Business Lending
Amazon’s Business Loan Trajectory
January 10, 2023According to documents purportedly obtained by Business Insider, Amazon plans to increase its business loan operations in 2023, estimating that loan receivables will eventually exceed $2B. Insider also says that its expected loss rate is 1.34%.
The receivable figure would not be all that surprising as Amazon as been on a steady trajectory upwards over the last decade with the exception of 2020 when covid struck. Its receivables reached $1.4B in Q3 2022. The year-end figure has not yet been released. $2B+ for 2023 would be in line with the historical trend.
2016: $661M
2017: $692M
2018: $710M
2019: $863M
2020: $381M (covid)
2021: $1B
2022 (Q3): $1.4B
Not counted in these figures is financing to Amazon sellers conducted through a third party. Amazon recently 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.
Last Chance to Comment on SBA’s Proposal to Lift SBLC Moratorium
January 4, 2023In November, the Small Business Administration formally proposed a rule to lift the moratorium on licenses for Small Business Lending Companies (SBLCs). The moratorium wasn’t some pause borne out of the covid era. It’s been in place since 1982, creating a market of just 14 licensed SBLCs over the span of 40 years. Originally this moratorium had only gone into place because the SBA “did not have adequate resources to effectively service and supervise additional SBLCs” but now in modern times the SBA has determined there’s a problem, “that certain markets where there are capital market gaps continue to struggle to obtain financing on non-predatory terms.” Their solution? Lift the moratorium.
The proposal was published on November 7th and the public’s ability to comment ends on January 6th. One potential outcome of lifting the moratorium is that fintechs could potentially become licensed SBLCs. That appears to be a desired outcome for Funding Circle who shared their comment on social media on Wednesday.
“We need the SBA to lift the SBLC moratorium in order for us to apply to originate 7(a) loans nationally,” Funding Circle wrote. “This would allow us to leverage our platform technology and more than a decade of lending experience to expand access to 7(a) loans for underserved communities and to do so quicker, at a lower cost and with a superior customer experience.”
With more than 60 comments garnered on the proposal so far, Funding Circle is virtually the only fintech to have weighed in at all. A number of comments from the traditional finance realm were highly critical of the idea of allowing fintechs to become SBLCs, citing their supposed inexperience and perceived failures to responsibly dole out PPP funds. Others expressed a belief that the SBA still did not have the resources necessary to supervise additional SBLCs even after 4 decades and that the agency is already stretched too thin as it is.
“SBA should not expand 7(a) Program until it requests, and receives from Congress, an appropriation to fund the additional SBA staff necessary to supervise additional 7(a) lenders,” the American Bankers Association wrote.
There are complexities and nuances to the pros and cons of the arguments, but the opportunity to comment at all is running out. The deadline is Friday January 6th.
Anyone can submit their own comment here.
Update: Upstart, another fintech, had their comment processed by the SBA after this story was posted. The company also supports lifting the moratorium.
$220M Worth of EIDL Funds Already Charged Off
January 2, 2023It’s a small sum compared to the total outstanding principal balance, but $220M worth of covid-related EIDL funds had already been charged off as of SBA fiscal year-end 2022. That year-end of September 30th is before almost any borrower was required to make even one payment on the 30-year loan. The total outstanding principal balance net of charge-offs was $358B at the time.
The SBA originally allowed a 30-month deferment on EIDL payments and just recently began offering an additional six-month deferment to eligible borrowers if they need it. Making payments at all can be a little bit complex in that of itself, however.
It remains to be seen how covid-era EIDL borrowers will perform. The SBA charged off $457M in just 7(a) loans in 2022 alone, for example, so the figures on the EIDL are not that material yet. In the years before covid, the SBA was regularly charging off between $800M-$2B/year in loans total. However, it is unlikely that a significant number of them defaulted before the first payment was even due.
2023 Is Here. Are You Ready?
January 1, 2023Happy New Year! deBanked CONNECT MIAMI is now only 2 and a half weeks away. Hosted at the Miami Beach Convention Center in South Beach on January 19th, this event will set the industry’s course for 2023.
![deBanked connect miami](https://debanked.com/blogimages/23mi.jpg)
Climbing Up The ROK
December 23, 2022![Patrick Manning - ROK Financial](https://debanked.com/wp-content/uploads/2022/12/patrickmanningrokfinancial.jpg)
This month Patrick Manning took over as the new CEO of ROK Financial. Previously representing the company as CRO and President, Manning’s been on an upward trajectory since he first started in sales roughly eight years ago. He learned the business from founder and former ROK CEO James Webster, who will be stepping into a new role as Executive Chairman.
Manning will be overseeing the leadership team with the help of COO Shannon Treadwell and continuing to grow the organization.
“I also have a large hand in the relationships with our lenders, we are a broker, and we utilize all of the top lenders in the industry,” said Manning. “And I sit at the helm of managing and building those relationships with our lenders.”
Manning described the industry as “lacking information and education” whether this be from brokerages or business owners themselves. Taking pride in the way ROK does business, Manning went on to describe a new learning experience the company will be presenting to the industry.
“I’m going to continue to help push on the company initiative of rolling out ROK-U or ROK University. ROK-U is an education platform which encompasses ROK’s 10-15 years of broker experience to an easy-to-follow training platform geared to properly educate those that are looking to enter into the industry,” said Manning.
ROK’s goal is to improve the way brokers interact with business owners and carry out transactions. This fully remote program will be available to anybody interested in entering the industry where they’ll learn proper techniques as well as language. The company soft launched the program in May with 30 enrolled students from all over the country. Testing the program out to see what areas needed improvement, ROK-U will officially launch in January 2023. It is also free of charge and will be live on their website.
