Articles by deBanked Staff
A Glimpse Into Amazon Lending
October 16, 2022
When Amazon revealed it had made more than $1 billion in small business loans in 2018, many people were stunned to find out they had become so active as a lender. But other than marketing it to sellers on their own platform, the company has not attempted to draw much attention to it. They have, however, regularly disclosed “seller receivables” which are defined as “amounts due from sellers related to [their] seller lending program.” Assuming the company has consistently kept their loans on balance sheet and kept loan terms steady, one can drawn their own conclusions about the trajectory of its loan program.
Below are the loan receivables as of year-end for each year except for 2022.
2016: $661M
2017: $692M
2018: $710M
2019: $863M
2020: $381M (covid)
2021: $1B
2022 (Q2): $1.3B
Loan receivables dropped significantly during covid and are most recently at their highest level ever, almost double what it had been in 2018.
In addition to its own Amazon Lending product, Amazon is also offering loans through Lendistry and lines of credit through Marcus by Goldman Sachs. The Lendistry relationship, which piloted last year, resulted in $35M being loaned to more than 800 sellers. Because of its success, Lendistry now plans to loan $150M to Amazon sellers over the next 3 years.
The Marcus by Goldman Sachs relationship is notable because it marks Marcus’ first foray into small business lending.
Upstart Hit With Another Lawsuit
October 13, 2022A new lawsuit brought by a shareholder of Upstart is also being brought derivatively on behalf of Upstart. That’s because plaintiff alleges that the Directors of the company would otherwise have to sue themselves or the company’s executives for the damage caused, a highly unlikely course of action.
Plaintiff alleges the company or certain directors and executives violated Section 14(a) of the Exchange Act, breached fiduciary duties, were unjustly enriched, abused their control, grossly mismanaged the company, wasted corporate assets, and violated Section 10(b) and 21D of the Exchange Act.
Things are not exactly great in shareholder land. The company’s stock as of May 4th close was $93.57 and is now currently hovering around $24.49. The plunge began when the company released its poorly-received quarterly earnings on May 9th. For a long time, the company had asserted it was not a balance sheet lender, but a shift in economic conditions was causing that to change.
The unwelcome quarterly earnings report was coincidentally timed after Upstart CEO David Girouard had sold more than $200M worth of company stock in the previous 8 month span and co-founder and SVP Paul Gu sold $140M worth over nearly the same time period.
Then, in August, Girouard said, “In the last few months, lenders and institutional credit investors reacted more quickly and abruptly than we anticipated. Despite the fact that our bank partners have seen consistently strong credit performance, meaning portfolios performing at or above plan across quarterly cohorts, several of them have paused or reduced originations due to fear about the future of the economy.”
Plaintiff alleges that false and misleading statements allowed the stock price to be propped up while insiders sold their stock on material non-public information. The full complaint can be viewed here.
This lawsuit is separate from a securities class action filed earlier this year.
IOU Financial Sets Internal Loan Originations Record for Q3
October 4, 2022
IOU Financial is showing no signs of slowing down. The company announced Q3 loan originations of $74.2M on Tuesday, up from $59.M in Q2. Altogether, IOU has originated $192.7M in 2022 so far.
“IOU’s strong Q3 2022 loan originations and progress towards its strategic goals makes us cautiously optimistic about delivering on the high end of our guidance,” said Robert Gloer, President and CEO, in a statement. “IOU Financial continues to execute on its strategy substantially growing loan originations while investing in technology and product innovation.”
The company has projected total originations of $220M – $260M by year end. That would be significantly higher than the $161.5M originated last year.
Wondering How to Comment on the Impending NY Disclosure Rules?
September 25, 2022The deadline to comment on New York’s latest iteration of its commercial financing disclosure rules is October 31st. As stated on the Department of Financial Service’s website, the agency’s official contact on the matter is George Bogdan (George.Bogdan@dfs.ny.gov). It’s the same contact as was given for the previous comment period.
