Articles by deBanked Staff
Connecticut’s New Law Took Aim at Prejudgment Remedies
September 1, 2023Although Connecticut Governor Ned Lamont signed SB1032 into law this summer, covered parties have until July 1, 2024 to start complying. On its face it was a disclosure bill, but as previously mentioned there was a twist, it amends chapter 903a of the general statutes, the code governing prejudgment remedies.
Specifically it says:
No commercial financing contract entered into on or after July 1, 2024, shall contain any provision waiving a recipient’s right to notice, judicial hearing or prior court order under chapter 903a of the general statutes in connection with the provider obtaining any prejudgment remedy, including, but not limited to, attachment, execution, garnishment or replevin, upon commencing any litigation against the recipient. Any such provision in a commercial financing contract entered into on or after July 1, 2024, shall be unenforceable.
Similar to Virginia, brokers will be required to register in order to broker deals to any Connecticut merchant.
Prosper Originates $595.6M in Q2
August 28, 2023
Prosper Marketplace’s Q2 loan originations of $595.6M was down 33% from the same period last year and down more than 5% from Q1 2023. The company attributed the decline to “reduced investor demand given the current uncertain economic environment.”
Investor demand is a major driver for Prosper which sells whole loans to institutional investors and notes to retail investors. The 33% YoY decrease is even more significant considering that it actually represents a 50% drop in the raw number of loans made.
Prosper generated a $52.7M net loss in Q2 on just $31.5M in net revenue.$32M worth of expenses, however, were attributed to “Change in Fair Value of Convertible Preferred Stock Warrants.”
“There was also a $8.1 million decrease in Total Net Revenues from Change in Fair Value of Financial Instruments, Net, due primarily to higher delinquencies and charge-offs for loans held in consolidated warehouse trusts and the Credit Card portfolio underlying the Credit Card Derivative, both of which have increased in size from the prior year,” the company wrote. “Additionally, higher interest rates have led to negative fair value adjustments on Loans Held for Sale.”
Should Lightspeed Ramp Up its Merchant Cash Advance Business?
August 18, 2023
Analysts are wondering if Lightspeed should be doing even more merchant cash advances than the company’s currently doing. The company generated just $8.1M in revenue from them over the last fiscal year, a number that amounted to just 1% of total revenue.
“Under normal circumstances, we would likely be pushing [Lightspeed] Capital even harder,” said Lightspeed CFO Asha Bakshani during the Q1 2024 FY earnings call this month, “however, given the current macro environment, we’re being conservative on the ramp. There’s no lack of demand from our customers, and we believe our high GTV customer base is an ideal demographic to use this financial service, especially in the long term. Risk of business failure is much lower with high GTV customers, but the need for capital is still substantial.”
When Lightspeed touted that it had increased its total merchant cash advance receivable balance by $11M for the quarter, an analyst from Bank of America Merrill Lynch wondered if they were being too conservative. “You mentioned that you would be pushing harder, but given the macro, you’re being conservative on the ramp,” the analyst said, “But then, you also mentioned that there is demand for it, so if there is demand, why not push a little bit harder for capital?”
“Yeah, you’re absolutely right,” Bakshani replied. “Capital is a very promising business for us, but what we have to keep in mind is that it still represents today a low single-digit millions in terms of revenue. And so when our sales teams are fully focused on unified payments, there was some distraction in the quarter on capital. And in addition, we want to make sure that in today’s macro that we’re not rushing anything. We want to make sure that we ensure that we stick with the very high rated credit-rated customers for eligibility. But you’re absolutely right, there’s tons of demand. We’re just taking our time intentionally given the macro. Our default rates still remain extremely low, but we definitely should see that pick back up in the back half of the year when unified payments is behind us.”
Lightspeed’s merchant cash advance program was repeatedly raised during the call in very positive terms.
“Once you’re on Lightspeed payments, we underwrite you for capital so you can have access to capital,” said Jean Paul Chauvet, CEO of Lightspeed. “That is a big win for them and our customers.”
Small Business Funding Companies Showcase Phenomenal Growth
August 15, 2023The annual Inc 5000 list is out again and with it some big reveals about who in the industry is taking off like a rocket. We’ve pulled out some of the relevant names for you below!
