Articles by deBanked Staff
The Company That Acquired Alchemy Technologies is a Small Business Lender
June 9, 2022
The sale of Alchemy Technologies to Business Warrior was announced on Thursday. The sale price of $8.75M ($2.25M in cash), is more than 3x Alchemy’s 2021 revenue of $2.8M.
While Business Warrior describes itself as “the source for small businesses in America to get more customers,” its homepage leads with a pitch for a working capital loan. “Our goal is to give you access to funding before you need it so you can grow without the restraints set on you by your bank,” the website says.
Business Warrior provides loans from $5,000 to $100,000 with interest rates as low as 7.97% and with terms between 12-36 months. It also offers marketing, software, and scaling solutions.
“After working with Alchemy, we quickly realized the massive potential of adding this international group of industry leaders to the Business Warrior team,” said Jonathan Brooks, Business Warrior President, in a press release. “With our Business Warrior platform, premium marketing, and now a global lending technology presence, we are building solutions that propel the success of small businesses.”
“We are so excited about joining the Business Warrior family!” said Timothy Li, CEO of Alchemy. “This move provides Alchemy with the additional resources, tools and capital necessary to enhance our service to customers. Both companies believe small business owners are the lifeline of local communities. By bringing Alchemy and Business Warrior together, the positive impact on these communities is going to be worldwide.”
Business Warrior is publicly traded under the ticker (OTC: BZWR).
RCG Advances Permanently Banned From MCA Business by FTC
June 6, 2022
It’s déjà vu. Five months after the FTC successfully banned someone from engaging in the MCA business, the agency has secured a similar outcome from additional defendants. This time it’s RCG Advances and its operator that are banned, according to the final settlement announced by the parties. In addition, RCG is required to make an upfront payment of $1.5M to the FTC and refund $1.2M to its previous customers that it had allegedly deceived.
The penalty may appear rather small in the big picture, but it is possibly as strong an outcome as the FTC could’ve hoped to obtain given the odd circumstances that befell the case. For example, the FTC filed its suit against RCG in June 2020 under Section 13(b) of the FTC Act, one of the most common tools in its legal arsenal. Less than a year later, the Supreme Court of the United States ruled that despite long-standing precedent, 13(b) did not give the FTC legal authority to obtain monetary relief, which from the FTC’s point of view, defeated the entire purpose of bringing such claims. In light of the ruling, the FTC was forced to change its strategy in the RCG case. In May 2021, the FTC asked the Court if it could amend its lawsuit to state that what the defendants had actually done all along was violate the Gramm-Leach-Bliley Act. It was perhaps a more difficult path forward.
By January, the first settlement was announced. This RCG settlement now follows that. One defendant in the case has not settled and the proceedings are still ongoing.
Economic Hurricane? Timeless Advice For Your Small Business Finance Company
June 2, 2022
“You know, I said there’s storm clouds but I’m going to change it … it’s a hurricane,” said JPMorgan CEO Jamie Dimon about the current economic situation. “JPMorgan is bracing ourselves and we’re going to be very conservative with our balance sheet.”
At the very least, Dimon is predicting that a recession may be just around the corner. And if that’s the case, we dug up some timeless advice about how a small business finance company can brace itself for such a scenario. These quotes are from 2016 when economic experts were already beginning to wonder if the economy had already overheated, if you can imagine that.
“If the market moves sideways and you rely only on a single source of funding, you are at risk. It’s an incredibly obvious statement, but it becomes more acute when the economic environment comes under pressure.” – Glenn Goldman
“Liquidity is king. The more that participants in this market are able to diversify their capital structure, diversify their funding sources and work with multiple providers, the better off they will be.” – David Snitkof
“[Funders will have to decide] to tighten and pivot while the rest of the players in the space are going full steam ahead. That’s where you have to have some conviction and trust your data and do the right thing.” – Stephen Sheinbaum.
“Just because someone paid you back yesterday doesn’t mean he’s going to pay you back tomorrow. You have to be right more often in a recessionary environment.” – Andrew Reiser
“A small recession could lead to big failures if you don’t take the right steps.” – Yoel Wagschal
In April 2016, when recession predictions were making the rounds, the S&P 500 was ~2,000, Bitcoin was $450, Ethereum was $8, gas was ~$2.20/gallon, and few, if any people, believed that Donald Trump would ever become President.
