Articles by deBanked Staff
Enova Originated $918M in Small Business Loans in Q2
July 29, 2024
Enova remains optimistic about the economy and its borrowers, according to its latest quarterly earnings report.
“Recently, there’s been significant talk from both pundits and our competitors about an uncertain macro environment, but our Q2 performance as well as internal and external data confirmed that both our SMB and consumer customers remain on solid footing as our customers continue to benefit from job growth, low unemployment rates, easing inflation, and rising real wages,” said CEO David Fisher during the earnings call.
SMB loan originations of $918M were down slightly from Q1 but up 29% year-over-year.
“I think competitively, I would say there’s very little has changed,” Fisher said. “There haven’t been new entrants in the space. We haven’t seen any of our competitors get particularly more aggressive. There’s always a little bit of ebb and flows but certainly no trends. As I mentioned in my comments, certainly over the last couple of quarters, we’ve heard some lack of confidence I think from some of the other players in the space and it’s probably holding them back a bit when I think we’re seeing somewhat of the opposite. … And as we talked about, we think our customers are in a really, really good place. Job growth has remained good. Wages continue to rise. Inflation is coming down. Enova is a very beneficial place for both consumers and small businesses.”
Debt Settlement Attorney Sanctioned by Court
July 29, 2024A self-proclaimed merchant cash advance debt settlement attorney was sanctioned in the New York Supreme Court for frivolous conduct attributed to making an overtly false and/or misleading statement of fact.
The attorney is Dominick R. Dale, who is defending a merchant in an action brought by a revenue based financing company in Index No: EF000224-2024. According to court documents, Dale sought to move a case filed by plaintiff in Orange County, NY (which the contract specified as the forum) to either Kings County or New York County on the basis that defendant was not a resident of the State of New York, had no connection to the state, and that the forum selection clause in the agreement was invalid.
The irony is that the defendant did actually reside in Orange County, NY.
In the order granting plaintiff’s cross-motion for sanctions, the judge ruled that the defense attorney’s motion to transfer venue was “solely based on the distance between defense counsel’s office and the courthouse” because the 71 mile distance was apparently too far for him to want to travel.
The case is still ongoing.
Dale, who is listed under the name Law Office of Dominick Dale, Esq. in the action, also goes by the name “Merchant Cash Advances Law Firm” with an advertised focus on debt settlement.
What’s Challenging in the Broker World
July 24, 2024Are you a small business finance broker? Here are some of the most common challenges that they report to deBanked.
The lender I was working with was not a lender
This is a preventable mistake. Instead of falling for a cold call, check the appropriate state registries, ask for feedback from your peers online (or in person), and conduct extensive due diligence. If you’re not willing to conduct due diligence as a broker, you will inevitably be fooled.
The deal was intercepted by a third party
Whether it’s through backdooring, big data, or a customer lying about shopping around, brokers often report the sudden appearance of a mysterious competitor right as their deal was approaching the finish line. Since there seems to be virtually no remedy on the horizon for this, brokers should speak candidly with their clients upfront about what to expect and lock in their loyalty well in advance so that this mysterious competition is shut down.
The available lead quality in the public marketplace is low or good exclusive leads are non-existent
If the business was easy as buying the same leads as everyone else and using them to earn huge profits on the deals closed without much hassle, then every single person in the country would be a broker. Being a broker is hard work and a significant part of the gig is marketing. You’ll have to decide if you or someone you hire is up to the task of generating the deals for you or your closers to close. If you can’t figure out how to market, you will eventually fail.
I didn’t get paid on a funded deal
While relationships do count for a lot, broker agreements count for just as much. As much as smaller shops roll their eyes at the prospect of having to shell out funds for attorneys to review contracts, it is a necessary cost to operate. If a lending company believes it doesn’t have to pay you, it won’t. Don’t be surprised when it happens to you. Instead be ready with your agreement, the facts, and your attorney to remedy the issue. Brokers unable to afford legal representation are much more likely to be bullied by a lender than everyone else. So do all the boring but necessary due diligence before signing up and if they ultimately breach the agreement with you, be ready to stand up for yourself in a way they will have no choice but to respect.
Ponzi Schemer Continued to Run Ponzi Scheme From Prison Phone
July 22, 2024Don’t syndicate with New Beginning Global Funding LLC, New Beginning Capital Funding LLC, and Lion Heart Capital Group L.L.C.
That’s because these entities were just named in a federal plea agreement as belonging to Johanna Garcia, a now-convicted ponzi schemer currently serving time in Miami’s federal detention center. Readers might remember her as being the mastermind behind a fake MCA company known as MJ Capital Funding. Garcia raked in more than $190 million as part of a fake syndication/investment scheme from thousands of duped investors. The SEC shut the company down in 2021 and she was charged criminally last year.
She did not go down quietly. Apparently after the SEC shut down her entities she simply set up new entities and kept going. When she was finally arrested and jailed awaiting trial she continued the ponzi from the prison phone and email.
In a proffer signed by Garcia, it’s stated that “Garcia and her co-conspirators told investors that their money would be used to fund general contractors who worked on commercial and residential properties through merchant cash advance loans. In truth, bank records show that there was little to no merchant cash advance activity, and the money raised was used to pay off previous investors.”
