Business Lending
New Domain Name Gold Rush Sets Up Possible Battle for Future of SMB Finance
April 25, 2022
If you could have businessloan.com or businessloans.com as your website, would you jump on the opportunity to get it?
It’s evident that the market for keyword-based domains has evolved over time. Couldn’t get the .com? You could’ve tried to get the less coveted .net or .org. Don’t like those? Today, you can get the .business, .deals, .financial, .loan, .loans, or hundreds of other customized tlds. With so many to choose from, most experts in the field would advise that if you don’t own the .com version, to not even bother getting cute with customizations for your brand or keyword because customers will just get confused.
But recently, another domain name market has quietly been gaining steam. It’s for something called a .eth, an Ethereum blockchain-based crypto address shortener by the Ethereum Name Service. It’s not necessarily something one could use to build a website with, at least not yet. Originally envisioned as a way to condense long impossible-to-remember crypto wallet addresses into memorable words, users have started to buy up a bunch of keywords that may be familiar to deBanked readers. Just to name a few:
- businessloan.eth
- businessloans.eth
- smbloans.eth
- merchantcashadvance.eth
- ach.eth
- syndication.eth
- lending.eth
- ppploan.eth
- underwriting.eth
- brokers.eth
- loanbroker.eth
- mca.eth
- factoring.eth
- funding.eth
- backdoored.eth
At face-value, this might appear to be a vanity crypto play, one in which one could send crypto to your-name-here.eth instead of trying to type out a long address like: 0x64233eAa064ef0d54ff1A963933D0D2d46ab5829. But an ENS domain name holds much more potential than just that. It’s moving towards becoming the backbone of one’s identity in the upcoming era of the web called web 3.0 (web3 for short). Instead of having to remember passwords for hundreds of websites, identity can be validated through one’s digital wallet. Such a concept is not theoretical. It’s already being used.
Take seanmurray.eth for example. You could send eth, bitcoin, litecoin, or dogecoin to it, but at the same time it’s connected to an email address and a url (this one). Plus it’s linked to an NFT avatar (broker #7 from The Broker NFT collection) which is in that wallet. I can use it to do an e-commerce online checkout in 5 seconds without ever needing to enter any payment information even if I’ve never visited the site before. It’s faster than PayPal and with less steps involved. I can connect it to my twitter account, OpenSea, or use it to vote in an official poll without ever having to create an account on something. The wallet is the identity verification. The .eth name, therefore, has the potential to become the defining baseline of who or what one is on the internet. Not theoretically. It’s already happening.
Crypto is already starting to creep into the small business finance industry. In August, a funding company announced that it would begin offering commissions and fundings in crypto because of the speed potential. Far from being a gimmick, brokers started to choose crypto payments over ACH or a wire because of how fast it would be. There’s also no chargeback risk with crypto.
Currently, the owner of mca.eth has listed the domain for sale on OpenSea at a price of 20 eth (approximately $60,000). That’s less than what MerchantCashInAdvance.com sold for in 2011. Perhaps the value of an Ethereum Name Service domain holds less promise than a website that ranked well on Google in 2011. But then again, being well ranked on Google is not as important as it used to be. It’s impossible to say what, if any impact web3 will have on the small business finance industry long term, but for now there are those out there quietly buying up names like ach and funding and syndication on the chance that they will become something.
Ten Percent of Small Businesses That Sought Financing in 2021 Sought a Merchant Cash Advance
April 18, 2022A whopping 10% of small businesses that sought financing last year sought out a merchant cash advance, according to the latest study published by the Federal Reserve. That figure was up from 8% in 2020 and 9% in 2019. For the the preceding years, that figure had held fairly consistent at 7%. [See 2015, See 2017]. Market penetration, therefore, has arguably increased by about 40% since 2015.
Meanwhile, the percentage of applicants that sought out leasing has gone down over the last seven years: from 11% in 2015 to 8% in 2021. Factoring has hovered around 3-4% consistently.
The pursuit of of loans and lines of credit decreased dramatically from 89% in 2020 to 72% in 2021. And approvals have gone down across the board. Approvals on business loans, lines of credits, and MCAs hit a peak of 83% in 2019 and plunged to 76% in 2020, the first year of Covid. The figure fell even further in 2021, down to 68%. Online lenders and large banks had the lowest approval rates overall, at 51% and 48% respectively.
Small Business Finance Industry Mulls What’s in The Rearview, Is Optimistic For Rest of 2022
April 14, 2022
The small business finance industry is looking ahead to anticipated growth for the remainder of the year, despite new challenges ahead. With massive government aid fading in the rearview, some industry players now have had the time to consider what the impact of it was as they move onward into the future.