“The team has been working diligently to roll out new technologies to help with this initiative. Those that enroll in ROK-U will have access to best-in-class technologies powered by Salesforce Communities to assist in training and getting their businesses off the ground,” said Manning.
The company will also be introducing the ROK Tour, a new networking event in eight major cities throughout the U.S to help promote ROK University.
Actually Paying the EIDL Not So Easy?
December 15, 2022“It’s like the DMV, everything’s very complicated,” said Eddie Klein, Managing Partner at YM Ventures. “The whole process was complicated to begin with…”
Just recently, the first round of EIDL borrowers were required to start making payments after receiving a 30-month deferment and already challenges are starting to present themselves. The availability of these funds came at a desperate time for merchants that needed the capital and few were probably asking about the servicing or repayment process.
“You really got to look at them from a perspective that they got very cheap money at a time where everyone desperately needed it, so very cheap money and dealing with a little bit of headache or taking expensive money and not dealing with a little bit of headache,” said Klein. “I would definitely always take the cheaper money.”
And so too did millions of American business owners go with the cheaper EIDL funds. But now that it’s time to pay, borrowers are learning that their balances and statements exist on one website, CAFS (caweb.sba.gov), and the system to make payments exists on another, (pay.gov). The first refers you to the latter but it’s not exactly a smooth transition. For one, each website has its own separate username and password system.
“If you’re going to ask these business owners for money back, which is fine, it’s the government’s right to do that, you got to make it simple,” said Trey Markel, VP Sales & Marketing at Centrex Software. “You got to have some videos, you got to have some tutorials, you got to make sure you’re guiding people down the right path and unfortunately, that’s just not happening.”
It can also be quite difficult to contact the SBA directly when dealing with system problems, according to Markel who provided an example. One of Markel’s clients has been trying to make interest payments on two EIDL loans but the system will only apply payments to one.
“He’s making principal and interest payments, technically to one, because that’s how it’s being calculated,” said Markel. “And the other one, the interest has been accruing the entire time, with no payments associated to it.”
The SBA, for its part, said it provides instructions to merchants to make payments.
“SBA sends a direct email to borrowers to remind them that their deferment period is ending, and they are entering repayment, including instructions to create CAFS account to check loan balance, payment amount and due date,” said Christalyn Solomon, Public Affairs Specialist at the SBA. “If they create a CAFS account, as instructed, they will also receive a monthly statement.”
And for borrowers experiencing short-term financial challenges, the SBA is now offering a Hardship Accommodation Plan allowing those who are eligible to request an extension for another six months.
“The Hardship Accommodation plan has been well received by borrowers experiencing difficulties in repaying their loans,” said Solomon. “SBA wanted to provide relief to existing COVID EIDL borrowers experiencing short-term financial challenges. The six-month payment reduction plan, called the Hardship Accommodation Plan will assist those who are still working to repay this COVID economic aid loan that provided them with much needed emergency working capital during the pandemic.”
Fora Financial Surpasses $3 Billion Funded Since Inception
December 14, 2022Fora Financial has surpassed $3 billion in funding to small businesses since inception, according to a post the company shared on social media. That was spread across 35,000+ businesses. The milestone coincides with a new look, which includes a new logo and website.
“Behind our new look, we’re making tons of operational refinements,” a blog post about the improvement says. “Fora Financial’s Capital Specialists are doubling down on their collaborations with customers to build creative, innovative funding solutions.”
Opportunities Still Ahead?
December 12, 2022With the year coming to an end, it’s time to analyze what direction the industry is going in. Some professionals in the industry are feeling optimistic despite macroeconomic pressures and there’s a reason for that.
Gerald Watson, Founder and President of The Watson Group, said with the latest Employee Retention Tax Credit (ERTC), his company has been on a steady incline. The tax credit was designed for companies affected by Covid in 2020-21 as a refund against payroll taxes they’ve already paid and that’s where Watson comes in because it can take a while for business owners to actually receive those funds, as long as 6-12 months, he said. With the help of funding partners, Watson can make an advance to business owners on the ERTC upfront. Watson’s core business has always been factoring but when he saw this opportunity, he went for it.
“I think maybe looking ahead as we get into 2023 next year, I think the industry is going to be continuing to look for ways to expand its product base, and I think it’s likely that we’ll see more and more maybe of your larger lenders moving into things like some form of factoring, for example,” said Watson.
On the fintech side, CRO at Encapture Tyler Barron says he’s noticed a shift this year regarding certain lines of business but that their product has historically performed well regardless, even if the deal sizes get a bit smaller. Encapture is a platform that sells automated programs to financial service companies – primarily big banks – and they’ve noticed large, regional, and community banks investing more in technology, specifically ones that help them automate and cut costs.
“What we’ve kind of seen over the past year is, there’s definitely been a pullback, as it relates to certain lines of business, like anything related to mortgage this past year has completely dried up,” said Barron. “But we are still seeing financial institutions, both fintechs, large banks, regional banks, and community banks invest in technology.”
Back at Broker Fair in late October, Pooja Nene, Broker Relationships Manager at Balboa Capital, told deBanked that she thought the industry was going in a good direction.
“I think with a lot of issues that we’ve had since 2020 our industry’s been holding up really well and there’s a ton of opportunities out there to get involved in different types of financing…” said Nene.
Overall, the demand for the products should continue.
“One thing about our industry is that people always need money; good times bad times, high interest rates, low interest rates,” said Gerald Watson. “There’s always going to be a demand for what we do.”