Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.
Articles by Sean Murray
Details Emerge About the OnDeck – JPMorgan Chase Deal
December 30, 2015
The Wall Street Journal recently published many details about the recent OnDeck/JPMorgan Chase deal that everyone has been wondering about. Here are the cliff notes:
- OnDeck will get fees to originate and service loans for Chase up to $250,000
- Chase’s small business loans will have terms of 6, 9, and 12 months
- Chase customers won’t know OnDeck is involved at all
- OnDeck will not get Chase’s declines
- OnDeck will process Chase’s business loan applications in a matter of hours instead of weeks
Perhaps most interesting of all is that Chase will be doing 6-12 month small business loans. 2016 should be a unique year. With a Chase loan approved in hours, the days of banks taking weeks or months to underwrite an application will be a thing of the past.
The First Ever Comprehensive Industry Report is Now Available
December 29, 2015
Months ago, investment bank Bryant Park Capital teamed up with us to conduct the first ever industry CEO survey of its kind. A sample of the initial findings were distributed at Money2020 in Las Vegas. Eligible participants that disclosed their identities to the surveyors have already received a complementary copy of the full anonymized report.
Today, those that either weren’t eligible to take the survey or missed the deadline to participate, can buy a copy of it.
With a sample size of small business funding companies that originate more than $2 billion annually, the final report reveals the industry’s Compound Annual Growth Rate, Average Annual Revenues, Average Annual EBITDA, Portfolio Loss Rates, Approval Rates, M&A Expectations, Valuation Expectations, Syndication Data, and much more.
This report is highly recommended for all funders and ISOs seeking to raise capital or for those that want to eventually sell their company. It’s also a must-have for any company that seeks to set short-term or long-term goals, that wants to compare themselves against the industry, or is creating a realistic business plan.
Investors in the industry also stand to benefit from this data.
If you are interested in buying the full report, e-mail sean@debanked.com.
The original report sample for public distribution
Mentioned in Forbes
Bryant Park Capital’s professionals have completed approximately 400 assignments representing an aggregate transaction value of over $80 billion.
Lending Club Gets More Aggressive With Direct Pay
December 28, 2015
Lending Club’s maximum debt-to-income ratio eligibility level until now had been 30%. But under a new pilot program called Direct Pay Loans, borrowers whose DTI is as high as 50% can now get approved. But there’s a catch…
The Direct Pay Loan program “requires a borrower to use up to 80% of their loan proceeds to pay off outstanding debt,” according to a notice published by the company. They’re not trusting the borrower in these cases to do that on their own either. Lending Club will actually be the ones making the payments on the borrower’s behalf.
The move is reminiscent of a fairly common practice in the commercial financing industry where liabilities such as past due rent and tax liens are payed by the funding company directly.
It’s unclear if the ultimate goal is to be able to lend to more risky borrowers or if this is an experiment to determine if paying directly reduces the odds that a borrower will lie about how they intend to use the proceeds.
As of September 30th, 2015, Lending Club reported that 67.7% of their borrowers used their loans to refinance existing loans or pay off their credit cards. Since that’s based entirely on what box applicants select on the online application and isn’t actually verified, it’s possible that no borrowers actually refinance or pay off anything. With this being the case, Direct Pay may help Lending Club force their borrowers to hold up their end of the bargain.
Bernie Sanders Poses Bad Lending Question
December 27, 2015Two loans: one with collateral, the other without any. All else being the same, which one do you think would have the higher interest rate?
Given his tweet, Socialist (Democrat) candidate Bernie Sanders might not understand the question.
You have families out there paying 6, 8, 10 percent on student debt but you can refinance your homes at 3 percent. What sense is that?
— Bernie Sanders (@SenSanders) December 26, 2015
The twitterverse was quick to pounce on him for it:
@SenSanders I like you but you have to understand collateralized debt
— Greg Wissinger (@gwiss) December 26, 2015
@SenSanders
A bank can repossess a house. They can't repossess your brain if you quit paying student loans. Though, you make me wonder.
— Smittie (@smittie61984) December 26, 2015
@SenSanders Collateralized vs non collateralized loan. But you knew that already.
— enargins (Neil) (@enargins) December 26, 2015
@SenSanders it makes perfect sense. A 'home' is collateral which the bank can take possession of in case of default. m/t @KurtSchlichter
— All-American Male (@chrisbraly) December 26, 2015
@SenSanders astonishing how you can run president and not understand this basic understanding of collateral.
— Wittorical (@Wittorical) December 26, 2015
@SenSanders I'm generally on your side, but mortgages are secured debt whereas student loans are unsecured and don't always increase income.
— Don Edwards (@DMEdwards) December 26, 2015
@SenSanders wow, big display of stupidity here. The house has resale value. Can we sell people now if they don't pay?
