Sean Murray: I think that means we're live. Okay. Hello.
Johny Fernandez: You guys welcome back. I'm Johny
Fernandez.
Sean Murray: I'm Sean Murray with deBanked. Thanks for
joining us again.
Johny Fernandez: So Sean, let's um, how are you? I know last
time you were here alone. So now we're back.
Sean Murray: And you look a little tan. You go somewhere?
Johny Fernandez: I did. I was down in Miami.
Sean Murray: Oh, yeah.
Johny Fernandez: So we have a special coming up. So it's
exciting. We're working on that.
Sean Murray: Did you? Did you interview anyone special too?
Johny Fernandez: We did, we ended up interviewing Miami's
mayor. So that's exciting. He has a lot of interesting things
to say about what's going on the business and the industry and
FinTech. So everything down there, what's going on down
there? We're gonna preview that and kind of give the whole story
later on in the week. So that's exciting.
Sean Murray: It should definitely be.
Johny Fernandez: Yeah, and it's also seeing all the changes. And
we'd also spoke with different business owners down there. So
it's definitely a piece that I'm excited to work on.
Sean Murray: Awesome. Well, I can't wait to show it to
everybody.
Johny Fernandez: Yeah, so it's gonna be a good one. It's gonna
be definitely gonna be a good one. So, but big, big Monday,
busy Monday, so let's start with LoanMe. LoanMe has been
acquired. That's big breaking news. So why don't we talk a
little about that, that announcement that was made by
NextPoint. So
Sean Murray: Sure.
Johny Fernandez: Good.
Sean Murray: Sure. So NextPoint is essentially a newly created
company. It didn't really exist before it was formulated out out
of a PAC. Not a PAC is SPAC. Thinking politics. SPAC. And
this company was formed, I believe in October, November of
last year,
Johny Fernandez: Oh it's fairly new.
Sean Murray: Yeah. And it was it was a joint acquisition they
acquired not only LoanMe, but also Liberty, Liberty Tax.
Johny Fernandez: Okay.
Sean Murray: Are you familiar with Liberty Tax like they have
Johny Fernandez: The Statue of Liberty is their icon.
Sean Murray: It's their icon, and they have storefronts all
over the country. And they actually have the Liberty Mascot
where you can actually see people on the side of the road
wearing statues. Full costume. And so that's now going to be
part of like the the LoanMe family. And they're now combined
and called NextPoint or NextPoint Financial.
Johny Fernandez: Yeah. So it's a good combination of both
NextPoint and
Sean Murray: Of the tax and the lending business, right. So I
was actually asked to write, in the news just came out today,
right. So we only we only have so much information. It was
disclosed publicly, they filed on the, it's they're listed on
the Toronto Stock Exchange, and all that information is public.
So there's like 38 pages of the 38 page investor presentation
online, that anyone can go and check out we have it up on our
site, actually go to deBanked.com you can find a link
to the 38 page investor presentation. And you can read
the whole thing, find out all the details about what the
combined two companies will mean. Of course, people already
asking me what does it mean?
Johny Fernandez: Yeah
Sean Murray: And it's really, you know, how the two of you
makes sense.
Johny Fernandez: Yeah.
Sean Murray: You know, you think Liberty Tax.
Johny Fernandez: Yeah.
Sean Murray: Right. Everyone knows that. And then on the
other side, all of a sudden, you have this company called LoanMe
does, they actually do consumer loans and business loans, and as
they recently disclosed, they also do a little bit of MCA, as
well. But how did the two, how did the two really like, you
know, what's the sort of the way that they mesh? It's a it, comes
down to Liberty Taxes business, because a lot of people go into
an actual tax, they go to a tax office to file their taxes at
the end of every year, like an H&R Block. Yeah. And that puts
them in touch with a lot of business owners. And I think
they actually disclose that they work with about 485,000 small
businesses every year, this is Liberty Tax. So you have 485,000
small businesses every year using Liberty Tax to file their
returns. And guess what, it's very popular to try to get a
loan on your future, you know, your future return. Right.
