Business Lending
PayPal: “We are now one of the top 5 lenders to small businesses in the United States”
February 2, 2022
PayPal’s Q4 earnings report failed to mention its small business lending division, but an internal assessment of its Working Capital product was made known through a recent interview published by McKinsey.
“Through our PayPal Working Capital product, we are now one of the top five lenders to small businesses in the United States,” said Franz Paasche, PayPal’s SVP, Chief Corporate Affairs Officer at PayPal. “Seventy percent of those PayPal Working Capital loans are going into regions of the country where banks have pulled out, sometimes for good economic reasons,” he continued.
Despite the self-reported achievement, the company’s attention is now focused in a different sector of lending altogether, in the rapidly expanding consumer market known as Buy Now, Pay Later (BNPL).
“Buy Now, Pay Later is a perfect example of the type of investment we are making to give shoppers and retailers more reasons to engage with PayPal,” said CEO Dan Schulman during the company’s recent earnings call. “Buy Now, Pay Later is available in 8 markets, including with Paidy in Japan. We continue to see rapid consumer adoption, with $3.2 billion of Buy Now, Pay Later TPV in Q4 alone, a $13 billion run-rate, with Q4 growth of over 325% year-over-year. We have processed 54 million loans globally since launch, with 13 million unique consumers and 1.2 million merchants using our Buy Now, Pay Later services.”
PayPal’s stock plummeted by 20% after earnings were released that was connected to challenges unrelated to lending facing the company.
Funding Circle Partners With Nationwide in Mutual Referral Program
February 1, 2022
Denver-based small business lender Funding Circle announced a partnership with Nationwide Insurance, in a move designed to improve access to capital for businesses that use Nationwide as their insurance providers. The move is a continued trend in the small business financing industry to create access to resources surrounding business financing in places that merchants are interacting with on a daily basis.
“Funding Circle is thrilled to partner with Nationwide to offer essential resources that seamlessly supplement our customers’ business needs and set them up for success in a competitive market,” said Vipul Chhabra, Managing Director of Funding Circle US.
“This first-of-its-kind partnership with one of the country’s leading insurance and financial services providers embodies our core values,” said Chhabra. “[Our values are] to truly support American small business owners in accomplishing their goals, especially among underserved populations that banks typically are not incentivized to reach.”
On top of access to funding, the partnership offers access to resources surrounding small business financing to Nationwide customers. According to a press release by the companies, this is the first merger of a top insurance company with an online lending platform.
“Today’s hardworking business owners have a variety of insurance and financial needs. They are looking for innovative ways to have those needs met so they can focus on running their companies,” said Kasey Ketcham, Associate Vice President of Commercial Digital Enablement at Nationwide.
“This partnership with Funding Circle is another example of Nationwide’s commitment to addressing the challenges small business owners are facing,” said Ketcham. “[Nationwide is] offering expert guidance and comprehensive insurance and lending resources hand-in-hand to help them make informed decisions to fortify their business and livelihoods.”
According to Nationwide, the partnership will be a mutual referral program, where Funding Circle customers will be exposed to Nationwide products, and Nationwide customers will be exposed to Funding Circle products. Nationwide representatives explained the partnership exclusivley to deBanked.
“Exactly what is provided through Nationwide.com or the app is a link to Funding Circle,” said a Nationwide representative. “Once there, the user can complete an application for loan coverage, but are not granted special exception because they came from Nationwide.”
“They would still go through the loan application and underwriting for funds and vice versa,” said the representative. “The Funding Circle website/app is providing a link to Nationwide that the user can ‘learn more’ through the Coverage Assistant page, or “get a quote” using Nationwide Business Express.”
As Alternative Finance Leaves NYC, Long Island May Be The Next Best Option
January 26, 2022
As things like cost of rent, remote work, and incoming disclosure laws cause uncertainty in the hub of alternative finance, many in the industry have decided to leave New York City. Some however, say the perception of a mass exodus is false, and it is Long Island that checks all the boxes for alternative finance’s new home.
“My company started on Long Island and it’s where most of our staff is from, so logically it made sense to keep it there in the beginning of [our] journey,” said Jared Weitz, CEO of United Capital Source. “It’s close to people’s homes so the commute is less for staff and the office space can be 10 to 40 percent less on cost and your loss factor on space is less so the space you do rent, you actually get to use more of.”
According to Weitz, employees in the industry lost a desire to commute during the pandemic. When transitioning from in-person work to remote and then back to in-person, it seems like a commute to Manhattan was a tough sell.
“During [the pandemic], a ton of larger companies who had massive offices in Manhattan ticked it down,” said Weitz. “Staff also didn’t want to commute anymore and so many offices in the city have either moved out to Long Island or stayed in [New York City] to smaller offices and did [remote work] with employees.”
When asked about the value of a Downtown Manhattan address on a business card, Weitz abruptly dismissed the notion that names like Wall, Rector, and Pine still hold the same prestige as it did in years past.
“No, no, no, no one looks at that anymore,” Weitz said. “Most often people are focused on client experiences, so reviews online, time in business, online presence, what can be found about them.”
Weitz spoke on the quality of employees that come from the New York area, and how their work ethic and work experience are some of the best the industry has to offer.
“Look, I’m from New York so I’m partial and I can see why people say [this]. New York [workers] have a certain grit, and a certain fight with laser focus determination.”
“I think there are people who are smart and who hustle anywhere,” Weitz continued. “While southerners may have a laid-back lifestyle, I know plenty who hustle hard, [but] I do think you can always tell the difference from a New York sales rep versus another.”
