Business Lending
Why the Human Connection is Still Important in Debt Recovery
February 10, 2019
The CEOs and lawyers for debt recovery companies, particularly those in the commercial space, say that speaking to merchants over the phone is the best way to collect money for their clients. At New York-based Empire Recovery, Managing Attorney Steven Zakharyayev told deBanked that they call this “soft collection.”
“Soft collection is probably the most effective way of collecting,” Zakharyayev said. “You can tie up [the merchant’s] business and freeze their accounts. That’ll bring them to the table. But the human interaction – negotiating with them – that’s where the deals are made and that’s how these accounts are ultimately repaid.”
Most of of the debt collection companies we spoke to have an in-house lawyer that can file a lawsuit against the merchant while also using “soft collection” to get to a settlement. But Dedicated Commercial Recovery, a Minnesota-based recovery firm led by Shawn Smith, who is not an attorney, sees itself as the step before attorneys get involved.
“We use a rapport-based collections approach,” Smith said. “We try to get to the real reasons why the customers are ignoring our client and come up with a viable solution for repayment.”
Merchants in default are usually not doing very well if they’re on a collections list.
“These [merchants] get pretty beat up by the time they get to us, so the more you can connect with [them] on a personal level, the better.”
Doug Robinson, the attorney at New York-based RTR Recovery, echoed this.
“There’s a story behind every default,” Robinson said. “Most of the merchants want to pay, so they appreciate someone reaching out and saying ‘What’s the matter?’”
Robinson said that he personally calls and emails every merchant and that they have a pretty high response rate with this simple technique. He said that the voicemails of the merchants are often full, but that they will usually respond to his email, where he explains that ignoring him will only escalate the problem.
If the merchant responds and engages with him, Robinson said he can create a payment plan with them, together with his client, that can reduce the merchant’s payments, stop payments temporarily, or change payments from daily to weekly.
Meanwhile, Houston, Texas-based AMA Recovery is often brought on after a collections agency has already unsuccessfully tried to get a merchant to pay. AMA Recovery’s Vice President of Legal Operations Kimberly Raphaeli said that a demand letter is always sent to the merchant, in addition to the use of secret shoppers or contacting neighboring stores to determine if a store is really out of business if the merchant says it is.
Even with these more aggressive tactics, Raphaeli said that calling is still critical. She said that they will move files around the office, noting that merchants respond differently to different personality types. Raphaeli said that by the time a file gets to AMA Recovery, the majority of the merchants have simply decided to stop paying and about 30% are legitimately no longer in business.
Having a merchant go out of business is never a good outcome for a collector.
“You want to keep them in business,” Zakharyayev said. “[…] You want to make a relationship with them where you leave them enough to stay in business but you collect enough that your client is satisfied and they get paid in full.”
While these collection companies all agreed that communicating – one human being to another – is the best way to approach recovery, that doesn’t mean that technology is thrown out the window. None of the companies deBanked spoke to said they use autodialing, but Smith said he uses texting and email technology to make contacting merchants more efficient.
Mark LeFevre, CEO of Kearns, Brinen & Monaghan, a collections firm with offices in Delaware and South Carolina, agreed that technology makes the collections process more efficient.
“It’s important that you combine technology with the [human touch] to be most effective,” LeFevre said. “The technology will allow us to get the client to show what we can do, how we do it and so forth. But once that relationship is gained…we must talk with their customers.”
SBA Processes Significant Loan Volume in Days After the Shutdown
February 4, 2019
After the longest partial government shutdown in U.S. history, which shuttered the Small Business Administration (SBA) for more than a month, SBA employees went back to work on Monday, January 28. At the end of the day on January 29, the SBA had processed 1,100 SBA 7(a) loans worth $500 million, according to Bailey Wolff, Public Affairs Specialist for the SBA’s New York District Office. For context, in all of 2018, the SBA processed $25.4 billion in SBA 7(a) loans.
“It’s a great number,” Wolff said. “We’re back up and fully operational.”
SBA loan funders and brokers have feared that the backlog of SBA loan applications created by a month-long closure of the government agency would cause extensive delays. But it seems that the SBA is processing these loans quite quickly.
“There is a backlog, but applications seem to be moving smoothly,” said Everett Sands, CEO of Lendistry which funds a sizable amount of SBA loans.