So, you know, in terms of making an all in one stop, you can also
get funded presumably at least apply for a LoanMe loan.
Johny Fernandez: Yeah.
Sean Murray: At the at the office there.
Johny Fernandez: You know, something that they, the company
said from this is from their actual statement, it said they
are "A one stop financial services, destination,
empowering, hardworking and credit challenged consumers and
small businesses to go to the NextPoint in the financial
future."
Sean Murray: Ok good, so that's where the NextPoint comes from.
I didn't know totally even missed that part. But yeah, that
all makes sense. And I think it's interesting that in the
world of FinTech, that this deal essentially merges an online
lender with a storefront business. I know that when
people are filing their taxes, you can use an online software.
Yeah, but a lot of people still choose to go to the storefront
Tax Office, right? And so who their competition be? Well,
it's not the first time that we've had a tax company merged
with an online lender we have Intuit with QuickBooks.
QuickBooks is very popular account software, a tax
software. And they have their own online lending arm called
QuickBooks Capital. And so they've already merged the two
successfully. So I'm not surprised to see Liberty Tax
merge with, you know, with LoanMe. And I think this is the
first case, though, that we're seeing that an online lender has
merged with a storefront. Yes, if I'm not mistaken, that
that part of it is, is pretty uncommon. But the pairing of two
different things to try to create an ecosystem is not that
is not that strange, you know, we have Square with payments,
and loans. And, you know, we have other other companies that
are trying to merge two different things together.
And so that they're not just an online lender, there's something
else too good way to diversify your business.
Johny Fernandez: Do you think this is something that we can
start seeing more often, like, as you move into the future that
these type of companies are merging together? Or do you
think this is gonna be like, you know, they're just trying this
out? And like you said, just creating something new, will
people follow? Will businesses follow
Sean Murray: I definitely think we'll see more. And I think, for
a long period of time, people, expected online lenders to
acquire other online lenders. But there's really no point to
that unless they do something entirely different than what the
other company already does. And so I think we'll see more online
lenders merge with companies that offer a different type of
business facing product, right? Like QuickBooks Capital, they
lead in with their QuickBooks software, the Intuit QuickBooks
software, and then you can get a QuickBooks Capital loan, but
their business is really the software first, right? It's kind
of like that with Square, you use square for payments, and
then you can add the capital portion to it. That's really the
best way to beat from a diversification standpoint,
because if you have another pandemic, and you're a lending
company only, or an MCA funding company only, and you have
nothing else, well, then you're going to be in a lot of trouble.
And that's what we've actually seen. A good example is OnDeck.
One of the few online FinTech companies, that was pure lending
didn't really have anything else. And of course, when the
pandemic hit, they suffered greatly. And so they were
acquired, but it was more of a more of a distressed, you know,
acquisition type situation. And, yeah, so I think
we'll see more online lending companies merged with companies
that can offer a business facing product, and the lending kind of
becomes an ancillary value add.
Johny Fernandez: Yeah. To me is to see what happens, and how can
they move forward? So for sure. So the next story is something
that caught my attention. And we've been talking about it here
in the office is a big league advanced to baseball players. So
it's something that you just found out about not that long
ago. And it's been around since 2016. So it's been around for a
while. So let's go ahead and start talking about that kind of
just a concept that it's not a merchant cash advance, but it's
a big league advance. And the deal pretty much it's
specifically geared towards baseball players. Walk us
through that.
Sean Murray: Sure. Yeah. So everyone, all of our viewers are
more or less familiar with merchant cash advances. We've
now learned about something else called a big league advance.
It's very, very, very similar to a merchant cash advance, but
it's directed at baseball players, as you mentioned, it's
directed primarily at minor league players, is my
understanding. And what they're offering is essentially capital
upfront, because you're if you're a minor league player,
you really don't make that much money. I've heard you can
make like, you know, $1,000 a month or something. Right?
