In 2019, LendingClub threw in the towel on its business loan product after mediocre demand and results.
But now LendingClub is somewhat back in the game, due to its acquisition of Radius Bank. The company reported $624 million worth of commercial loans on its Q2 balance sheet, which consists of equipment financing, commercial real estate, and other commercial financing. The average yield on these loans is only 5.81%.
This portion of their business has received little attention, but LendingClub’s website now touts a variety of business loan options available including commercial real estate, SBA loans, equipment financing, and yacht loans.
On leases, it says its target transaction size is between $1 million and $10 million.
During a previous earnings call in Q1, Lending Club execs said they expected all of their portfolios to grow in 2021, but that their focus would remain on the consumer segment. The company originated $2.7B in consumer loans in Q2.
New to the small business finance industry? deBanked has more than 50 FREE explainer videos on terms and topics that merchant cash advance and small business lending professionals must know to succeed. This library will continue to grow over time and remain completely free!
Miami-based Greenbox Capital, a small business finance provider, has acquired Level Up Funding.
Level Up, which focuses on small business lines of credit, was co-founded in 2019 by industry veterans Maciej Bykowski, once the Director of Sales for OnDeck, and Drew Batiato, the former Chief Credit Officer of Idea Financial. Level Up was based in Denver and relocated to Miami, nearby to where Greenbox is.
In an official announcement, Greenbox Capital CEO Jordan Fein, said “We are thrilled to have Level Up Funding join our organization. Their founders and key staff are a wealth of industry knowledge. The acquisition will immediately impact growth and the unique selling proposition that we offer our clients.”
Fein says to expect more such deals in the future:
“We’ll continue to make strategic moves to scale, which includes synergistic acquisitions to further distance ourselves from our competitors,” he said. “Level Up is the first of many to come.”
Bykowski of Level Up said, “Our mission has always been driven by a consumer first perspective. Having a shared vision for the future of alternative lending, we are excited to work together to leverage technology to enhance Greenbox Capital’s product offering and create a seamless customer experience.”
“We’re very excited for our future here at Greenbox. We will have the opportunity to develop new products that will aid clients across the US and abroad with their business growth,” said Level Up’s Drew Batiato.
For businesses that have held on into 2021, it’s possible that even more free money might still be available. The SBA’s Shuttered Venue Operators Grant, rolled out in April, was received by the general public with a collective meh, but eligible businesses can get a grant equal to 45% of their entire gross earned annual revenue in 2019. That’s nearly half a company’s annual revenue given to them for free.
Eligible entities include:
- Live venue operators or promoters
- Theatrical producers
- Live performing arts organization operators
- Museum operators
- Motion picture theater operators (including owners)
- Talent representatives
More than 10,000 businesses have already been funded a total of $7.5 billion through the program, despite an initial rocky rollout. Another $8.5 billion still remains available to apply for.
Lenders and brokers eager to provide value to their small business customers might want to consider sending them the application link.
“After making improvements to the Shuttered Venue Operators Grant program, the SBA is now delivering money quickly, efficiently and fairly to highly-impacted small businesses and venue operators that are critical to America’s cultural fabric and local economies,” SBA Administrator Isabel Casillas Guzman said. “When I began my tenure at the SBA, this first-of-its-kind SVOG program was not where I wanted it to be. I’m proud that, thanks to the hard work and dedication of our talented team, we have turned the ship around. America’s small businesses can rest assured that the SBA will continue to work around the clock to provide the relief that is needed to revitalize local economies and build back better from the pandemic and economic crisis.”
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.
Square Capital has been reduced to just one of several banking products under the Square Financial Services umbrella. That’s one result of Square successfully becoming a bank earlier this year.
Loans will be one product offered alongside checking accounts, savings accounts, and debit cards.
Just as before, Square’s loans will be repaid by diverting a percentage of a business’s card sales. The methodology is derived from its merchant cash advance roots, but what’s different is that a Square loan has a fixed repayment term.
“Pay it back automatically,” Square says of its loan product. “You won’t have to schedule any payments. We just ask that you meet your minimum every 60 days.”
Square has originated more than $9 billion in small business loans since inception and is one of the largest small business lenders in the country.
“We’re about people and platforms,” President of National Funding Joe Gaudio said. “PP: People and platforms, not PPP, that’s my little acronym.”
National Funding is back and looking to hire fresh talent, rebuilding their team after the pandemic rolled through the California market.