Connecticut Commercial Financing Disclosure Bill Didn’t Make it Through
May 24, 2022
In an era where it has become almost fashionable for states to introduce commercial financing disclosure laws, the bill proposed in Connecticut this past March did not make it through. Its first draft was rough, freely using ambiguous terminology like “double dipping” which was clearly drawn from an original draft presented to the New York State legislature more than a year ago.
The bill stalled in the Senate despite a couple of favorable committee reports. The legislature adjourned for the year on May 4th, ending the bill’s prospects for advancement in 2022. This was the second time the bill had appeared so a version of it will likely return in 2023.
DoorDash Capital Warrants No Mention in Latest Report
May 23, 2022Readers interested in hearing the results of DoorDash’s foray in to MCA funding were keenly disappointed by the last earnings call. It didn’t even come up. The product was formally announced by DoorDash on February 9th. At the time, the company said that it was offering DoorDash merchants MCAs through a partner company named Parafin. The offers would be visible right in the DoorDash portal.
DoorDash reported Q1 revenue of $1.5B and a net loss of $167M. The material impact of DoorDash Capital, only in its infancy, was likely minimal then.
IOU Financial Was Profitable in Q1
May 19, 2022
IOU Financial may have originated $59.6M in small business loans in Q1, but the company also managed to do it profitably. Specifically, IOU recorded net earnings of $1.1M in Q1 2022 compared to a $100,000 net loss over the same period the year prior.
“IOU Financial continues to deliver on its promise to stakeholders by growing loan originations and increasing profitability while continuing to invest the scalability of its operations and technology,” said Robert Gloer, President and CEO in a public statement.
IOU’s Q1 revenue totaled $3.9M, earned mostly from servicing and fee revenue that is generated by its marketplace model. $500,000 of it was attributed to referral fee revenue earned by IOU’s direct-to-merchant retail operation called ZING Funding.
Prosper Marketplace Receives Full Forgiveness of Its SBA Loan
May 18, 2022
Three months after the SBA told a Sioux Falls small business lender that it wasn’t eligible for PPP loan forgiveness because it was involved in lending, the same agency approved full forgiveness for one of the nation’s largest consumer lending businesses, Prosper Marketplace.
“On March 21, 2022, we were notified by the SBA that all principal and interest under our PPP loan, totaling $8.6 million, was forgiven through a full forgiveness payment made on March 15, 2022 by the SBA to the lender of our PPP loan,” Prosper reported in its Q1 earnings. The company also announced that it had facilitated $560.6M in Borrower Loan originations in the first three months of this year so far.
Technically, Prosper is a “credit marketplace.” All loans originated through the marketplace are made by WebBank. Prosper facilitated $1.9B in loan originations last year alone.
Prosper was among the lenders that actually turned a profit in 2020, $18.5M to be precise, on $1.5B in loans facilitated.
Senior Business Lending Exec of Square Has Moved to Coinbase
May 16, 2022
Ronak Daya, who spearheaded several of Square Capital’s lending divisions, including “head of product for business lending” and “head of product for external lending and partnerships,” announced on twitter that he had moved on from the company. He had been involved in SMB lending for 7 straight years. His new role? Head of Financing Products at Coinbase.
If you thought Coinbase was just about buying Bitcoin, you’re wrong. Daya announced that he’ll be leading a team “to build lending and financing products both for consumers and institutional clients.”
“As I explored what came after Square, my primary focus was on challenging myself to go in a fundamentally new domain/area, and build for a new customer,” Daya wrote. “The priority was learning. Learning by building in domains that I am passionate about, but know little about.”
Convinced that the world is moving towards becoming a crypto-native economy, Daya added that he wants to “play a part in using trust, ease and education to onboard the next billion customers to a new financial system.”
Currently, Coinbase already offers a lending product, loans up to $1 million at 8% APR with monthly payments and no credit check. Though Bitcoin is used as collateral, payments are made by monthly ACH debit or through a linked USD wallet.
