Articles by deBanked Staff
Has PayPal Eclipsed OnDeck in Small Business Loans?
April 26, 2019
It’s been said that Kabbage is on pace to surpass OnDeck in small business loan originations, but PayPal has already done it.
When PayPal announced a working capital program in the Fall of 2013, few were predicting that the initiative would propel them to the top of the small business lending charts. Just two years later, however, the payment processing giant had already loaned more than $1 billion to small businesses.
Today, that number is over $10 billion, according to a comment made by PayPal CEO Dan Schulman on the company’s Q1 earnings call.
That figure would suggest that they had loaned approximately $9 billion from Fall 2015 to the end of Q1 2019. OnDeck, by comparison, loaned $7.5 billion since Fall 2015 through Q4 2018. Several other data sources, including previous statements from PayPal that they had surpassed more than a billion dollars in quarterly small business funding in 2018 (already more than OnDeck), indicate that PayPal has become #1 on the deBanked small business funding leaderboard.
PayPal’s growth was helped in part by its acquisition of Swift Capital in 2017.
Two of the top four are payment processors:
| Company Name | 2018 Originations | 2017 | 2016 | 2015 | 2014 | |
| PayPal | $4,000,000,000* | $750,000,000* | ||||
| OnDeck | $2,484,000,000 | $2,114,663,000 | $2,400,000,000 | $1,900,000,000 | $1,200,000,000 | |
| Kabbage | $2,000,000,000 | $1,500,000,000 | $1,220,000,000 | $900,000,000 | $350,000,000 | |
| Square Capital | $1,600,000,000 | $1,177,000,000 | $798,000,000 | $400,000,000 | $100,000,000 | |
| Funding Circle (USA only) | $500,000,000 | |||||
| BlueVine | $500,000,000* | $200,000,000* | ||||
| National Funding | $427,000,000 | $350,000,000 | $293,000,000 | |||
| Kapitus | $393,000,000 | $375,000,000 | $375,000,000 | $280,000,000 | ||
| BFS Capital | $300,000,000 | $300,000,000 | ||||
| RapidFinance | $260,000,000 | $280,000,000 | $195,000,000 | |||
| Credibly | $180,000,000 | $150,000,000 | $95,000,000 | $55,000,000 | ||
| Shopify | $277,100,000 | $140,000,000 | ||||
| Forward Financing | $125,000,000 | |||||
| IOU Financial | $91,300,000 | $107,600,000 | $146,400,000 | $100,000,000 | ||
| Yalber | $65,000,000 |
*Asterisks signify that the figure is the editor’s estimate
< 5% Annual Returns On Small Business Loans?
April 25, 2019
If you were to invest in small business loans with 4-year terms, what kind of return would you hope to get?
Retail investors that put their money in a mix of high-risk and low-risk loans on Funding Circle’s UK platform should expect to achieve a return of 4.5% to 6.5% a year (after defaults and 1% servicing fee), the company recently announced. That’s down from their previous projections. Meanwhile, their conservative loans could achieve returns of 4.3% to 4.7% a year.
A Marcus By Goldman Sachs savings account in the UK by comparison earns 1.50%
Funding Circle explained in a blog post that the returns could actually be higher or lower than projected.
To-date, investor interest has continued to grow with peers on the platform investing £1.5 billion in 2018 and £419 million in the 1st quarter of 2019.
More Than Half of Small Businesses Seek Less Than $100,000 in Financing
April 22, 2019
Small businesses need capital in small doses. That’s a takeaway of the latest study published by the Federal Reserve that revealed 57% of employer firms (with less than 500 employees) that applied for financing in 2018, sought $100,000 or less. 20% sought less than $25,000.
56% of all financing applicants said they applied in order to expand their business or pursue a new opportunity while 44% said the funds would be used to meet operating expenses.
47% of employer firms that applied for credit received all of the financing they sought. 19% said they received less than half of what they needed and 22% said they didn’t get anything at all.
Unsurprisingly, those that received nothing were categorized as high credit risk. The Federal Reserve defined that category as having a FICO score less than 620 or a business credit score between 1 and 49.
Small Businesses Rank Online Lenders More Transparent Than Big Banks
April 16, 2019When it comes to business loans, small businesses say online lenders are more transparent than big banks.
Specifically, 15% of respondents to a Federal Reserve survey reported challenges with transparency experienced at big banks versus only 12% with online lenders. Small businesses also ranked big banks worse on credit decision wait times, application process difficulty, and other unspecified challenges.
The Federal Reserve survey examined small businesses with less than 500 employees.
Small banks fared the best on transparency, payment terms, and interest rates.
Merchant Cash Advances Surpass Leasing As Goto Financing Option for Small Businesses
April 16, 2019
More small business applied for merchant cash advances in 2018 than they did leasing, factoring, or equity investments. That’s according to a recent Federal Reserve study of small businesses with less than 500 employees.
Nine percent of applicants applied for merchant cash advances in 2018 while only 3% applied for factoring. Leasing dropped year-over-year from 10% in 2017 to 8% in 2018.
On average, merchant cash advances were approved 85% of the time compared to business lines of credit (73%), business loans (67%), and SBA loans (52%). Six percent of all small businesses surveyed said they used merchant cash advances on a regular basis, versus 9% for leasing and 3% for factoring.
Unsurprisingly, small businesses overwhelmingly still sought loans or lines of credit. Of those surveyed that applied for any type of financing in 2018, 85% applied for a loan or line of credit and 28% applied for a credit card.
You can download the Federal Reserve’s complete report here.
Direct Lending Investments Had Over 950 Investors
April 16, 2019
Documents filed in a New York Supreme Court case by the receiver managing Direct Lending Investments (DLI), revealed that DLI had more than 950 investors worldwide with collective investments on the books totaling over $780 million.
