Business Lending
The Underwriter’s Song of 2020
July 15, 2020
It was just a day in February when my broker sent a deal
I remember feeling ordinary because COVID wasn’t real
Another ruse, just more fake news, I went and pulled the credit
A sterling score, I said please send more, but the broker said forget it
The lender just next door to you, he offered to pay me double
Plus they need less docs for their wider box, saving me the trouble
It was on that day that I said “hey!” I’m sick of being small
I called that broker back and swore I would fund them all
So he sent the files, several piles, of paper good and bad
And I did what I should not have, so the broker would not be mad
Hot damn my port was a big ‘ol fort of terrifying risk
But I checked deBanked’s top funders and we were up there on the list
I pulled up my chair, said a prayer, “so long as things remain”
On an upward track, in the black, there won’t be any pain
But then came March and things looked dark, I couldn’t believe my eyes
They said stay indoors and close your stores, we’re really sorry guys
America is shutting down, we hope you were prepared
If you were very careful then you’ll probably be spared
Of course I freaked when our financials leaked, I tried to rationalize
That we had to fund those files to compete with the other guys
It was no no no and then fund fund fund, I tell you it was grand
I made my case on Daily Funder but the contents got me banned
It wasn’t me, it was the broker you see, it all started with a deal
His spiel about getting double, turns out it wasn’t real
So jolly hot damn, I’m in a jam, of the sort that’s budgetary
How I wish, nay I pray! That it was February
Funding Circle US Lays Off 120 Employees
July 9, 2020Funding Circle US laid off 120 employees yesterday, according to a post shared by Ryan Metcalf, Head of U.S. Regulatory Affairs and Social Impact.
Reuters reported that the company will also centralize its technology development in the UK rather than have a separate US team going forward.
The US operation had largely been focusing on PPP lending and SBA 7(a) loans since the shutdowns occurred.
The announcement coincided with its UK business being approved to participate in the Bounce Back Loan Scheme.
Breakout Capital Weathered The Storm And Came Out With Expanded Access to Credit
July 8, 2020
Breakout Capital never stopped funding. That’s what CEO & President McLean Wilson recently shared with deBanked. The company not only weathered the storm but has come out with expanded access to credit totalling $20MM with Medalist Partners, one a current term loan facility and the other a new term loan facility with “attractive” forward flow features.
The company said in its announcement that these facilities will allow Breakout to increase loan originations across all of its product offerings, including its term-loan product, FactorAdvantage®, and its newest factor product, FactorBridge.
“Small businesses are at the core of our economy and they were, as we were, largely blindsided by recent economic interruptions,” Wilson told deBanked. “We adapted quickly and rolled with the punches and never stopped funding. It is a testament to the resiliency, loyalty and borrower first mentality that Breakout Capital has not only weathered the storm, but has strengthened our company throughout the past few months. We quickly adapted to a new way of thinking, which helped us serve our clients in real time and forge ever closer relationships with our factor partners, lenders, online marketplaces, ISOs and borrowers.”
John Slonieski, Director of Private Credit for Medalist Partners, said in the announcement that “We are pleased to enhance our relationship with Breakout Capital in our asset-based lending strategy. Their high-quality underwriting and SMB-friendly lending solutions, coupled with their talented credit and management team, provide us confidence as we continue working closely with them to successfully scale their lending program.”
Every Business That Got $150,000 or More in PPP Funds (The List)
July 7, 2020In the interest of transparency, the SBA dumped a list of more than 660,000 businesses that got $150,000 or more in PPP funding.
You can download the entire thing right here.
Canadian Small Business Lender Looks Doomed In Wake of COVID-19
June 29, 2020
As well-known (1, 2) small business lenders in the United States continue to negotiate COVID-19 era workouts with their creditors, another in Canada appears to be falling off the cliff.
On Thursday, Lendified’s President & Director Kevin Clark tendered his resignation effective July 3rd. He follows other board members Edward Kelterborn and Benjy Katchen whose resignations went into effect on June 25th. Company CFO Norman Tan previously resigned on June 9th and no replacement has been named.
COVID-19’s arrival came at a difficult time for Lendified. Before COVID, the company had never turned a profit or reported positive cashflow in its entire history.
“Lendified is in default in respect of credit facilities with its secured lenders. Forbearance and standstill agreements are being discussed with these senior lenders, with none indicating to date that any enforcement action is expected although each is in a position to do so,” the company said. “However, no formal agreements in this regard have been concluded as of the date hereof.”
The company expressed that it would not be able to continue operations if it was not able to finalize a forbearance on its defaults AND simultaneously obtain an immediate infusion of capital to fund its operations.
Lendified’s board of directors is presently considering selling its assets or its entire business in order to raise revenue.
