Business Lending
Idea Financial’s Co-Founders Weigh In On Their New $84M Credit Facility and Future
July 9, 2021
Miami-based Idea Financial closed on an $84 million warehouse facility with the Specialty Finance Division of Synovus Bank and Hudson Cove Capital Management. Co-founders Larry Bassuk and Justin Leto said the funds are going right toward financing their pandemic proof SMB line of credit product and supporting their one-of-a-kind litigation insurance and plaintiff-lawyer financing.
“We’re still firing on all cylinders with our flagship line of credit products with small businesses, and Synovus and Hudson Cove are going to allow us to use these facilities to finance the litigation cost finance product,” Leto, who serves as the CEO, said.
The two former lawyers will draw from their experience in insurance, their legal backgrounds, and SMB underwriting to create a product that serves contingency lawyers called Level Esq. Often overlooked, the founders said law firms are just like other small businesses.
“Not only our experience as lawyers but also our experience as fintech lenders; we’re bringing all that expertise to bear here, and this is the culmination of our experience in finance, law, and insurance,” Bassuk, president of Idea Financial said. “Not only is our product going to be revolutionary and the best in market, but the customer experience is going to mirror the experience that our small business customers have.”
They focus on contingency firms — cash-dependent practices where lawyers invest their own money to back plaintiffs in injury and compensation cases. If there is no victory, there is no payout, so their other company, Level Insurance, offered protection for lawyers left holding the bag in the case of failure.
“Larry and I invented a first and only-of-its-kind insurance product that allows plaintiffs lawyers to protect all of their cost investment for their case,” Leto said.
The new brand coming soon, Level Esq., will offer a loan upfront to finance cases, while Level Insurance has lawyers’ backs with insurance if cases fall through.
“We’re providing an actual line of credit, loans, or small business loans for the lawyers themselves, so they finance their case costs. It’s a pretty revolutionary product and we’re doing it the way we financed small businesses,” Leto said. “Lawyers will be able to tap into that fintech side of our business. If it currently takes weeks if not months to get this type of financing, you’ll be able to do it in hours or days.”
In general, Bassuk said the warehouse closing is a sign that the hard work during the pandemic paid off, and Georgia-based Synovus Bank and Jersey-based Hudson Cove noticed.
“Over the last year, 18-months-plus since the beginning of Covid: our underwriting methodologies, our risk management, management strategies, and our operations were validated,” Bassuk said. “And I think that’s also something that Synovus and Hudson Cove noticed is that our business model, our portfolio performed exceptionally well under stress and during Covid, and I think that’s another contributing factor that led us to where we are.”
Leto and Bassuk recently starred in a deBanked TV docuseries about doing business in Miami.
The Biggest Expansion Period of Our Lifetime? The Non-Bank Finance Industry Says Full Steam Ahead
July 8, 2021
Erez Stamler, Managing Director of Fresh Funding, said that the events of the past year has been an up and down ride, from the initial shutdown shock to rushes in demand. Now that the world is back, those that survived are here to stay and need capital to grow.
“At first the system was in shock, then a phase where we saw a strong spike in submissions [where] the owners were probably looking for some sort of PPP-type solution, and that was not available by us,” Stamler said. “Going into 2022 we believe there’s a lot of demand out there. A lot of businesses have demonstrated growth during Covid and hopefully will continue that into 2022. As far as we can see right now, we’re going strong this year for sure.”
Alex Vasilakos, who tracks online interest in alt finance as the director of marketing for Finance Marketing Group, said there had been an increase in online searches for non-bank financing solutions in the past year because banks weren’t sure how the pandemic would pan out.
“We are back in the office, and we are seeing a large uptick in digital advertising since Covid, and it is continuing to increase,” Vasilakos said in an email. “I am seeing and predicting that people will be leveraging more online sources for financing than they have in the past.”
Amotz Segal, a startup co-founder of Edge Funder, said that if the Covid spikes and black swan events are over, there is no limit to demand, and the hybrid model is here to stay. Edge Funder uses lead generation and AI underwriting to make SMB deal-making easier, Segal said.
“I think nobody’s really bullish enough, I think we’re facing the beginning of the biggest expansion period of our lifetime,” Segal said. “Our team based in New York City will hopefully gradually go back to the office this fall. That being said, I don’t think that we will ever see a one-hundred percent office-space environment. I think what the pandemic did is accelerated a trend that already began of people working from home, working remotely, and not having to attend the office daily.”
