Business Lending

Funding Circle US Lays Off 120 Employees

July 9, 2020
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Funding Circle US laid off 120 employees yesterday, according to a post shared by Ryan Metcalf, Head of U.S. Regulatory Affairs and Social Impact.

Reuters reported that the company will also centralize its technology development in the UK rather than have a separate US team going forward.

The US operation had largely been focusing on PPP lending and SBA 7(a) loans since the shutdowns occurred.

The announcement coincided with its UK business being approved to participate in the Bounce Back Loan Scheme.

Breakout Capital Weathered The Storm And Came Out With Expanded Access to Credit

July 8, 2020
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Breakout CapitalBreakout Capital never stopped funding. That’s what CEO & President McLean Wilson recently shared with deBanked. The company not only weathered the storm but has come out with expanded access to credit totalling $20MM with Medalist Partners, one a current term loan facility and the other a new term loan facility with “attractive” forward flow features.

The company said in its announcement that these facilities will allow Breakout to increase loan originations across all of its product offerings, including its term-loan product, FactorAdvantage®, and its newest factor product, FactorBridge.

“Small businesses are at the core of our economy and they were, as we were, largely blindsided by recent economic interruptions,” Wilson told deBanked. “We adapted quickly and rolled with the punches and never stopped funding. It is a testament to the resiliency, loyalty and borrower first mentality that Breakout Capital has not only weathered the storm, but has strengthened our company throughout the past few months. We quickly adapted to a new way of thinking, which helped us serve our clients in real time and forge ever closer relationships with our factor partners, lenders, online marketplaces, ISOs and borrowers.”

John Slonieski, Director of Private Credit for Medalist Partners, said in the announcement that “We are pleased to enhance our relationship with Breakout Capital in our asset-based lending strategy. Their high-quality underwriting and SMB-friendly lending solutions, coupled with their talented credit and management team, provide us confidence as we continue working closely with them to successfully scale their lending program.”

Every Business That Got $150,000 or More in PPP Funds (The List)

July 7, 2020
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In the interest of transparency, the SBA dumped a list of more than 660,000 businesses that got $150,000 or more in PPP funding.

You can download the entire thing right here.

CARES Act

Canadian Small Business Lender Looks Doomed In Wake of COVID-19

June 29, 2020
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LendifiedAs well-known (1, 2) small business lenders in the United States continue to negotiate COVID-19 era workouts with their creditors, another in Canada appears to be falling off the cliff.

On Thursday, Lendified’s President & Director Kevin Clark tendered his resignation effective July 3rd. He follows other board members Edward Kelterborn and Benjy Katchen whose resignations went into effect on June 25th. Company CFO Norman Tan previously resigned on June 9th and no replacement has been named.

COVID-19’s arrival came at a difficult time for Lendified. Before COVID, the company had never turned a profit or reported positive cashflow in its entire history.

“Lendified is in default in respect of credit facilities with its secured lenders. Forbearance and standstill agreements are being discussed with these senior lenders, with none indicating to date that any enforcement action is expected although each is in a position to do so,” the company said. “However, no formal agreements in this regard have been concluded as of the date hereof.”

The company expressed that it would not be able to continue operations if it was not able to finalize a forbearance on its defaults AND simultaneously obtain an immediate infusion of capital to fund its operations.

Lendified’s board of directors is presently considering selling its assets or its entire business in order to raise revenue.

A wholly owned subsidiary of Lendified, Judi.ai, an automated loan underwriting platform, is poised to cease operations as a result of a cashflow shortfall. “[Judi.ai] requires cash infusions in the amount of approximately $100,000 per month in order to maintain operations,” Lendified reported. “Its cash reserves at this time are approximately $80,000. At this time, the Company is not in a position to continue to fund the Business and there can be no assurances that it will be able to do so in the future.”

The company went public on the Toronto Stock Exchange on May 26th via a reverse merger and has since experienced a 95% drop in its share price. The company’s market cap on Monday hovered around $700,000 USD.

