Business Lending
Shopify Capital’s Funding Volume Continues to Surge
May 6, 2023Shopify’s business lending and merchant cash advance division originated a whopping $477M in the first quarter of 2023. That’s up substantially from the $346.7M produced in the first quarter last year. Despite the continuous strong increase, Shopify Capital was not mentioned or even asked about during the company’s quarterly earnings call.
Shopify is a huge e-commerce business. The company generated $1.5B in revenue in Q1 and generated a net income of $68M.
Square Loans Originates $1.1B in Funding in Q1
May 5, 2023
Block is not slowing down its small business lending division. Square Loans originated $1.1B across 113,000 loans in the first quarter of 2023, keeping it on pace to continue remaining the largest small business lender that deBanked publishes data on. The company said that loss rates remained consistent with historical ranges and that strong revenue and gross profit were achieved.
It’s Not Just You, Small Business Lending Fraud Really is On The Rise
May 3, 2023
LexisNexis Risk Solutions recently conducted a small business lending fraud study that observed a significant increase over the last two years. According to the study, lending fraud grew by 14.5% since 2021. Fintech and digital lenders experienced the greatest increase in fraud at 16.5%. While fraud against smaller banks, large banks, and credit unions remains high, fintech and digital lenders suffered the most as a percentage of revenue at 7%
Remote channels, which comprise mostly of online and mobile, continue to be the primary driving force of fraud-related losses. Sixty-four percent of lenders have reported altering their approach to remote channel fraud detection and mitigation.
The increase in fraud is just another challenge that the industry must find a solution for. And while the expectation for fraud to rise persists, plans to boost investments in fraud prevention are also set to increase. Expanding staffing on fraud teams, special fraud prevention initiatives, and increasing spend on vendor solutions are three options SMBs can use to address it, according to the study.
Amazon’s Seller Lending Program Receivables Cool Off
April 30, 2023
According to documents purportedly obtained by Business Insider in January, Amazon had planned to increase its business loan operations in 2023, estimating that its loan receivables would eventually exceed $2B. Instead, the receivables figure has been slowly going in reverse, according to an examination of the company’s regular quarterly earnings reports. Amazon’s seller lending receivables hit a high of $1.4B in Q3 of 2022 but then ticked downward to $1.3B by year end. In Q1 of this year, those receivables had gone down again to $1.2B.
Amazon’s Seller Lending Receivables
2016: $661M
2017: $692M
2018: $710M
2019: $863M
2020: $381M (covid)
2021: $1B
2022 (Q1): $1.1B
2022 (Q2): $1.3B
2022 (Q3): $1.4B
2022 (Q4): $1.3B
2023 (Q1): $1.2B
Not counted in these figures is financing to Amazon sellers conducted through a third party. Amazon teamed up with Parafin on merchant cash advances, Lendistry for Business Loans, and Marcus for lines of credit, for example. Data on funding from these parties is a little more difficult to come by.
Enova Originated $770M in Small Business Loans in Q1
April 27, 2023
Enova originated $770M in small business loans in Q1, according to the latest earnings report. The company posted an overall impressive net income of $51M to boot.
“We delivered another quarter of solid top- and bottom-line results, with our balanced approach to growth enabling us to successfully navigate the current macroeconomic backdrop,” said David Fisher, Enova’s CEO, in an official statement.
SMB credit products now makeup 65% of Enova’s portfolio, up from 56% last year.
“Given our strong brand presence, minimal competition and diverse portfolio, we continue to see a long runway ahead to drive meaningful volume,” Fisher said.
Although the company’s eye is still on growth they are being intentionally conservative given the macroeconomic conditions.
“…with the good credit metrics and entering a more seasonably attractive time of year, that gives us incentive to accelerate originations a bit, which I also mentioned on the call,” said Fisher. “And those could push up the metrics a bit because, it’s important to remember, there’s 2 ways of accelerating originations. You can open up your credit model and bring in more lower credit quality customers or you can spend more per customer and attract more higher credit quality customers. And we vary those tactics based on what we’re seeing in our data each and every day. And we’re twisting those dials each and every day to adjust marketing spend and adjust where our credit metrics are.”
IOU Financial Reveals 2022 Financials, Is Adapting to Current Macroeconomic Conditions
April 26, 2023
IOU Financial originated $82.7M in funding in Q4 2022, according to the company’s latest financial report. That put them at $275.5M for the year total, a new all-time record for the company. IOU was profitable for the year but by a razor thin margin, eking out a net income of just $38,826.
In an official announcement, IOU disclosed that “During the fourth quarter of 2022 macro-economic factors including inflation and rising interest rates impacted the operating environments of many small businesses and negatively impacted IOU’s collections efforts and servicing revenues. This has led to a write down of specific servicing assets and reduced revenue accrual rates, resulting in a net loss of $(2.7) million on an IFRS basis and $(0.9) million on an adjusted earnings basis for the quarter ended December 31, 2022.”
IOU has already taken decisive action to adapt, the company stated, which has already led to a positive impact on collections but also resulted in sigifnicantly reduced originations in the first quarter of 2023.
“IOU Financial has weathered many storms and always emerged stronger than before,” said Robert Gloer, President and CEO of IOU. “We’ve pivoted to adjust to current macro-economic conditions and remain committed to investing in products and technology designed around the needs of small business owners and our broker network.”
Small Business Financing Industry Representatives Testified in New York Senate Hearing on Licensing
April 26, 2023Several representatives from across the small business finance industry testified in a New York State Senate hearing on Tuesday. Up for debate was Senate Bill S1450, which would require a license to engage in commercial financing. As part of that, Banking Committee Chairman Senator James Sanders Jr. fielded testimony and asked questions about bad actors, usury caps, non-compliance penalties, and more. Those called upon at the hearing included:
- Natalie Pappas, Deputy General Counsel, Rapid Finance, on behalf of the SBFA
- Amy Carpenter Holmes, Deputy Counsel, Kapitus
- Chris Grimm, Head of State Government Relations, ILPA
- Katherine C. Fisher, Esq., Partner at Hudson Cook, LLP, on behalf of the RBFC
- Phil Goldfeder, CEO, American Fintech Council
- Chuck Bell, Programs Director of Advocacy, Consumer Reports
Almost all of the organizations were in favor of some form of licensing system in New York except for the Innovative Lending Platform Association (ILPA). The ILPA, more famously known for its previous SMART Box initiative, explained that high compliance costs, inflation, and rising interest rates were putting significant pressure on its member’s businesses.
The video below, which curates just the relevant parts of the day, consists of two separate panels on the same subject. Be sure to watch them both.
Amex to Continue Extending Credit to Small Businesses, Not in Same Position as Smaller Banks
April 20, 2023
American Express plans to continue extending credit to small businesses despite some of the challenges in the economy, according to the company’s latest quarterly earnings call. CEO Steve Squeri said that the company isn’t in the same position as a lot of the other smaller banks right now.
“…for those credit worthy small businesses we will continue to extend credit and it could be an opportunity for us actually, provided the credit is good,” Squeri said. Part of that opportunity, Squeri explained, was in being able to service businesses that historically had not considered them a “lender of first resort.”
Amex’s business loan division was formerly known as Kabbage. It rebranded to Business Blueprint in January.
Broadly, times are good for Amex. The company experienced a record-setting first quarter with $14.3B in revenue and a healthy profit of $1.8B.
