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
Canadian Lenders Summit a Real Bright Spot in Challenging Times
November 17, 2022
When the Canadian Lenders Association last convened for its summit in 2019, the organization had only 75 members. Today, its membership is approaching 300. Most people I spoke with attributed the rapid growth of membership to the tireless efforts of CLA co-founder and President Gary Schwartz. That achievement was also visually evident on Wednesday when more than 500 attendees literally packed into the MaRS building in Downtown Toronto for the first return to in-person since all those years ago.
The excitement of being back together was bittersweet in that there was collective acknowledgment that the economic climate had become less than favorable. For example, the opening session of the entire day was aptly named Raising in a Downturn. However, the discussion itself was much more optimistic. Neil Wechsler, CEO of OnDeck Canada, for example, talked about the benefits of having operated their business “underleveraged and overcapitalized” to be prepared for times such as this while numerous sidebar conversations suggested that startup fundraising was still very active. Expansion was also top of mind for many with several companies revealing that they had just set up shop in Canada from abroad or that they had expanded their home-grown Canadian business into other markets like the US. 
Predictions for what’s to come were all over the place but few, if any, expressed any real fear (except for the mortgage people). Attendees came to the summit to do business, grow, and to partake in the annual ritual of lamenting the slow adoption of open banking.
The banks, meanwhile, are also warming to fintech (finally) and had ample representation at the event. Innovations in concepts like loan insurance and collections technology also stood out. Seating during the sessions were always completely full throughout the day and overall it was a major success. Despite whatever happens next, I would anticipate that the CLA would probably graduate to an even larger venue next year as the organization grows in importance.
Think You’re Good at Closing Deals in the US? Apply Your Skills in the UK or Australia
November 10, 2022
Think you’re well-versed in the SMB finance business? You might want to take advantage of a fast pass being offered to replicate your success in the UK or Australia.
The opportunity stems from a proposal posted on LinkedIn by Capify CEO David Goldin. Goldin’s got two decades of experience in the business itself and 14 specifically in the UK/Australian markets. Now he’s looking to personally select a handful of brokers and/or small funding companies and guide them on expanding their business overseas.
But why?
Goldin believes that US operators could bring a certain dynamic lacking in the other markets, complete dedication to a single product where there is a lot of opportunity. “There’s very few MCA shops there,” he said. “Very few of them that are MCA-only companies.”
And so the dedicated MCA broker shop is something uniquely American and could prove to be a potent model if applied abroad. Brokers do play a major role in those markets but they’re a jack of all trades, Goldin explained, offering every product there is, resulting in limited throughput for a single core product. Markets like the UK and Australia offer some unique advantages in that they’re English speaking and the products themselves are already established. Goldin said that there’s an opportunity for US operators that “know how to sell risk-based capital” to come in and leverage the Capify infrastructure and intellectual capital.
To be clear, he’s not talking about sitting in an office in New York or Miami and calling business owners in Sydney and London, but about actually opening up a local office in those markets.
“You got to have a local presence,” Goldin said. “A remote company doesn’t work. You need to actually be there.”
All this would be set up and developed with the guidance of Capify, a benefit that would shorten the learning curve of doing business in a new market. “There’s a lot of stuff to navigate,” he said. “Different regulations, different rules, different clients.”
deBanked first began exploring the Australian market in 2015. At the time, there were about 20 alternative lenders operating in the country. Since then the market has flourished. The population of Australia is only 26 million people, about two-thirds that of Canada, but Goldin said that it’s not as competitive.
“The US is bigger but also 50x the competition,” he said.
For anyone interested in this opportunity, the best way to contact him is through LinkedIn. The original post can be found here.
How the Amazon / Parafin Merchant Cash Advance Deal Came to Be
November 2, 2022Back in December, Parafin, then a fintech startup with 20 employees, submitted a proposal to Amazon to roll out a potential Amazon merchant cash advance product. At the time, Parafin was little known to the general public and its surprise deal with DoorDash wouldn’t even become public until a month later.