OnDeck Update 6/23

June 24, 2020
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On June 23rd, OnDeck filed the following statement with the SEC:

On June 23, 2020, we obtained a limited consent (“Consent”) for our corporate debt facility (“Corporate Facility”). Under the Consent, the lenders consented to delay the effectiveness of the increased monthly principal repayments until July 14, 2020 (or such later date as may be agreed by the Administrative Agent), which were triggered by an Asset Performance Payout Event (Level 2) (“APPE”) that occurred on June 17, 2020. In consideration for the Consent, the Company agreed to make a $5 million principal repayment (“Repayment”) substantially concurrent with the execution of the Consent. Under the Consent, the lenders also agreed that, at the Company’s option, the Repayment will either (i) reduce the amount of the monthly principal repayment due on July 17, 2020 by the amount of the Repayment or (ii) if the parties enter into an amendment on or prior to July 17, 2020, be credited towards any principal repayment required under that amendment. The Company entered into the Consent in contemplation of entering into a broader amendment to the Corporate Facility to address impacts stemming from the COVID-19 pandemic. If such an amendment is not entered into, the APPE triggers $21 million monthly principal repayments which, if not cured, would commence on July 17, 2020 and continue until the Corporate Facility is repaid in full. The Company made a payment of approximately $13 million on June 17, 2020 as a result of the previously disclosed Asset Performance Payout Event (Level 1), bringing the total balance outstanding as of that date to approximately $92 million. The Revolving Commitment Termination Date occurred as a result of such Level 1 event. Certain capitalized terms not defined in this section of the report are used with the meanings ascribed to them in the Corporate Facility as amended by prior amendments thereto and the Consent.

Shares of OnDeck closed at 86 cents yesterday. The company was previously warned that long-term pricing below $1/share would result in delisting from the New York Stock Exchange.

IOU Financial Affected By COVID-19

June 23, 2020
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IOU Financial approved the re-appointment of all of its current directors and auditors yesterday. The company, however, is currently experiencing challenges similar to other online lenders.

In late May, the company filed its Q1 financials and revealed that the COVID-19 pandemic had put them in an “over-advance position with its financing credit facilities.” At the time, the issue remained “uncured” and “the company received default notices subsequent to quarter end.”

“The Company and the financing credit facilities are working together to remedy the situation,” IOU reported. “Nevertheless, there is no assurance that these initiatives will be successful.”

IOU had furloughed 40% of its full-time employees and implemented a temporary 20% reduction in salary for all remaining employees commencing on April 1, 2020.

The company’s market cap has plummeted to CAD$7 million, down from $18 million in February. The company had previously been on a fairly positive trajectory until Q1 when they cranked up their provision for loan losses in anticipation of the fallout caused by the pandemic.

Kabbage and Uber Partner for PPP

June 18, 2020
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UberTwo months after its first round, Kabbage and Uber have partnered to offer a streamlined PPP application process for the latter’s drivers. In a surprise move, the companies have come together to offer Uber drivers a fast-tracked and automated option to apply for the Payment Protection Program. According to a Kabbage press release, the specialized application will be sped up by prepopulating relevant information, outlining eligibility, and automated decision-making.

“They basically will go through a totally separate path that’s purpose-built for Uber drivers,” said Kabbage CEO Rob Frohwein in the statement. “With more than $100 billion left in the PPP, there is a meaningful opportunity for the self-employed to still apply and receive funding. With Uber, we aim to provide hundreds of thousands of more independent contractors access to federal funding.”

With Uber defining its drivers as independent contractors rather than employees, these drivers were initially ineligible for certain unemployment benefits. However the CARES Act expanded these benefits to include independent contractors from various industries.

This is not Uber’s first foray into providing some sort of assistance for its drivers. Following the signing of the CARES Act in March, the ride-hailing company released a detailed guide for its drivers explaining how to apply for these benefits. As well as this, in France the company has offered drivers emergency grants during the pandemic as well as a stipend to cover sterilizing and safety products.