Segal has grounds to be bullish: Edge was just acquired by Yes Lender after only a year of development.
James Lee, CEO and co-founder of Julius Technologies, said that people had definitely gotten a feel for remote work, but virtual does not replace in-person communication. Julius is a startup that creates cost-effective back-end infrastructure for fintechs, building efficient data analytics for credit underwriting.
“We will see some shift. People got a taste of what it’s like to work from home; the hybrid model is a possibility in the short term,” Lee said. “In the long term we’ll see if Covid comes back in the fall with people working closely together. Hybrid works, but face-to-face time is irreplaceable and very difficult to replace in a virtual sense.”
Lee said that in-person interaction is vital for networking, mentorship, and even random, spur-of-the-moment conversations that bring a team together. Lee recently completed the Techstars incubator program fully virtually. Everything but launch day was virtual in a process that is usually hands-on.
Some firms are back in the office full time. Samuel Yakubov, director of ISO Relations at Maverick Funding, said he was already working in the office in June and had high hopes for 2022.
Tyler Deters, president and CEO of Paradigm Equipment Finance in Utah, said his business was back indoors and on track.
“We are optimistic for the future,” Deters said. “Our staff has all returned to the office, and we are full steam ahead.”
Joe Lustberg from Upwise Capital couldn’t agree more and said his team had been working in the office through the shutdown. Lustberg is confident that the post-pandemic world will be great for business, and Upwise has been doing well servicing PPP, equipment and trucking financing, and niche cannabis industry funding. Upwise also took advantage of the dip in real estate to snag an office in Manhattan and “never looked back.”
“We made sure that everybody was vaccinated, and before the vaccination was available we were still in the office. We were getting tested monthly and my guys had the option to work from home,” Lustberg said. “To be honest, most of them want to be around the company culture, the show floor. It’s much easier for them to walk in my office and ask me a question than FaceTime. It’s good New York is coming back.”
Six or seven months ago, it might have been a market full of PPP loans, but MCA is coming back strong, Lustberg said. With government funds exhausted, he said even firms that had never taken an advance before are looking for funding.
Steven Hunter would agree the industry is back. As a consultant that works best coaching underwriting teams in person, however, the work from the home model has been a drag. He said hybrid may work for relaxed work environments, but to get ahead, in-person is the way it has always been and always will be.
“I think the fact that we have proven we can, in most situations, work remotely has made [funding shops] think: ‘well you know airfare, hotel, meals and Ubers.. you know it adds up.’ So, I think I think a lot of people are going to be cost-sensitive to travel in a way they weren’t before,” Hunter said. “But if you want to make it in this industry as a startup funder, and you want ISOs to give you deals, you cannot do that by the phone and you cannot do that via Zoom call. You have got to show respect for the good shops.”
Hunter said in the actual MCA business, you don’t win deals by calling them 100 times. You get deals from the best of the best by selling face to face.
“You get deals from [top brokers] by putting your ass on a plane and flying into LaGuardia, taking a cab to their office and camping out there for three days, and talking to them looking them in the eye and saying this is what I’m going to do for you,” Hunter said. “Sales is always going to be boots on the ground. You got to put people out there.”
Funding E-Commerce Businesses Helped This Startup Get Acquired Right After They Launched
June 23, 2021
Less than eight months after Yardline announced their launch in the e-commerce financing space, they were acquired by Thrasio. The blazing fast progression from launching to selling the company suggests that Yardline’s niche presents a unique opportunity.
“There are many companies out there that look at e-commerce businesses in the space and say, ‘there’s no barrier for entry to operate in e-commerce, they’re all drop shippers, it’s a hobby, they have no skin in the game,'” said Seth Broman, Chief Revenue Officer of Yardline. “What Yardline does is really unique: One, we obviously have a lot more information and understanding of how they operate their business, and we can really break down on a deal by deal basis, what their margins look like, to get them a more customized offering that meets their needs.”
Yardline will fund Amazon sellers, for example.
Broman said that while most MCA funders know how to look at a merchant’s fixed costs like rent, payroll, taxes, and inventory to provide funding based on a gross revenue, those same funders don’t have a risk tolerance for e-commerce.
Yardline pulls data from digital marketplaces like Amazon and online storefront platforms like Shopify to make better credit decisions, Broman said, and this was a banner year for digital shopping.