Sands now has seven SBA loan applications waiting to get funded. So far, since the SBA re-opened on January 28, none of his applications have been funded yet. (Normally, it takes 1-2 days for his SBA loans to be approved). But Sands said that last week was essentially catch-up week for the agency. If the volume of loans processed from January 28 through January 29 continues at this pace, delays will be minimal.
“We should be back on track this week,” Sands said.
Top Accounting Officer at StreetShares Resigns
January 31, 2019Jesse Cushman, who served as StreetShares’ Chief Business Officer and Principal Financial & Accounting Officer, has resigned, according to a Form 1-U filed with the SEC this week. His exit was made effective as of January 1, 2019.
StreetShares president Michael Konson is currently filling the role in an interim capacity until a permanent successor can be named.
StreetShares’ financials have left something to be desired. The company recently reported a 12-month net loss of $6.5 million on only $3 million in revenue.
Fundbox Increases Speed of B2B Transactions
January 29, 2019
Prashant Fuloria, COO, FundboxAt the end of last week, Fundbox announced that it has launched an AI-enabled platform for B2B companies at the point of transaction, or check out.
“We’re positioning ourselves to be the PayPal for B2B transactions,” a company spokesperson, Tim Donovan, told deBanked. “And that means becoming as ubiquitous as finding Visa, Amex or PayPal in a B2C checkout flow.”
As part of this new e-commerce feature, Fundox can underwrite companies looking to make a purchase in as fast as 45 seconds, Donovan said. And sellers get paid right away. This, of course, is a boon for sellers, who often must wait to get paid. (Fundbox takes on the risk of potentially not getting paid.) For buyers, Fundbox’s terms are generally better compared to using a credit card, Donovan said. As long as the buyer’s credit is approved, they can purchase inventory on an online platform within 3 minutes.
“This [new feature] marks our evolution from a product-centric company to a platform-centric company,” said Prashant Fuloria, COO of Fundbox.
Fundbox offers a number of small business products including small business loans, factoring and lines of credit. Fundbox is partnered with larger companies like Eventbrite, for event organizing, and QuickBooks, for accounting, to help lend to small businesses that use these platforms.
deBanked CONNECT Miami 2019 Photos
January 28, 2019
Funding Circle Partners with Stripe
January 23, 2019
Funding Circle announced this morning that it has joined the Stripe Partner Program, which will allow the company to provide financing to Stripe customers in the United States. Funding Circle is a small business loan funder that offers fully amortizing small business term loans. Their loans range from $25,000 to $500,000 and have terms between six months and five years.
“We’re excited to work with Stripe to connect even more business owners with the affordable capital they need to go further,” said Bernardo Martinez, U.S. Managing Director of Funding Circle. “Funding Circle and Stripe are both dedicated to helping companies scale their businesses in the digital age, ultimately creating jobs, opportunities, and driving growth in the broader economy.”
This is Funding Circle’s first integration partnership with a payments platform in the U.S. With the partnership, Funding Circle gets access to Stripe’s small business owners, but Stripe also wins by providing more services to its customers.
“We are enabling Stripe customers to finance their growth and the end result is that, as these companies grow, [Stripe] has a higher number of payments go through their system,” said Martinez.
No money will exchange hands between Funding Circle and Stripe, Martinez said. While this partnership will start with Stripe’s U.S. small business customers, Martinez said that Funding Circle is excited about the opportunity to scale with Stripe, which serves customers internationally.
Funding Circle is not the only small business lender that has partnered with Stripe. Another company called Bitbond, based in Berlin, is listed on the company’s Stripe Partner Program.
Founded 2010, Funding Circle is headquartered in London and has lent $8.6 billion to 62,000 businesses globally. Listed on the London Stock Exchange as FCH, the company employs about 1,000 people and has offices in San Francisco and Denver.
Small Business Funding is Blasting Off
January 18, 2019Despite the pall of the record long partial government shutdown which has hurt brokers and funders of SBA loans, many companies and individuals in the online small business funding space are off to a very fruitful 2019. Below are some that we found.
After 15 years in the screen printing and embroidering business, Edward DeAngelis spent about four years learning the online funding business before creating Amerifi, a small business funding brokerage. Amerifi and DeAngelis, its CEO and founder, have had a very strong 2019 so far. Since January 1, DeAngelis said that Amerifi has facilitated $7,420,667 in funding. This is compared to $1,284,890 for the entire month of January 2018.
