Business Lending

SMB Lending Fraud Being Combatted with Fintech, AI

December 9, 2021
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online fraudAfter almost a month in service, Linear Financial Technologies has seen success with its machine learning fraud detection program, Linear Defense. The technology is used to help prevent fraud in all stages of small business lending.

“Since launching Linear Defense last month, market feedback has been very positive,” said Sandip Nayak, Chief Strategy & AI Officer at Linear Financial Technologies, exclusively to deBanked. “We are actively deploying the solution with our first fintech client and have a second major client, [our] first bank client, preparing to deploy Defense in early 2022.”

According to Nayak, Linear Defense is leading the way in fraud prevention since its release. “We have engaged with a number of banks to test Linear Defense on their customer channels, and the solution has shown it can outperform existing fraud programs in accurately and efficiently detecting fraud.”

Linear Defense gains its predictive power through unsupervised machine learning. The software can be taught to detect fraud in multiple types of financial products and applications, using any combination of first party, third party and alternative data to determine its detection algorithms, according to the company.

​​”Fraud costs the global economy trillions annually, in terms of actual fraud and lost business opportunities from ‘false-positives.’ Now more than ever, financial institutions and other companies delivering financial services products are concerned with the increasing sophistication of fraudsters and are searching for more effective tools to keep up,” said Linear CEO Sam Graziano.

The company claims they have created a simple, lightweight solution that clients consume through an API, seamlessly integrating into their current origination, customer onboarding, or other operating systems.

“Linear Defense is a one-of-a-kind, AI-based fraud platform that surpasses existing market solutions when it comes to detecting financial crimes and fraudulent activity. Using true alternative data and deep learning algorithms, the platform has the unique ability to auto-calibrate to a client’s specific channels and customer population,” said Nayak.

“The solution’s superior predictive power enables clients to reduce the manual touch points required to onboard new customers,” said Nayak. [It’s] creating a better experience for consumers and SMBs, and a more secure process that protects our clients against bad actors.”

Broker Fair is HERE

December 5, 2021
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broker fair 2021 handbookMonday kicks off Broker Fair 2021 at Convene at Brookfield Place in lower Manhattan. The venue can be found on the 2nd floor of 225 Liberty Street. You must have a ticket and proof of vaccination to enter. The event is sold out.

deBanked TV will be streaming live from inside the venue where host Johny Fernandez will be talking to attendees throughout the day. You can tune in to watch live on debanked.tv starting in the morning on December 6th.

If you see the below entrance on the 2nd floor of the building on December 6th, you’re at the right place:

Convene Entrance

Citi Uses Branding and Fintech to Bring Merchants Directly to Funders

December 3, 2021
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CitigroupCiti’s release of Bridge, a virtual loan broker offering merchants a three step process to apply for capital through over a dozen banks, has branched out across seven states and is continuing to grow four months in— according to recent LinkedIn posts from Citi employees.

“I am excited to announce I have been working on a new and innovative platform along with the Citi team for the past few months!” wrote Caitlyn Boyle, Assistant Vice President and member of the team who designed Bridge. “I am extremely proud to be part of such an amazing team, and to assist in building out a great platform to connect small and medium sized businesses with local, regional, and community banks.”

“If you are looking for a loan, do not hesitate to visit our platform!” Boyle wrote.

Richard Banziger, Head of Citi’s U.S. Commercial Bank, commented during the launch of the program about Bridge’s potential to not only improve the application process for merchants, but how the program gives access to capital that will be given to minority business owners who may have never been able to get access to that capital in the past.

“Citi believes in the power of local, small businesses and continues to find ways to support businesses that are the foundation of communities across the U.S. Citi funded loans totaling more than $5 billion as part of the Small Business Administration’s Paycheck Protection Program during 2020 and 2021.”

“As both a lender and a community stakeholder, we have a deep understanding of the problems businesses face when trying to navigate the borrowing process” said Banziger. “We are committed to finding digital solutions that can make the process easier, more seamless and more equitable.”

According to Citi, Bridge’s goals are broken down into five points. They hope to create liquidity and access to capital, modernize and automate prospecting, add digitization, transparency, and standardization to the loan process, continue to digitize small and medium sized business lending, and democratize the loan process for lenders and brokers.

“Citi prides itself on encouraging a spirit of entrepreneurship among its employees to solve financial access issues and improve digital offerings for our clients and community partners,” said Vanessa Colella, Citi’s Chief Innovation Officer.