Bob Squiers of Meridian Leads expressed his view on the topic, “a lot of our customers, mostly the ISO shops, many of them converted and started selling and pitching the government programs. So in that sense it kind of helped keep those guys afloat, helped keep our business going. A lot of what we do in the marketing side, translated for those government programs. But then it did also squash the demand for the cash advance.”
In some cases, government funding has helped merchants pay off pre-existing obligations in a timely manner. Matthew Washington, founder and CEO of Moneywell GRP, noted, “An educated business owner is using the financing options available as they see fit for the timing. Someone that is waiting to get an SBA or an EIDL is more susceptible to take a bridge product to get them through that time gap,” he said. “As long as you’re working with the merchant and pushing out good products and you know what is on the rise, I think it has done nothing but help in some cases.”
Trucking became one of the number one fields that made up a large percentage of submissions during the pandemic, industry insiders say. However, with gas prices increasing, business with trucking could go down. Other businesses such as restaurants, where only a third received funding last year from the government, are desperate for funding.
“There’s tons of restaurants left that haven’t yet received their funding. So we could be seeing a lot of exposure in that industry,” stated Michael Yunatan of Specialty Capital. “But overall, I definitely do feel that we’ll be seeing an uptrend in our numbers across the board.”
“We definitely do think the industry is growing as a whole,” said Yunatan. “Even though we are a new player in the space we have been growing.”
Chad Otar, founder and CEO of Lending Valley, said, “We need to keep monitoring the interest rates that are coming up from the Federal Reserve, we need to make sure we’re not heading towards a recession, we need to make sure that we’re able to fully have the capital ready, in order to be able to deploy at a reasonable rate.”
Otar acclaimed the indirect benefit of large tech companies operating in the space with a competing product, arguing that the presence of PayPal and Amazon are helping to bring exposure to the industry overall.
“And now that Kabbage is back as well, since they partnered up with American Express, it’s gonna help us out to be able to push the product more into the mainstream,” said Otar. “So I believe there will be a growth in the industry.”
Brokers, Funders Find Their Footing and It’s Back to Business
April 12, 2022
For Mike Brooks, CEO of Best Connect Capital, the deal making never stops. A former boxing trainer turned funder said that there are no days off. “I’m always funding, I am always, always funding,” he said.
Recently, Brooks has taken an interest in text message marketing. “I’ve had trouble finding somebody in text marketing,” he said. I was going on the internet and using word of mouth, and I wasn’t really able to connect with anybody. I hooked up with this company [in Miami], and it worked out really well. I already funded a couple of deals.”
Around the industry, brokers and funders have found their footing after Covid. A recent mass gathering in Miami definitely helped push things along. “The second I got off the plane in Miami this year, I saw an old friend, a business associate,” said Brooks. “That was a great connect right there.”
Nicholas Saccone, Senior Funding Advisor at Proto Financial had a similar experience. “Having the opportunity to meet up with some of our partners face-to-face [is] a really cool experience,” said Saccone. “Sometimes it is hard to find time to build relationships with all of our schedules. [Through networking] I’m able to get different perspectives on where the industry is headed and where we are now.”
“Small business lending is on the up and up,” said Frankie DiAntonio, CEO of Lexington Capital, who also ventured down to Miami with his team from Long Island. “With inflation going up, we’re finding that small businesses are outsourcing their need of funding outside the government, and there are companies like us that can come in and take care of them.”
DiAntonio spoke about how important it is to sell legitimacy to both his lenders and staff. “We’re the new kids on the block, we’re a newer company,” he said. Despite the head start his competitors may have, DiAntonio said that old school sales mentalities combined with modern marketing strategies have recently helped his company consistently fund deals and build a book of business.
“We bring in a lot of Google click ads which brings us a lot of leads, but obviously our guys just make phone calls throughout the day, as much as humanly possible,” DiAntonio said. “My guys know what they’re doing, they know the industry, they’re really good on the phones, and they know how to take care of customers.”
Alchemy’s Lending Tech Has Come to the Small Business Lending Market: Here’s What You Need to Know
April 7, 2022
“We are the salesforce for embedded finance.”
Timothy Li, CEO of Alchemy, has launched a financing software for both commercial and small business lenders that can automatically approve applicants through an integrated decision engine. The service offers what he calls a “soup to nuts” digital lending platform — offering lines of credit, installment loans, and even loan servicing.
For the past six years, Li has been building a suite of products for those who want to sell financing. He compared his product to what many companies are now offering in the form of Buy Now Pay Later. As his service began to grow, Li realized there was an “extension” of potential with his service.
