Business Lending
Enova Surpasses $1 Billion in SMB Loans in a Single Quarter For First Time
October 23, 2024Enova’s small business loan arm had a huge 3rd quarter.
“Notably, for the first time in our history, we originated over $1 billion in small business loans, up 33% year-over-year and 14% sequentially,” said Enova CEO David Fisher during the company’s earning call. “The main drivers of this growth are consumer spending and confidence from small business owners in this current economy.”
Additionally, he said:
As discussed on our first quarter call, we identified opportunities within our SMB business that we believe would support continued strong growth with improved unit economics. We continue to see the benefits of this strategy in the third quarter as small business originations growth was strong, small business revenue yield continued to move higher sequentially and the small business quarterly net charge-off ratio remained on the low end of our expected range. Expectations for our future credit performance remained stable as the consolidated consumer and small business fair-value premiums were all largely unchanged from last quarter.
How Erica Bell of Tax Guard Won Second in The Poker Tournament
October 13, 2024
When the final hand of the B2B Finance Expo’s official poker tournament had concluded, Erica Bell, a Business Development Account Executive for Tax Guard, walked away with 2nd place. Bell has enjoyed poker for a long time and knows the game well. She’s even played in tournaments at the Ameristar Casino in Blackhawk, Colorado and won 1st place in one of them.
“The game’s strategy is what I truly enjoy,” Bell told deBanked. “A couple of individuals came up to me and congratulated me [on coming in 2nd].”
Bell, who at least took home a small prize, has worked for Tax Guard for 5 and a half years. For those not familiar, “Tax Guard is a 3rd party due diligence company who provides real-time insights into hidden tax debt of individuals and businesses by retrieving and analyzing IRS data directly from the source, the IRS,” she says.
The company’s services are primarily used by commercial lenders and financial institutions to assess tax-related risks associated with borrowers. Tax Guard is widely known throughout the industry and has been frequently referenced on deBanked. The company’s co-founder and CEO, Hansen Rada, even did a Zoom interview with deBanked during the early lockdown era of Covid.
The company’s value is pretty straightforward, a lot of tax debt is not easily discoverable, and they’ll get the info you don’t even know you’re missing straight from the source.
“By offering earlier visibility into potential tax issues, liabilities, liens, & levies, we help our customers make more informed lending decisions and mitigate financial risks,” Bell explains.
And if there is a hidden tax issue, Tax Guard can proactively work to resolve it and even negotiate a payment plan. One downside of ignoring tax debt as a lender is having to compete with the IRS when they ultimately move to enforce collection.
Clients can use the Tax Guard portal to run reports or integrate their API right into a CRM. Other critical information can be obtained as well including a wage and income transcript from the IRS. “This includes data from W-2s, 1099s, and other income forms, as well as withholding details,” Bell says. “This data provides a comprehensive view of a taxpayer’s reported income and can be critical when assessing financial risks, resolving discrepancies and verifying financial details.”
Obviously, Bell says that anyone interested in learning more can reach out to her directly.
“My role is highly dynamic, being sales, strategic partnership and relationship focused,” Bell says. “I really enjoy working with extremely talented people at Tax Guard, meeting new folks in the finance industry and learning from their perspectives.”
She’s also apparently planning to host her own upcoming friendly poker tournament so it’s safe to say she has no intention of letting her skills get rusty.
TikTok is Now Offering Business Financing
October 7, 2024
Add TikTok to the list of tech platforms offering business loans. TikTok Shop Capital is now “offering sellers access to fast and flexible business financing,” the company states on its website. Unsurprisingly, one of TikTok Shop’s partners is Parafin but the company also lists Storfund and Kanmon as funding partners. Storfund announced its deal with TikTok earlier today and said that its program would be called Daily Advance.
“TikTok is not a lender or loan broker,” the company website states. “TikTok partners with third-party lenders and financing providers to offer TikTok Shop sellers business financing options.”
The process works different depending on which solution a customer uses. For example, Storfund repayments are automatically debited from TikTok Shop payouts, Parafin repayments are automatically debited from the business bank account associated with TikTok Shop payouts, and Kanmon requires repayment via auto-pay deductions from the business bank account provided during the application process.
The Parafin option does not appear to be a standard merchant cash advance. TikTok says it would actually be a Parafin commercial flex loan issued by Celtic Bank. There is no credit check required for it.
TikTok’s foray into business financing is invite-only. “If a seller has an available pre-qualified and/or pre-approved offer, it will appear within Seller Center under the Finances tab,” the website says.
Only 10% of Banks Have a Credit-Scoring System That Can partially or Fully Automate Small Business Lending
October 3, 2024If you thought that fintech had already largely come in and revolutionized the lending process at banks, you’d be wrong. According to the FDIC’s latest annual small business lending report, only 10% of banks have a credit-scoring system that can partially or fully automate the underwriting of some non-credit-card lending. Further, only 3% of banks use a credit-scoring system to auto-approve loans and less than 1% will auto-approve a loan of $250,000.
When it comes to fintech, “banks most commonly use fintech to help with regulatory compliance and for steps taken after loan approval,” the report says, “such as closing, performance and servicing, and portfolio analytics.”
Still, that doesn’t mean they’re terribly slow. In fact, thirty percent of banks can approve a small and simple business loan within one business day and 75% of of banks can approve one within five business days, though approvals usually happen within ten days on average.