Garcia, and those that participated in the scheme with her, used MCA as a cover for their scheme. She was not actually known to people in the industry nor actually worked in it.
Fake LOC Scam Results in Guilty Plea
July 17, 2024Yisroel (“Scott”) Heber pleaded guilty last month for his role in a fake business line of credit scam. In April, the US Attorney for the Southern District of NY and the US Secret Service alleged that Heber and a co-defendant posed as a lending company and induced victims to make payments related to loans that they promised they would get but never actually came through with. Heber pleaded guilty to Conspiracy to Commit Wire Fraud.
Prosecutors called it an “advance-fee merchant cash advance fraud scheme through which they agreed to defraud victims of a total of more than $1.5 million.”
The case against Heber’s co-defendant is still ongoing.
eBay Brings Back Revenue Based Financing Product
July 12, 2024eBay announced that Liberis had been onboarded as one of its “Seller Capital” partners this week, making it the second official partner after Funding Circle (which was recently acquired). Liberis, homegrown in the UK, expanded to the US in 2020 and offers a revenue based financing product described by eBay as a “Business Cash Advance.” While eBay has partnered with similar companies in the UK for years, eBay customers in the US have seen this before.
In 2010, for example, Kabbage was arguably the first company to offer revenue based financing to eBay customers, which deBanked first covered 13 years ago. And they had it all to themselves until PayPal began to muscle its way in with a similar product starting in 2013. Given that eBay owned PayPal, PayPal held a distinct advantage until the two companies split in 2015. Still, PayPal continued to be the default payment service for eBay until 2018.
Kabbage continued to thrive anyway, evolving beyond the platform at least until covid when Kabbage suddenly imploded and was sold to American Express. PayPal’s working capital product also continued to thrive at least until 2023 when it announced a dramatic pullback after elevated charge-offs.
The result is that in 2024, eBay sellers can now look toward getting funding via Liberis.
“As a pioneer in ecommerce and the home to small businesses in more than 190 markets, eBay understands the challenges small businesses encounter in securing fast, flexible and transparent financing,” said Avritti Khandurie Mittal, VP & General Manager of Global Payments and Financial Services at eBay in the official announcement. “eBay Seller Capital is aimed at fueling our sellers’ growth by providing them with tailored financing solutions that meet the unique needs of their businesses. The addition of Business Cash Advance to our suite of offerings in partnership with Liberis enables us to expand capital availability for our sellers on flexible terms – when they need it the most.”
“We understand the unique challenges eBay sellers face when securing financing through traditional means,” adds Rob Straathof, CEO of Liberis. “Through eBay Seller Capital, Liberis will empower sellers with access to fast and responsible financing. We’re thrilled to partner with eBay to support eBay sellers to operate and grow their businesses.”
B2B Financing Industry Poker Tournament
July 11, 2024The pre-show gathering for B2B Finance Expo taking place at Wynn Las Vegas this September will include a poker tournament for those interested in participating. It will not be cash stakes and all registration fees will go toward an appropriate cause (to be named). Players must also be registered to attend the conference. If you ever wanted the opportunity to play cards against your peers, potential partners, or competitors, this is an opportunity that can’t be missed.
B2B Finance Expo
Poker tournament: September 22 (7-10pm)
Conference: September 23-24
REGISTER FOR THE CONFERENCE HERE
READ MORE ABOUT THE CONFERENCE HERE
Anyone attending the conference who doesn’t want to play is free to watch the tournament and enjoy a networking atmosphere.
B2B Finance Expo is a collaborative effort between deBanked and the SBFA.
OIG Report Shows SBA Forgot to Report Many Charged Off PPP Loans
July 9, 2024
For many underwriters the era of PPP loans is now a distant memory. The loans were either forgiven long ago or are for some reason now tied up in collections. It’s the latter that should be cause for concern. According to the Office of the Inspector General, the SBA was required to report charged-off PPP loans to three major commercial credit reporting agencies but for the sample the OIG reviewed, the SBA failed to report 37% of charge-offs to any credit agency. Further, it failed to keep the credit agencies updated on its charge-offs on a regular basis, missing its required reporting deadlines 97% of the time.
“SBA did not report these charged-off PPP loans to commercial credit reporting agencies because it relied on its automated process used to report loans to credit reporting agencies and did not periodically monitor or conduct reviews to ensure loans were reported, as required,” the OIG report said. “When we asked SBA officials why they did not report all loans to credit reporting agencies, they stated that all charged-off PPP loans should be reported, and that SBA’s Office of Capital Access was in the process of reviewing and updating its system to correctly identify PPP loans eligible for reporting.”
The OIG added that as a result there was an increased risk that delinquent borrowers could inappropriately obtain other loans.
“We compared our list of charged-off PPP loans to the loans identified in our COVID19 Pandemic EIDL and PPP Loan Fraud Landscape report and found that 169,589 loans [out of 203,101] totaling $5.8 billion were also reported in the fraud landscape report as potentially fraudulent,” the report said. That’s 83% of all charge-offs in the sample.
The takeaway is that most of the early PPP charge-offs were actually a result of fraud and if the SBA was forgetting to report most of these to the credit agencies, then this useful information may not be known by any subsequent lender or funder down the road.
