, CommonBond closed a $168 million securitization, backed by $178 million in collateral with an ‘A1’ rating from Moody’s and ‘AA’ from DBRS.
This is the company’s second deal this year, after a $150 million transaction, earlier in April.
Founded by Wharton graduates David Klein, Michael Taormina, and Jessup Shean in 2012, CommonBond set out to address the need for affordable graduate student loan options. So far, the company has crossed $500 million in funded loans and provides MBA loans, personal loans and refinances student loans . The New York-based lender uses data and technology to underwrite its loans, holding half on its balance sheet and selling the other half though a marketplace. In July this year, it also raised $30 million in equity, $300 million in debt and acquired a personal finance startup, Gradible.
“CommonBond has built a sterling reputation in the capital markets due to our meticulous, data-driven underwriting,” said Morgan Edwards, Chief Financial Officer of CommonBond. “We continue to be excited to see new investors participate with each transaction we bring to the market and expect to see the diversity of investors increase with subsequent deals,” he said in a statement.
CommonBond competes with the likes of SoFi, which recently securitized bonds worth $427 million, its third deal this year. And like SoFi, which started off with student loans before moving to personal loans and mortgages, CommonBond also wants a larger share of the pie. “Our long term vision is to provide our customers with their evolving needs and we are well positioned to provide other products and services over time,” CEO David Klein told deBanked earlier.
Barclays and Goldman Sachs served as joint-lead managers and bookrunners on the transaction.
With Cybersecurity Rule Looming, It’s About To Get Way More Expensive To Be A Traditional Lender In New York State
October 18, 2016
Coming soon to New York, any company required to operate under a license, registration, charter, certificate, permit, accreditation or similar authorization under the banking law, the insurance law or the financial services law, will need to implement a cybersecurity program.
“Senior management must take this issue seriously and be responsible for the organization’s cybersecurity program and file an annual certification confirming compliance with these regulations,” the NYDFS proposed rule states. That likely means hiring computer experts to comply. Actually, it definitely does because one of the requirements is to employ cybersecurity personnel sufficient to manage cybersecurity risks and to perform core cybersecurity functions. That includes training, monitoring, penetration testing, auditing, implementing multi-factor authentication, and encrypting non-public data, among other tasks.
Based on the language, MCA companies are likely exempt, as are companies that have fewer than 1,000 customers a year, are generating less than $5 million in revenue a year and have less than $10 million in assets.
In Leasing News, Barton, Klugman & Oetting attorney Tom McCurnin, argued the proposal will be a disaster for small banks with branch offices in New York.
The rule is slated to go into effect on January 1, 2017. And even if the rule doesn’t apply to you, it might be a good time to start bolstering your cybersecurity anyway, if for no other reason than to protect your customers and your company.
SBA’s Office of Advocacy Goes to Bat for Payday Lenders
October 17, 2016
What’s the Small Business Administration’s Office of Advocacy doing advocating for payday lenders? Well they’re small businesses first and foremost, according to a letter submitted to CFPB Director Richard Cordray, and the CFPB’s short-term lending proposal puts them at risk.
Coming in at a cool 1,341 pages, the proposal no doubt exudes costly compliance. And it’s not just lawyers and compliance officers that payday lenders need to worry about, they’re also asked to forfeit some of their major profit centers, a condition that has left many of them outraged. In a roundtable convened by the Office of Advocacy, “some [short-term lenders] stated that they may experience revenue reductions of greater than 70 percent and be forced to exit the market.”
The CFPB has more-or-less acknowledged these steep revenue loss projections and if you read between the lines, having these companies be forced to exit the market seems to be the unspoken consequence they’re probably hoping for.
But at what cost?
“The CFPB’s proposed rule may force legitimate businesses to cease operation,” The Office of Advocacy argues. “Imposing such a regulation will not alleviate a consumer’s financial situation. The consumer will still need to pay his/her bills and other expenses. Imposing these strict regulations may deprive consumers of a means of addressing their financial situation.”