It's you can't live off it. Yeah, you have to have another
job. You know what I mean? If you don't have a big, you're not
like a trust fund kid. Yeah, I don't know how many minor league
players or bares.But what this company will do Big League
Advance, and I didn't speak to them. So this isn't comments
that were sent to me. It's based upon what I was able to read on
their own website. But they will essentially give a minor league
player a large sum of capital upfront, and in return, they
sign away a percentage of whatever earnings, they'll get
it, they end up signing an MLB contract. So if your minor league
player you could get offered, I don't know, let's say half
million dollars, maybe maybe, maybe less than that. Right?
Yeah. And if you're not making very much half million dollars
up front sounds pretty good. Yeah. So the trade off to that
is, while if you end up becoming a major league player, a
percentage of the contract that whatever you earn, whatever you
signed for, will go to the company that gave you that
money. If you never make the pros, you never get signed by a
major league team, then you don't owe anything at all. So
it's a pretty good trade off to be a minor league player to get
this huge sum of money. Knowing that, hey, if you never go pro,
you don't owe anything back. So imagine the amount was like
500k?
Johny Fernandez: Yeah.
Sean Murray: And they're like, hey, if you become Pro, you
know, then we're gonna need like, 8% of all your future MLB
earnings. That might sound pretty good.
But the reason you brought it up is because the biggest news
right now is that we have a player for the Padres who signed
a 14 year contract for $340 million
Johny Fernandez: And their cut gets out, and if he, their cut is
potentially going to be as much as 30 million.
Sean Murray: Yeah. And so the way where that number comes from
is that I think they take up 10 perce- this is all agreed upon
at the time that they're doing the contract- they take up to
10% of your future earnings, but the average they say is 8%. So I
think the $30 million numbers roughly 8%, like $300 or
$340 million. It could be less, it could even be a little bit
more. But it's somewhere in that neighborhood of what he's going
to have to give to Big League Advance. So, of course, it's in
the news, because, you know, because everyone's wondering, is
this deal worth it? This player signed this amazing contract,
and from what I understand, it's kind of a landmark, a landmark
deal. All of a sudden, over 14 years, he's got a fork over 30
some million dollars over two Big League Advance and like,
well, what did he get for it? My understanding was that he was
pretty happy that some of these players are actually pretty
happy with it. And I haven't heard any I haven't heard any
regret stories. I did hear I did hear one, yeah, there was a
there was a lawsuit or something filed, but he ended up
apologizing to the company. So you know, it seems like this is
a pretty good product that baseball players could benefit
from.
Johny Fernandez: Yeah, and it's interesting, because we - you've
heard this and I've heard this that like a lot of baseball
players, a lot of athletes, like once the money is gone. Like
some of them just go completely broke. Yeah, and you know, but
this is definitely an interesting way. You know, to I
mean, if they make it, you know, they don't make it then, you
know,
Sean Murray: What's your favorite baseball team?
I don't know. Cuz then we might have rivals here in the studio.
What's yours?
Yankees? Okay.
Johny Fernandez: I go Yankees. I'm not a big Mets guy. Okay, I
didn't grow up with the Mets, grew up towards the Yankees. But
I know that's like, depending on who you're with, and it can
divide a whole room. So.
Sean Murray: That's true. I am not a Yankee fan to an extent
that I hate other teams.
Johny Fernandez: Yeah.
Sean Murray: You know, I know. It's no, because it's like, the
only thing I can say. Because, you know, we're gonna we're
gonna offend part of the audience, I grew up in. I grew
up in New York, you know what I mean? So, I'm a Yankees fan. But
if somebody say a Red Sox fan or something, it doesn't mean like
a somebody from the Boston area likes the Red Sox,
Johny Fernandez: but even here locally, with the subway series
you either choose the Yankees or the Mets.
Sean Murray: But I don't hate Met fans, but I know that
they're people that take it to the extreme. Canceled deBanked,
Sean says he likes the Yankees, Red Sox rule. I'm in trouble.