A wholly owned subsidiary of Lendified, Judi.ai, an automated loan underwriting platform, is poised to cease operations as a result of a cashflow shortfall. “[Judi.ai] requires cash infusions in the amount of approximately $100,000 per month in order to maintain operations,” Lendified reported. “Its cash reserves at this time are approximately $80,000. At this time, the Company is not in a position to continue to fund the Business and there can be no assurances that it will be able to do so in the future.”
The company went public on the Toronto Stock Exchange on May 26th via a reverse merger and has since experienced a 95% drop in its share price. The company’s market cap on Monday hovered around $700,000 USD.
OnDeck Update 6/23
June 24, 2020On June 23rd, OnDeck filed the following statement with the SEC:
On June 23, 2020, we obtained a limited consent (“Consent”) for our corporate debt facility (“Corporate Facility”). Under the Consent, the lenders consented to delay the effectiveness of the increased monthly principal repayments until July 14, 2020 (or such later date as may be agreed by the Administrative Agent), which were triggered by an Asset Performance Payout Event (Level 2) (“APPE”) that occurred on June 17, 2020. In consideration for the Consent, the Company agreed to make a $5 million principal repayment (“Repayment”) substantially concurrent with the execution of the Consent. Under the Consent, the lenders also agreed that, at the Company’s option, the Repayment will either (i) reduce the amount of the monthly principal repayment due on July 17, 2020 by the amount of the Repayment or (ii) if the parties enter into an amendment on or prior to July 17, 2020, be credited towards any principal repayment required under that amendment. The Company entered into the Consent in contemplation of entering into a broader amendment to the Corporate Facility to address impacts stemming from the COVID-19 pandemic. If such an amendment is not entered into, the APPE triggers $21 million monthly principal repayments which, if not cured, would commence on July 17, 2020 and continue until the Corporate Facility is repaid in full. The Company made a payment of approximately $13 million on June 17, 2020 as a result of the previously disclosed Asset Performance Payout Event (Level 1), bringing the total balance outstanding as of that date to approximately $92 million. The Revolving Commitment Termination Date occurred as a result of such Level 1 event. Certain capitalized terms not defined in this section of the report are used with the meanings ascribed to them in the Corporate Facility as amended by prior amendments thereto and the Consent.
Shares of OnDeck closed at 86 cents yesterday. The company was previously warned that long-term pricing below $1/share would result in delisting from the New York Stock Exchange.
IOU Financial Affected By COVID-19
June 23, 2020IOU Financial approved the re-appointment of all of its current directors and auditors yesterday. The company, however, is currently experiencing challenges similar to other online lenders.
In late May, the company filed its Q1 financials and revealed that the COVID-19 pandemic had put them in an “over-advance position with its financing credit facilities.” At the time, the issue remained “uncured” and “the company received default notices subsequent to quarter end.”
“The Company and the financing credit facilities are working together to remedy the situation,” IOU reported. “Nevertheless, there is no assurance that these initiatives will be successful.”
IOU had furloughed 40% of its full-time employees and implemented a temporary 20% reduction in salary for all remaining employees commencing on April 1, 2020.
The company’s market cap has plummeted to CAD$7 million, down from $18 million in February. The company had previously been on a fairly positive trajectory until Q1 when they cranked up their provision for loan losses in anticipation of the fallout caused by the pandemic.
Kabbage and Uber Partner for PPP
June 18, 2020
Two months after its first round, Kabbage and Uber have partnered to offer a streamlined PPP application process for the latter’s drivers. In a surprise move, the companies have come together to offer Uber drivers a fast-tracked and automated option to apply for the Payment Protection Program. According to a Kabbage press release, the specialized application will be sped up by prepopulating relevant information, outlining eligibility, and automated decision-making.
“They basically will go through a totally separate path that’s purpose-built for Uber drivers,” said Kabbage CEO Rob Frohwein in the statement. “With more than $100 billion left in the PPP, there is a meaningful opportunity for the self-employed to still apply and receive funding. With Uber, we aim to provide hundreds of thousands of more independent contractors access to federal funding.”
With Uber defining its drivers as independent contractors rather than employees, these drivers were initially ineligible for certain unemployment benefits. However the CARES Act expanded these benefits to include independent contractors from various industries.
This is not Uber’s first foray into providing some sort of assistance for its drivers. Following the signing of the CARES Act in March, the ride-hailing company released a detailed guide for its drivers explaining how to apply for these benefits. As well as this, in France the company has offered drivers emergency grants during the pandemic as well as a stipend to cover sterilizing and safety products.
For Kabbage, this marks a step away from the dark days of late March which saw the company close its offices in Bangalore, India; cut executives’ pay; and furlough an unspecified but “significant” amount of its previously 500-person United States staff, according to a company memo.
The PPP program, which ran out of money within two weeks of its first round, had more than $130 billion left to give to business owners by June 9, just three weeks before the SBA is scheduled to close the application process on June 30.