For Kabbage, this marks a step away from the dark days of late March which saw the company close its offices in Bangalore, India; cut executives’ pay; and furlough an unspecified but “significant” amount of its previously 500-person United States staff, according to a company memo.

The PPP program, which ran out of money within two weeks of its first round, had more than $130 billion left to give to business owners by June 9, just three weeks before the SBA is scheduled to close the application process on June 30.

Good Internet Connection: A Recap of Broker Fair Virtual’s Debut

June 17, 2020
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Broker Fair 2020 VirtualLast week’s Broker Fair Virtual was the first of its kind for the industry. The day-long event offered talks and networking, just like the in-person event, albeit without the catering service and open bar. Offering a digital space that included a virtual auditorium, networking lounge, expo hall, and individual company booths, the event attempted to recreate the experience of connecting and mingling with the rest of the industry, as much as was possible.

Kicking off with a Matrix-inspired introduction to the virtual space led by alternative finance’s version of Neo’s mentor, Mur-pheus (Murray as Morpheus), the show then went in numerous directions, with panels and talks covering a variety of topics and sectors.

Funding Metrics’ David Frascella took to the virtual stage to talk about how his company and the industry at large have been getting through the pandemic; what’s to come for America was up for discussion with Scott Rasmussen, the veteran pollster, who elaborated on how business could be effected by the upcoming presidential election; the future of combining people with data was debated by figures from Become, Elevate Funding, and Ocrolus; Canada’s lending situation and prospects were talked through in Covid and Canadian Credit;The new normal was discussed by NYC’s Fintech Women; and John Henry, an entrepreneur and star of VICELAND’s ‘Hustle,’ spoke of his experience running businesses and what made his story a success.

As well as this selection of talks, another standout was the cannabis panel. Led by a number of industry veterans, which broke down the difference in funding marijuana-based companies compared to other deals, and what could be down the road for the industry as more states consider legalization.

National Funding’s CRO, Justin Thompson, held an extended Q&A session, fielding queries about how National has been faring through these times and what its approaches are as the economy begins to open back up.

How long-term is long-term for the coronavirus’s impact? Are SBA deals the way to go? Does the industry need to go further with its adaption to this new normal? All these questions were asked and answered in The Great Debate, a panel made up of industry figures from various backgrounds.

And brokers’ futures were considered by Lendio’s Brock Blake, United Capital Source’s Jared Weitz, National Business Capital & Service’s James Webster, and The Watson Group’s Gerald Watson. Here, the idea of a recovery, how each struggled through March and April, and PPP were all debated by the panelists, with perspectives of what’s to come leaning both ways.

There’ll be an evolution of new industries and how we do business,” Gerald Watson noted in his closing words, “just look at this conference for example.”

There was no lobby to find brokers and funders hashing out deals in relative privacy away from the expo hall, instead this was replaced by private messages exchanged. Rather than line up for some chicken wings, people chowed down to whatever was in their home on that day. And instead of gathering around a bar and finishing the day after the final talk, attendees cracked something at their desk and chatted it up in the networking lounge, recalling previous events and what was once taken for granted: the ability to connect effortlessly.

The coronavirus continues to physically keep people apart, but for one day last week the industry was able to come together and network, make deals, and gain insight; albeit in a different way, internet connections providing.

Broker Fair Has Completed A Historic Milestone

June 12, 2020
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Broker Fair reached a milestone yesterday by successfully completing the industry’s first-ever virtual conference. The experimental concept was a response to this year’s restrictions and precautions on large gatherings.

We hope that the hundreds of attendees found the event fun, educational, and productive! The in-person show is still happening at Convene at Brookfield Place in Lower Manhattan on March 22, 2021.

Yesterday’s show included live sessions, a networking chat, and a virtual exhibit hall. Attendees will have formal access to the recorded sessions very soon (There were a lot of them).