“During COVID, you were seeing such an increase of demand for e-commerce goods; Amazon, Shopify, if you look at their stock price over the last 15 months, it’s incredible,” he said. “And the reason being retails closed, everybody’s shopping from home, and the demand for all my goods is through the roof.”
Before everyone was stuck inside, e-commerce already made up 20% of consumer commerce, Broman estimated. Then everything was online-only, and demand became nearly unlimited, he said. Amazon’s third-party sellers transact 60% of all products sold on the site, and Thrasio is one of the largest consolidators of those sellers in the world, Broman said.
Now, Yardline will have access to Thrasio’s international seller network.
“We’re confident in saying that untapped ecosystem can be very profitable for ISOs if they were to start focusing on e-commerce businesses,” Broman said. “There’s less demand for it, less competition, and now they have a home for where they can get these deals done.”
Broman said after the pandemic, typical brick and mortar stores were hit hard and required PPP to keep the doors open while e-commerce flourished.
“It’s not a matter if shopping online is the future; shopping online is the present. People will continue to shop at brick and mortar, people want to eat out, just look at New York City,” Broman said. “If you look at what Amazon offers, what Walmart’s doing, what Target’s doing, what these online marketplaces are doing to make commerce quicker and easier, there’s no doubt that it’s going to continue to grow.”
The Small Business Finance Industry is BACK
June 21, 2021
The industry is back. I say this while sitting in a Miami hotel, my third such trip to Florida since becoming fully vaccinated against Covid in May.
There’s a lot of action going on. I’ve sat down in multiple broker shops in both New York and Florida and the phones are ringing off the hook.
The demographic of the average customer in the post-covid recovery seems to vary. Some say the credit quality has gotten better, others have said it’s worse. Some merchants have become used to forgiveable loans and low APR financing while others appear willing to take capital at any price just to keep up with the pace of their growth. It’s one of those things where everyone is just trying to adjust to the new normal, even if there’s little consensus as to what that is.
In New York City, the return of packed bars and overflowing restaurants stands in stark contrast to the rows of abandoned stores and For Lease signs that dot the landscapes around them. And yet if one looks past all that, the only reminder that Covid was ever even there is the requirement that one still wear a mask on the subway even if they’re vaccinated.
In Florida, it’s the opposite. I recently got yelled at by a bus driver for wearing a mask in the first place.
The broker shops I’ve visited still had office space that were filled with teams that were more than happy to be occupying them in person. But at the same time, the industry has become extremely popular with the traditional work-from-home crowd.
Leo Kanell’s 7-day marathon challenge on facebook draws in more eager industry participants than I would’ve ever thought possible, an accomplishment I know to be true because I dropped in on him unannounced late one friday night while he was live.
Similarly, Oz Konar, who I did a livestream interview with in person, has trained more than 3,000 brokers in the industry, many who work for themselves from home.
We’ve also been very busy in the last couple months and have met a lot of brand new entrants on both the funding and broker side.
All this activity is setting the stage well for Broker Fair 2021 on December 6 in New York City. It is perfectly timed to discuss the new disclosure law that goes into effect in New York on Jan 1, 2022, one that is so consequential that at least one company has relocated to New Jersey.
What a time to be in the industry!
Mexican Small Business Lender Buys a Bank, Eyes United States
June 18, 2021
Change is happening south of the border. Online lenders and alternative funders are growing across Mexico much the same way as elsewhere. This week, Credijusto, an online small business lender based in Mexico City, acquired Banco Finterra, marking the first time that a fintech has acquired a bank in the country.
According to Reuters, “Credijusto aims to ramp up services for Mexican companies that sell to the United States, and build a business for U.S. companies that do cross-border trade in Mexico and beyond in Latin America.”
Mexico also has more than 6 million small businesses, a market that is effecively 4-6x larger than Canada’s.
Prior to this, Credijusto had already collectively raised $400M from Goldman Sachs, Credit Suisse, Point72 Ventures, New Residential Investment Corp., Kaszek, QED Investors, John Mack, Ignia, Promecap and LIV Capital.
“The acquisition of Banco Finterra seeks to create the first truly digital banking platform for Mexican companies in the future,” commented Allan Apoj, co-CEO of Credijusto. “This transaction marks an important milestone in Mexico and the region, and we are proud to be revolutionizing the future of banking in Latin America.”
