Business Lending
Why Strategic Funding Rebranded as Kapitus
January 15, 2019
Today, Strategic Funding announced the launch of a new brand identity, including a name change. Strategic Funding will now be called Kapitus.
“We had a name that was very well respected,” said Kapitus founder and CEO Andy Reiser. “Everybody loved our name, quite frankly. They loved it so much, they all copied it. You can’t trademark ‘Strategic Funding.’ It’s too generic.”
Kapitus, spelled this way, is not a word in any language, which makes it easier to trademark.
“We wanted to separate ourselves in a way that is clearly identifiable,” Reiser said. “It’s an easy one-word name [that] symbolizes stability and strength. It’s ‘capital from us,’ if you want to break it down.”
Reiser said that the company has been relatively quiet over the last three years, but they have been advancing all along, and they are particularly proud of their brand new ISO portal. According to Reiser, the new portal helps ISOs better understand their book at Kapitus and allows brokers to generate a contract quickly without having to call them. The company has an in-house marketing team, but well over 50% of its business comes from the ISO channel.
Kapitus provides a variety of financial products, including equipment financing (they have an in house equipment leasing division) and factoring (they have a small internal factoring group). They also offer business loans, lines of credit and MCA deals. But the company’s largest portion of its business – more than 15% – comes from its Helix Healthcare Financing product, which finances healthcare practitioners like doctors, dentists and veterinarians.
Unlike other funders of healthcare practitioners that may offer financing terms up to 18 months, Kapitus offers terms of up to 10 years as long as the merchant satisfies its requirements. The company also funds a considerable number of healthcare-related businesses, like medical equipment providers. Otherwise, Reiser said that Kapitus has a diversified mix of merchants, from restaurants to manufacturers.
Reiser said that about 15% of Kapitus’s business consists of deals above $150,000 for which they have a seperate team. They do deals as high as $750,000.
When operating under the Strategic Funding name, there was a payment servicing division of the company, called Colonial Servicing. That entity will remain, but will be woven into the new Kapitus name.
Founded in 2006, Kapitus employs 240 people divided among three offices. The headquarters is in New York and there is an office with about 30 people in Arlington, VA, and a Dallas-area office with about 35 people working in collections and customer service.
Kabbage Finances US Small Business Customers of Alibaba
January 14, 2019
Kabbage announced today that it has partnered with Chinese e-commerce giant, Alibaba, to provide financing to small businesses that purchase materials on the platform. The financing program, offered by Alibaba and powered by Kabbage, is called Pay Later.
“Financing at the point of sale requires a fully automated solution that can handle the immense volume of daily transactions that occur on Alibaba.com,” said Kabbage CEO Rob Frohwein. “We are incredibly impressed with the service and value that Alibaba.com delivers to American businesses and want to do all we can to support their important mission.”
According to the Kabbage announcement, Kabbage had a beta launch of Pay Later in June 2018 and it has so far delivered millions of dollars in financing to American small business. The business to business (B2B) financing product provides lines of credit up to $150,000, and according to Kabbage, each purchase financed via Pay Later creates a six-month term loan for the merchant with rates as low as 1.25% per month. Kabbage also said that there are no fees to maintain the line of credit, no order transaction fees and no early repayment fees.
This partnership is not the first of its kind. In February 2015, Lending Club announced a similar arrangement with Alibaba that offered funding to U.S. small business owners for point-of-sale transactions on the platform. Lending Club offered loans up to $300,000 and had an exclusive relationship with Alibaba for point-of-sale business financing. Kabbage told deBanked that their arrangement with Alibaba is not exclusive. Lending Club did not respond in time to explain their current relationship with Alibaba.
How an SBA Lender is Managing Through the Shutdown
January 10, 2019
As a result of the U.S. government shutdown that started on December 22 of last year, hundreds of thousands of government employees have been working without pay. The shutdown has also temporarily stopped the Small Business Administration (SBA), a government agency, from operating. This means that obtaining an SBA loan, which is backed by the federal government, is no longer an option for American small business owners. (A lender cannot fund an SBA loan without the authorization of the SBA).
While most SBA loans are funded by banks, a fair amount are also funded by non-bank lenders, like Lendistry, for which 60% of its business came from SBA loans last year. In his 20 year career, Lendistry CEO Everett Sands remembers another government shutdown in 2013. According to data collected by The New York Times, the 2013 shutdown lasted 16 days. As of today, the shutdown has lasted 20 days, and the longest shutdown since 1976 was 21 days.
Sands told deBanked that lenders like him are continuing to process the loans. However, they have to wait until the government re-opens before closing on any new loans. Since Sands and other SBA funders can’t close on the loans, they can’t yet generate money from them. Thankfully for Sands, he just recently started expanding his product offering.
“I think we feel a little bit calmer than we would have last year because we [recently] rolled out [new products,]” Sands said. “An express line of credit program, a traditional line of credit, an express term product, and a commercial real estate product. So these products will not only keep us busy, but will allow us to weather the storm.”
Sands said that his team has been calling its borrowers and asking them if they would like to wait for their SBA loan to be processed or apply for a different kind of loan. He said that about half have decided to wait and half have decided to shop for another loan.
While SBA loans have been put on hold, Sands said that a government shutdown like this will likely increase the demand for loans in general, particularly among government contractors who are not getting paid.
“Historically, when there’s been a government shutdown, employees get their backpay. The government contractors do not. They just get delayed and pushed back further,” Sands said. “Generally, when people do not receive money, because the bills do not stop, they’re going to turn to resources…like lending organizations.”