What's Ahead for Brokers

NYC Fintech Women

The Great Debate

deBanked Booth

The Funders Are Coming Back

June 10, 2020
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ComebackNearly three months on from the beginning of the United States’ lockdown, the alternative finance industry is starting to feel a recovery. As states look to ease lockdowns, businesses seek to start back up, and offices are reopening, an element of normalcy, if it can be called that, appears to be returning. deBanked reached out to a number of businesses in the industry to find out how they were plotting their recovery, as well as what they thought of the future for the space and the American economy.

One such company was Everest Business Funding. After experiencing a strong start to 2020 in January and February, covid-19 and the economic shutdown that accompanied it came as a shock to Everest, CEO Scott Crocket explained.

“It’s difficult to imagine an exogenous event outside of our control that could more squarely impact an industry like this,” Crockett stated. “I mean, after all, we provide capital to small and medium-sized businesses all across the United States, all 50 states, every type of small business you can imagine. And we’re cruising along, we had a record 2019, we’re off to a great start with January, February, even the beginning of March … and we really saw it come on in the third week of March, the week that started with Monday the 16th. It started as a kind of a trickle in, but by the end of the week it was more of a tidal wave in terms of the number of small businesses in our portfolio that were calling in looking for some type of relief as a result of what was happening.”

Crockett said that they paused all new funding the following week, out of concern for the company’s ability to generate business while there was a national economic shutdown in place. Since then however, Everest has been slowly getting back to what it was, with employees now returning to the office in waves and discussions being had over when exactly to start funding again, be it late June or early July.

“IT’S GOOD TO SEE THAT THE OLD-SCHOOL APPROACH IS BACK AND WORKING AGAIN”

Another firm that halted its funding operations was the New York-based PIRS Capital. Similarly, it was mid-March when the pressure was first felt, and PIRS didn’t return to funding until May 15th. PIRS COO Andrew Mallinger chalked this up to the company’s lack of reliance on automated underwriting processes, saying that although “the industry was leaning towards automatic funding and all these models and 20-second approvals, we weren’t fully invested in that yet. So it was good to see that the old-school approach is back and working again, interfacing with these brokers and really understanding their deals and what they’re bringing to the table.”

Mallinger is also confident going into the rest of 2020. Saying that while the company is maintaining a cautiously optimistic outlook, PIRS is working off the assumption that there will eventually be growth this year and that it is set to continue working from home for however long that may be, on the basis that New York may be one of the last states to return to offices.

“ANYONE WHO CAN WEATHER THIS STORM IS GOING TO COME OUT 10 TIMES BETTER THAN THEY DID GOING IN”

Also looking forward is Velocity Group USA’s Trace Feinstein, who believes there will tough times ahead for many in the industry, but who also holds that there are opportunities for those who can make it through.

“Anyone who can weather this storm is going to come out 10 times better than they did going in.” The Chief Syndication Officer said in a call. “It’s an adjustment for our economy, it’s an adjustment for our country, and I think it’s an adjustment for our industry on top of that. So there’s a lot of different changes and things are going to be happening, but I think it’s going to be very good for the ones who make it out of it.”

Feinstein, who said that most of Velocity’s workers are back in its offices, noted that it approached underwriting during the pandemic with thoroughness. Daily underwriting meetings entailed going through each state, looking at what was happening there with infection rates, and discussing how various industries could be affected.

Reporting that applications following the lockdown were actually cleaner than before, with average credit scores going up to be between 650 and 750, Feinstein explained that he pushed underwriters to rely on common sense rather than overthinking their decisions and to treat these deals like they would any MCA application.

And while many funders have struggled through the lockdown period, another part of the industry, collection agencies, have been doing well after an initially tough stretch.

Shawn Smith of Minneapolis’ Dedicated Commercial Recovery has claimed to have grown the company’s portfolio by 100% in 60 days despite a particularly trying period in mid-April. Explaining that the company was two weeks away from having to bring in strict measures to keep things going, Dedicated began getting calls again just in time, with its clients mostly phoning in about MCA deals.

