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
Velocity Capital Group Becomes First Funder to Offer Broker Commissions Via Crypto
August 2, 2021
Velocity Capital Group is bullish on crypto as a means of payment. Company President and CEO Jay Avigdor told deBanked that the company is officially incorporating cryptocurrency in two ways:
(1) Brokers can now choose to get paid commissions in cryptocurrency instead of cash.
(2) Merchants can now choose to get funded via cryptocurrency instead of cash.
In both cases, Avigdor touted the speed in which cryptocurrency can change hands versus waiting around for an ACH or a wire.
“Our goal since day 1 of VCG, was to give ISOs and merchants the ability to access capital as fast as possible,” Avigdor said. “With VCG’s proprietary technology, we have been able to change that mindset from ‘as fast as possible’ to ‘the FASTEST possible.'”
The company says it will use stable coins (USD Coin and DAI) to conduct these transactions “in order to limit market volatility” but that depending on the merchant or ISO relationship, they would be open to transmitting Bitcoin, Ethereum, etc.
Merchants getting funded with crypto would still have their future receivables collected via ACH so that part of the arrangement would not change. The underlying business is the same.
VCG alluded to there also being potential tax benefits of taking payment in crypto.
Avigdor believes that among industry peers, VCG is the first to offer commissions in crypto. He further explained that this is only one piece of the puzzle and that there are plans to integrate the company’s technology in a way that will allow merchants to access funding in less than 20 minutes from the time of submission to funds actually being received.
NJ Resurrects Small Business Finance Disclosure Bill
July 28, 2021New Jersey’s legislature has revived its small business finance disclosure bill. Having languished since last January, the Senate Commerce Committee quietly gave it a favorable report this past June.
New Jersey’s bill is similar to the law that New York is putting into effect on January 1st. As part of it, non-loan products will be required to calculate an APR even if one cannot be mathematically calculated by “estimating” one.
Brokers would be impacted too:
A broker who charges any fees or commission that would be paid by the recipient of the financing shall provide, at the time of extending a specific offer for a commercial financing transaction and in a form and manner prescribed by the commissioner, a written disclosure, in a document separate from the provider’s contract with the recipient, stating the following, if the information is not contained within the disclosure offered by the provider directly to the recipient:
(1) a list of all fees or commissions that would be paid to the broker by the recipient in connection with the commercial financing;
(2) the total dollar amount of charges listed pursuant to the bill;
and
(3) any increase to the annual percentage rate due to the charges listed above and the resulting dollar cost.
You can read the Senate Commerce Committee’s report here.
Should Small Business Lenders Weigh Risk of Applicants Getting Prosecuted for PPP Fraud?
July 23, 2021
As law enforcement officers and prosecutors gradually move on from fake businesses that got PPP in favor of real ones that lied to get more PPP funds than they should have, non-PPP loan underwriters may be forced to grapple with a new question: Is the merchant at risk of PPP fraud prosecution?
Alarm bells have already been sounded by Experian for a different reason, one that warned commercial fintech lenders that the mere receipt of PPP funds should not be considered enough to confer legitimacy on a loan applicant.
But what if everything checks out and the business is legitimate? PPP could come back to adversely affect the performance of the loan if the applicant is later prosecuted or forced to give back all or a portion of the PPP funds. A recent roundup by the Department of Justice, for example, resulted in 22 individuals being charged for PPP related fraud. More than a dozen actual businesses were ensnared by it, with the litany of charges including things “false statements to a federally insured financial institution.”
If a business misappropriated the funds, lied to get more than they should have, lied about when the business was founded, or engaged in some other kind of misleading impropriety, that business could be a ticking time bomb for lenders.
Proactive underwriters or fintech technology could assess whether or not the PPP funds obtained by an applicant were financially realistic and that the business start date aligned with PPP requirements. A business doing $20,000 a month in sales that obtained $200,000 in PPP funds, for example, may look sustainably healthy but raise a red flag that it may not have been legitimately obtained. Underwriters should be crunching the numbers and thinking about whether or not this applicant is likely to face consequences and what that might mean for the loan if it’s approved.
This editorial is the opinion of the author.