Yeah, I just got canceled.
Johny Fernandez: Alright that's good. And so the next thing is
in regards to the MCA, and prohibition in Maryland, so the
new house bill passed. House Bill 664, so Sean, let's go
ahead and jump in straight on that because that's something
that it's seems very similar to something that passed here in
New York.
Sean Murray: Right? Yeah, it does. So what you're referring
to is the bill in the Maryland State Legislature that was a
state, statewide bill that stands to only affect the state
of Maryland, not the rest of the country. Maryland interesting in
that last year, it proposed members of the legislature, not
the whole state, but members of the legislature proposed a a law
that would ban outright ban, merchant cash advance products
very, very strange and narrow bill, usually when you have a
bill that's that's aimed at alternative finance, they kind
of try to get everything at once. Small Business Loans
factoring equipment leasing, MCA, right is because they're
trying to standardize things or, you know, make things uniform,
or enhanced disclosures. So it's very strange last year, to see a
bill that would actually try to ban I mean, they call it the
merchant cash advance prohibition bill. Very strange.
I mean, like somebody in Maryland really hates the
merchant cash advance. And so that bill ended up dying,
potentially, because of COVID kind of took over the whole
conversation. And the bill never made it out of committee. So
never voted on in the floor. The bill is back, more or less, it's
not called merchant cash advance prohibition. Now, it's got this
whole other whole other name that purports to look like it's
a disclosure bill, which is what happened in New York, they
passed the disclosure bill that mandates that you have to
disclose an APR, even if one can't be calculated. If you
can't calculate one, you have to estimate one so it wasn't that
weird to see that in this bill. You know, like, oh, let's look
at New York to see what they what they're doing. But this one
goes one step further. It says that, when you estimate your
APR, that's all good and fine, but the max estimate can only be
24%. If it's beyond 24%, it's illegal to the point where you
could actually end up going going to jail if you do a
transaction that that exceeds that number.
Johny Fernandez: It's like half New York shut down MCA.
Sean Murray: Well, yeah, you know, and I, you know, it's
weird how they picked the 24% of the I don't know what that
number is supposed to represent. Because the number that
represents the threshold for fairness that I've come across
most often seems to be 36%. I don't know how that number came
about. Yeah. But when you hear about regulating, when you hear
about interest rate caps, you usually hear about 36% APR and
never heard one that said, 24%. Now we do have something in New
York that says you can't lend above 16% APR. Or you need some
sort of, you know, license or something like that. But I've
never heard of that. The Maryland thing is very strange.
And also, it only attempts to do this for merchant cash advance.
This isn't a business loan, disclosure bill. Yeah, it's not
a broker, you know, like licensing, but well, it is like
it requires licensing and all this other stuff. But it what it
really effectively tries to do is prohibit merchant cash
advances from being transacted in the state. I don't really
know why. There was a hearing that took place, it was a live
public hearing copy of it is up on our website. And we got to
hear a little bit of a discussion on this bill. And
there were members from representatives from the
industry in the MCA industry, as well as some members of the
state's legislature also talking, and then we'll get to
kind of say what their piece was. And I don't really feel
like there were any arguments put forward for the member who
proposed the law, it seemed to me that I want to
mischaracterize you. And I mean, I was just an observer of it.
But it seemed to me like he was seeking the information, kind of
like, let's kind of propose a band first, and then let me find
out what this even is. Yeah. And I mean, like he was he was
asking, like fundamental questions like, how do these
work? Yeah. Very weird question to be asking when you're
proposing a ban. Yeah. Right. Like, he's probably Yeah, but
you know what I mean, like, I know, yeah, you should know, you
should probably know it inside and out. Yeah. By the time
you're already you should be like, I know everything there is
to know. Now we need to ban it. Right. It's weird to say, let's
ban it. How did this work? Yeah, it seemed that was the that was
my personal take away.