#30 – B2 Capital Solution Provider – Miami, FL – 10,446% growth over 3 years
#38 – Novo – Miami, FL – 9,906%
#76 – Byzfunder – New York, NY – 6,228%
#89 – Valiant Capital – Houston, TX – 5,223%
#157 – Ampla – New York, NY – 3,404%
#180 – LeasePoint Funding Group – Austin, TX – 2920%
#192 – Backd – Austin, TX – 2,819%
#269 – Percent – New York, NY – 2,087%
#1383 – eCapital – Aventura, FL – 422%
#1617 – North Mill Equipment Finance – Norwalk, CT- 354%
#1622 – Oakmont Capital Services – Westchester, PA – 346%
#1837 – Nav Technologies – Draper, UT – 305%
#1942 – Crestmont Capital – Irvine, CA – 289%
#2026 – 7 Figures Funding – American Fork, UT – 277%
#2593 – SBG Funding – New York, NY – 210%
#2929 – 1West – New York, NY – 179%
#2947 – ApplePie Capital – San Francisco, CA – 178%
#3145 – Channel – Minnetonka, MN – 164%
#3737 – Direct Funding Now, Irvine, CA – 128%
#4085 – Smarter Equipment Finance – Las Vegas, NV – 111%
#4094 – iAdvance Now. – Uniondale, NY – 111%
#4651 – Expansion Capital Group – Sioux Falls, SD – 87%
If we missed you, let us know, email info@debanked.com.
Loan Applicants Might Just Give Up After Unattractive Offer
August 13, 2023
A lender offering unattractive loan terms may not be driving those prospects into the arms of a competitor. Instead, they might actually be discouraging them from searching any further.
This phenomenon was raised in Upstart’s most recently quarterly earnings call when analysts began asking about APRs and acceptance rates. Upstart’s max APR is 36% and they’ve found that the higher the rate goes, the less likely the applicant will accept it.
“I mean it’s very simple,” said Upstart CFO Sanjay Datta. “It’s a pretty classic sort of supply and demand construct, where we raise our rates and not only do our approval rates go down because of the 36% APR cut off but for those who remain approved they’ll be less likely to take a loan.”
That is when Datta expanded further on what becomes of applicants who choose not to move forward.
“And typically, at least what we’ve observed in our data is that people who don’t take loans with us don’t necessarily take them from a competing source,” Datta said. “The majority of them just don’t take the loan. So it causes people’s demand to reduce.”
The Q&A did not invite further opportunity for additional insight on why that might be. Upstart’s experience as a consumer lender also may not translate into small business lending either. For example, in April 2022, a fintech lending study found that 40% of business loan seekers compared more than six options.
Bank Issues Humorous Quarterly Earnings Statement
August 10, 2023
Think all banks are boring? First Guaranty Bank which operates primarily in Lousiana and Texas, opened its most recent quarterly earnings with a letter from its president Alton B. Lewis.
“Resilient: Springing back, rebounding,” Lewis begins in his address to shareholders, citing Random House Webster’s Unabridged Dictionary Second Edition. “Returning to the original form for position after being bent, compressed or stretched. Recovering readily from illness, depression, adversity, or the like; buoyant. Another good word is strong. An even better word is tough. These are words that describe what First Guaranty has been during a six month period in which we have survived wound after wound, not of our own causing as we continue to deliver to our shareholders, customers, and our staff members extraordinary results.”
It then goes on to say that there’s been “enough crying over spilt milk” and that “basically, we have and will continue to make a lot of money for our shareholders.”
Lewis appears to have at least delivered. “We have significantly increased our loan interest income to offset the increased cost of deposits which are set by the Federal Reserve,” he said. “For the quarter, we made over $2,000,000 for our shareholders even after the FDIC assessment.”
Square Loans Adds Monthly Payment Option, Tops $1B in Loans in Q2
August 4, 2023Block’s Square Loan subsidiary is adding another business loan feature to its arsenal, a monthly payment option “to serve larger sellers who wanted more visibility into managing their cash flow.”
The company had a major quarter by making 119,000 loans for a total of $1.10 billion in originations. The company has consistently ranked among the top online small business lenders in the country.
Square Loans said that 25% of its fixed payment loan customers so far have been “mid-market sellers,” small businesses that process more than $500,000 in annual card payment volume.
Shopify Capital Continues to Gain Momentum
August 2, 2023Shopify Capital continues to gain momentum, according to the company’s most recent quarterly earnings call. Historically, the company has broadcast its precise business loan and merchant cash advance origination figures for each quarter but this time it held off from doing that. Instead, it emphasized that it had “$719 million in loans receivables and merchant cash advances outstanding on June 30, 2023.” As that figure came straight off the balance sheet, that could be compared to the $629M outstanding in the quarter before. So, receivables went up but originations was not disclosed.
Nevertheless, Shopify explained that Capital was among several business segments that were leading to some of highest cross-sell volumes they have ever achieved.
“The team is working tirelessly,” said Shopify President Harley Finkelstein. “They’re executing it really effectively.”