Apoj’s partner, co-CEO David Poritz, hinted to Reuters that in a couple of years it may consider the acquisition of an American bank as well.
Earlier this year, Mexico began to allow fintech companies to obtain a Financial Technology Institution license.
Estamos muy orgullosos de revolucionar el futuro de la banca en México con la adquisición de Banco Finterra y de beneficiar así a las empresas a través de productos financieros de nueva generación. Conoce más de este gran logro: https://t.co/pbGBVyo04p pic.twitter.com/A32vaHDOB1
— Credijusto (@credijusto) June 15, 2021
Thrasio Acquires Yardline to Offer E-Commerce Funding
June 16, 2021
Amazon merchant conglomerate Thrasio bought Yardline to incorporate e-commerce finance into the product offering. Thrasio has been active with Yardline since the firm’s initial backing of the company, and is now making Yardline a wholly owned subsidiary.
Yardline Chief Revenue Officer Seth Broman said that historically, e-commerce has been risky with no barrier to entry like traditional brick and mortar shops. Broman added that online stores used to be for supplements, but through Amazon’s third-party marketplace and Shopify’s help, scaling a quality business has become possible.
“Through COVID, the script was flipped,” Broman wrote in a statement. “E-commerce businesses became less risky, and brick-and-mortar businesses suffered the most. It’s also a much smaller universe and harder to target than a brick-and-mortar business.”
Thrasio boasts it is the largest acquirer of Amazon brands globally, and co-founder and co-CEO Carlos Cashman said 40% of brands they approach end up selling. Now, they can help scale those brands.
“Yardline will be an asset in creating more opportunities for these entrepreneurs and offering more sophisticated avenues for growth,” Cashman said in a statement. “They’ve been doing something different in the space—their strategic approach to providing embedded capital across e-commerce marketplaces is unique—and we’re eager to have their technology and proficiency on our team.”
Tomo Matsuo, president of Yardline, will be joining Thrasio’s senior leadership team. “It’s conceivable that every eCommerce-related platform will have FinTech capabilities in the future,” he said in a statement. “And our acquisition by Thrasio demonstrates that.”
Live Stream With Oz Konar
June 2, 2021I will be speaking with Oz Konar, the founder of Business Lending Blueprint, at 12:15pm ET on deBanked TV.
Konar teaches people how to build successful home-based businesses in the alternative finance industry and has a highly popular youtube channel.
Tune in at 12:15 on deBanked TV.
After Funding Millions, Alt Financier Hosts Funding CEO Challenge
May 25, 2021
Leo Kanell, a funder from Utah, runs the 7 Day Funding CEO Challenge, a seven-day marathon video livestream of inspirational and educational funding content.
“So how [the challenge works] is basically, we’re looking for communities, and we’re building a community,” Kanell said. “Our focus is how can we help existing loan brokers, and then how can we help people who are looking for an additional stream of income that they can do from home obviously with the pandemic.”
All the action happens in a livestream on Facebook.
“Everybody kept asking ‘we need some training,’ so we built out a custom website for them so that they can build their funding empire from home,” Kanell said.
Many of the brand new market entrants are sales-minded individuals that are interested in working from home. Kanell has a sales mind and a small business funding background. He grew up in a family of nine from a small town in Utah with a population of only 3,000. He knew he would be a salesman when he turned a summer painting business internship into a $60,000 operation. After college, he tried his hand at real estate, but after 2008 he started looking for another industry.
“I started and went ‘Well, I’m gonna need money for that business,'” Kanell said. “I started looking at the different options to get financing for that next business venture, and it was very difficult, especially for a new business, especially if you’re a pre-revenue business or you don’t have a lot of sales and or collateral.”
He realized SMB funding was the business he should be getting into so he jumped in with both feet. From there he veered into a business education program alongside products like business credit cards.
He soon said that he was doing well, but he heard the funding industry calling his name. “Everything pulled me back into funding,” Kanell said and he decided to combine his education system toward loan broker training programs. He said many brokers don’t realize startups and pre-revenue bushiness can qualify for 0% for up to 15 months.
Now, Kanell hosts an industry podcast that features financial industry guests, and alongside funding, he looks forward to building a community of broker and funder education services.
“We’re going to not only get you the best funding guaranteed, but we’re going to educate you and empower you along the way,” Kanell said. “They can work as direct funders and keep 100% of the commission, and that if they want us to do the work you know, we can do splits.”
