Articles by deBanked Staff

The ERTC and Other Value Added Products

2023 has ushered in a new era of value-added products for sales agents. The Employee Retention Tax Credit (ERTC) is one major example. Another is a throwback to earlier times in the working capital space, merchant accounts. On May 8th, several industry veterans will convene at the Hilton Midtown in New York City to educate sales agents on these opportunities. It’s all happening at Broker Fair from 3:20 – 4pm for the ERTC and Other Value Added Products panel. If you’re registered for this event, it’s one session you won’t want to miss!

IOU Financial Reveals 2022 Financials, Is Adapting to Current Macroeconomic Conditions

IOU Financial originated $82.7M in funding in Q4 2022, according to the company’s latest financial report. That put them at $275.5M for the year total, a new all-time record for the company. IOU was profitable for the year but by a razor thin margin, eking out a net income of just $38,826.

In an official announcement, IOU disclosed that “During the fourth quarter of 2022 macro-economic factors including inflation and rising interest rates impacted the operating environments of many small businesses and negatively impacted IOU’s collections efforts and servicing revenues. This has led to a write down of specific servicing assets and reduced revenue accrual rates, resulting in a net loss of $(2.7) million on an IFRS basis and $(0.9) million on an adjusted earnings basis for the quarter ended December 31, 2022.”

IOU has already taken decisive action to adapt, the company stated, which has already led to a positive impact on collections but also resulted in sigifnicantly reduced originations in the first quarter of 2023.

“IOU Financial has weathered many storms and always emerged stronger than before,” said Robert Gloer, President and CEO of IOU. “We’ve pivoted to adjust to current macro-economic conditions and remain committed to investing in products and technology designed around the needs of small business owners and our broker network.”

A Side Effect of New State Laws? Registry Lookups

DailyFunder, the original funder’s forum since 2012, will include links to governmental registries on its site. Among the first two to be added are California and Virginia. The purpose is to serve as a reference point to verify a funder or lender’s claims. Additional states like Utah and New York will follow. Brokers and referral partners should use all the tools at their disposal to conduct due diligence on whomever they are considering to work with.

“‘The ‘I saw them in the courts’ or ‘I saw them in banks’ method isn’t exactly proof of legitimacy,'” a post on the forum stated.

DailyFunder also recently shared that it is experiencing a rather vibrant burst of interest. The forum logged 2.3 million page views in 2022 and this year is on pace for 3 million, it claims.

Percentage of Merchants Seeking MCAs in 2022 Waned But Approval Rate Went Up

Only 7% of small businesses that applied for financing in 2022 applied for a merchant cash advance, according to the most recent report published by the Federal Reserve. Of those, 90% reported being approved for some amount of capital. That’s up from the 84% in 2020 and up from the 87% reported in 2019 prior to the pandemic. Approvals, it appears, were quite generous in 2022.

Overall, the percentage of merchants seeking MCAs has dipped, however. In 2019 for example, 9% of businesses said that they were seeking an MCA. In 2021 it was 8%. In 2022 it was 7% as mentioned above. The decrease could be explained by the pandemic which introduced an abundance of free and low interest government business aid. Also, the proliferation of low-cost online lenders created by the 0% interest rate environment may have weakened demand for alternatives like MCAs. Given that much has changed in the last 4 months, the Fed’s next report (scheduled for release in approximately March 2024) stands to be much more informative.

The most recent report can be downloaded here.