Articles by deBanked Staff
Examining the Charge Off Rates on PayPal’s Business Loans
February 13, 2023Wondering how a competing small business lender with more than $17 billion in originations since inception has been doing lately with? Check out some of PayPal’s business loan and MCA stats:
| Period | % of Merchants Within Expected Timeframe | % of Merchants > 90 Days Past Expected | Net Charge-offs |
| 2017 | 87.4% | 5.5% | |
| 2018 | 91% | 3.7% | |
| 2019 | 89.6% | 4.2% | 7.4% |
| 2020 | 75.4% | 12.5% | 18.9% |
| 2021 | 91.8% | 3.1% | 4.7% |
| 2022 | 90.7% | 3.7% | 4.5% |
Enova’s Current Small Business Lending Strategy
February 10, 2023
“We are being very conservative with our small business lending right now. There’s a tremendous amount of demand,” said David Fisher, CEO of Enova, on the company’s most recently quarterly earnings call. “I think both demand from businesses who need money coming out of COVID still but also from a lack of competition and a reduction of competition. So there’s a tremendous amount of demand. We’re filling a very small portion of it as we are trying to remain very, very conservative with respect to our originations, so we can manage through any turmoil in the economy.”
Fisher said that for its small business lending right now, the focus is really on diversification, that being “diversification across states, across industries, across product types and across kind of the credit spectrum.”
“…as we’ve just seen over the last 6 to 12 months, there are some industries that are doing well for a couple of quarters and some that are doing worse and then that rotates,” he said. “And having that strong diversification has allowed us to manage through that variability over the last couple of years without too much difficulty.”
Despite the company’s conservative strategy right now, Enova still managed to originate $826M in small business loans in Q4 2022, an increase from the $807M in the previous quarter.
Given all of Enova’s consistent success, especially in the current environment, one analyst asked if there was a play for the company to increase its marketshare.
“So we’re not being super aggressive with taking share right now because we don’t want to be too aggressive with our lending,” Fisher replied. “But we continue to build out products and expand the types of opportunities we can offer to small businesses and we’ll continue to do that over time so that as we do get aggressive hopefully in the next — more aggressive over the next 6 to 12 months, we can take our industry-leading position, combine that with the new products that we can offer customers and we’ll be even in a more dominant position. So we’re gaining share kind of just by the fact that competitors are pulling back even more due to credit concerns or lack of capital and we’re fine with that. But we’re not trying to maximize our market share right now because we do want to make sure that we’re being smart about credit. But continuing to build in the background so that when we do get more aggressive, we’re really well positioned.”
New Challenge to MCA Legality in New York
February 10, 2023
It’s effectively well settled law, that proper purchases of future receivables are not considered loans in New York State. But a three year-old merchant cash advance case is poised to become center stage for a fresh review of that policy.
At issue is AH Wines Inc., et al. v C6 Capital Funding LLC which the New York Court of Appeals recently agreed to hear. The crux of the plaintiff’s arguments has been that defendant’s purchase of future receivables was actually a usurious loan. The plaintiff was unsuccessful at both the trial court level and appellate level with their case and so appealed to the highest possible court in New York, the Court of Appeals. On February 9, the motion for leave to appeal was granted.
A Quick Analysis of Bank Data? Kuboon!
February 8, 2023
Accessing a small business borrower’s bank statement data is nothing new but Kuboon, not to be confused with kaboom, gives the whole experience an upgrade. A lender can embed Kuboon’s technology into their existing CRM with a simple line of code and be up and running in no time.
According to Kuboon VP of Sales Brysen Partridge, the technology doesn’t necessarily compete with universal tools like Plaid and Finicity because Kuboon actually uses them too.
“So we compare differently because our engines are far more advanced,” said Partridge, “[The big aggregators] give you a small out of the box engine of just giving the transactions and then you have to come up with your dev team to try and filter out and fix and categorize all those transactions and make them into something useful. We do all that for you…”
Partridge said that’s far from everything. “It’s not just bank details,” he said. “We have payroll and ID data. We have other sources that are coming in soon that will provide a ‘complete integrated intelligence.'”
Recognizing that not everyone will embed it, Partridge said that Kuboon can also be used as its own standalone CRM, a feature they call Kuboon Lobby and that many clients choose to use it this way.
Lightspeed’s MCA Business is Growing
February 2, 2023Lightspeed Commerce, a global e-commerce platform for merchants, reported an increase in its merchant cash advance business in its latest earnings report. As of December 31, 2022, $15.8M of mcas were outstanding, up 25% from the previous quarter, the company announced.
Lightspeed is no small company. It reported $188.7M in total revenues for the most recent fiscal quarter, $74.5M of which was drawn from subscriptions and $107.2M from transactions.
“To further complement our core cloud solutions, we offer a merchant cash advance program called Lightspeed Capital,” the company said in its quarterly statements. “This program provides cash advances to eligible merchants and is designed to help them with overall business growth and cash management.”
New York Finalizes its Commercial Financing Disclosure Rules
February 1, 2023
That’s all folks. New York State’s Department of Financial Services has finalized its rules on commercial financing disclosures. The Fifty-three page rulebook dictates what covered parties will be required to do.
“The New York State Department of Financial Services received 21 comments on proposed revised rule 23 NYCRR 600,” a note accompanying the finalized rules said. “The Department has considered every comment received and has made several revisions…”
Those expecting years of possible back-and-forth commentary like what happened in California may be surprised to find that this is the final version. The effective date of the rule is the date the notice is published in the State Register, but compliance with the rules themselves is slated to take effect six months from that date (please consult with attorney to confirm).
“Clear and easy-to-compare disclosures are paramount as entrepreneurs and small businesses evaluate financing,” said DFS Superintendent Adrienne A. Harris in an official press release.
Kabbage Rebrands to Business Blueprint
January 31, 2023
Kabbage by American Express is now Business Blueprint. A lot of terminology on the former Kabbage website, which now forwards to an official page on the American Express website, have already been reworded. Kabbage Funding, for example, is now being referred to as American Express Business Line of Credit and the Kabbage mobile app is now the American Express Business Blueprint app.
On social media, American Express Group President of Global Commercial Services & Fraud Risk at American Express said, “today marks an important milestone for us, as we fully integrate Kabbage into American Express with the launch of Business Blueprint.” Marrs continued by saying that American Express will work towards becoming a digital one-stop-shop for small businesses’ financial needs.
Although it is not specifically stated, negative news headlines related to Kabbage’s former PPP business before the American Express acquisition probably contributed to the official rebrand.
Small Business Fears Are Actually Calming Down
January 31, 2023
Right now small business owners are less concerned about rising inflation, a possible recession, staffing issues, consumer demand, and public health than they were in July 2022. Those are among the findings of a recent small business survey conducted by IOU Financial. It appears the fear, uncertainty, and doubt of what the end of 2022 might bring has since subsided and even transformed into a sense of optimism!
Eighty-eight percent of respondents, for example, now project that their business will be somewhat better or much better by the end of the first half of 2023 than they are right now. Sixty-one percent say they even plan to invest in their business over the next 6 months.
The improvement in sentiment seemingly stands in stark contrast to news coming out of the large tech companies that were plagued by layoff announcements all last quarter. The small business sector is looking a little more resilient by comparison, although it still has fears of its own. Seventy-three percent of respondents are still concerned about rising inflation but that’s down from 84% in July and 44% are concerned about consumer demand but that’s down from 62% respectively.
While the circumstances of the economy aren’t exactly great and the impact of rapidly rising interest rates has yet to be determined, this survey at least suggests that small businesses are getting used to this reality.