And just because a bank’s business loan operation isn’t fully automated doesn’t necessarily mean they’re at a disadvantage competitively because banks actually tend to view the personal relationship with their small business loan customers as one of their core advantages.
“Banks use and high value branch locations and on-site visits as ways to generate and maintain small business lending relationships,” the report says. “About four in five banks define their geographic market for small business lending based on their branch footprint and, on average, their market extends 40 miles from their branch locations.”
“Very few banks allow borrowers to complete a loan application entirely through an online portal,” it adds. And that’s by design apparently. Of the banks surveyed for the report, almost half of them said they had NO PLANS to use or CONSIDER fintech in small business lending.
There’s a lot more insight in the full report that you can view here.
Lenders, Brokers Doubtful That Merchants Would Use Their Domain Names as Collateral if They Could
September 12, 2024Only 26% of respondents said that merchants would use their business’s website domain name as collateral for a loan (presumably if they were given the option to). This according to an informal poll conducted on LinkedIn that asked that very question without any context or clarification. Forty eight percent of respondents straight up said that merchants would not use their domain name as collateral for a loan. Ironically, many secured loans with liens on all assets would already include domain names among those assets.
Back in April, deBanked predicted that lending specifically against a domain as collateral was a product likely to happen in the near future. The following month a domain name registrar partnered up with a peer-to-peer lending site that touted the use of blockchain technology. The first ever domain name loan executed by smart contract actually happened in January of this year, however, by deBanked.
Funding Circle UK Now Simpler, Leaner After Selling US Arm
September 5, 2024Funding Circle published its first financial statements since divesting its US business. The international small business lender’s primary market had always been the UK. In its latest shareholder presentation, Funding Circle explained that 92% of its income comes from fees.
Specifically:
53% transaction fees
27% servicing fees
12% drawdown fees
Overall, the company’s financial picture was pretty good for the first half, generating £79.9M in revenue and a small profit (before tax). The company should be well on its way to continued profitability given its plan to reduce headcount by 120 while focusing more on management layers and productivity, a plan which includes generative AI tools. One slide explains that it is now a “simpler, leaner and profitable business.”
Funding Circle pioneered peer-to-peer lending in the small business finance market. iBusiness Funding, a subsidiary of Ready Capital is the company that acquired its US business.
MoneyThumb Acquired, Ryan Campbell Takes Over as CEO, and What to Expect
August 29, 2024Ryan Campbell will take over as CEO of MoneyThumb as part of the deal announced earlier today. MoneyThumb is being acquired by an investment group led by Iron Creek Partners LLC that includes Main Street Capital Corporation (NYSE: MAIN). Campbell was for a long time MoneyThumb’s EVP of Sales & Marketing. Ralph Mayer, MoneyThumb’s founder, will move on to an advisory role and retain his board seat.
MoneyThumb is widely known in the small business finance industry for two signature products it offers, PDF Insights, which reads and analyzes financial documents, and Thumbprint, which assesses whether documents have been manipulated and could be fraudulent.
The idea for the company, which originated over a decade ago, came to Ralph Mayer when someone had asked him a basic question, could he convert the data in a PDF file?
“I had been in software my entire career. I was an angel investor and I was looking to get into something a little bit different,” Mayer said of the time when the idea for MoneyThumb came to him. “Originally we got started selling software to accountants.”
MoneyThumb soon encountered a field that seemed to handle an unlimited number of PDFs and was ripe for the product they were building. It was the MCA & revenue based financing industry. MoneyThumb has made a name for itself in it ever since.
Ryan Campbell told deBanked that it’s actually quite common for funding companies to be on the receiving end of manipulated bank statements and that about 6% of the documents they analyze on average end up meeting or surpassing the scoring threshold they’ve built to indicate manipulation.
“It happens a whole lot more than what you would think,” Campbell said.
One major trend they’ve noticed is that before covid 90% of fraudulently submitted bank statements did not even have financial columns that reconciled numerically whereas now most fraudulent ones today do. Today’s fraud, because of how good scammers have gotten, may not even be noticeable to the naked eye which is why their technology has become even more important.
Campbell said that as part of the acquisition it will be business as usual with their clients. The company is keeping its name and Iron Creek is going to continue letting them do what they do best. MoneyThumb is used by both funders and ISOs and Campbell is regularly seen on the industry trade show circuit.
“This acquisition underscores MoneyThumb’s proven technology and strong industry demand, and supports our long-term growth objectives,” Campbell said in an official statement. “This partnership marks an exciting milestone for our company and with the support of Iron Creek, we are well-poised to accelerate our growth, continue to deliver exceptional software solutions for our customers and help lenders manage risk and deliver more capital faster to small businesses.”
Whoa, QuickBooks Capital Shoots Up in Business Loan Originations
August 22, 2024Intuit’s fiscal year ending July 31, 2024 revealed a stunning detail, $2.4B in financing through QuickBooks Capital over 12 months. This was up 28% from the prior year. That number likely puts Intuit’s business loan volume ahead of Shopify’s but that’s still less than Enova and Square. Customers of QuickBooks Capital can apply for financing by clicking a button right in their QuickBooks software.
QuickBooks Online accounting revenue grew 17% in Q4 and 19% in fiscal 2024, the company reported. Intuit has the advantage of many related QuickBooks services slowly merging into one such as payments, payroll, capital, and Mailchimp. Intuit also owns Credit Karma.