Loan options range from as little as $100,000 to as high as $10,000,000.

The Broker: A Sister Duo Gets Borrower-Centric

November 29, 2021
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Brooks Partners Finance
Left: Porsha Brooks, Right: Mercedes Brooks

When the company she worked at was halted by pandemic woes, Porsha Brooks, then an MCA salesperson, was asked by her sister Mercedes how they could get together and pick up where her other company left off. “My sister approached me at that time saying, ‘well what is it you’re doing, I want some action in that’, then I said, ‘that action is kind’ve drying up— but we can do our own thing, we can start our own business.'”

“So, that’s what we did.”

While offering a suite of loan options to their clients, Porsha spoke with deBanked about how her experience in sales, combined with her small business finance knowledge, has powered the creation of a borrower-centric lending product through their company, Brooks Partners Finance.

“As far as MCAs go, I’m not pro or against it, but at the same time, I know what they are,” said Brooks. “The industry for the most part, every MCA [funder], every broker, is pushing MCAs. Everyone is pushing MCAs. But I see that it really does do a detriment to businesses and business owners.”

Although Brooks Partners still writes MCA deals, that’s only if that is the best option for the client at that time. Brooks claims her company’s business model isn’t to push businesses into whatever type of loan makes sense for her company, but rather the opposite, using different types of tools to figure out exactly what loan is best for the borrower.

“If I have every option for that individual, I don’t have to push them into an MCA,” Brooks continued. “I can still get paid, and still do right by that business owner.”

“WE’RE VERY, VERY HANDS ON HERE.”

When speaking about her past work, Brooks spoke about how coming up in an all-male environment was actually a motivating experience.

“They quickly judged, saying ‘you know, she’s a woman, and she’s probably not going to last here for too long, because they normally don’t’ and it turns out I did,” said Brooks. “Three months in, I rose to be one of the top salespeople at the firm. Within that time, I got the attention of both partners at the firm, and I would say about a year in, I was promoted to head their new banking department.”

But when the pandemic slowed the business down, it led to the genesis of Brooks Partners Finance. “I already had certain contacts, I had my foot in the door, and I had a taste for bank loans,” said Brooks.

“I’d say the biggest moneymakers for us are SBA and conventional [loans],” said Brooks. “We have a range of banks that we work with and we are able to give to individuals, not just existing businesses, but startup businesses too. We’ve learned the SBA world like the back of our hand. We’ve been studying this for several months, we basically have to know everything about how to get somebody approved for an SBA.”

With access to these types of loans being notoriously difficult for small businesses to qualify for, Brooks spoke about how teamwork between a broker and a merchant can lead to a plan for approval.

“We’re different [from] most brokers in the industry; we’re very, very hands on here. We stay on from the onset until the funding process. Now what we’re doing is we’re holding our clients’ hand. We’re telling them how they can get qualified, taking them through that process, we’re working with the lender, and not letting the lender cut us out.”

“We make sure that we stay in our lenders’ faces for our clients’ benefit,” Brooks continued. “Making sure we are always a part of that process and making sure things go smoothly, so we do get a lot of SBAs and conventional loans done.”

“I’m not just the ordinary middleman, I am supposed to help [my] client and guide them to their best loan option for their business,” Brooks continued. “If I don’t know where I’m sending them or don’t know if they’re going to be qualified, I am doing them a crazy disservice to my client. That’s where we differ.”

Broker Fair Ticket Registration To Shut Off Any Day Now

November 28, 2021
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Broker Fair CrowdBroker Fair 2021 ticket registration will shut off days before the December 6th event. The broker-centric conference is now officially counting down to its kickoff at Convene in New York City.

“This pretty much happens every time we put on a show,” said Broker Fair founder Sean Murray. “Even though this event is post-covid, we’re looking at the number of registrations so far and are very pleasantly surprised.”

Hundreds of small business finance brokers are registered to attend Broker Fair. The annual event first launched in 2018.

“I don’t know what day we’re going to disable registration yet, but based on the pace I’d say there’s no way we make it until Friday,” Murray said.

While supplies last, tickets can still be purchased here

Not Just For Salespeople: Becoming a Certified Small Business Finance Professional

November 23, 2021
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Certified Small Business Finance ProfessionalIts aim is to become an industry standard. The newly launched Certified Small Business Finance Professional (CSBFP) program will first become available at Broker Fair in New York City on December 6th.