Looking ahead, Smith is anticipating a busy summer and fall as businesses, funders, and the courts come back, but he is worried about a second wave and the alternative finance industry not putting in the precautions needed to stave off the economic impacts this next time around.

“WHEN IT GOT STRESS TESTED, THE PAIN CAME BACK REAL QUICK”

“Anyone can lend out a lot of money or put out a lot of money on the street, but your ability to get it back is going to be very important, and you want the fire extinguisher in place before the house is on fire … what you’re seeing in the MCA industry is because it’s just not as aged as the equipment leasing and banking industries … the MCA companies just didn’t have 20-30 year veterans in collections and legal … we’re so concerned with how to write more deals and get more money out there, and not about how to get it back and not about having strong enough underwriting standards and things like that. So when it got stress tested, the pain came back real quick.”

Likewise, Kearns Brinen & Monaghan’s Mark LeFevre claimed that after having a rocky road during the earlier stages of the pandemic and switching to a “plan B” for the year, the collections company is optimistic about going forward. Having weathered what may be the worst stretch without having had to furlough or lay-off anyone, KBM now has brought most of its workers back after a reworking of the office space. A pre-return fumigation, sneeze guards, and temperature-taking upon re-entry to the office building have all been employed after KBM’s employees asked to return to the workplace.

“The industry is changing literally day to day,” explained the President and CEO. “Some of the laws that are passed by the House and by the Senate are changing quicker than I’ve ever seen. I’ve just never seen it before. But I think it’s for the better and we’re starting to see the comeback of the economy, the stock market, employment. The unemployment numbers are really good and, in my opinion, [the numbers will] continue to go down from what we’re seeing in our industry.”

Broker Fair 2020 Virtual Video Q&A

June 6, 2020
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Broker Fair 2020 Virtual is this week! Still have questions? I answered some of Johny Fernandez’s questions in this video interview below:

Register for Broker Fair Here

OnDeck Status Update

May 28, 2020
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OnDeck submitted an unprompted mid-quarter update with the SEC early this morning on its status. Unlike previous submissions, the company prepared a visual of its debt situation. The bad news is that there is a good amount of negotiating with creditors left to be done. The good news was that there was an uptick in borrower payments. The attached graphics were pulled straight from their filing.

The company also said that it believes it is “well-positioned to benefit from economic recovery & market dislocation.” It based that belief on the below stated bulletpoints:

  • Small business lending is a large market and will be critical in leading the economic recovery.
  • OnDeck has deep experience from a 14-year operating history to increase originations with a targeted approach and reshape the portfolio.
  • OnDeck is a scaled platform with demonstrated historical profitability and an established brand, unlike many competitors.
  • Consistent with the last crisis, banks are likely to retrench further and only selectively serve SMBs.
  • Expected consolidation of SMB lending industry will ultimately lead to improved unit economics and growth opportunities.

ondeck trends

The full presentation, which is mostly a recap of the company’s Q1 earnings data, can be accessed here.

Most Brokers Plan to Minimize Use of a Central Office Post-COVID, Survey Suggests

May 26, 2020
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altfi impactA survey conducted by Overland Park, KS-based Strategic Capital revealed that only 36.8% of respondents plan to completely return to the office full-time after cities fully open back up. The vast majority of respondents were small business finance brokers.

44.7% selected that they would minimize office space or only use office space to house core team members while 18.4% planned to terminate their office lease altogether and adopt a work from home model permanently.

The full survey results can be found here.

OnDeck Hits Payout Event Trigger on $105M Credit Facility

May 22, 2020
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Earlier today, OnDeck filed a status update to shareholders with the SEC. The company’s portfolio performance triggered an Asset Performance Payout Event (Level 1 they say) with a credit agreement that at present has an outstanding balance of $105 million.

The event triggers monthly principal repayments which, if not cured or amended, would commence with a $13 million payment on June 17, 2020. Subsequent principal payments are based on a percentage of the currently outstanding balance of $105 million until the Corporate Facility matures in January 2021. The Company is in active discussions with the Corporate Facility lender group to evaluate potential options with regard to this facility.

