Articles by deBanked Staff
Enova Doubles Small Business Loan Originations YOY
May 4, 2022
Enova’s small business lending arm, powered mostly by OnDeck, originated $659M in Q1 of 2022. That was more than double the volume over the same period in 2021 and up 14% sequentially from Q4 2021. Overall, Enova reported a Q1 net income of $52M.
“The first quarter net charge-off ratio for small business receivables was 1.9%, up from 80 basis points last quarter, but below the prior year ratio of 2.6% and below pre-pandemic periods as we continue to see strong payment performance across all of our small business products,” said Enova CFO Steven Cunningham during the quarterly earnings call.
Company CEO David Fisher said that Enova felt really good about its market position in the small business lending space and considered itself the largest player in the non-prime sector of it overall. “We are not feeling APR pressure in our small business products,” Fisher said when asked if competitive forces might drive the company’s loan prices down. He attributed the company’s rapid originations growth to both an increase in marketing spend and an increase in customer awareness that they can access capital quickly online.
“…small businesses have a pretty strong appetite for growth, but also for kind of more traditional non-bank small business lenders,” Fisher said. “I think kind of the online approach with kind of the speed and the ease and the transparency is really appealing to businesses.”
LendingClub Expects Modest Growth of its Commercial Lending Business
May 1, 2022
Fintech bank LendingClub expects its commercial loan business to grow modestly, according to Sameer Gokhale, Head of Investor Relations. Gokhale made the comment briefly during the company’s Q1 earnings call. “These commercial loans are largely secured by collateral or cash flow and should continue to be a good source of revenue and credit quality diversification,” he added.
LendingClub had $615M worth of commercial loans and equipment leases on its balance sheet as of March 31st. That excluded the $185M worth of PPP loans it still held.
The company’s overall lending business is still consumer-focused. Auto lending is expected to increase, but not to such an extent that it catches up to Lending Club’s personal loan business.
Overall, the company reported a net income of $40.8M on $289.5M in revenue for the quarter.
IOU Financial Originated $59.6M in Loans in Q1 2022
April 27, 2022
IOU Financial is experiencing tremendous growth. The small business lender revealed that it originated $59.6M in loans in just the first quarter of 2022. In its quarterly earnings report, it set a target range of $220M to $260M in originations for the whole year of 2022. This would be a massive increase over its loan originations last year when it set a personal record of $161.5M.
Separately, the company is profitable. IOU achieved net earnings of $3.7M on an IFRS basis. It also had $119.5M in loans under management as of year-end 2021.
“The Company attributes a significant portion of its strong growth in loan originations to its successful transition from a balance sheet strategy (under which the Company traditionally funded loans to its balance sheet) to a marketplace strategy under which new loan originations are primarily being sold to institutional purchasers,” IOU said in its official announcement.
“IOU’s marketplace strategy allowed the Company to originate significantly more volume in 2021 than would have previously been possible under the financial limitations of a balance sheet strategy,” said Robert Gloer, President and CEO of IOU. “This has proven to be a win-win that has in turn given us the financial latitude to repurchase approximately $3.7 million in convertible debentures in 2021 and invest in strategic growth initiatives as part of our Post-Pandemic Growth Plan.”
Business Loan Seekers Likely to Consider Numerous Options, Study Says
April 25, 2022
New data published in the annual FinTech Lending Study published by Smarter Loans revealed that 40% of business loan seekers compare more than six options.
Though this study focused on the Canadian market, it may partially explain a finding in the US, that more small business owners seeking capital are seeking out a merchant cash advance as a potential option than ever more. (A Federal Reserve study said that 10% of SMB capital seekers sought a merchant cash advance in 2021). That would make sense if business owners are obsessively applying to multiple sources for the sake of making more comparisons.
But even while they shop, they might not always be satisfied with what they learn, nor the outcome. Smarter Loans reported that only 60% of business loan seekers felt informed about their options while 40% of business owners that went forward with a business loan were not satisfied with their loan provider.
When examining both the business loan and consumer loan market, Smarter Loans says that loan seekers are more likely to receive their funds the same day they apply than ever before. (53% of those surveyed received funds within 24 hours of applying.)
Click here To view the full 2022 FinTech Lending Study published by Smarter Loans.