Johny Fernandez: Yeah. So let me ask you this, Sean. Do you think
that obviously, we've seen New York do something very similar
to this Wi Fi? we're now seeing Maryland do something similar
o this? What about other state ? Do you think this will be
a pattern with other states that they will also start
implementing something like this? But then we can also see
that some other states will maybe welcome MCA is, you know,
the MCA Business. So what a e your thoughts? Do you think this
will continue to be a trend across? You know, the Northeast?
Out West?
Sean Murray: Yeah, well, these type of proposals, they don't
come from nowhere. They usually come from an advocacy group who,
you know, embarks on a long mission to complete some type of
objective. The fact that this bill ended up in Maryland,
wasn't just because people in Maryland were sitting there
being like, oh, you know, we've read in the news in New York, we
want to do it too, right? Somebody proposed it to them,
and show them what was done in New York and show them what was
done in California and saying, you too, should also adopt it.
And here's how they did it. Right. So which whoever the
group is behind all this, right? It's my belief that they will
continue to push for these type of changes in other states. Now,
whether or not the states will be as open to it as California
and New York, which are very progressive, is yet to be seen.
I highly doubt we'll end up in a situation where all 50 would do
it. Yeah. Especially since we're dealing with commercial
transactions. That's the craziest part about all this is
that these aren't really consumer protections, right?
these are, these are commercial financing regulations. And I
would be shocked if this was, you know, widely adopted, like
try attempts to ban or whatever whatever it is, in even even
having a mandatory APR disclosure. And I don't really
know ultimately, what you know what that will accomplish?
Right? From what I've heard that disclosing an APR on a loan, you
know, forget about MCAs for a second doesn't necessarily allow
doesn't really make people change their minds. Yeah. Right.
And so they might be informed about the number. But if you're
still doing the same thing after that, you know, it's kind of
like well, what really happened?
Johny Fernandez: Yeah,
Sean Murray: Right
Johny Fernandez: Yeah. Yeah. That's very much true. So that's
interesting.
Sean Murray: You were asking like when the states become
friendly, or something like that? Well, you know, the states
like Florida, which is technically been a debtor
friendly state more than a creditor friendly state, that is
where you just were just in Florida.
Johny Fernandez: Yeah I was in Florida. It is something I spoke
with the mayor about. So that question was asked.
Sean Murray: Yeah, so they're, they're not normally known as a
creditor friendly state. But they are from what I'm get parts
of it are FinTech open minded. Yeah. All right. And I think
that involves all types of financial innovation. And so
what I'm what I'm hearing is that there is an interest level
in relocating from states, like New York, to states like Florida
in order to continuing to conduct your business.
Johny Fernandez: That's interesting. Do you think that
these type of decisions that are being made will start driving
will pretty much be the reason why MCA is dead in New York or
in Maryland?
Sean Murray: These type of decisions? What do you mean?
Johny Fernandez: Like these type of bills that are being
proposed, the fact that they're being brought to light and that,
you know, there's people like the advocacy groups or like
leaders that want to pretty much push MCA, MCA owners out? Will
like, kill the business here in New York?
Sean Murray: Well, that's a, that's a really good question.
And that is to be seen. My understanding is that the New
York disclosure bill goes into effect at the end of June, there
was originally speculation that it was going to be delayed until
about January, January 2022. And now it looks like the original
date is, you know, set in stone, and we're looking at June, for
one is going to be implemented. What's strange about the law is
that it talks about transacting business in New York, it doesn't
necessarily, and I'm not a lawyer, maybe, you know, maybe
the lawyers gonna get mad at me for talking about it. But, you
know, this is my layman's person of it. It talks about
transacting business in the state of New York. It makes me
wonder if if I was in New York, and I decided not to work with
New York customers in this transaction still happening
here. You know what I mean? So and so maybe it's safer, to, to
not operate in the state out of an abundance of caution,
Johny Fernandez: but was unclear and this is something that,
again, we're not lawyers, so we definitely need to specify with,
you know, someone from the office or a lawyer, but when I
met when I met transaction doing a transaction in New York wasn't
the big debate that we discussed, was if it touches New
York, like technically like, alright, like doing a
transaction? Is it working one on one with someone? Or if
there's some type of connection to New York? Does that count as
doing as you know, transacting in New York?