But what’s the difference between this one and others? Steve Denis, Executive Director of the Small Business Finance Association (SBFA), says that his organization’s backing of the CSBFP makes all the difference.

“We’re the largest trade group in the space without question,” Denis said, adding that the group has about 30 members, several of which are among the largest in the country.

“It’s going to be a signal that you’re doing things the right way and want to go out of your way to show that you are doing things the right way,” Denis said.

“IT’S OPEN TO ANYONE IN THE INDUSTRY”

The certification will require applicants to complete a course centered on understanding products, laws governing the industry, and compliance. The certification exam will focus on testing applicants’ ability to understand key concepts and best practices.

This course is designed to be taken in person. While it will be available at Broker Fair, Denis said that they plan to partner with other events as well.

SBFA“We’re going to focus on as many in-person training sessions as possible,” he said.

And it’s not just salespeople they’re targeting. Underwriters, collectors, support staff, and more are not only all welcome to obtain their certification, but are also encouraged.

“It’s open to anyone in the industry,” Denis said. “The more the better. […] It will send a very strong message that there is a diverse group of people that want to take a certification and take it very seriously.”

In the official announcement, it was stated that it would be more than just a stamp and that certified professionals would also be provided with “a way to connect, learn and grow beyond the initial education process.”

Denis compared the CSBFP standard to CFPs (Certified Financial Planners) in the financial advisor space.

Attendees of Broker Fair 2021 can take the course at the event at no extra charge.

IOU Financial Originates $52.2M in Q3

November 19, 2021
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iou homepageIOU Financial continued its growth trajectory this past quarter with $52.2M in small business funding originations. It was the company’s biggest month since inception.

“Our successful migration to a marketplace strategy has enabled IOU Financial to capture more volume in Q3 than would have previously been possible,” stated Robert Gloer, President and CEO in an official statement. “This has proven to be a win-win that has in turn given us the financial latitude to invest in growth initiatives and further reduce our corporate debt.”

The company was also profitable in Q3, though the company said this was “due in part to a reversal in its provision for loan losses and recoveries of loans previously written off, as well as a reduction in operating expenses due to the recognition of $1.5 million in employee retention credits.”

IOU’s customers have been in business for an average of 11.5 years and borrow $82,688 on average for a weighted average term of 11.9 months.

For the first 3 quarters of 2021, the company has originated $111.9M.

Wing Lake Capital Announces New Capstone Fund

November 12, 2021
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wing lake capitalAfter acquiring Franklin Capital in October of last year, Wing Lake Capital CEO Shaya Baum spoke to deBanked about a new fund the company is unveiling, the Capstone Fund. 

A mix of debt and equity has put $50 million into the Capstone Fund, all from investors of the Franklin Fund. According to Baum, the Franklin Fund still has about $100 million in it. 

“Wing Lake Capital has two funds now,” said Baum. “There’s the Franklin Fund and the Capstone Fund. The Franklin Fund was launched as a bridge for companies that are stuck in the cash advance merry-go-round. Companies are stacking cash advances until they are using Peter to pay Paul, and then there are no more Peters.”

Comparing the Franklin Fund to the Capstone Fund, Baum described it as a “graduate fund” that will enable companies with too many advances to move beyond them and that it would serve as a stepping stone between the Franklin Fund and traditional SBA or bank financing.

Additionally, the Capstone Fund is also a place where companies who have extenuating reasons why they’re denied credit, but aren’t in distressed business situations, can get access to capital. 

Baum’s business model is sometimes at odds with the advance providers his companies try to draw customers away from, with Baum going so far as to say that some of these providers “hate” him. Despite this, he says that some quietly work with him.

“These companies say one thing publicly and privately do another,” said Baum. “These companies that come to us for help are companies that can no longer pay their cash advance debt.”

As part of his company’s program, the advance provider can recover some of its money, he asserted.

“We’re getting 800 deals a week from cash advance companies saying ‘hey, can you help us get out of these?’”

Regardless of the tension with competitors, Baum believes the new fund will ultimately benefit the merchants.

“The Capstone Fund is really focused on growth capital as opposed to restructuring distressed assets. Okay, we’ve restructured your business, you don’t have to pay that cost of capital, you have to focus only on growth. You have opportunities to grow, room for success, now let’s scale the business.”