Business Lending
Irish Lending is Making a Comeback Despite ILCU’s Request for Less Regulation
March 22, 2022
In what some have called the financial services capital of Europe, Ireland’s financial sector has been making a serious comeback since its pandemic-induced slumps. Despite a recent release from the Central Bank of Ireland (CBI) saying that small business lending was making a serious comeback, credit unions throughout the country are pleading with regulators to remove “handcuffs” and allow them to fund their local merchants.
Current regulations enforced by the CBI limit both mortgage and small business lending to banks at 7.5% of the credit union’s total assets.
The Irish League of Credit Unions (ILCU) has said that credit unions are prevented from expanding into the mortgage market because of restrictive lending limits. While the effort comes across as a desire for credit unions to have more flexibility in mortgage options, small business lending has been tied into the deal and thus a part of the movement to get these regulations lifted.
According to the CBI’s data, net lending to small business owners in Ireland was €91m in the fourth quarter, reversing consecutive decreases from the previous two quarters. Estimated repayments by Irish SMEs were the lowest on record over the year as well, to the tune of €4.2 b.
As the data portrays, Irish lending is chugging its way back to normalcy. While the CBI appears to believe that the current system in place is working just fine, the credit unions are making a case that they can help speed up the Irish economy’s recovery process by being able to get a slice of the lending pie.
The ILCU recently responded to remarks made by minister of State Sean Fleming, who when speaking on credit union involvement in lending, encouraged their participation. “Credit unions should fill the gap left by the departures of Ulster Bank and KBC from the Irish market and start lending more mortgages.”
Fleming also included a claim that credit unions are “not doing enough of lending” in his remarks.
In response, ILCU deputy chief executive David Malone cited these regulations that the group has been fighting against as the cause for Fleming’s accusation.
“In order for credit unions to become community banks, and to really engage in the mortgage market, the ILCU is asking Minister Fleming to address the imbalance caused by the restrictive regulatory lending regime in his soon-to-be-published review of the policy framework within which credit unions operate,” said Malone.
Ireland has notably made some big moves in regards to supporting, financing, and government investing of fintech companies from both Ireland and abroad. As the country continues to come out of the financial hardships of the pandemic while also working in the contemporary European financial ecosystem, the CBI doesn’t appear to be lifting any regulation anytime soon, as long as lending numbers keep creeping back to normal.
Reality TV Loan Broker Shares What Happened After the Show
March 17, 2022
Juan Carlos Marcano’s experience on Equipping the Dream has given his loan brokering career a major jumpstart.In a chat with Juan Carlos Marcano this week, the Equipping The Dream broker who became a fan favorite for his personality and demeanor, it was learned that he’s been up to some interesting stuff since he appeared in deBanked’s first reality show. While operating JFK Business Financing in Dallas, Texas, Marcano shared that he is still in cahoots with some of the other participants in the show.
“I closed five deals last week,” said Marcano, when asked about what happened after he left the training office of Everlasting Capital. “After filming the show, I started with Will and Josh,” he said in reference to the two partners of Everlasting Capital. “They sent me leads, and I started closing.”
When asked what the Spanish speaking merchant needs most out of the small business financing industry, and more so Spanish speaking brokers like him, Marcano spoke about how these merchants just need service above all else. He spoke about how because of the language barrier, many of these merchants don’t have access to the same type of capital as an english-speaking business because there are not many people out there to go ask for it in their language.
Marcano awaited the final results of the one-week training competition at Everlasting Capital while wearing the flag of Venezuela as a cape, his native country.When asked if he is working exclusively with the brokerage from the show or if has future plans to expand his business, Juan spoke like a true broker. “I’m open to hearing from other funders and brokers about doing more deals,” he said.
“I will use the leads I get from [Everlasting] to help build my business in that industry,” said Marcano. “I’m starting to get better and better. When I get my cash flow going on and up, I’m setting a plan with a strategy to build my own details. I just need to get better with my website, social media, everything here is marketing.”
He said one major advantage of being a small shop is the potential he has as a broker in where he can live and do business. Currently a Dallas resident, Marcano sees a future in multiple cities. “I want to open up businesses in Miami,” he said, “but as I think about it, I’d like to open up a business in New York too.”
When asked about how he will compete with big tech’s emergence into small business lending, Marcano highlighted customer service and personality are the key to success for companies like his.
“For me, it’s all about providing great service. It’s all about five star service.”
You can meet Marcano at deBanked Connect Miami on March 24, where he alongside the cast of Equipping the Dream will be in attendance.
Meet The Aspiring Brokers Who Competed on Camera
March 10, 2022
The full cast of Equipping The Dream, the first b2b sales reality show, will reunite at deBanked CONNECT Miami on March 24th.