Fraudsters May Leverage Their PPP Approvals to Get Business Loans and MCAs
July 21, 2021
A small business finance underwriter torn between approving or declining an applicant probably should not consider whether or not that business got PPP funding as evidence of the applicant’s legitimacy.
A new alert put forth by Experian claims that “greater than 75% of PPP loans originated by commercial fintech lenders were NOT run through a fraud screening and have a greater probability of containing bad actors.” Experian says that “lenders will need to be more vigilant as they assess these businesses for future offers of credit.”
Experian cites data from the FTC that shows fraud and identify theft have surged since the pandemic started, climbing to even higher levels in 2021 over 2020.
Fraudsters that successfully obtained PPP loans with altered documents, for fake businesses, or on behalf of real businesses using stolen identities, may now use those as leverage to obtain additional money, particularly through sources where the perceived consequences of being found out are low. Non-bank funders and fintech lenders are an attractive target.
Just because an applicant got a PPP loan, underwriters should not assume it has passed a fraud check.
NYC is Back, So is it Time to Buy Here?
July 12, 2021Now that New York City is back, opportunity abounds to move in or make money off the dynamic real estate market. You might be able to get in on it even if you’re a first time investor. To size up the market and the common questions to consider, we spoke one on one with Erin Sykes, the Chief Economist of Nest Seekers International.
You can also watch it here on deBanked TV.
Watch More from deBanked’s Real Estate Investing Docuseries Here.
LendUp Stops Making New Loans
July 10, 2021
LendUp, a fintech lender that hoped to disrupt the payday loan industry, is no longer making new loans. A note posted on its website said “We are currently not offering loans to new customers.”
When deBanked sat down with the now former CEO Sasha Orloff in 2017, he said that their product was simply cheaper and more flexible.
“The easiest person to convince that we’re a better product is an existing payday user because it’s slightly cheaper at the beginning, it gets much cheaper over time,” he said then. “It has a lot more flexibility.”
But for all the bells and whistles, their still relatively high rates generated a target on their back with regulators.
In 2016, for example, the CFPB said “[LendUp] did not give consumers the opportunity to build credit and provide access to cheaper loans, as it claimed to consumers it would.”
Balancing the messaging with the reality seemd a difficult task.
Orloff stepped down in January 2019, but in less than two years the CFPB took a second crack at LendUp for allegedly violating the Military Lending Act.
In January of this year, LendUp settled the charges, agreeing to pay $300,000 in redress to consumers and to pay a $950,000 civil money penalty.
As recently as April, LendUp’s website was still offering loans with a promoted APR of 400%.
On The Scene With KEO in Miami
July 8, 2021Farid Shidfar is Head of US Operations at KEO, a small business finance company based in Midtown Miami. I sat down with Shidfar to ask about KEO’s recent foray into the market, what they’re seeing on the front lines, and their plans for the future. Our one-on-one interview is below:
Snapchat Acquired Mobile Shopping App Founded By Former MCA Execs
July 2, 2021
A brother and sister team formerly known throughout the merchant cash advance industry have achieved major success in another market altogether, mobile shopping.
Recently, their app was acquired by Snapchat, according to various news outlets, and the tech has since been integrated into the Snapchat app.
Molly and Meir Hurwitz, both original stalwarts of the old Pearl Capital in New York, co-founded Screenshop in 2017, an app that integrated shopping with fashion and social media. Its initial launch received added buzz thanks to Kim Kardashian’s early involvement as an advisor. Notably, Screenshop CEO Mark Fishman was previously a Risk Manager at Pearl Capital, rounding out the former MCA crew.
“We’re No. 5 on the app store category of fashion,” Meir Hurwitz told deBanked in November 2017. “We’re just getting started.”
The success continued.
“Screenshop gives shopping recommendations from hundreds of brands when you Scan a friend’s outfit,” Snapchat wrote in a published announcement this past May.
More than 170 million Snapchatters use scan features every month, the company revealed.
“Screenshop is now a part of ‘Scan’ said Snapchat CTO Bobby Murphy during the company’s annual Partner Summit broadcast on May 20. The above screenshot is of Murphy demonstrating the Screenshop technology.