For those wondering what’s happened since word of the hedge fund’s shocking demise, Bradley D. Sharp of Development Specialists, Inc. has been appointed to serve as permanent receiver for the fund’s estate. In the New York Supreme Court case, which coincidentally involves VOIP Guardian Partners, Sharp explained that they are currently dealing with a number of “urgent matters arising during the first two weeks of the SEC Action, including but not limited to: securing the business assets and cash of the receivership estate; taking custody of records of the Receivership Entity, including records held by third parties; filing notices of the receivership in approximately 50 district courts across the country; addressing insurance and loan portfolio matters; providing notice to and responding to inquiries from investors; and other similar pressing matters.”
Regarding the $192 million owed to DLI by VOIP, “the Receiver is evaluating enforcement and collection of the VOIP Guardian Loans as against VOIP Guardian Partners I LLC in light of its pending bankruptcy proceeding, and the underlying loans comprising the collateral for the VOIP Guardian Loans.”
Recovering the $192 million in bankruptcy from VOIP may prove difficult. deBanked determined that $159 million of it was actually loaned by VOIP to other companies internationally, including Telacme Ltd in Hong Kong and Najd Technologies Ltd in United Arab Emirates. At the time of its reporting, the websites for both companies had been taken down from the web. The website for Telacme has since been restored.
A class action lawsuit was filed against DLI, its former chief executive Brendan Ross, and others on April 1st.
Additional documents filed in the case on 4/12/19 can be viewed here:
DLI-41219-15.pdf
DLI-41219-16.pdf
Lots of Tech Buzzwords, Scary Problems
April 16, 2019
A federal regulator cut through the shield of fintech buzzwords on Monday when it announced that a darling of online lending valued at $2 billion, failed to properly handle rudimentary loan practices. The lender is Chicago-based Avant, who reportedly settled with the FTC for $3.85 million.
According to the FTC, Avant struggled to accurately determine borrower loan balances and repeatedly mismanaged payments. FTC Bureau of Consumer Protection Director Andrew Smith said that Avant’s issues were systemic. “Online lenders need to understand that loan servicing is just as important to consumers as loan marketing and origination, and we will not hesitate to hold lenders liable for unfair or deceptive servicing practices,” he said in a press release.
The FTC alleged:
“When consumers got an email or verbal confirmation from Avant that their loan was paid off, the company came back for more – sometimes months later – claiming the payoff quote was erroneous. The FTC says Avant dinged consumers for extra fees and interest and even reported to credit bureaus that loans were delinquent after consumers paid the quoted payoff amount.”
The FTC further stated:
“The lawsuit also alleges that Avant charged consumers’ credit cards or took payments from their bank accounts without permission or in amounts larger than authorized. Sometimes Avant charged duplicate payments. One unfortunate consumer’s monthly payment was debited from his account eleven times in a single day. Another person called Avant’s customer service number trying to reduce his monthly payment only to be charged his entire balance. In other instances, Avant took consumers’ payoff balance twice. One consumer was stuck with overdraft fees and angry creditors when Avant withdrew his monthly payment three times in one day.”
In a subtle dig, the FTC said that online lending could be beneficial “if 21st century financial platforms abandon misleading 20th century practices.”
Under the settlement order, Avant, LLC will be prohibited from taking unauthorized payments and from collecting payment by means of remotely created check (RCC). The company also is prohibited from misrepresenting: the methods of payment accepted for monthly payments, partial payments, payoffs, or any other purpose; the amount of payment that will be sufficient to pay off in its entirety the balance of an account; when payments will be applied or credited; or any material fact regarding payments, fees, or charges.
Kabbage Could Be Neck and Neck with OnDeck for Originations This Year
April 8, 2019Kabbage funded $600 million in the first quarter of the year, putting it on pace to potentially overtake OnDeck in originations for 2019. OnDeck reported $658 million in originations just a quarter earlier to finish 2018.
The two companies have been among the top three funders by origination volume on deBanked’s leaderboard since 2014. OnDeck has consistently been on top with Kabbage and Square solidly in the #2 and #3 slots.
In 2018, OnDeck funded $2.48 billion, while Kabbage CEO Robert Frohwein told deBanked that the company originated “north of $2 billion.”
Both companies are expanding.
“We solidified our position as the leading online lender to small businesses in the US, launched ODX, our platform-as-a-service business, and announced plans to scale our international operations and enter the equipment finance market,” said OnDeck CEO Noah Breslow in a 2018 Q4 report statement.
Meanwhile, Kabbage announced in January of this year that it will be powering a program that offers financing to U.S. customers of the Chinese e-commerce giant Alibaba.
“Financing at the point of sale requires a fully automated solution that can handle the immense volume of daily transactions that occur on Alibaba.com,” said Kabbage CEO Rob Frohwein. “We are incredibly impressed with the service and value that Alibaba.com delivers to American businesses and want to do all we can to support their important mission.”
| Company Name | 2018 Originations | 2017 | 2016 | 2015 | 2014 |
| OnDeck | $2,484,000,000 | $2,114,663,000 | $2,400,000,000 | $1,900,000,000 | $1,200,000,000 |
| Kabbage | $2,000,000,000 | $1,500,000,000 | $1,220,000,000 | $900,000,000 | $350,000,000 |
| Square Capital | $1,600,000,000 | $1,177,000,000 | $798,000,000 | $400,000,000 | $100,000,000 |
deBanked’s leaderboard omits companies that have not disclosed their small business origination volumes.
Kabbage’s $700 million securitization that was announced today will be used to pay down a previous securitization.