“[The] extension of this is that some of the small businesses also happened to be small business lenders,” he said.
According to him, he created the service not as an idea of innovation, but to meet a growing demand from his users. “I heard from all of the small business lenders in the New York area,” said Li. “They said ‘Tim, could you augment or come up with a piece of software fully automated for us to use’”?
Although it took some time, Li said this recent announcement is what the lenders that came to him years ago were looking for. “I said well, we’re almost there, give me a year or two to kind of really properly do it right. So that’s what we’ve done.”
In what he refers to as “private labeled” software, Alchemy’s Lending SaaS (or Lending-as-a-Service) allows merchants and lenders alike to operate a fully branded and operational lending platform with a full suite of financial products. Customers range from tattoo removal companies to lenders, to companies that have now grown to become publicly traded.
The ability to literally send Alchemy a JPEG of some branding and marketing and becoming on online lender is as easy as just that. “Anybody can put their label on and have [their lending platform] up and going in a matter of weeks,” said Li.
When speaking about the role ISO’s play alongside his technology, Li didn’t dismiss the value brokers play in the small business lending industry. “The good ol’ ISO model is great,” he said. “It’s great that there is a product like this that can help [merchants] grow and drive their company. But as the new generation comes in, they don’t have time. They might be on their phone for five minutes after they close their store or small business, and these kind of products are out there sitting there for them to apply for on their own time.”
Li hinted that his product is best utilized by merchants who are digitally-native and are looking to have access to data quickly, while being given the time to make a decision regarding the type of financial product best suited to their business.
“[Alchemy] lets them pick what they want to pick based on their own cash flow,” he said. “It’s no longer that there will be a sales process where things aren’t as transparent. The ‘I am not going to tell you who my lender is until I’m paid,’ [thing], you know how the ISO world works. This stuff takes all of that away, and puts it right in the hands of the consumer that needs it.”
When asked if brokers could find any use of this product, Li said that if used right, the value proposition for brokers that use this software is huge.
“Brokers can use our system just like any other lender. If they want to have another way to be able to market to these small businesses, and have them use their products more. It’s essentially HubSpot for financing.”
Clearco to Invest €100 Million into Digital-First Irish Businesses
April 6, 2022
Clearco, the world’s self-proclaimed largest e-commerce investor that provides revenue-based financing capital solutions to e-commerce businesses, is making yet another move. Directed by CEO Michele Romanow, a star in the hit TV show “Dragon’s Den,” Clearco recently announced that it will be introducing its product to Irish founders and entrepreneurs. Upon continuation to support the 15+ % growth predicted in the Irish economy in 2022, the company plans to put €100 million into digital-first Irish businesses.
An international sales and business development hub has been developed in Dublin. The Clearco team currently consists of 75 members with a plan of adding 125 employees in the future. This will support Clearco’s plan to grow in Europe, North America and Asia Pacific in 2022.
This year Clearco plans to expand its products and services within current European operations and into new key markets across the continent. This includes Western Europe, Central Europe and the Nordic region.
Clearco has invested over $3.2 billion globally into 7,000+ businesses across three continents. Ireland is the fourth international market for Clearco. To be able to serve as many founders as possible internationally, the creation and development of its sales and development team is key.
Romanow stated “Clearco is excited to bring our revenue-based funding model to Irish founders. Ireland has one of Europe’s strongest economies and a dynamic start-up sector. We are confident that we will have a meaningful impact on the Irish e-commerce economy. Clearco is excited to establish this International Sales hub in Ireland to support our growth in the EMEA region. We’re impressed by the talent and tech skills here and I look forward to building the team to serve our growing customer base.”
Businesses in all 50 states have been funded by Clearco within the US market. However, over half of the company’s funding goes to businesses outside of California, New York, Illinois and Massachusetts, which received about 70%. Clearco believes the same trends will be seen in the Irish marketplace as they hope to help fund traditionally underserved communities.
Relying on Google Maps to Verify a Merchant’s Business? Be Careful
April 5, 2022
If a Google Maps listing inspired confidence in a small business loan applicant’s existence, then you may not know just how many people try to create fake profiles. In 2018, for example, Google acknowledged that it had removed more than 3 million fake business listings from its platform while simultaneously disabling 150,000 accounts that created them. At the time, industry experts told the Wall Street Journal that Google’s efforts were hardly making a dent, estimating that on any given business day, 11 million businesses listed on Google Maps were fake.
Some fake business types are more common than others. Sources told the WSJ that contractors, electricians, towing and car repair services, movers, and lawyers ranked among those most used in a scheme.