The prospect of an MCA would not have been foreign to Amazon given that the company already offers direct business loans, lines of credit through Marcus by Goldman Sachs, and other loans thanks to a successful pilot with Lendistry. But the team behind Parafin were virtual unknowns in the merchant cash advance industry itself. The company’s 3 co-founders, including CEO Sahill Poddar, all hail from Robinhood, the investment app that became wildly popular especially with younger adults over the last several years.
Coincidentally, more than a dozen people employed by Parafin, including the co-founders, are former Robinhood employees, according to profiles reviewed on LinkedIn. It’s part of a trend, it appears, as other members of their team hail from well known Silicon Valley firms like Lending Club, Stripe, Funding Circle, Google, Amazon, Facebook, StreetShares, and more.
Ultimately, Parafin’s big bet paid off. On Tuesday, November 1st, Amazon announced that the Parafin team was the one it had chosen to debut its official merchant cash advance product.
“Amazon is committed to providing convenient and flexible access to capital for our sellers, regardless of their size,” said Tai Koottatep, director and general manager, Amazon WW B2B Payments & Lending, in the announcement. “Today’s launch is another milestone in strengthening Amazon’s commitment to sellers, and builds on the strong portfolio of financial solutions we already provide. This latest offering significantly expands sellers’ reach and capabilities, and broadens their access to capital in a flexible way—one that helps them control their cashflow, and by extension, their entire business.”
“We founded Parafin with the mission to grow small businesses, and we’re thrilled that we have the opportunity to do that by providing Amazon sellers with this merchant cash advance option,” said Vineet Goel, co-founder of Parafin. “It’s a privilege to count ourselves among Amazon’s suite of financial solutions, and we look forward to making a difference for Amazon.com sellers looking to expand their business.”
The product is already listed on Amazon’s website and was rolled out to some US businesses immediately. It will be available to hundreds of thousands of additional sellers by early 2023, the company claims.
Unique to an Amazon MCA is that funding amounts can start as low as $500 and go up to $10 million.
Amazon’s entrance into the merchant cash advance market coincides wih a unique moment in the product’s history as several states are in the midst of imposing strict regulations on their sale.
Broker Fair 2022 Photos
October 25, 2022The Broker Fair 2022 Photos can be FOUND HERE. Thank you so much to all the sponsors and attendees!
Ready for what’s next? deBanked returns to Miami Beach on January 19th! Registration is now open. For questions, email events@debanked.com.
Broker Fair is Sold Out: Here’s What You Need to Know Now
October 20, 2022
Broker Fair 2022 is sold out. If you’re registered, here’s what you need to know now:
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Pre-show (Sponsored by Lendini): October 23, 7-9pm (only open to pre-show ticket holders). This event is also sold out.
Location: 48 Lounge
Location: New York Marriott Marquis, 7th floor. Our room block is sold out.
Start Networking Early: Download the mobile app and connect with other attendees that have already begun using it too. |
Think The New California Disclosure Law is Just About a Disclosure Form? Think Again
September 13, 2022
“We’re one of the good guys so of course we’ll comply and include the form with our contracts.”
Variations of the above phrase have been oft-repeated in the last few months by participants in the commercial finance industry when queried by deBanked about California’s new disclosure law. Several companies have shared that they are prepared for what’s to come, but are they? The regulations go into effect on December 9th and begin a new chapter of compliance for the industry.
Though one might be aware that California will require specific disclosures on commercial finance contracts (including purchases of future sales), Katherine C. Fisher, Partner at Hudson Cook, LLP, explained that the breadth of the state’s law will likely require changes to a funding company’s operational processes as well. Fisher told deBanked that there’s not just the matter of disclosing but also the matter of what triggers a disclosure having to be made. What might otherwise be considered the normal discourse between a funding provider and a customer prior to a deal being consummated is now an area requiring close examination.
“If a broker sends a text to a merchant with the offers, could it trigger this?” is one scenario she posed about the threshold for disclosure.
The funding provider needs to know the answer because once the disclosure requirement is triggered, the broker needs to relay back the details of the offers made, the specific disclosures provided, and the timestamp of when this took place. All of this data then needs be stored by the funding provider to maintain compliance.
