Articles by deBanked Staff
The New Largest Merchant Cash Advance in History: $90 million +
September 9, 2020The largest merchant cash advance in history (at $40 million), first publicly disclosed in 2018, has been outdone. On Tuesday, the Receiver in the Par Funding SEC case revealed that its largest customer had outstanding purchased receivables of $91.3 million. The customer is an office and cleaning supply company based on Long Island. The amount is now the largest known merchant cash advance deal in history.
Par’s second largest customer had outstanding purchased receivables of $35 million.
Par’s total receivables are estimated to be $420 million. $228.8 million of it stems from just 10 customers including the two referenced above, according to a recently filed report.
Sketchy Virginia SBA Loan Brokers Indicted
August 26, 2020Ronald A. Smith and Terri Beth Miller, owners of Virginia-based Business Development Group (BDG), an SBA loan brokerage, were indicted this month over an advance-fee scheme in which many customers are alleged to have paid money to obtain SBA loans but did not in fact get them.
As part of the scheme, defendants are alleged to have made many false and misleading representations to prospective borrowers including that:
- BDG was a large, multi-state company
- BDG was headquartered at the Trump Building in New York City and had an additional business in Las Vegas
- BDG has assisted certain named companies in obtaining SBA loans
- BDG was a business established in 2005 or earlier
- BDG was affiliated with the SBA
- BDG had relationships with banks across the nation that allowed it to facilitate the loan approval process with SBA lenders in a customer’s area by utilizing a “Lender Linker” made up of the most preferred SBA lenders in the country
- BDG had a program that included a “Powerful Online Grant Writer Interface Service” that was directly connected to the federal government and “handled everything from A to Z in Finding, Writing, Submitting and Securing Grants”
- BDG offered a money back guarantee
- BDG won the 2016 Best of Manhattan Business Award for Business Development Software and Services
BDG was really just an internet-based business whose goal was to obtain money through fraudulent pretenses and promises, prosecutors contend.
A copy of the grand jury indictment can be obtained here.
CEO Of Online Lender Arrested For PPP Fraud
August 19, 2020
Sheng-wen Cheng, aka Justin Cheng, the CEO of Celeri Network, was arrested on Tuesday by the FBI. Celeri offers business loans, merchant cash advances, SBA loans, and student loans.
Cheng applied for over $7 million in PPP funds, federal agents allege, on the basis that Celeri Network and other companies he owns had 200 employees. In reality he only had 14 employees, they say.
Cheng succeeded in obtaining $2.8M in PPP funds but rather than use them for their intended lawful purpose, he bought a $40,000 Rolex watch, paid $80,000 towards a S560X4 Mercedes-Maybach, rented a $17,000/month condo apartment, bought $50,000 worth of furniture, and spent $37,000 while shopping at Louis Vuitton, Chanel, Burberry, Gucci, Christian Louboutin, and Yves Saint Laurent.
He also withdrew $360,000 in cash and/or cashiers checks and transferred $881,000 to accounts in Taiwan, UK, South Korea, and Singapore.
This, of course, is all according to the FBI. Statements made to Law360 indicate that Cheng maintains his innocence.
A press release published by Celeri late last year said that the company had raised $2.5M in seed funding that valued the company at $11M.
Fintech Companies Settle “True Lender” Lawsuit With Colorado Attorney General
August 19, 2020
Avant, Marlette Funding, and several banks consented to a settlement with the Colorado Attorney General earlier this month to close the books on litigation that has gone on for more than three years.
The lawsuits alleged that Avant and Marlette, who enjoyed bank partnerships, were themselves not covered by federal bank preemption and that they had violated the Uniform Consumer Credit Code of the state by among other things, charging excessive costs to consumers.
After a lengthy battle, Avant, Marlette, WebBank, and Cross River Bank entered into a joint settlement agreement with the Colorado Attorney General that prohibits the fintech companies from charging more than 36% APR in the State of Colorado, along with requiring that the fintech companies maintain a state lending license and engage in a long list of new and redundant measures of compliance.
Lendified Is Still Trying To Pull Through
August 18, 2020
On June 29th, deBanked ran a story titled Canadian Small Business Lender Looks Doomed In Wake of COVID-19. It was about Lendified. Several of the company’s top executives had recently resigned and its financial situation was dismal.
