Business Lending

In The Funding Biz? Here’s What to Know

March 9, 2023
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Are you in the biz of funding small biz? Listen to these execs tell you how to make it work!

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“Aggressive” Funding

March 7, 2023
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aggressive dealSometimes 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, 2023
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The 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:

us cohorts

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
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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
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blockSquare 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

Give Him a Try. “He’s a Good Guy”

February 23, 2023
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please fundHe 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.”

Idea Financial Upsizes its Credit Facility to $112M

February 23, 2023
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Idea FinancialIn just eighteen months since Idea Financial closed on an $84M warehouse facility with the Specialty Finance Division of Synovus Bank and Hudson Cove Capital Management, the company has gotten it upsized to $112M and the term extended by another 3 years. Idea Financial provides small businesses with lines of credit while its sister company LevelEsq finances the cost of lawsuits mostly undertaken by lawyers that work on contingency.

Co-founders Larry Bassuk and Justin Leto say that the upsizing news is “a testament to our discipline and our focus on risk management.”

The company has around 50 employees, less than what might be expected, but Bassuk and Leto say that technology has helped make tremendous efficiency possible while emphasizing that they have a human underwriting team that reviews every single loan before it goes out.

Jayan Krishnan, Managing Director of Synovus Bank, said that they were “very happy to provide them with the growth capital they need.” Synovus is the senior debt in the arrangement. Krishnan said that they love to work with companies that are thoughtful, mindful, and conservative and that Idea fit that criteria.

Fred Wang, a Co-Founder and Partner at Hudson Cove, said his firm is pretty selective on mezzanine within the small business lending asset class but that Idea’s performance has been very strong and consistent. “We’ve gotten a very good feel for them as a management team,” Wang said.

Both Synovus and Hudson Cove are well-versed in the commercial finance space.

“We’re obviously growing and they’re happing to be growing with us,” said the two founders of Idea Financial. “We run our company risk management first and sales second.”

LendingClub Ceases Equipment Financing Biz

February 22, 2023
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LendingClubSimilar to Upstart, LendingClub is hitting the pause button on a segment of its lending business. In particular the company announced that it has ceased originations in equipment finance and commercial real estate.

“…commercial real estate and equipment finance, in this environment just not as attractive returns for the bank or for shareholders,” said LendingClub CEO Scott Sanborn in the Q4 earnings call. “So, we aren’t originating new loans there.”

What will remain on the commercial side, however, is its SBA Government Guaranteed Lending business.