OnDeck was able to further modify agreements on two credit facilities (ODAF II and ODART) to which they had previously secured only interim relief of a few days.

Full filing here.

Shares of OnDeck have hovered between 60 cents and 70 cents in the past week.

Broker Fair, Not a Webinar… A Virtual Reality Conference

May 21, 2020
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Broker Fair 2020 VirtualComing June 11th, Broker Fair in Virtual Reality. Much different from a webinar, Broker Fair Virtual will actually be a virtual world with a lobby, exhibit hall, networking lounge, and auditorium. Attendees will be able to interact with each other as well as visit and interact with sponsors at their virtual booths.

BF Booths

There will be live video sessions too of course (see the agenda here), but if you’re there for the networking, get ready for a totally unique experience!

Broker Fair 2020 Virtual isn’t replacing the In-person event. That’s been rescheduled to 3/22/21 at the same location, Convene at Brookfield Place in New York City. All attendees registered for the in-person event are able to attend this virtual event on June 11th for free. If you never registered for that, you can still buy tickets that grant access to both at: https://brokerfair.org/register/

Additional Sample Screenshots

Networking Lounge

deBanked Booth

See you at Broker Fair!

Hidden Tax Liabilities: Assessing Small Business Borrower Risk Before, During, and After The Pandemic

May 19, 2020
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How lenders assess the risk of small business borrowers is changing and one important factor that no one will be able to ignore is tax liabilities. Hansen Rada, CEO of Tax Guard, told deBanked that outstanding tax liabilities are not always readily apparent in the form of a lien. Tax Guard can fill in the blanks on what lenders normally wouldn’t be able to see.

I asked Rada what tax liabilities even meant for a small business, especially in today’s environment.

“Tax liability is not the disease,” Rada said. “It’s a symptom of the disease. The disease is cash flow.”

In this 17 minute Q&A, I asked Rada many questions that underwriters all over the country are probably thinking about right now. Watch it below:

The Latest With OnDeck

May 18, 2020
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A Week after OnDeck reported Q1 earnings, the company experienced its first early amortization event brought on by the COVID-19 crisis.

The news was publicized in a May 11th filing with the SEC:

On May 7th, an early amortization event occurred with respect to the Series 2019-1 notes issued by OnDeck Asset Securitization Trust II LLC, or ODAST II as a result of an asset amount deficiency in that Series. Beginning on the next payment date under the ODAST II Agreement, all remaining collections held by ODAST II, after payment of accrued interest and certain expenses, will be applied to repay the principal balance of the Series 2018-1 notes and the Series 2019-1 notes on a pro rata basis.

OnDeck NYSEThe company also revealed that it had amended a debt facility “so that no borrowing base deficiency shall occur during the period from April 27, 2020 to July 16,2020.”

On May 15th, OnDeck notified shareholders of additional events and maneuvers through a new filing published after the closing bell. The filing stated that:

On May 12th, a similar event happened with the 2018-1 notes as had happened with the 2019-1 notes.

On May 14th, OnDeck modified the terms of a debt facility so that “from March 11, 2020 to August 31, 2020, receivables granted temporary relief in response to the COVID-19 pandemic will generally not be considered delinquent […] so long as such receivable is paying in accordance with its modified terms.”

Also on May 14th, OnDeck obtained a temporary waiver on another debt facility. “Under the waiver, the lenders temporarily waived the occurrence and existence of reported borrowing base deficiencies and any failure to cure such deficiency amount, in each case, until the close of business on May 19, 2020.” OnDeck accepted the waiver with the understanding it would enter into a broader amendment to remain in compliance with performance and other criteria in light of increased delinquency and other portfolio dynamics that result from COVID-impacted loans. “If such an amendment is not entered into or if the borrowing base deficiency is not otherwise cured, the borrowing base deficiency would constitute an event of default under the ODAF II Facility at close of business on May 19, 2020.”