— Ms. Parker (@CaseyParksIt) December 26, 2015
To be fair, student loans might be unsecured debt but they can’t be discharged in bankruptcy. There’s also ways for debt collectors to garnish a paycheck to pay them back. That’s entirely dependent on the borrower generating income though and likely means a substantially longer repayment period. In a famous op-ed by Lee Siegel in the NY Times titled, Why I Defaulted on My Student Loans however, it is apparently possible to just avoid the debt altogether (and apparently feel okay about it).
With stories like that it’s easy to understand why a loan secured by a home would cost less than a loan secured by someone’s willingness and ability to pay. And in the case of Bernie Sanders, a candidate who believes college should be free for everyone, it’s tough to say if his question was really just rhetoric meant to stir up his base or a serious one in which he really doesn’t understand how the underwriting of loans work.
Either way, many people are worried:
.@SenSanders doesn't understand why having collateral would account for a lower interest rate. And people want to make him president?
— Caleb Cassel (@CalebCassel) December 27, 2015
BizBloom Lights Up Times Square
December 24, 2015BizBloom’s “Yes, we’re local” campaign produced by industry veteran Thomas Costa is making its debut in New York City’s Times Square. Its mission, according to Costa, is to tell the story of the American Dream, particularly the struggles and accomplishments of entrepreneurs.
To do that, BizBloom intends to rely on the help of college students to interview small business owners all over the country. The stories that garner the largest social media responses will be featured in their slot airing over 43rd and Broadway. Additionally, for each story a student collects, BizBloom will donate to a special scholarship fund.
The campaign is already live and includes supporting endorsements from Quick Bridge Funding and deBanked:
Fundry Donates $25,000 to Kiva at Red Carpet Event
December 22, 2015Fundry, the parent company of Yellowstone Capital and Green Capital, hosted a red carpet event last Thursday evening in New York City where they presented a donation of $25,000 to Kiva. Kiva is a non-profit organization with a mission to connect people through lending to alleviate poverty.
The event, which also celebrated their 2015 success, was attended by more than 300 people. All told, Fundry originated nearly half a billion dollars in small business funding for the year.
Brooklyn Eyeglass Merchant Defrauds Business Lenders
December 22, 2015
It’s another case of bad merchants. In this instance, Maksim Grinberg, the owner of D&M Optical and 9th Street Vision in Brooklyn have been charged with defrauding lenders out of $3.4 million. According to an article in the New York Times, Grinberg, along with two co-defendants, used false documents and guarantors to obtain numerous business loans over the last five years. He then used those funds to gamble, shop with his girlfriend, and pay his rent. The charges have resulted in a 148-count indictment filed by the Brooklyn district attorney’s office.
Brooklyn District Attorney Ken Thompson is quoted in the official report as saying, “this long-running scheme allegedly took advantage of banks and leasing companies as well as of hard-working doctors whose identities were stolen so they could be listed as loan guarantors. We investigated this brazen scam, put an end to it and will now hold those responsible accountable.”
The roster of victim lenders which included names like Wells Fargo, noticeably did not list any alternative lenders. While a UCC search revealed his D&M Optical Store used a merchant cash advance 10-years ago, Grinberg’s scam was directed at what was apparently an easier target, traditional lenders. “To secure the loans,” according to the DA’s report, “the defendants submitted fraudulent documents, including applications, lease agreements and delivery acceptance forms as well as forged signatures of loan guarantors, according to the indictment.”
It is perhaps another sign that lenders need to move away from paper statements and to tools that can be verified electronically through third parties in an automated fashion. According to the Times, the scheme only began to unravel once a guarantor whose identity had been stolen was contacted to make a payment on their $1 million loan.
World Business Lenders Rings in 2016
December 18, 2015On December 8th, World Business Lenders (WBL) wrapped up 2015 and prepared for the coming new year at their annual shareholder meeting hosted at the Waldorf Astoria in New York City. The event, which was mostly restricted to company employees, referral partners and shareholders, featured some out-of-town guest speakers including BFS Capital CEO Marc Glazer and RapidAdvance Chairman Jeremy Brown.
On a panel moderated by WBL Managing Director Alex Gemici, Brown and Glazer expressed their optimism for the industry’s future, but to some extent heeded caution. Brown specifically made reference to his prediction of a bursting bubble but conceded that he might have been off by a year or two. Glazer reminded the audience that both executives had weathered the financial crisis so that they had witnessed firsthand how a recession can affect their businesses, and made them stronger because of it.
WBL CEO Doug Naidus made a similar admission in his presentation, in that he thought that the bubble of unsecured lending would burst in 2015 but that it hadn’t happened yet. Still, he thinks it’s right around the corner. One of their primary hedges against a correction is that they secure their loans against real estate. Naidus has a background in mortgage lending so it’s a market they’re familiar with.
Another one of their key strategies is the franchise model. Over the last two years, WBL has acquired commercial finance brokerages and converted them into originating houses for their collateralized loan program. It has had a really positive impact on their growth and on their margins, according to information disclosed at the event. It’s expected that they will continue to pursue more acquisitions.
The sentiment of the event was rather festive and optimistic, with WBL enjoying a positive trajectory of growth and success.
