Business Lending
Navigating Debt in A Post-COVID World: How Collections Agencies and Individuals Must Adapt
March 14, 2023
It’s been a hectic few years on the economic front.
From the shaky first days of the COVID-19 pandemic and the havoc in the economic system still ongoing, to the supply chain shocks and Russia’s war in Ukraine, it has been a time of deep economic uncertainty.
These crises had–and continue to have–a significant impact on individuals and businesses around the world. As many lost their jobs and saw their income reduced, it is likely that a large percentage accumulated debt during this time, furthering the financial struggles up the chain as more and more businesses had to contort themselves to stay afloat, despite their outstanding receivables.
As economies begin to recover and adapt to the current moment, businesses will be looking to collect what they are owed, but it’s important to consider how debt collection practices may evolve in a post-COVID world and how individuals and businesses can manage their debt.
Debt collection practices have traditionally been viewed as harsh and unforgiving, but as the world adapts to the new normal, the collection industry will need to evolve to be more compassionate and flexible.
As collections agencies, our job is to represent the interests of our clients who are looking to collect what is owed to them and recover as much of it as possible.
Collection agencies will need to take into account the fact that many people and businesses have been hit hard by the pandemic, and may not be in a position to repay their debts in full or at the pace creditors are used to.
One way in which collection agencies can evolve is by offering some form of a settlement that would involve a more flexible repayment plan. Rather than insisting on a fixed repayment schedule, collection agencies may need to consider allowing debtors to make smaller, more manageable payments over a longer period of time. This could involve negotiating a lower interest rate or waiving fees.
Another way in which collection agencies can adapt to the current moment is by offering debtors a reduction in the overall debt if the full balance is paid in lump. This involves the debtor agreeing to pay a lump sum amount that is less than the total amount owed. In some cases, this may be the only viable option for debtors who are struggling to make payments, and the only way a business can expect to see any of their money back. Collection agencies can be the conduit and work with both sides to negotiate a settlement that is reasonable and manageable for all parties involved.
Communication is also key, and never more important than it is right now. It’s crucial for collection agencies to be transparent and open in their communications with debtors. This means providing clear information about the amount owed, the payment schedule, and any fees or penalties that may be incurred. It also means being open to questions and concerns from debtors and providing them with accurate and timely information about their debt.
For individuals and businesses struggling with debt, there are several steps that can be taken to manage their debt effectively. Proactively communicating and working with your creditors offers the best chance at a reconciliatory solution.
The first step is to assess the situation and determine the total amount owed. This can be done by reviewing credit reports and contacting creditors to obtain a full picture of the debt.
Once the amount owed has been determined, the next step is to create a budget that takes into account all income and expenses. This will help to identify areas where expenses can be reduced and savings can be made. It may also be necessary to consider increasing income by taking on additional work or selling assets.
Once a budget has been established, it is important to prioritize debt repayment. This may involve negotiating a repayment plan with creditors or seeking the assistance of a credit counseling service. In some cases, it may be necessary to consider a debt consolidation loan or a balance transfer credit card to simplify payments and reduce interest rates.
Finally, it is important to maintain a positive attitude and stay focused on the goal of becoming debt-free. This may require making difficult decisions and sacrifices in the short term, but the long-term benefits of debt freedom are well worth the effort.
With a good-faith-first approach from creditors, debtors and collection agencies, it is possible to manage and clear debt effectively, even in an uncertain economic climate, and achieve financial security for all parties.
Signature Bank Shuttered By Regulators, Customer Service to Continue Uninterrupted
March 12, 2023
If you’ve been following the news, then you’ve heard that Signature Bank was shut down by the New York Department of Financial Services on Sunday. Signature was a popular bank in the small business finance industry. Although it is now under the control of the FDIC, “Depositors and borrowers will continue to have uninterrupted customer service and access to their funds by ATM, debit cards, and writing checks in the same manner as before,” the FDIC said. “Signature Bank’s official checks will continue to clear. Loan customers should continue making loan payments as usual.”
The FDIC is now marketing the institution to potential bidders. All depositors will be made whole, thanks to a special exception ordered by the Treasury Department.
Signature Bank relied mainly on commercial customers and enjoyed a famous director, former Congressman Barney Frank, the architect of Dodd-Frank, aka the Wall Street Reform and Consumer Protection Act of 2010.
In The Funding Biz? Here’s What to Know
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“Aggressive” Funding
March 7, 2023
Sometimes it pays to be aggressive!
“I think [aggressive funding] is a good phrase, I think in particular in the ISO organization as you’re speaking to the merchant you have to present yourself that you’re going to take an aggressive position to help them,” said Steve Kietz, CEO at Reliant Funding, “to help them get the biggest MCA deal size that you can get them, the best pricing that you can get them, be aggressive in terms of speed to try to get money for that merchant.”
And once that deal is in a broker’s hands, they may turn around and expect their network of funding partnerships to make that happen. Some lenders and funders lean into this style of courtship and market themselves as being similarly aggressive with their approvals.
“The word aggressive, that’s like my favorite word in this industry, because I guess it’s supposed to turn brokers on,” said Amanda Kingsley, Director of Marketing and Development at Merchant Marketplace.
The level of aggressiveness may depend on the attractiveness of the deal itself. According to Joseph Vaknen, Head of Business Development at SuperFastCap, funders will get more aggressive with their offers when there’s a “hot deal” on the table and it will kick off something similar to an auction or a bidding war. That scenario could potentially lead to the best outcome for the merchant just as intended and the broker essentially proves their value.
