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
Up Next On The New York Legislative Agenda: Funder, Lender, and Broker Licensing
September 10, 2019
New York State Senator James Sanders Jr. has introduced S6688, a commercial financing licensing bill that would require persons or entities engaging in the business of making or soliciting commercial financing products in New York state to obtain a license from the New York Department of Financial Services. The bill covers small business lenders, merchant cash advance companies, factors, and leasing companies for transactions under $500,000.
The bill likely won’t see any activity until the New York legislative session resumes in 2020, at which point it could be amended or killed.
As currently drafted, applicants for a license would be subject to a criminal background search and be required to submit their fingerprints for a review by agencies such as the FBI. In addition to paying an application fee, applicants would be required to maintain liquid assets of $50,000.
Sanders, the bill’s sponsor, is the Chairman of the banking committee. You can read the full text of the bill here.
Stripe Ventures Into Merchant Cash Advance Financing
September 6, 2019
Stripe, a payments firm lauded as the world’s most valuable private fintech company (at $22.5B), has officially launched a merchant cash advance product.
Dozens of news outlets have announced that the company is providing loans, but that’s not all, deBanked has learned. Both loans and merchant cash advances are available.
The company’s FAQ page originally explained the “Capital” product as a merchant cash advance but it’s since been updated to reflect that they offer access to both merchant cash advances and loans. An official Stripe spokesperson also clarified that an offer could be an MCA or a loan. The updated FAQ says that funding terms would be available in the customer dashboard, in the funding contract, and that which one a customer qualifies for depends on the specifics of their business.
Stripe merchant account customers can find out if they’re eligible for funding in their dashboard. If they’re not, they can still send Stripe a note through the dashboard to signal that they’re interested, say how much they’re looking for, and select what they plan to do with the funds. Stripe says they will not review your credit report and that all offers are based solely on Stripe transaction history.
The new product will not disrupt the separate integration with Funding Circle, according to a statement provided to Digital Transactions. Stripe customers can still apply to Funding Circle by connecting their Stripe account. Funding Circle offers term loans that range from six months to five years.
Stripe’s MCA product is currently only available in the US, but the company’s founders, Patrick and John Collison, brothers, hail from an unlikely place, rural Ireland. The company handles tens of billions of dollars in payments a year across 34 countries.
Like other recent entrants into the small business funding space, Stripe’s advantage is its ability to tap into its existing customer base. Other payments companies such as PayPal and Square, for example, were among the top four largest originators (for which public data is available) of alternative small business funding in 2018.
Note: This article has been updated to reflect the changes made on Stripe’s website as well as an additional clarification from the company.
A Side-By-Side Look At Small Business Funding Securitization Pools
September 6, 2019Several small business funding companies have closed majored securitization deals since 2018 with Kroll Bond Rating Agency rating the transactions. For the most recent transaction with National Funding, Kroll compared each securitized pool side-by-side in a chart. An abbreviated version of it is below:
| NFAS 2019-1 (National Funding) | RFS 2018-1 (Rapid Finance) | CRDBL 2018-1 (Credibly) | SFS 2018-1 (Kapitus) | |
| Weighted Avg Original Expected Time (months) | 9.9 | 11.7 | 11.5 | 7.8 |
| Weighted Avg RTR Ratio | 1.36x | 1.27x | 1.32 | 1.35 |
| Weighted Avg Credit Score | 664 | 665 | 679 | 649 |
| Weight Avg Time in Biz (years) | 9.6 | 14.6 | 12.3 | 12.5 |
| Percentage of MCA | 0.0% | 14.1% | 45.8% | 60% |
| Percentage of Loan | 100% | 85.9% | 54.2% | 40% |
New York’s COJ Restrictions Have Been Signed Into Law
August 30, 2019
Governor Cuomo has signed S6395, the law that outlaws entering a Confession of Judgment in New York against a non-New York debtor.
Rich Azzopardi, a senior advisor to the governor, said on social media that the law has “closed a loophole that allowed unscrupulous creditors to use NY courts to penalize out-of-state consumers with no ties to the state.” He congratulated Senators Brad Hoylman and Assembly Member Jeffrey Dinowitz for their work on the bill.
Senator Hoylman tweeted in response that “the entire business model of lenders who exploited New York’s court system and laws to prey on out-of-state small businesses through confessions of judgment was immoral.”
The Confession of Judgment ban is very specific, it prohibits the entering of a COJ in New York against a non-New York party. It does not prevent parties from filing lawsuits in New York. It does not prohibit COJs from being filed in other states. This law is significant because approximately 99% of COJs being utilized in the small business finance industry were being filed in New York regardless of where the debtor resided. That is because the New York Court system is the fastest and most efficient when it comes to entering COJs and securing a judgment.
The bill was drafted in response to a controversial story series published by Bloomberg reporters Zeke Faux and Zachary Mider that alleged abuses were taking place in the New York courts via COJs.
New York’s COJ Bill Has Been Delivered To The Governor
August 28, 2019
New York’s infamous Confession of Judgment bill has finally been delivered to the governor for his signature. Although the legislative process offers flexibility to depart from the statutory timelines (as we have witnessed), the governor now presumably has 10 days or less to sign it. Stay tuned.
The Confession of Judgment ban is very specific, it prohibits the entering of a COJ in New York against a non-New York resident. It does not prevent parties from filing lawsuits in New York. It does not prohibit COJs from being filed in other states. This law is significant because approximately 99% of COJs being utilized in the small business finance industry were being filed in New York regardless of where the debtor resided. That is because the New York Court system is the fastest and most efficient when it comes to entering COJs and securing a judgment.