Notably, the DFS has said that it has received some comments that have asked the agency to abolish the disclosure rules altogether. That won’t happen, the DFS explained, because it is required by law to enact them.
Even if there are no additional comment periods after this one, it is highly unlikely that the NY rules would go into effect this year.
New York DFS Publishes New Proposal on Commercial Financing Disclosure Law
September 15, 2022
The New York regulator in charge of rolling out the commercial financing disclosure law, published a new draft of the rules in the State Register yesterday.
In it, the New York Department of Financial Services (DFS) also gave its own assessment of the comments received from potentially covered parties.
“Some commenters are opposed to the basic purpose of the Commercial Finance Disclosure Law (“CFDL”), Financial Services Law (“FSL”) sections 801-811, and accordingly are opposed to the regulation,” DFS said. “Most commenters acknowledge the need for the rule to implement the CFDL and made comments intended to improve the regulation from their perspective.”
Thus, with all of the feedback previously received, the new proposal is out. The public now has until October 31st to provide further feedback to it.
Funding Circle US Originates $168M in 1st Half of 2022
September 8, 2022
Funding Circle’s US arm originated $168M worth of small business loans in the first two quarters of 2022.
“In the US, we continued to offer our commercial loan product during the six months to June 2022 and we have expanded this offering to serve super-prime businesses,” the company said in its latest financial disclosures.
Notably, Funding Circle closed funding deals with four banks and credit unions during the period and anticipates adding new investors as the year continues.
Globally, Funding Circle says it has helped 130,000 small businesses access $19.4B in funding since inception.
“Lending investor returns through the platform remain robust and attractive,” the company said on LinkedIn. “We’re making early progress against our medium-term plan to transform the business into a multi-product platform, as we continue to help more small businesses get the funding they need to win.”
Who’s Growing in the Industry?
September 6, 2022Despite Covid, several small business finance companies successfully secured spots on the 2022 Inc 5000 list for their stellar 3-year revenue growth. Here’s a snapshot of who made it:
| Ranking | Company Name | 3 year growth % |
| 127 | Crestmont Capital | 3,548% |
| 271 | Fountainhead | 2,006% |
| 799 | Business Lending Blueprint | 793% |
| 835 | Clearco | 755% |
| 970 | Valiant Business Lending | 668% |
| 1,047 | Funding Forward | 618% |
| 1,240 | Lending Science DM | 524% |
| 1,587 | Lendio | 401% |
| 1,876 | Choice Merchant Solutions | 324% |
| 1,970 | Nav | 306% |
| 2,343 | Novae | 250% |
| 2,886 | Velocity Capital Group | 189% |
| 3,262 | Fundbox | 162% |
| 3,410 | SBG Funding | 154% |
| 4,284 | Flexibility Capital | 107% |
| 4,367 | Fund&Grow | 103% |
| 4,737 | ApplePie Capital | 89% |
| 4,959 | Fundomate | 82% |
The Inc 5000 list requires companies to apply and submit data. Companies that may have qualified to be ranked could have chosen not to apply.
First Criminal Charges in MJ Capital Funding Saga
September 6, 2022
Criminal charges have finally been introduced to the MJ Capital Funding ponzi scheme saga. Last week, 29-year-old Pavel Ramon Ruiz Hernandez was charged by federal prosecutors with Conspiracy to Commit Wire Fraud. According to the allegations, Hernandez helped manage the operations of MJ Capital and oversaw significant fundraising efforts for the company while knowing that the business was a ponzi scheme. All told, it’s alleged that he and his co-conspirators defrauded investors out of $42 million.
MJ Capital Funding pretended to be an MCA provider but did not actually operate an MCA business, nor was the company known within the MCA industry.
Much of the investigations have focused on Johanna M. Garcia, the CEO of the company, but to date she has not been criminally charged.
If Ruiz Hernandez is convicted, he faces a maximum penalty of 20 years in prison, the DOJ states. The MJ Capital ponzi scheme is reported to have affected over 9,000 investors.