The 19th is tomorrow.

A similar waiver was obtained for another debt facility. The company has until May 20th to enter into a broader amendment to remain in compliance on that one.

The company is in a fight for its survival. In late April, OnDeck “suspended nearly all new term loan and line of credit originations and previously ceased all equipment finance lending.” The company reported that it is “focused on liquidity and capital preservation and expects there will be a significant portfolio contraction, reflecting an 80% or more reduction in the second quarter origination volume.”

The stock closed at 64 cents on Friday and a market cap of only $37.3M. Shares had traded over $4 earlier in the year.

On May 7th, shareholders voted overwhelmingly in favor of keeping CEO Noah Breslow on the company’s board of directors.

Ireland’s Alternative Finance Industry and the Coronavirus

May 18, 2020
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Grafton Street, DublinAs the effects of the coronavirus continue to slow down the American economy, around the world, many countries remain in lockdown, with their businesses having been halted. Be it to the north, south, east, or west, of the United States, the results are the same: money has stopped flowing. As such, we took the opportunity to follow up with some of the businesses that featured in our coverage of alternative finance in Ireland last Fall, hoping to see what differed and what was the same in their responses to the pandemic.

Despite differing in size and range of variety when compared to their North American counterparts, the Irish alternative finance and fintech industries have largely felt the same impacts from covid-19. Certain funders have stopped operations, others have become very cautious, and just like here, some businesses have turned to the government for help.

LEO, or Local Enterprise Offices, is an advisory network for small and medium-sized businesses, which provide guidance as well as offer capital. The Irish government has pointed to these as the point of contact for small businesses owners, with LEO providing microfinance loans of up €50,000. This figure being upped from the pre-coronavirus maximum of €25,000.

Rupert Hogan, the Managing Director of brokering company BusinessLoans.ie, explained that some businesses would be better going with LEO over banks and even some non-banks. Noting that non-bank lenders can’t compete with the rates offered by LEO and, just like in the US, banks can’t act with the speed that these business owners need.

Ireland lockdownHogan, who describes the current situation as “The Great Lockdown,” said that banks “aren’t too helpful, even in the good times,” due to the high rejection rates that SMEs experience when looking for loans. In regards to merchant cash advances, he’s expecting, when the MCA companies reopen, that they’ll be funding at reduced rates, some doing as much as 50% less than their pre-coronavirus amounts.

Jaime Heaslip, Head of Brand Marketing at the MCA company Flender, explained that before the virus, the company was experiencing a period of productivity, with lending activity and amounts deposited being up from previous years. And despite the virus disrupting commerce, the former international rugby player noted that business owners are still coming to Flender for funds.

“We provide flexibility for people, there’s a lot of people coming to us to get contingency funds together,” he said over a phone call, commenting that as well as this, many businesses are looking for financing to move their operations online. “We’re trying to help SMEs get through this and provide as much help as possible.”

Beyond merchant cash advances, business continues to run, says Spark Crowdfunding’s Chris Burge. Being an investment platform, Spark is still active with businesses looking to get off the ground.

“We’ve actually found that we’ve still got a large amount of inquiries coming through,” the CEO and Co-Founder said. “Our pipeline of companies wanting to go onto the platform is very strong, and we’ve been engaging with them all and they’re very keen. They all need money, which, of course, hasn’t changed from before there was a crisis. And they still are needing money, they need that to expand as opposed to survive.”

When asked about changes made because of covid-19, Burge explained that their investor evenings have been disrupted. Previously an opportunity for the investors and investees on the digital platform to meet up personally and pitch each other, these 100-person gatherings are no longer an option. Instead, virtual webinars and assemblies are what Spark has started using to keep up communication between parties.

And on the subject of fundraising, Trezeo’s Garrett Cassidy said that it has become a nightmare under the pandemic. Disrupted communication channels and the inability to pitch to someone in the same room as you have been hurdles, but besides that, Cassidy assured me that Trezeo is still going strong.