RJ Rochelle, Juan Carlos Marcano, Thomas Long, and Angela Thompson (above in order), all participated in a week long sales training last November that was captured on camera. They competed for a grand prize that was won in the season finale that aired just recently on March 3rd. Equipping The Dream is the defining b2b sales reality show. Now you can meet the brokers and the trainers that helped them in person!
Only a limited number of tickets to deBanked CONNECT Miami are left and sponsorships have already sold out. This will be deBanked’s 4th event in Miami since 2018.
All six episodes of Equipping the Dream are available on deBanked TV FREE.
Funding Circle’s Originations Have Slowed Dramatically in The US
March 10, 2022
Funding Circle’s US originations fell significantly in 2021 versus the previous two years, the company’s latest year-end report revealed. US originations were only £316M in 2021, of which £224M was PPP funding. That £92M in non-PPP funding was a massive drop from the £619 in 2019, for example.
Funding Circle attributed the reduction in demand to the ending of government stimulus programs.
“The US has a fragmented SME lending market,” the company stated in its full-year report. It estimated that 89% of all SME lending was done through banks and only 10% through specialty finance providers.
Funding Circle’s loans have small margins. The company projects annualized returns of only 5-7% on its US-originated non-PPP loans. Meanwhile, annualized inflation in the US by comparison is currently trending at 7.9%.
Funding Circle also announced its exit from the peer-to-peer lending model. According to the Financial Times, Funding Circle CEO Lisa Jacobs said of it: “There’s been a big shift; the industry has shrunk severely.”
Broker Show Ends in a Cold Call Showdown For The Ages
March 3, 2022
The nearly 1-hour long season finale of Equipping The Dream aired on Thursday, concluding the first reality show to ever capture the business finance industry. The six-episode series which followed four aspiring equipment finance brokers, proved, if nothing else, that cold calling and phone sales are not dead.
The show’s contestants capped off their week of sales training with a calling competition that came down to the wire and an outcome that left viewers shocked. Josh Feinberg, one of the sales trainers in Equipping The Dream, explained it best. “It almost seemed like it was scripted, but it couldn’t have been more real.”
Two episodes were released each week starting on February 15th. The March 3rd airing of the finale means that eager viewers can now binge the entire show on deBanked TV without having to wait for future episodes. (Start With Episode 1 here)
The show captured a real life broker training at the office of Everlasting Capital in Rochester, New Hampshire. deBanked’s Sean Murray served as Executive Producer.
“I really had no idea what we were going to capture by having our camera crew there all week,” Murray said. “But what we got is something everyone doing sales in the industry should watch at least once. It came out that good.”
Can a Merchant Fund Themselves with Their 401k or IRA? Sort of
March 3, 2022
“There is a way to use a 401k to fund a business, and it’s possible without triggering a taxable event within the retirement account.”
Daniel Blue, Owner of a merchant and consumer learning program about utilizing retirement funds called Quest Educations, believes that merchants are overlooking untapped funds that they have already paid into when searching for capital to fund their businesses. According to him, not only does the IRS actually allow individuals to tap into their retirement plans if they fulfill certain qualifications, but banks and Wall Street have a vested interest in keeping this information under wraps.
“A Traditional IRA or a 401k from an old job can convert into a Solo 401k,” said Blue. “Since most IRAs and 401ks from previous employers don’t allow you to access the money inside the account penalty- and tax-free, the ‘Solo’ 401k is the solution to that problem.”
A ‘Solo’ 401k is an IRS-approved retirement account for an entrepreneur who doesn’t have any W-2 employees on their payroll. If a merchant works with an entire staff of freelancers or solo, they can convert their nest egg into this type of 401k.
Blue explained in detail about how this particular type of funding is done. By tapping into what the IRS calls a ‘loan feature’ on the Solo 401k, merchants can actually go in and get cash.
“Per the IRS, the loan feature allows you to take fifty-percent or $50k (whichever number is less) out of the Solo 401k penalty and tax-free,” said Blue. “The money taken out must be paid back to the Solo 401k within five years to avoid a taxable event.”
“There is an interest rate on this loan,” he continued. “Once locked in, the interest rate is fixed and returned to the Solo 401k. The interest rate is prime plus one or two percent. The money taken out of the Solo 401k via the loan feature can be used to fund a business.”
This type of loan isn’t as risky as it sounds. Blue says that the merchant isn’t risking their retirement accounts should they default.
“The IRS requires that quarterly payments get made back to their Solo 401k, and the loan must be paid in full within five years to avoid a taxable event,” he said. “If the loan gets into a default status, the remaining loan balance becomes taxable income. [The merchant] doesn’t lose their retirement account or their business if their Solo 401k loan gets into default status.”