Secretary Clinton Spoke About Small Business Lending in Goldman Sachs Speech, Wikileaks Reveals
October 16, 2016
On October 29th, 2013, former Secretary of State Hillary Clinton said that one of the biggest complaints she gets as she travels around the country is “how do we get more access to credit in today’s current system for small businesses?” This comment was made at a private Goldman Sachs event hosted at the Ritz-Carlton Dove Mountain in Marana, Arizona, according to a transcript published by Wikileaks.
As a contender to become the President-elect in just a few weeks, she appears to understand that small businesses lack access to capital and the shortcomings of the current system. Transcript excerpt below:
ATTENDEE: Secretary Clinton, I’m Patty Greene from Boston College’s Goldman Sachs 10,000 Small Businesses. And first off, thank you for all the work you’ve done with women entrepreneurs both domestically and globally over your career. That’s really meant a lot.
My question is more domestic based. We have the rather unusually organized Small Business Administration, we have the Department of Commerce, and we have programs for entrepreneurs with small business pretty much scattered across every single other agency. How do you see this coming together to really have more of a federal policy or approach to entrepreneurship and small businesses?
SECRETARY CLINTON: I would welcome your suggestions about that because I think the 10,000 Small Business Program should give you an opportunity to gather a lot of data about what works and what doesn’t work. Look, neither our Congress nor our executive branch are organized for the 21st Century. We are organized to be lean and fast and productive. And I’m not — I’m not naive about this. It’s hard to change institutions no matter who they are. Even big businesses in our country are facing competition, and they’re not being as flexible and quick to respond as they need to be.
So I know it wouldn’t be an easy task, but I think we should take a look at how we could, you know, better streamline the sources of support for small businesses because it still remains essential. You know, one of the things that I would love to get some advice coming out of the 10,000 Small Businesses about is how do we get more access to credit in today’s current system for small businesses, growing businesses, because that’s one of the biggest complaints I hear everywhere as I travel around the country. People who just feel that they’ve got nowhere to go, and they don’t know how to work the federal system. Even if they do, they don’t feel like they’ve got a lot of opportunities there. So we do — this is something we need to look at.
You know, I don’t think — I don’t think our credit access system is up to the task right now that is needed. I mean, there are a lot of people who would start or grow businesses even in this economic climate who feel either shut out or limited in what they’re able to do. So we need to be smarter about both private and public financing for small businesses.
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More recently, Clinton’s campaign has publicly stated that she wants to “harness the potential of online lending platforms and work to safeguard against unfair and deceptive lending practices.”
CircleBack Lending is No Longer Lending
October 14, 2016CircleBack Lending is no longer originating loans, Bloomberg reports. A Lending Club competitor, the company was an online lending darling, having secured a $500 million deal with Jefferies just two years ago. At that time, company CEO Michael Solomon said in an announcement, “we are taking a rigorous approach to credit underwriting and want to make sure we know our customers before issuing any loans.”
Along the way something must have gone wrong. According to Bloomberg, Solomon recently said that if the lender can’t raise money, it will transfer existing loans to another company to handle collections and payment.
Lending Club Increases Interest Rates
October 14, 2016Delinquencies are up among borrowers with “high indebtedness,” Lending Club said in a document filed with the SEC on Friday. As a result, they’re increasing interest rates by an average of 26 basis points with the bulk concentrated on F and G grade loans.
The announcement comes on the heels of a previous raise made six months ago and another made approximately six months before that. It is not uncommon for the company to make adjustments as trends change.
“Consumers appear to be taking on more debt overall due to low prevailing interest rates,” Lending Club states in their report, citing a Federal Reserve study that observed an increasing amount of indebtedness across student loans, mortgages, credit cards, auto loans, and other forms of credit as of the second quarter 2016.
They’re also tightening up their criteria in such a way that “approximately 1% of borrowers who previously would have been able to obtain a loan under prior underwriting criteria will no longer be approved.”
