Articles by deBanked Staff
Attend deBanked CONNECT MIAMI for Broker Brilliance
November 20, 2023
Before the Broker Battle at deBanked CONNECT MIAMI, come join the Broker Brilliance session!
- Enjoy a preview of the official SBFA broker certification led by the Executive Director of the SBFA and a Partner of top law firm Hudson Cook, LLP.
- Learn about pending legislation and regulations that could impact your career forever.
- Find out what licenses are required for brokers and broker shops so that you stay compliant.
- Hear about the extraordinary opportunity that comes with joining the official Broker Council.
- Don’t just sell for today, make sure you’re set up for longevity!
BUT, in order to experience all of it you MUST be registered for deBanked CONNECT MIAMI. Join the industry on January 11th!
Judges Announced for Broker Battle at deBanked CONNECT MIAMI
November 17, 2023The first ever Broker Battle™ taking place at deBanked CONNECT MIAMI on January 11th at the Miami Beach Convention Center has locked in 4 highly qualified judges.
The Battle will feature 5-8 brokers exhibiting their abilities while fielding questions from the judges in front of a LIVE audience. The winner of the championship round will receive a $5,000 grand prize. More than 30 brokers have already entered themselves in for consideration. The submission deadline is December 1. More information and the entry form can be viewed here.
deBanked CONNECT MIAMI will also have a full slate of additional content including a complete Broker info session called Broker Brilliance on top of networking.
BHG Financial Tightening Its Credit Box, Dealing With Tough Environment
November 13, 2023BHG Financial (formerly Bankers Healthcare Group) originated $1 billion in loans in Q3, according to recently filed disclosures about the company. That was down from $1.1B in Q2. BHG mainly provides business loans and unsecured loans to healthcare practitioners. Although the company considered it to be a stronger quarter than anticipated, it predicts that Q4 will not be as strong and that originations will actually drop significantly to between $600M to $800M.
“As we look to the fourth quarter, BHG believes origination volumes will likely be less than Q3 as they continue to shrink their credit box,” said Terry Turner, CEO of Pinnacle Financial Partners, which owns 49% of BHG.
While originations start to slow, loan loss reserves have also increased.
“The decrease in income from BHG during the three and nine months ended September 30, 2023 as compared to the same periods in the prior year is largely the result of increases in (i) the liability for estimated future inherent losses for the outstanding core portfolio of loans sold to banks through the auction platform that may be subject to future substitution due to payment default or prepayment and (ii) the allowance for loan losses for loans BHG has retained on its balance sheet due to the uncertain economic environment.”
BHG is also exiting its “merchant financing business,” according to Pinnacle CFO Harold Carpenter. Carpenter was referring to NaluPay, BHG’s Point of Sale financing division. NaluPay launched a little over a year ago to great fanfare, claiming it would enable merchants “to offer their customers large credit lines, a suite of promotional and non-promotional financing options, and instant credit decisions within seconds.”
Nevertheless, Pinnacle says that BHG is feeling good about the direction things are heading.”BHG is optimistic about credit at the end of the third quarter,” Turner said.
Conversion Rates on Upstart’s Consumer Loans
November 7, 2023
Upstart is having a tough time in the current interest rate environment.
“In the third quarter, rates were at an all-time high in our marketplace, higher than we expected them to be, reflecting both decades high interest rates and significantly elevated risk in the consumer economy,” said Upstart CEO David Girouard during the company’s Q3 earnings call. “This is not a path we would have chosen and is obviously not constructive to our growth, but it reflects the reality of operating responsibly in this environment.”
The company won’t offer loans above 36% APR which means if the risk models indicate a rate higher than that would be necessary to move forward, they just decline the loan altogether. Notably, this and other economic factors has had a negative impact on their conversion rates.
“I think our [conversion rate] for this quarter was around 8.5%,” said Upstart CFO Sanjay Datta. “So meaning, of all applicants to fill in an application and submit, about 8.5% of them become funded loans. I think at our peak, that number was closer to 24%.”
And of all loans that get approved, only 1/3rd of them fund.
It’s been a rough couple of years for Upstart. The stock is down 92% from its all time high in October 2021. At the time the company was planning to expand into the small business loan market, which it finally did in June 2022. In the subsequent quarter it originated $9M in small business loans. But earlier this year the company suspended it entirely. At the time Girouard said, “This was a necessary step to ensure we can adequately resource the rest of the roadmap. We look forward to the day when we can resume our pursuit of the world’s best AI-powered business loan.”
It has not resumed business lending though it continues to cite in its quarterly earnings presentations that the addressable small business loan market numbers $895B.
Square: Business Loan Originations, Loss Rates Steady in Q3
November 2, 2023Block’s Square Loan division chugged along in Q3, originating 120,000 loans for a total of $1.17B. The company’s origination figures in the first nine months of this year are basically on par with the origination figures of the last nine months of 2022. This suggests that Block is being cautious and conservative.
Block also said that loss rates on Square Loans “remained consistent with historical ranges.”
Square loan originations for the past six quarters:
Q2 2022: $1.01B
Q3 2022: $1.14B
Q4 2022: $1.16B
Q1 2023: $1.10B
Q2 2023: $1.10B
Q3 2023: $1.17B
Block did not talk about Square Loans on its earnings call except to say that it’s among a number of products it offers that serves as a retention tool and that in the future it will become more of an acquisition channel as well.
Originations Increased, Losses Decreased for Shopify Capital
November 2, 2023
Shopify Capital is still experiencing an increase in business loan and merchant cash advance originations, according to the company’s latest Q3 earnings report. The company recently stopped disclosing precisely how much it is they are originating, however. It used to give precise numbers but starting this year Shopify now only cites its loans and merchant cash advance receivables balance.
“Transaction and loan losses decreased for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to a decrease in losses related to Shopify Capital.”
So funding is up, losses are down, which is precisely the opposite situation that is going on at rival PayPal.
Shopify somewhat skimmed over its Shopify Capital business in its Q3 earnings announcements and on its official call except to state that it’s a strong segment that is growing.
PayPal Pulls Back on MCAs and Business Loans
November 2, 2023PayPal’s merchant cash advance and small business loan originations in 2023 are down significantly from 2022. The company revealed that it had only purchased $1.3B in merchant receivables for the first 9 months of this year versus $2.3B over the same period last year.
In the earnings call, Acting CFO Gabrielle Rabinovitch said that the company is maintaining a “tightened origination strategy for the PayPal business loans portfolio.”
Charge-offs are up. “The increase in the charge-offs for the nine months ended September 30, 2023 compared to the same period of the prior year was due to the expansion of acceptable risk parameters in 2022, which resulted in a deterioration of the overall credit quality of loans outstanding,” the company disclosed.
Two Commercial Financing Bills Introduced in Pennsylvania
October 28, 2023
Add Pennsylvania to the list of states with commercial financing bills. Last week, Representative Kristine C. Howard introduced HB1791 and HB1972, which would outlaw Confessions of Judgment provisions in contracts and require mandatory disclosures to businesses respectively. In the latter, commercial financing providers would be required to disclose the total amount of funds provided, the total dollar cost of the financing, the term or estimated term, the payment method/frequency, prepayment policy, and APR.
The bills were expected. Rep. Howard pledged to introduce them back in February when she circulated a memo titled “Protecting Small Businesses from Predatory Lending.“