“Lendified is in default in respect of credit facilities with its secured lenders,” the company disclosed at the time. “Forbearance and standstill agreements are being discussed with these senior lenders, with none indicating to date that any enforcement action is expected although each is in a position to do so, however, no formal agreements in this regard have been concluded as of the date hereof.”
Among the company’s last ditch plans to recapitalize was the raising of equity through a private placement. But that was made impossible by the Ontario Securities Commission who entered an order prohibiting any such transaction for “failing to file certain outstanding continuous disclosure documents in a timely manner.” The filing failures, of course, were due to the issues they were facing. This order just compounded them.
The Commission partially revoked the order on August 14th, paving the way for the private placement to continue. Lendified is only seeking up to $1.4M, the proceeds of which would be used to “pay, among other things, outstanding fees owed to the Company’s auditors and other service providers, public and filing fees, legacy accounts payable as well as for general working capital purposes.” The company further said that “Completion of the Private Placement will help the Company in its efforts to prepare and file the outstanding continuous disclosure documents with the applicable regulatory authorities.”
Lendified offers no guarantees that the private placement will be successful. The company sold off a subsidiary, JUDI.AI, in July.
Where Fintech Ranks on the Inc 5000 List for 2020
August 12, 2020Here’s where fintech and online lending rank on the Inc 5000 list for 2020:
| Ranking | Company Name | Growth |
| 30 | Ocrolus | 7,919% |
| 46 | Yieldstreet | 6,103% |
| 351 | Direct Funding Now | 1,297% |
| 402 | GROUNDFLOOR | 1,141% |
| 486 | LoanPaymentPro | 946% |
| 534 | LendingPoint | 862% |
| 539 | OppLoans | 860% |
| 566 | dv01 | 830% |
| 647 | Fund That Flip | 724% |
| 1031 | Fundera | 449% |
| 1035 | Nav | 447% |
| 1053 | Fundrise | 442% |
| 1103 | Bitcoin Depot | 409% |
| 1229 | Smart Business Funding | 365% |
| 1282 | Global Lending Services | 349% |
| 1360 | CommonBond | 327% |
| 1392 | Forward Financing | 319% |
| 1398 | Fundation Group | 318% |
| 1502 | Fountainhead Commercial Capital | 293% |
| 1736 | Seek Capital | 246% |
| 1746 | PIRS Capital | 244% |
| 1776 | Braviant Holdings | 240% |
| 1933 | Choice Merchant Solutions | 218% |
| 2001 | Fundomate | 212% |
| 2257 | Lighter Capital | 185% |
| 2466 | Bankers Healthcare Group | 167% |
| 2501 | Fund&Grow | 165% |
| 2537 | Central Diligence Group | 162% |
| 2761 | Lendtek | 145% |
| 3062 | Shore Funding Solutions | 127% |
| 3400 | Biz2Credit | 110% |
| 3575 | National Funding | 103% |
| 4344 | Yalber & Got Capital | 76% |
| 4509 | Expansion Capital Group | 70% |
LendingClub’s Loan Originations Dropped By 90% in Q2
August 4, 2020LendingClub’s Q2 financials revealed that the company loaned $325.8M for the quarter, down 90% year-over-year. The company also recorded a net loss of $78.5M.
“In the current challenging environment, we have remained focused on the things we can control and are successfully executing against our strategic priorities,” CEO Scott Sanborn commented. “We are pleased with our ability to maintain strong levels of liquidity, are encouraged by the payment behavior of our members and the resilience of the loan portfolio and remain focused on the acquisition of Radius Bank.”
The company had $338M in the bank at quarter-end, up from the $244M in the bank at year-end 2019.
Square Capital Resumes Business Lending
August 4, 2020
Square Capital, the small business lending division of Square, resumed offers for its “core flex loans” in late July, the company announced. However, there will be “stricter eligibility criteria.”
Square Capital made no core flex loans in Q2, having paused in mid-March on news of the impending crisis.
The company pivoted to PPP lending in Q2 in the interim and through this program managed to fund over 80,000 small businesses for a grand total of $873 million. The average came out to approximately $11,000 per loan.
Square says that in PPP they “expanded awareness of Square Capital as 60% of [their] PPP borrowers had never before received a loan through Square.”
Loss rates during Q2 were about 2.5x prev-COVID levels, a range they accurately predicted might happen at the end of Q1.