Since then, efforts to trick Google have become even more prolific. Google revealed that more than 7 million fake business profiles were removed in 2021, more than double that of three years earlier. The company also caught schemers in the act of trying to create new fake business listing more than 12 million times in 2021.
These results should be alarming for a small business lender that is unable to conduct an on-site visit or mobile site inspection with an applicant. For smaller sized applications, a cursory check on Google Maps or Google Street View to scope out the business location may be the only visual analysis that an underwriter conducts. Mismatches on Street View can be explained away by claiming that the Google car hadn’t come by recently to refresh the pictures or that the signs on the building hadn’t been changed or gone up yet, but the listing itself on Google Maps might imply that the business must be there, even if the Google car hadn’t come by lately. Obviously, as the data shows, that’s not perfectly reliable.
Online reviews, meanwhile, have already been the subject of skepticism for years, with there being allegations of companies manipulating reviews. Savvy searchers might read such attestations and conclude that a company’s positive testimonials are fake and perhaps the products or services being offered are not as good as they’re being artificially acclaimed to be. Google said that it removed 95 million “policy-violating reviews” in 2021. That’s on top of blocking 190 million photos and 5 million videos.
“Every day we receive around 20 million contributions from people using Maps,” Google said in its announcement “Those contributions include everything from updated business hours and phone numbers to photos and reviews. As with any platform that accepts contributed content, we have to stay vigilant in our efforts to fight abuse and make sure this information is accurate.”
Despite the immense number of fraudulent listings, Google touts that it amounts to less than 1% of all the total listings on Google Maps. That’s perhaps reassuring news to anyone that relied on the data in the past to make a crucial decision. The danger, however, is that schemers are trying to create more fakes, not less, and it may only take a handful of applications to slip through the cracks of underwriting to realize one can never get too comfortable with an external data point.
A restaurant with twenty identically worded reviews about how good the soup is, for example, might trigger one’s skepticism radar about it actually being all that good. “Ah, ha,” you might say, “they’re trying to cover up the fact that something is wrong with their soup!” And that’s where they’ve got you, because while you’re busy playing soup detective, you’re completely missing the real con. There isn’t even any soup at all, the restaurant itself doesn’t even exist.
Women Discuss Strategies to Grow Their Businesses
March 30, 2022
The U.S. Small Business Administration (SBA) held its 2022 Women’s Business Summit this week. The summit was a two-day event that consisted of virtual panels, workshops and fireside chats. The event was held in co-sponsorship with the Nasdaq Entrepreneurial Center.
Remarks were made by United States Vice President Kamala Harris, along with other notable panelists. Harris stated, “Women small business owners power the economy of our nation.”
“Women small business owners face many unique challenges, many lack access to paid leave, affordable child care and the capital to grow,” Harris made clear.
Harris noted, “Through SBA we have opened women business centers in every state of our country, 141 in total.” These centers connect women business owners with the tools and resources to succeed. Kamala later declared that the fight to pass legislation for women for affordable child care and paid leave will continue.
During the Innovation and Investment panel, Marianne Markowitz, CEO of First Women’s Bank, discussed how there is a gender gap in the lending market.
“We launched last year as the only women-founded, women-owned bank in the country that’s focused on closing the gender lending gap at a national level,” said Markowitz.
Women only receive 2% of all the investments in America. Markowitz discussed that women are being introduced to the wrong loans and capital. Many women are relying on personal credit and sometimes lean on equity at the wrong stage of their business. Markowitz provides women with the proper education to make the right choice, fully understand and be prepared for when they apply for loans.
Mekaelia Davis, Director of Inclusive Economies, Surdna Foundation, explained how the consolidation of the banking industry has removed a great amount of financial institutions. This has had a negative impact on relationships with financial partners, leading to more predatory actions online taking the place of financial institutions.
“New York City Small Business Founder Collective estimated there is nearly annually $45 billion of unmet capital, most demand coming from Bronx, Eastern Brooklyn, Queens,” according to Davis.
Susan Au Allen, CEO and National President of the U.S. Pan Asian American Chamber of Commerce explained that even if women are educated they are not aware of all of the services that the SBA offers.
“For the Asian American community and the women community it is a structural problem, a systemic structural obstacle that we have faced,” Allen asserted.
The Associate Administrator of SBA’s Office of Investment and Innovation, Bailey DeVries, described what they have done for small business, “We have provided over $100 billion worth of small business through the SBIC program and currently manage over $34 billion worth of assets through those partnerships.”
The summit provided women with an opportunity to become further educated on how to succeed in their small businesses.