One’s aggressiveness can also be used to describe an overall risk appetite in general. “If you are considered an aggressive funder in the sense that you are funding bad deals then more likely than not the rate is super high and the term is super short,” said Vaknen. In that case, it’s important that all involved understand what is meant by aggressive.
And on the contrary, plenty of funding providers distance themselves from any such connotations of aggressiveness and are happy to be branded the opposite, conservative in their ways. That too can provide its own attractiveness depending on the circumstances. Aggressiveness, as one is surely aware in the financial services industry, can carry a certain stigma attached to it anyway.
“I think it’s a word that does have a negative connotation, but – you know, the word that we’ll add is caveat emptor buyer beware — as long as the customer knows what he or she is doing, having an aggressive ISO can be a good thing for them,” said Kietz of Reliant.
Funding Circle US Originates $393M in 2022
March 2, 2023The American arm of Funding Circle originated $393M in business loans in 2022, according to the company’s latest public financial statements, nearly quadruple the previous year.
The majority of Funding Circle’s loans are currently projecting annualized returns in the vicinity of US inflation levels. A graph of their loans by cohort is below:
Funding Circle US has a fairly diversified base of capital, having worked with eight forward flow funders in 2022, one of which was a credit union.
The UK still remains the overall company’s primary market. It originated £723M in business loans in 2022, not including those part of government support scheme programs.
A Glimpse At How Big Fintechs Are Approaching The Small Business Loan Market
March 1, 2023| Company Name | Status | Notes |
| Square Loans | Just recorded its biggest originations year ever. $4.07B funded in 2022 | |
| Enova/OnDeck | Seeing tremendous demand. Focusing on diversification. $2.97B funded in 2022 | |
| Shopify Capital | Reporting strong renewals. Just had its biggest originations year ever with $1.66B funded in 2022. | |
| Upstart | Suspended business loan originations only 6 months after it started them. | |
| LendingClub | Has suspended its equipment financing and commercial real estate lending divisions. | |
| SoFi | Not interested in joining the small business loan market at this time. |
Square Loans Completes Monster Funding Year
February 26, 2023
Square Loans rose to the top of deBanked’s small business loan originations leaderboard last year after announcing $1.16B in originations in Q4. That brought the company, which is a subsidiary of Block (formerly Square), to over $4B funded for the year total, spread out across 461,000 loans.
In its annual shareholder letter, Block said that “Square Loans achieved strong revenue and gross profit growth during the fourth quarter of 2022.” Demand for loans has been steady and loss rates have stayed consistently within historical ranges.
Square Loans typically approves merchants for less than 20% of a merchant’s expected annual Square gross payment volume, is repaid by withholding a percentage of credit card sales, and enjoys a borrower base that pays off its loans in less than 9 months on average.
Block’s business is so large and now has so many components that Square Loans did not even come up in Block’s Q4 earnings call. Overall, the company generated $5.7B in revenue in 2022.
The small business loans originations leaderboard contains a lot of blanks. That’s because several public companies have attempted to obscure their business lending figures or non-public ones have opted to not disclose their figures. If you want your company’s figures to be added, email info@debanked.com.
Give Him a Try. “He’s a Good Guy”
February 23, 2023
He may be a good guy, but does he pay his loans on time? The infamous, he’s a good guy line circulates in this business daily. Citing what an admirable individual they are should require a bit more verification than that. And trusting a reliable source in the industry may not always unfold the way it’s supposed to. Therefore, is pushing for a merchant, company, or any party based solely on personal traits enough to create a depiction of who they are?
“This phrase is interesting in that it often serves as a shortcut for assessing the character of a person or company in the industry, and its prevalence is understandable given the amount of trust that is necessary for successful financial transactions,” said Tony Borchello, General Manager at Finance It Forward. “At the same time, this phrase should not be taken as a full assessment of someone’s character or a complete substitute for due diligence. While it can be helpful in certain contexts, relying too heavily on this phrase can lead to bad investments or other costly mistakes.”
Ultimately this phrase is not meant to be negative, but one’s relationship with a person or company may not replicate the experience for someone else. Finding great partners in the industry plays a role in this too. Without building credible connections to be used for future references, it can be difficult to take anybody’s word.
“You always have people on the outside that are looking out for each other in this industry, which is great, don’t get me wrong,” said Amanda Kingsley, Director of Marketing and Development at Merchant Marketplace. “But everybody is so quick to just use that one phrase to make it seem like ‘Oh he’s a good guy,’ okay I’ll trust you. I’ll do it because you said that.”
Key words are useful to look out for as well when relying on a reference. For example, “promise” may not have the impact intended, Kingsley described. If someone is promising to pay back a loan on behalf of another person, it could actually heighten the risk of it falling through.
“As soon as you hear the word promise, you know that they’re going to break a promise,” said Kingsley.
A person’s credibility in the business should not justify an automatic approval all on its own. While referrals are an obvious and necessary part of the business, doing a thorough examination on the backend is key.
“It’s important to remember that ‘He’s a good guy’ should not be the only factor that’s considered when making a financial decision,” said Borchello. “Instead, this phrase should be used in conjunction with other sources of information such as research, reviews, and interviews, in order to get a more complete picture.”