Missouri Introduces Commercial Financing Disclosure Bill
January 25, 2022Add Missouri to the list of states proposing mandatory disclosures in commercial financing transactions.
[See: New York, California, New Jersey, Virginia, North Carolina]
Missouri’s SB 963 is different from bills in other states in that it does not seek the disclosure of an annual percentage rate. Adopting a simpler approach, SB 963 would require commercial financing companies to disclose:
1. The total amount of funds provided
2. The total amount of funds disbursed
3. The total amount to be paid
4. The total dollar cost
5. The manner, frequency, and amount of each payment
6. Prepayment costs or discounts
7. Whether or not a broker will be compensated
The bill was introduced by State Senator Justin Brown (R).
Fountainhead Hires Former SBA District Director as SVP
January 21, 2022S
mall business lender Fountainhead has hired former US Airforce Veteran and SBA District Director Joseph Amato as their new Senior Vice President. Amato served for four years as the District Director of the SBA’s Nevada District Office prior to taking his new position at FountainHead.
“Joe’s strong work ethic and extensive knowledge base will be an invaluable asset to Fountainhead, as we build on our past success as the largest nonbank SBA lender in the Southeast and execute our nationwide growth strategy,” said Fountainhead CEO and Founder Chris Hurn.
Amato assisted Nevada’s SBA program in the implementation of stimulus programs that helped keep many Nevadan businesses afloat during pandemic-induced lockdowns. Many of these stimulus programs have been credited to keeping places alive, like the businesses on the Las Vegas strip, for example.
“I’m eager to leverage my experience with the SBA and beyond to help Fountainhead drive financing opportunities and support to millions of small businesses across America,” said Amato.
Kabbage Co-founder Rob Frohwein Steps Down from the Company
January 6, 2022
Rob Frohwein, who served as the CEO of Kabbage for more than a decade, has left the company. A post he published on social media revealed that his last day was December 17th.
“I didn’t make a big deal – the company has always been about our customers & our employees – and never about any person,” Frohwein said about the quiet exit.
The move is not altogether unsurprising. American Express acquired Kabbage in August 2020 after covid heavily disrupted its small business financing business. Amex first reintroduced Kabbage as a checking account brand and only just recently resurrected its funding operations.
That re-emergence was the catalyst to move, according to Frohwein.
“Why now? Lots of blah blah blahs but it’s the right time,” he wrote. “We’ve relaunched our products with Amex. Now, it’s time to fully devote myself to being an entrepreneur once again.”
Frohwein has kept busy on the side as an advisor & investor in SentiLink, the vice chair of StimLabs, and the CEO of Drum Technologies, Inc, according to his profile, but he apparently has even more plans in the works.
“So what now? Well, I’m pretty excited for what is next. Keep a lookout!”
The benign salutation may actually be a nod to what his next venture is. We’ll see…
New York’s Commercial Financing Disclosure Law to Undergo Further Comment and Review
January 4, 2022
Implementation of the New York Commercial Financing Disclosure law originally intended to go into effect four days ago, is now subject to another delay on top of the existing one, with no official date on when compliance will be required.
Seeing as the New York Department of Financial Services (DFS) was still accepting comments on the proposed regulation through December 20th, DFS had originally granted covered companies a six-month reprieve on compliance. But after having reviewed the comments, DFS determined that it’s actually back to the drawing board on a regulatory proposal. Sometime “early in the new year,” DFS said, it will publish a revised proposal for further public comment.
“Given the complexity of the disclosures required by the CDFL (Commercial Financing Disclosure Law), we believe the Legislature intended that the Department first provide regulatory guidance regarding the standardized disclosures required to be provided under the CDFL,” said Serwat Farooq, a Deputy Superintendent at DFS, in a published statement. “Waiting to commence CDFL obligations until implementing regulations are in place will ensure that the disclosures are made in a consistent, standardized fashion. This will help businesses understand the terms and conditions of the various forms of credit being offered to them, the very intent of the CDFL.”
Five Things Small Business Financing Should Look out for in 2022
January 3, 2022
With another year in the books, below is a list of things that the small business finance community should think about in 2022.
Disclosure Laws are Coming
The laws in New York are changing. While the date for the new law was pushed back at least until June, the state is about to make it very difficult to finance small businesses. California, New Jersey, Maryland, Connecticut, and North Carolina are among other states to also keep an eye on regarding disclosures in 2022.
Blockchains, Blockchains, Blockchains
Regardless of the legitimacy of things like cryptocurrencies and NFTs, blockchain technology is on its way to the initial states of implementation in the financial world. In a further effort to eliminate paperwork, redundancy, and time, the idea of a decentralized ledger has all corners of the financial world watching closely.
Merchants are Becoming Digitally Native
As business owners are continuing to emerge as younger and more technologically sound, lenders should embrace fintech in any area of their processes that they can. Just to appear as a tech company may become a marketing strategy for some brokers or lenders, as those who offer the smoothest, simplest, and most technological form of funding will win over their competition with this new emerging business owner.
Brokers Using Motivational Social Media Posts to Develop Brands
As small business financiers continue to try and find their place on social media, there seems to be a gathering of those in the broker space to create motivational content. Keep a lookout for more brokers to continue internet marketing via motivational posts to not only give a face to their company, but legitimize themselves as a go-to in the space; so maybe they can launch some type of broker training program in the future.
Networking Will Continue to Re-Emerge as Top Tool
As 2021 concluded with in-person events slowly approaching normalcy after pandemic induced restrictions, the industry is showing an unprecedented amount of desire to get together multiple times a year to build their books of business. Look for events across finance, technology, and cryptocurrency spaces to increase in both numbers and attendees.