And funding providers will need to be vigilant.
“The funder is responsible for broker compliance,” Fisher said.
The entire process of who-said-what, when, and how will suddenly become a realm requiring tight control it seems. And that all comes back to the form itself, which is not all that simple either.
California will require funding providers to estimate an APR on a purchase transaction using one of two methods: the Historical Method or the Underwriting Method. While the methodology selected is probably best left to qualified counsel to assist with, the likely deviation of a future estimated APR from a backwards-looking APR was a reality considered by state regulators. To bridge this gap, California requires that funding providers disclose reasonably anticipated true-up scenarios. A true-up in this instance refers to the already well-established option for a merchant to perform a monthly reconciliation of payments if the amount collected is above or below the purchased percentage specified in the contract.
Though the very nature of the reconciliation is a consequence of not being able to predict the future exactly, California’s law requires that funding providers disclose the dates and amounts of the true-ups that they reasonably anticipate. Such concepts and mathematics, once perhaps the subjective domain of a funding provider’s in-house underwriters will soon be subject to regulatory scrutiny for total accuracy. And this just scratches the surface.
The scope of this law is so unique and technical that the Hudson Cook law firm spent a considerable amount of time preparing a guide on this very subject. deBanked saw some of the pages of this guide during a call.
Fisher, meanwhile, insisted that compliance in California is different than compliance with the law recently enacted in Virginia and that if funding providers wait until December to begin preparing, it will probably be too late to be ready in time.
“This is more than just a form,” Fisher said. “You need to spread the word about it.”
Got a Mantle, Bryant, or Mahomes Card? This Company Wants to Fund You
September 12, 2022
Last month, an anonymous bidder paid $12.6M for a 1952 mint condition Topps Mickey Mantle baseball card, the highest amount ever fetched for a piece of sports memorabilia at an auction. Understandably, the news electrified a fast growing market of collectors, traders, and financiers that predicted the next big asset class wasn’t just going to be real estate or crypto or NFTs, but physical sports trading cards.
The value of the Mantle sale came as no surprise to one budding entrepreneur in South Florida. On Instagram, he’d been talking about Mantle cards for weeks, even going so far as to hold up another ’52 Topps Mantle card to the camera to promote what his company can do, which is provide quick cash advances to owners of valuable sports cards.
The entrepreneur’s name is Edward Siegel, CEO of Card Fi. Siegel’s no stranger to the alternative finance space because he spent about a decade in the MCA industry, most recently as the founder of Bitty Advance, which he sold in 2020. Since then, Siegel returned to his roots and early passion of his youth.
“I had a background in sports cards as a collector, you know as a kid, but then in my early twenties, I was promoting card shows at malls,” Siegel said. “I was heavily into the hobby, setting up the card shows and promoting them and doing player appearances where players come in and do an autograph appearance.”
That was back in the late 80s, early 90s, according to Siegel.
When Covid hit and he exited his most recent company, he noticed a massive resurgence in the sports trading card market. His next business ultimately became Card Fi, a company that will evaluate the market value of a card and make an advance against it. There’s obviously risk involved so they take possession of the card for the duration.
“We have to get a hold of these cards and we’re responsible for them and then we vault them in our in-house bank vault,” Siegel said. The cards are stored in a highly secure climate controlled environment. Card Fi shows the vault off frequently in its Instagram videos.
Such a business requires large amounts of capital so Siegel went searching for investors, a pursuit that led him to a unique place, an Instagram Live pitch competition hosted by famed CEO and reality TV star Marcus Lemonis. Siegel entered himself in as a contestant, knowing full well that the odds of even being chosen to present his business to Lemonis were about a million-to-one.
Somehow, he was called up to pitch.
“So [businesses] went on there during the quarantine and you pitched your business,” Siegel explained. “I went on there and I pitched it […] And he understood it and he thought it made sense.”
The moment eventually led to a deal with Lemonis’ company and Card Fi was on its way.
Siegel, meanwhile, dispels the notion that the burgeoning trading card industry or his business hinges upon old vintage cards or that it’s a baseball-card-centric universe.