Blue referred to the process as a merchant ‘becoming their own bank’. In a time where finding different avenues of funding is the name of the game in small business lending, harnessing a niche customer to provide them a personalized, low risk financial product seems like a no-brainer if the qualifications of funding are met.
Why a Small Business Finance Company Brought BNPL to B2B Transactions
February 27, 2022
Tabit, a subsidiary of Vancouver-based Merchant Growth, has rethought business financing by integrating a newly conceived consumer-based product, (Buy Now Pay Later) BNPL to the B2B transaction world. As a decade-old small business finance company, Merchant Growth’s launch of Tabit shows how alternative financiers from across North America are trying to find new financial products that serve tomorrow’s merchants.
According to David Gens, CEO and President of Merchant Growth, Merchant Growth’s steady business provides Tabit with the infrastructure, manpower, and underwriting capabilities it needs to develop this kind of unique financial product.
“At a Money 20/20 conference many years ago, a speaker made a comment that resonated with me,” said Gens, when asked about the origin ideas in Tabit’s development. “That speaker, I forgot who it was now, said that small business financial services share more similarities with consumer offerings than they do with the mid-market and commercial space. In other words, innovations that become successful in the consumer space end up translating over to small business.
“Ever since then I’ve taken that to heart and as we watched the explosive growth in the consumer BNPL space,” Gens continued. “We were constantly thinking about whether the timing is right to translate this over to B2B transactions.”
Gens also gave credit to his industry awareness, saying that he saw those on the international stage having similar ideas.
“In the past 12 to 24 months, we’ve also seen a number of announcements internationally of companies raising VC funds to do just this, but nobody has yet announced in Canada,” he said. “In our strategic planning meetings, we looked closely at our company’s capabilities and determined that we are well suited to build this.”
Tabit’s perceived advantage is that they can reinvent the lending space by not wrapping a financial product in a digital service like other techy lenders, but instead use relationships between businesses and their vendors in order to keep their cost of acquiring customers down, thus having the cost of financing cheaper for the borrower.
“Tabit is our answer for how to reach as many small businesses as possible in an economically sustainable way, therefore delivering a cost-competitive product,” said Gens. “That is by leveraging the relationships that B2B sellers have with their buyers, [and] it’s a great way to scale the delivery of SMB credit and provide significantly greater access to capital at competitive rates.”
Gens also touched on the idea of the need for new financial products to compete with innovation in lending. Despite recognizing the existence of digitally native merchants and the desire to incorporate tech into a financial product, Gens doesn’t seem to think there is a need to overhaul the market with experimental ideas.
“I think that the launch of Tabit is an embodiment of the trend of digital consumer experiences proliferating in the small business and B2B space,” said Gens. “[It] also speaks to the growing influence of digitally savvy and millennial business owners on SMB fintech offerings. Credit is fundamentally an old product that’s been around for thousands of years. It’s the way in which it is delivered and how and when that will continue to evolve.”
“It is also becoming increasingly dynamic and fluid with real-time data and machine learning models, creating unprecedented convenience as well as accuracy in pricing of risk, which drives accessibility,” Gens continued. “Innovation should remain focused on minimizing the friction and “number of clicks” for users of credit, freeing up time to be spent on other valuable activities.”
At the consumer level, BNPL has faced some scrutiny by both users and regulators. Credit being available at a moment’s whim at the point of sale, with limited time to decide on the consequences of taking on a financial product has had many people question the ethics and long term outlook on it. Gens however, is not one of those people.
“I struggle to see how low-interest point-of-sale financing can be considered predatory,” said Gens. “Such a product eases financial burdens, it does not increase them. Particularly in the B2B space where such an offering helps accelerate growth for small businesses, I am optimistic that regulators will perceive B2B BNPL payment solutions favorably.
Square Loans Originated $850M in SMB Funding in Q4
February 24, 2022Despite Block feasting off of Bitcoin sales revenue last year, the company’s small business lending division, Square Loans, originated $850M in loans in the 4th quarter of 2021. That was spread out across 103,000 loans.
That brings the full year 2021 total to $2.45B, a new annual record for Square Loans, whose non-PPP related lending had dropped by more than 50% in 2020 when compared to 2019. It also put them ahead of rival OnDeck for the first year ever.
Square Loans was not mentioned by name during the company’s Q4 earnings call, but Square CFO Amrita Ahuja said, “We continue to believe our Square ecosystem is differentiated due to our integrated and cohesive set of products across the hardware, software, payments and financial services, serving seller needs in a more comprehensive way. We are making progress in surfacing incremental product adoption to serve our sellers across multiple vectors, with a goal of creating a more retentive and valuable relationship.”