“Whether it was California or if we resided in another state, it impacted small business owners throughout the country,” Gaudio said. “Small businesses took a big impact. A significant number of customers requested temporary relief loan modifications. And that’s how the PPP program helped bridge that gap for a lot of small business owners, and get them through the pandemic.”
Gaudio said that National Funding was affected like every peer firm was by the pullback, explaining that their normal customer was looking for PPP funding, not a bridge loan. National rolled back their team by about 50%, and rolled back funding for several months. After the worst of it had passed by the end of the summer, National was back, strictly pulling the reigns but still going. Now they are hiring in every department, and Gaudio said nothing is stopping a gigantic 2022 rebound of demand. Benjamin Flowers as CTO and Luca Marseglia to the Data Science Division are just the beginning.
“We’re rescaling, we’re hiring quite a bit this year, and so these two hires are part of our rescaling: rebuilding not only the leadership team, but the rest of the organization,” Gaudio said. “We’re always looking for new high performers and contributors that that fit into our culture. Even pre-pandemic: if you’re an A-player, you’re a high performer, and you can add value, we will take a look at you, we will find room for you.”
National believes the coming year will unleash tremendous pent-up demand, Gaudio said. In the short term, the firm plans to offer intermediate financing to help SMBs handle the bumps on the way. Though there will be some supply chain, labor, and schooling/childcare problems next year, it will still be big, and National has been preparing, working at the office the whole way through.
“That’ll still continue to put somewhat of a cap on the recovery for small business owners, but we expect a big year in 2022,” Gaudio said. “We’ve embraced the hybrid model for certain functions, [but] sales and operations, underwriting: we’re 100% back in the office, and we’ve been like that since last July. It’s important to our culture to be together… I just continue to be very bullish about the future, and I think it’ll be exciting to see the continued evolution of our industry and the platforms.”
Miami-based Idea Financial closed on an $84 million warehouse facility with the Specialty Finance Division of Synovus Bank and Hudson Cove Capital Management. Co-founders Larry Bassuk and Justin Leto said the funds are going right toward financing their pandemic proof SMB line of credit product and supporting their one-of-a-kind litigation insurance and plaintiff-lawyer financing.
“We’re still firing on all cylinders with our flagship line of credit products with small businesses, and Synovus and Hudson Cove are going to allow us to use these facilities to finance the litigation cost finance product,” Leto, who serves as the CEO, said.
The two former lawyers will draw from their experience in insurance, their legal backgrounds, and SMB underwriting to create a product that serves contingency lawyers called Level Esq. Often overlooked, the founders said law firms are just like other small businesses.
“Not only our experience as lawyers but also our experience as fintech lenders; we’re bringing all that expertise to bear here, and this is the culmination of our experience in finance, law, and insurance,” Bassuk, president of Idea Financial said. “Not only is our product going to be revolutionary and the best in market, but the customer experience is going to mirror the experience that our small business customers have.”
They focus on contingency firms — cash-dependent practices where lawyers invest their own money to back plaintiffs in injury and compensation cases. If there is no victory, there is no payout, so their other company, Level Insurance, offered protection for lawyers left holding the bag in the case of failure.
“Larry and I invented a first and only-of-its-kind insurance product that allows plaintiffs lawyers to protect all of their cost investment for their case,” Leto said.
The new brand coming soon, Level Esq., will offer a loan upfront to finance cases, while Level Insurance has lawyers’ backs with insurance if cases fall through.
“We’re providing an actual line of credit, loans, or small business loans for the lawyers themselves, so they finance their case costs. It’s a pretty revolutionary product and we’re doing it the way we financed small businesses,” Leto said. “Lawyers will be able to tap into that fintech side of our business. If it currently takes weeks if not months to get this type of financing, you’ll be able to do it in hours or days.”
In general, Bassuk said the warehouse closing is a sign that the hard work during the pandemic paid off, and Georgia-based Synovus Bank and Jersey-based Hudson Cove noticed.
“Over the last year, 18-months-plus since the beginning of Covid: our underwriting methodologies, our risk management, management strategies, and our operations were validated,” Bassuk said. “And I think that’s also something that Synovus and Hudson Cove noticed is that our business model, our portfolio performed exceptionally well under stress and during Covid, and I think that’s another contributing factor that led us to where we are.”
Leto and Bassuk recently starred in a deBanked TV docuseries about doing business in Miami.