DeAngelis attributes this in part to his increasingly diversified product offering. Amerifi, located in Broomall, PA, offers term loans, asset backed loans, lines of credit and merchant cash advances, among other products. He said that he’s trying to develop a brand known for funding every deal, large and small. He also said that developing a solid team, which now includes eight salespeople, is very important.
“I’m not one for high turnover,” DeAngelis said. “I invest in my team. I spend plenty to provide good leads to all my guys and I treat my team well.”
DeAngelis said he provides his whole team with health insurance. Founded in March of 2017, Amerifi has so far brought nearly $49 million of funding to American small businesses.
Co-founder and CEO of Idea Financial, Justin Leto, said they have seen an uptick in volume starting in December of last year and carrying over into 2019.
“In the first week or so of December the volume wasn’t as high as we thought,” Leto said. “But then all of a sudden as we got to the end of the year, even up until New Year’s Eve when we thought there would be nothing going on at all, the volume was tremendous. And it wasn’t volume that we were just declining. It was really good paper coming in. And it has continued through January. The paper has been solid. The quality of the deals are very good.”
Idea financial, based in Miami, FL, provides a line of credit product, with 12 and 18 month repayment periods.
“We have a 650 minimum FICO, so we have to get the higher credit quality merchants,” Leto said. “And they’ve been coming. What I’ve seen is we have an approval for $100,000-$150,000 and it’s rare that anybody takes the full amount…If people are taking a percentage of the line and using it over time and continuing to draw over time for different projects, I think that’s a sign of a responsible borrower…I don’t see a recession coming.”
CEO of Accord Business Funding, Adam Beebe, told deBanked that it was doing about double the amount in funding this month compared to last January. Completely ISO driven, Beebe said that submissions over the past month or so have been up 30 to 40 percent but couldn’t attribute it to any one specific thing.
Founded in 2013, Accord funds MCA deals exclusively and employs over 20 people in its Houston-based office. Last year, it made a key hire to expand its marketing efforts.
“I’ve had more deals in the last two weeks than during any other two week period last year,” said Jarret Ortmann, Senior Lending Officer at Ironwood Finance in Corpus Christi, Texas.
He also said that he’s been seeing more deals coming in from his brokers. Ironwood provides working capital, equipment financing and collateral lending.
Capify Secures Massive Credit Facility from Goldman Sachs
January 16, 2019
Capify, which serves the UK and Australia markets, announced this morning that it has secured a £75 million (roughly $95 million) credit facility from Goldman Sachs.
“This credit facility validates our company as a leader in the marketplace and underlines the strength of our business model to provide simple, affordable and smart financial options to UK and Australian small businesses,” Capify founder and CEO David Goldin said.
The achievement is notable for a company that is not venture capital or private equity based.
“Capify is one of the leading small business providers in the UK and Australia,” said Pankaj Soni, Executive Director at Goldman Sachs Private Capital. “We have been impressed with the management team, business model and innovative finance solutions for small businesses [and] we look forward to supporting their growth in the years ahead.”
Capify provides MCA deals and business loans to small business merchants. Goldin told deBanked that MCA deals make up about 75% of Capify’s business in the UK, with about 25% in business loans. The ratio in Australia is the inverse, he said.
Goldin entered the UK and Australian markets in 2008 and said that they have become hyper competitive over the last three to four years. He acknowledged that both markets are still far smaller than the U.S. though.
“You don’t see these big crazy origination volumes [that you do in the U.S.]…[for us,] it’s about building a profitable, growing company.”
According to Goldin, another difference between the U.S. market and the UK and Australian markets is that the latter has embraced self-regulation much faster than the U.S. For instance, in Australia, there have been recommendations from semi-governmental organizations on how funders should perform, including the publishing of APR in contracts for business loans.
“These markets have moved quicker for self-regulation in the last two or three years than the U.S. market has moved in 10 years.”
This may be a matter of other countries learning from the experiences of the U.S., he said.
Goldin said that in addition to scaling Capify, the money from the facility will also be used to launch partner/broker programs in the UK and Australia. So far, the majority of Capify’s leads come from internal direct marketing efforts.
Capify employs more than 120 people divided between two offices, one in Manchester, England and the other in Sydney, Australia.
Goldin integrated the U.S. operations of Capify to Strategic Funding (now Kapitus) in 2017.