“If we look at it, there’s two different markets, you have the modern card market [where] I would say it’s basketball [that leads the pack],” he said. “For the vintage card market it’s baseball.”
Football is huge as well, he explained. A Patrick Mahomes rookie card, for example, an NFL Quarterback that’s still currently playing, recently fetched $861,000. There are only one of five like it in the world, the scarcity playing a major role in the value. Meanwhile, a Justin Herbert rookie card, an NFL Quarterback who’s only in his third year was already receiving bids above $1 million at the time this story was being written.
“It really depends on the card itself,” Siegel explained. “Some players might be known for having better careers but then you have cards that have more scarcity to them. Something that’s a one of one or maybe a very low populated card and a graded PSA 10 could very well be worth more than a [Michael] Jordan rookie because it has scarcity in it.”
PSA refers to cards that have been verified as authentic and graded on the condition of the card itself. Ten is the highest level a card can receive. Card Fi will only work with graded cards to avoid any funny business when it comes to advancing funds based upon the value.
Siegel explained that Card Fi’s average advance is about $40,000 – $50,000. The max right now is $500,000. There’s a big market for this type of funding it turns out because Card Fi’s much larger rival, PWCC, just raised $175 million to make similar offerings to sports card owners.
“This financing benefits the market as loans and cash advances have become an increasingly asked-for offering among trading card collectors,” said Chad Fister, PWCC’s CFO in a story that originally appeared on Sportico. “Enabling our clients to access liquidity through a menu of capital offerings is key as trading cards continue to prove themselves to be a valuable tangible asset class.”
For Card Fi, customers that take an advance can track everything through an online portal, including details about their cards, payments, and balance.
“We want to note that we built a full-service automated underwriting and collection platform to where, whether it’s the customer or the broker, they can log into our system and put the description of the card into the system and it’s going to automatically underwrite it and price it out,” Siegel said.
That description sounded like something straight out of the fintech industry of his past, especially the component about brokers.
“Just like the MCA space, we have a whole partnership side, a broker side, where brokers can refer us customers just as an affiliate where they just send the info over,” Siegel said. Similarly, they can earn a commission if a transaction is completed, he explained.
In this industry, brands like Topps, Upper Deck, and Panini have become the bread and butter for Card Fi. Even though it’s all business for Siegel these days, he couldn’t help but mention a particular card he had a personal attachment to.
“My personal favorite card in my collection is the 1965 Topps Joe Namath rookie card,” Siegel said. “Of course being a die hard New York Jets fan, that has to be my favorite card.”
Inflation? So What – SMBs Are Bullish On the Rest of 2022
August 17, 2022Eighty-nine percent of respondents projected that their small business will be doing the same, better, or much better by the end of the year, according to a recent survey conducted by IOU Financial. The majority of those polled actually selected better (39%) or much better (21%). Twenty-nine percent said they expected to be about the same.
The sentiment is significant given that 84% said that they were somewhat concerned or very concerned about rising inflation and 85% said that they were somewhat concerned or very concerned about a possible recession.
This data is in line with responses found from other surveys like the recent NFIB study that determined that inflation was the single most important problem that business owners were facing. But even that study revealed a sense of persistent optimism, similar to the IOU survey, when respondents said that financing and interest rates ranked the lowest on their selected list of problems.
All of which means that the biggest challenge small businesses are facing right now is not viewed as a mortally perilous one. Indeed, 74% of respondents to the IOU survey said that they plan to invest in their business in the next six months.
“They plan to fund expansion, make equipment or inventory purchases as well as put money into staffing and marketing,” the IOU report states. Only 5% flat out said that they do not plan to invest in their business in the next 6 months. The rest said that they might invest.
The optimism that is there is cautious, however. Seventy-five percent of respondents said that the covid pandemic is not fully over and 32% said that they would rate the current state of their business as somewhat negatively or very negatively.
The damage from the last two years lingers on but business owners are looking at what’s ahead of them and signaling that it’s onward and upward regardless.
The full IOU Small Business Survey can be downloaded here.