Covid-19Offering payment structures and benefit bundles to freelancers and the self-employed, Trezeo has seen some of its customer base drop off as unemployment sky-rocketed in the UK, its prime market. Despite this, as more and more people are beginning to go back to work, Cassidy says numbers are rising.

“Now we’re starting to see earnings pick back up again, some of them were the ones who were off work who are now coming back to work. So it’s been interesting watching that but the reality is that they’re also scared. They’re out working every day delivering parcels or food, depending on which, and just working really hard. It’s the most important ones who are paid the least and that have the least protection.”

Looking ahead, Trezeo has been working with the UK’s Labour Exchange to establish a new program that would see the creation of channels to help pre-qualify workers for certain positions. These workers would be pooled, and employers would be able to choose from them, streamlining the hiring process for both sides.

“They need money in their pockets, somehow, quickly,” Cassidy said of workers, whether that be by returning to work safely, or through some government assistance program, the CEO is adamant that people need to stay solvent.

Altogether, Ireland’s alternative finance industry, like others the world over, has been hit hard by the coronavirus’s economic effects. With the country’s phased lifting of the lockdown being plotted out over the course of the summer, the island nation may not see as quick a return to commerce as certain American states, but its fintechs and non-banks hope to stick around, by hook or by crook, as the Irish say, by any means possible.

$100 Million in PPP Fees

May 12, 2020
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$100 million. That’s the gross revenue floor that Ready Capital reported yesterday will be earned from its PPP loan origination efforts. PPP lenders earn between 1% to 5% of the loan amount in the form of a fee from the SBA and Ready Capital was the 15th largest PPP lender by dollars in the first round alone.

The SBA pays 5% for loans under $350,000, 3% for loans between $350,000 and $2 million, and only 1% on loans over $2 million. With the majority of Ready Capital’s loans being for less than $350,000, the pure volume of loans originated (40,000+), translates into significantly larger fee income against a lender who may have originated the same dollar amount but with a much larger average loan size. JPMorgan’s average PPP loan size in Round 1, for example, was $515,000 (an average of a 3% fee) versus Ready Capital’s $73,000 (an average of a 5% fee).

Ready Capital clarified that on a net basis of those fees, they will take home substantially less, since the economics of those fees were in many cases split with referral agents and other partners that contributed in the process. Without committing to a firm figure, they estimated that their net revenue on PPP originations is actually going to be in the neighborhood of 35%-50% of the gross ($35 million to $50 million).

That is so far. Ready approved $3 billion in loans and has so far only funded $2.1 billion of them. The company said it expects that a large percentage that remain will still be funded and they will earn additional fee income respectively from those.

The company also addressed funding delays that had been reported across social media. “While there have been some challenges outside our control that have caused some delays in the distribution of funds, we have facilitated the funding of 2.1 billion through last Friday and are actively working through the remaining population to disperse funds as quickly as possible.”

Ready’s exposure on the loans themselves may be limited. The company said “we do not expect to carry much of the production on the balance sheet at all. So a very small portion will remain on the balance sheet. The majority of it will now be sold off balance sheet.”

Shopify Shows Strength in Q1 Results, Issues $162.4M in MCAs and Loans

May 6, 2020
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eCommerce platform Shopify, 2nd only to Amazon in retail eCommerce sales, issued $162.4M in merchant cash advances and business loans in Q1, up from $115.9M in the previous quarter. The statistic pushed them past the $1 billion threshold of funds cumulatively issued since inception.

The company’s provision and allowance for loan losses ticked up from significantly from the same period the prior year but Shopify at that time was originating 50% less volume.

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The company reported a GAAP net loss of $31.4M on $470M in revenue. Shopify also has approximately $2.36B in cash and cash equivalents on its balance sheet.

The company reported an increase of monthly recurring revenue, thanks to an increase in the number of merchants joining the platform, strong app growth, and Shopify Plus fee revenue growth.

Shares of Shopify (NYSE: Shop) jumped by more than 5% after the announcement.