Articles by deBanked Staff
Funding Merchants in New York? What Don’t You Know?
May 15, 2024It doesn’t matter if you’re sitting in an office located in Florida, California, New Jersey, or anywhere else, if you work with any merchants in New York State the legal stakes have never been higher. If you saw even half the commentary and feedback that deBanked has reviewed over the last two months about what’s taking place, you’d understand why you really can’t afford to miss this segment at Broker Fair this coming Monday in NYC. You’re not the only one with questions.
Don’t be that person that reaches out after it’s too late to say you wish you had known something ahead of time. Hear it from qualified attorneys that are both on the panel and in attendance at the event on May 20th in NYC. Already have a lawyer that advises you on all this? Great! Send them to this too. You only get one shot to do it right in this business. Register Here
Shopify Capital MCA, Loan Origination Growth Appears to Slow Down
May 9, 2024Shopify Capital, the funding arm of Shopify that provides merchant cash advances and loans to merchants on its platform, experienced no increase in these related receivables in Q1 compared to Q4 2023. The company typically records significant growth in this figure each quarter. Shopify used to broadcast its origination figures far and wide in each quarterly earnings report and call but has since gotten shy about this segment of its business and no longer discloses originations. Instead, its balance sheet line item for “Loans and merchant cash advances” is virtually all there is to go by now and they were listed at $815M in Q1 vs $816M the prior quarter. This, of course, only reflects anything they’ve kept on balance sheet and could be a misleading indicator if those receivables are being sold off or taken on by a third party.
Shopify’s major rival, Amazon, never disclosed origination figures for its Amazon lending program, and in March announced that it was discontinuing its in-house lending program altogether after a 12-year run.
Shopify is still among the largest online small business lenders in the US.
An MCA Debt Settlement Owner Arrested by FBI
May 8, 2024
One of the alleged masterminds behind MCA Cure LLC, LDMS Group, LLC, and Evergreen Settlement Group LLC, was arrested by the FBI six weeks ago after inducing merchants to divert payments away from their MCA providers and then failing to negotiate with the funders.
The accused is Mark Csantaveri, who is named along with two unnamed co-conspirators from New Jersey. Both co-conspirator names were made easily discoverable by details disclosed by the FBI however. The debt settlement websites made claims that they had a “proven proprietary debt restructuring system” that could lower their payments by 80%. As part of the enrollment process, merchants were directed to send funds to an escrow account, for which the co-conspirators would then transfer to their own personal accounts.
According to the complaint, they would then claim to be negotiating with the funders and give updates about waiting to hear from attorneys and settlements. The charges are for Wire Fraud, Conspiracy to Commit Wire Fraud, and Money Laundering.
Csantaveri was immediately remanded to jail, was represented by a public defender and was only recently released on a $200,000 unsecured bond.
“Csantaveri and his conspirators misappropriated the victims’ money for their personal use, including over $1 million in gambling expenses,” the DOJ said. “Csantaveri’s scheme ultimately defrauded more than 50 victims of more than $3.4 million dollars.”
Conspiracy to commit wire fraud is punishable by a maximum of 20 years in prison and a fine of $250,000 or twice the gross gain or loss involved in the offense, whichever is greatest.
“MCA Debt Settlement” Company Sued
May 7, 2024A firm that offers to “restructure corporate debt primarily MCA or Merchant Cash Advance debt” was sued last month by a small business owner for fraudulent inducement, consumer fraud, unjust enrichment, breach of fiduciary duties, and for a declaratory judgment. Corporate defendants include MCA Resolve LLC and Coastal Debt Resolve (ABSM LLC) in addition to several individuals.
The alleged scheme, as laid out by plaintiff, asks business owners to pay huge fees to the debt settlement firm all while being forced to default on their business financing agreements on the hope that they might eventually get a proposal to settle for far less than the amount agreed. In this case, plaintiff explained that the result was that they actually ended up owing more because of how much defendants were charging. The case was filed in the Superior Court of Arizona and can be viewed here.
Notably, MCA Resolve LLC is currently being sued by two unrelated MCA funding companies in the New York Supreme Court.
Square Loans: $1.32B Funded in Q1, Expands to Japan
May 2, 2024
Square Loans, a subsidiary of Block, originated 129,000 small business loans for a total of $1.32B in the first quarter.
“Strength in banking gross profit was driven by continued strong demand for loans and healthy repayment trends,” the company said. Loss rates also remained consistent with historical ranges.
The company also expanded its business loan program to Japan and it has so far exceeded their expectations.
“Clearly, quick access to funds and a seamless product experience are true differentiators relative to existing financing options for SMBs in Japan,” said Block CFO Amrita Ahuja.
Separately, Block CEO Jack Dorsey spent an inordinate amount of time talking about Bitcoin in the quarterly shareholder letter, his entire message in fact.
It opened up with the following quotation: “Why the hell are you all spending so much time on bitcoin?”
“We get this question a lot. We’ll use this quarter’s letter to answer it,” Dorsey wrote in response.
Enova Has Big Q1, Sees Strong SMB Market
May 1, 2024
Enova originated $960M in small business loans in Q1 2024, setting what is believed to be a new quarterly record. During the earnings call, Enova CEO David Fisher said that confidence in the economy and consumer spending was driving the SMB market forward.
“Our small businesses aren’t concerned about inflation,” Fisher said. “Strong consumer spending and the ability to increase prices are offsetting that. And we are seeing stable performance in that portfolio.”
In fact, the company expects yield on the SMB side of its business to increase in the short term.
“We’ve just shifted more towards kind of the middle to upper end of our APR range for the SMB products,” said Fisher. “And so with those higher APRs from slightly higher defaults – so you’ll see over the next few quarters just slightly elevated compared to historic level default rates in the SMB business and eventually slightly higher net charge-offs as a percentage of ARR. But what will come along with that, is higher yields and higher revenue. And so the ROEs on those products, those originations are looking really, really good.”
Enova also expressed the value it’s gotten out of marketing its products on TV.
“We’ve gotten heavier and heavier in TV,” Fisher said. “That’s been an area of success for us for sure relative to say five to seven years ago, and I think certainly relative to our competitors. And then digital I think has improved for us in ways that we probably wouldn’t have guessed a few years ago. And a lot of that growth I think is kind of taking share away from leads. I think leads has continued to shrink as the share of the total, which was fine, we’d like to control our own destiny.”
California Launches its Own Business Loan Marketplace
April 28, 2024
It’s a sign of the times. State and federal organizations are launching their own business loan marketplaces to compete with the numerous ones that exist in the private sector. The latest is California which just launched its “Small Business Loan Match” tool.
“We created Loan Match to ease the process of finding trusted loans for California entrepreneurs, gathering dozens of lenders on one platform for a one-stop experience,” the site says. “All lenders have been pre-vetted and enrolled in IBank’s Loan Guarantee Program, which specializes in bridging the gap between responsible lenders and small businesses.”
IBank, not to be confused with iBank, is the California Infrastructure and Economic Development Bank that was created to “finance public infrastructure and private development that promote a healthy climate for jobs, contribute to a strong economy and improve the quality of life in California communities.”
California follows New York City which launched NYC Funds Finder, the SBA’s Lender Match tool, the CFPB’s planned loan marketplace comparison tool, and Bank of America’s Access to Capital Connector.