The 2019 Top Small Business Funders By Revenue
August 14, 2019The below chart ranks several companies in the non-bank small business financing space by revenue over the last 5 years. The data is primarily drawn from reports submitted to the Inc. 5000 list, public earnings statements, or published media reports. It is not comprehensive. Companies for which no data is publicly available are excluded. Want to add your figures? Email Sean@debanked.com
| Company | 2018 | 2017 | 2016 | 2015 | 2014 |
| Square | $3,298,177,000 | $2,214,253,000 | $1,708,721,000 | $1,267,118,000 | $850,192,000 |
| OnDeck | $398,376,000 | $350,950,000 | $291,300,000 | $254,700,000 | $158,100,000 |
| Kabbage | $200,000,000+* | $171,784,000 | $97,461,712 | $40,193,000 | |
| Global Lending Services | $232,200,000 | $125,700,000 | |||
| Bankers Healthcare Group | $220,300,000 | $160,300,000 | $93,825,129 | ||
| National Funding | $121,300,000 | $94,500,000 | $75,693,096 | $59,075,878 | $39,048,959 |
| Forward Financing | $75,500,000 | $42,100,000 | $28,305,078 | ||
| ApplePie Capital | $69,700,000 | ||||
| Fora Financial | $68,600,000 | $50,800,000 | $41,590,720 | $33,974,000 | $26,932,581 |
| Reliant Funding | $64,800,000 | $55,400,000 | $51,946,000 | $11,294,044 | $9,723,924 |
| Envision Capital Group | $32,700,000 | ||||
| Expansion Capital Group | $31,300,300 | $23,400,000 | |||
| SmartBiz Loans | $23,600,000 | ||||
| 1 Global Capital | bankruptcy | $22,600,000 | |||
| IOU Financial | $19,200,000 | $17,415,096 | $17,400,527 | $11,971,148 | $6,160,017 |
| Quicksilver Capital | $16,500,000 | ||||
| Channel Partners Capital | $23,000,000 | $14,500,000 | $2,207,927 | $4,013,608 | |
| Lendr | $16,500,000 | $11,800,000 | |||
| Lighter Capital | $16,000,000 | $11,900,000 | $6,364,417 | $4,364,907 | |
| United Capital Source | $9,735,350 | $8,465,260 | $3,917,193 | ||
| Fundera | $15,600,000 | $8,800,000 | |||
| US Business Funding | $14,800,000 | $9,100,000 | $5,794,936 | ||
| Wellen Capital | $12,200,000 | $13,200,000 | $15,984,688 | ||
| PIRS Capital | $11,900,000 | ||||
| Nav | $10,300,000 | $5,900,000 | $2,663,344 | ||
| P2Binvestor | $10,000,000 | ||||
| Seek Business Capital | $8,800,000 | ||||
| Fund&Grow | $7,500,000 | $5,700,000 | $4,082,130 | ||
| Funding Merchant Source | $7,500,000 | ||||
| Shore Funding Solutions | $5,000,000 | $4,300,000 | |||
| StreetShares | $4,967,426 | $3,701,210 | $647,119 | $239,593 | |
| FitSmallBusiness.com | $3,000,000 | ||||
| Eagle Business Credit | $3,600,000 | $2,600,000 | |||
| Everlasting Capital | $2,500,000 | $2,100,000 | |||
| Swift Capital | acquired by PayPal | $88,600,000 | $51,400,000 | $27,540,900 | |
| Blue Bridge Financial | $6,569,714 | $5,470,564 | |||
| Fast Capital 360 | $6,264,924 | ||||
| Cashbloom | $5,404,123 | $4,804,112 | $3,941,819 | ||
| Priority Funding Solutions | $2,599,931 |
Chase Ends Partnership With OnDeck, OnDeck Stock Tanks On Bucket of Mixed News
July 29, 2019
The market didn’t take too kindly to OnDeck’s Q2 earnings announcement on Monday. The stock price set a new all time intraday low of $3.01, down 24% from Friday’s close.
First, JPM Chase ended their partnership with OnDeck, the company said, bringing a 3-year relationship to a close. “We can’t speak for Chase and their change in priorities,” OnDeck CEO Noah Breslow said during the Q&A with analysts. “I don’t think it was specific to us.”
It was subsequently revealed that the relationship was never a significant moneymaker for their business to begin with. “On a standalone basis, it was a positive contributor,” the company said, but that it was “not a contributor to the bottom line profit.”
Breslow called the Chase deal a one-off that had some costs involved with it, but that they were optimistic about other deals with banks through their subsidiary ODX. “We do believe the drivers of this are not some fundamental readout on the ODX model,” he explained. “Again, we had a product that performs very well from an underwriting perspective. Customers loved it. We can’t speculate on why Chase made this particular decision. We just know it was specific to them.”
OnDeck also announced plans to pursue a bank charter and believed that the timing was right. Although they were “far along in [their] thinking,” they had not actually applied for a charter and they left the door open to possibly acquiring a chartered bank to achieve that goal. “I think the next logical milestone would be to look for some kind of either application for such a charter, but we’re not prepared to talk about a timeframe over which that would occur,” the company said.
Originations shrank to $592M, down from $636M in the previous quarter. “We do expect a return to sequential originations growth in the third quarter,” Breslow said.
The company also plans to buy back up to $50 million worth of stock to boost the share price.