Sean Murray: Well, these are the things that certain litigators
I'm sure are licking their, you know, licking their fingers and
lips for you know, getting ready to argue, yeah. I think it it's
important, though, that we talk about it. And we mentioned it,
even if lawyers like, you know, like, you know, because if
you're continuing to conduct business in New York, and you're
not fully versed, or fully briefed by your own legal
counsel on how to proceed with this new law in place, you could
run into trouble, right? People are like, oh, it's some
disclosures. Right. So you gotta add a box, you got to add, put a
number and then just disclose, disclose. It's a little bit more
than that. Yeah. It's, uh, and I think people should at least
take away from this conversation that I better have a lawyer.
Yeah, read this and tell me if I should still be doing business
in any way. In the state of New York. Yeah.
Johny Fernandez: And I think we were also when we talked about
and we've the stories on it, the fact that there's so much open
ended questions in that, you know, just that entire thing.
Because there's questions that are left unanswered, and they
just kind of draft it together, it changed. And they kind of
just kept it hush hush, and, you know, kept pretty much everyone
up in the air, because there's a lot of questions that no one has
the answers to.
Sean Murray: That's right. We didn't like we were just saying,
we still only have the answers. It's like, Yeah, all we can tell
you to do is you should probably go yeah, contact a lawyer and
tell tell you what to do. That's the best thing to do. You know,
as a layman, I can form my own kind of opinions about what it
means. But yeah, there's a lot of things in there. I don't even
I have no clue. I don't really don't know what it means. And,
uh, you know, but I'm not a funding company. We're not we're
not funders. But if you are out there, if you're a broker, and
if you're a funder, if you're a lead generator, you really need
to work with counsel about compliance with this law. What
is it you need to do, maybe everything is going to be fine,
but you need someone to tell you it's going to going to be okay,
or what you should be doing.
Johny Fernandez: Awesome, great advice. So i think that wraps it
up for us now. Big Day today's Bachelor Monday.
Sean Murray: Bachelor Monday.
Johny Fernandez: Yeah, we're excited for that. I know
everyone's been talking about that little snippet from a
couple weeks ago. So I'm excited to see what happens tonight.
Sean Murray: Is it hometown's finally?
Johny Fernandez: Not yet, we're getting. We're getting there.
Sean Murray: Next, the next bachelor brief will be after
hometown
Johny Fernandez: No, it is. Oh, it is hometown. I'm sorry. Yes.
Okay.
Sean Murray: Yeah, it's all coming up next.
Johny Fernandez: It is. I'm tired. I forgot about that. It
was it was
Sean Murray: I need to get my bachelor bracket. I actually got
a text right before we went live that I have reminders set my
bachelor bracket.
Johny Fernandez: That's awesome. Well, you have a couple more
hours before the show, sir.
Sean Murray: Yeah, but I don't want to wait till the last
minute. And everyone's trying to set their lineup you know, right
before. This is the fantasy sports that I do.
Johny Fernandez: Well, we'll see you guys next time. I can't wait
to chat with you guys again. And if anyone has any comments,
questions, possible, write to us reach out to us
Sean Murray: Email, email, LinkedIn, Facebook, Instagram,
comment away,
Johny Fernandez: Twitter,
Sean Murray: Twitter, whatever you want,
Johny Fernandez: Whatever you want. Definitely let us know.
engage with us because we're always looking for feedback. And
if anyone has any questions, any tips definitely reach out to us.
So awesome. Again, Johny Fernandez, here with deBanked.
Sean Murray: Sean Murray with deBanked
Johny Fernandez: See you guys next time.