Posting Fake Reviews To Make Your Financial Services Company Look More Appealing? The CFPB Says You Will Face The Consequences
April 21, 2022
The CFPB has put companies that offer financial products and services on notice. If you post fake reviews about yourself online, it “may result in significant penalties.”
“Corporate disinformation campaigns that suppress legitimate reviews or manufacture fake reviews are not only a threat to free speech and fair competition, they are also illegal,” said CFPB Director Rohit Chopra. According to the agency, manipulating customer reviews is unlawful under the Consumer Financial Protection Act. “Laundering fake reviews in ways that appear completely independent from the company to improve their ratings may constitute a deceptive practice,” the agency states.
Examples were provided. One involved a company that relied on its own employees to leave reviews of the company’s products, which it said was unlawful because they had not disclosed that they were employees in the reviews themselves. Another example involved paying non-employees to post materially misleading reviews.
Also apparently illegal is only showing positive reviews about ones own products while hiding or refusing to publish the negative ones.
The CFPB cited a similar initiative undertaken by the FTC. “Fake reviews and other forms of deceptive endorsements cheat consumers and undercut honest businesses,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Advertisers will pay a price if they engage in these deceptive practices.”
With the CFPB’s purview being more narrow than the FTC’s, the CFPB’s closing message was that “Banks and financial companies should ensure that their customer review practices comply with all applicable laws, including the Consumer Financial Protection Act. Violations are subject to civil penalties and other legal consequences.”
Man Who Defrauded MCA Companies Indicted
April 19, 2022
An alleged fraud executed five years ago against merchant cash advance companies did not go unnoticed. A grand jury indicted an El Dorado Hills resident named Suneet Singal on April 7th under seal. The Department of Justice announced it yesterday morning.
According to the Grand Jury, Singal engaged in a scheme to fraudulently induce financing companies to provide merchant cash advances to a company he had previously sold and no longer owned. In doing so, Singal allegedly received six wires from four financing companies between April 12 and May 22, 2017 in the amounts of $197,370, $112,308, $48,500, $294,946, $96,970, and $43,975. The indictment did not cite any of the companies by name. Allegedly, Singal used those funds for various expenses, and the company he did not own was forced to file for bankruptcy. Singal was indicted on 10 counts.
The DOJ did not publish the full indictment but it can viewed in its entirety here. Despite the “sealed” stamp at the top, the court ordered it be unsealed upon Singal’s arrest and is public record.
New Bill Would Give CFPB Regulatory Authority Over Small Business Lenders
April 1, 2022
When Congress passed a law in 2010 that gave the newly created Consumer Financial Protection Bureau a mandate to collect small business loan data, industry observers wondered just how broadly the agency would interpret that authority.
At least one Congresswoman, however, feels that the statute as written is limited. That’s because Rep. Nydia M. Velázquez introduced a bill on Friday that would explicitly give the CFPB the power it lacks to oversee small business lending altogether.
H.R. 7351, the Promoting Fair Lending to Small Businesses Act, is designed to give the CFPB supervisory authority of “nondepository persons offering or making small business loans.”
“This bill will play an important role in applying the same standards for all lenders who make loans for small businesses, and especially those that have been historically underserved by lenders such as minority- and women-owned businesses,” said Velázquez.
It would be no surprise if a small business lender had not been previously aware of the CFPB’s pre-existing data-collection powers. That’s because the law that was passed twelve years ago, still has not been completely rolled out.
Utah Passes Commercial Financing Disclosure Law
March 28, 2022
The Governor of Utah signed SB183 last Thursday, a law that will require commercial financing providers to formally register with the State as well as provide uniform disclosures on the transactions they conduct.
Beginning January 1, 2023, covered parties will require State approval to conduct business with Utah customers. Following that, the disclosures listed below will be required in the contracts:
- Total amount of funds provided to the business
- Total amount of funds disbursed
- The total amount to be paid
- The total dollar cost of the transaction
- The manner, amount, and frequency of each payment OR the estimated amount of the initial payment
- A statement of costs or discounts associated with prepayment
- The broker’s commission amount
- Explanation of payment methodology and hypothetical circumstances that could cause it to vary
The full text can be read here. deBanked first reported on this bill on February 9th.
Utah follows Virginia, New York, and California who have all passed their own versions of a commercial financing disclosure law. Maryland is the most likely state to pass one next.