As for SBA loans, once the shutdown is over, there will be a backlog, Sands said. He said that the SBA generally approves their loans in two days or less, but thinks that the approval time will probably move to 5 to 10 days if the shutdown stopped yesterday.
Sands joins most of the country in hoping that the shutdown will end soon. As it relates to his business: “I think it’s important to be able to offer clients all products that should be available to them, [including] the longer term [SBA] products which equals better cash flow. And if you think about it as a lender, you want to put your clients in the best position to pay you back.”
Despite the shutdown, 2018 was a very successful year for Lendistry with SBA lending. The company closed 92 SBA loans totaling $17.5 million and they have only been approved for SBA lending since June 2017, and only in California.
Founded in 2014, Lendistry employs 23 people. They offer loans of up to $1 million to small businesses in a variety of industries from restaurants to healthcare providers.
Trained at OnDeck, LendingFront Founders Help Banks Lend to Small Businesses
January 9, 2019
Yesterday LendingFront announced that it has raised $4 million to help deliver its white label software designed to help banks and other financial institutions lend to small businesses. The company was founded in 2015 by two former OnDeck employees, Jorge Sun and Dario Vergara.
Sun was the Chief Credit Officer at OnDeck from 2007 to 2012 and said he was the company’s third hire. Vergara joined OnDeck as its Chief Technology Officer in 2008 and was also among the first to join the company, Sun said. They both left before OnDeck went public in 2014 and took other jobs before reconnecting to create LendingFront together. Sun said that it is very difficult to create a technology company inside a large bank, which is what he tried to do in his job at Capital One, following his time at OnDeck. Vergara was working as VP of Technology at Bonobos, an online clothing company.
As Sun began talking with Vergara about going out on their own, he recalled telling Vergara: “There are no platforms in this space directly created to help lenders become more efficient…We’ve built this once [at OnDeck], let’s build it again. But the difference now is it’s strictly a technology company. We take no risk, we don’t lend. All we’re doing is powering other lenders.”
Sun said that LendingFront is “lender agnostic,” in that they license out their proprietary lending platform to any financial institution, including banks, community banks, leasing companies and Community Development Financial Institutions.
Their customers pay them a licensing fee and the customer, say a bank, sets its own parameters with regard to underwriting. The platform simplifies the underwriting process, but completely allows for customization and design of the customer experience, Sun said.
The idea of helping banks become better online lenders is not completely unique. In fact, the founders’ former employer, OnDeck, recently launched a separate entity called ODX, with the mission of making banks better lenders to small businesses.
But Sun said that while ODX and LendingFront both help banks, there is a difference between the two. He said the difference is that ODX is more of a full service shop acting on behalf of a bank.
“With us, a bank is using our platform like using Excel…versus [using] Excel and then giving it to a different company and saying ‘use Excel on our behalf.’”
Sun said that customers have funded $150 million through the LendingFront platform since they started licensing it out in 2016. They previously raised $1.6 million in 2016 and they employ 24 people in an office in New York.
How One Broker Moved from One-Man Home Office to 23 Person Shop
January 7, 2019Zach Ramirez started the brokerage company ZR Consulting from his home in Orange County, CA in June 2018. He was generating leads and making phone calls, often in a hushed voice because he was also looking after his six month old daughter.
“That was difficult, having a baby and with my life savings in the business,” Ramirez said.
But he had three brokers working remotely for him and things were working pretty smoothly. That number was growing by the time deBanked profiled him in August.
His fledgling business was manageable until he got to six brokers. At this point, the 29 year-old Ramirez said his home office was starting to feel like a call center.
“All day, I was answering calls to help them,” Ramirez said. “‘Zach, I have a question about this merchant, Zach, can you help me close this deal?’ It gave me a ton of anxiety.”
Ramirez realized that it would be much easier to manage employees from a brick and mortar space. So he found the company an office.
“Technically, we could have stayed at home,” Ramirez said.
And he acknowledges that some brokers can make a nice living working from home.
“But I want to have the biggest ISO,” Ramirez said.
With this as his goal, he said it makes the most sense to have everyone under one roof. If he’s having a large meeting, he wants to know that everyone is paying attention and not driving or playing a video game as they could on a conference call.
“It was difficult to manage salespeople and to track everything, like how many leads we generated in one day? How many leads does it take for me to fund one deal? How much money does the average deal bring me?”
Having his brokers work remotely made keeping track of these numbers even harder. Ramirez still has a couple of people who work for him remotely, but he said that 95% of his employees, or 23 people, now work at their office in Anaheim, CA. Ramirez said that the office was much too big for them with just six people at the beginning.
“We could hear echoes bouncing off the walls,” he recalled.
But now with 23 people, mostly brokers and some support staff, Ramirez is actually planning to expand into an office next door.
“[As we grew in the office,] we just re-invested every penny we earned back into the company,” Ramirez said. “We upgraded our computers and furniture and we put people on W-2s. We gave our employees a 401k right away. I think it’s important to really treat your people right.”
Ramirez acknowledged that he can’t make changes to the business as quickly as he used to. With more than 20 people, he said that costs go up dramatically and therefore decisions have to be much more calculated.
“It takes time to move the ship,” Ramirez said, “and if you’re not careful, everyday can be consumed by the small stuff.”
That’s why he stresses the importance of delegating roles to others.
“It’s the only way to free up your time so you can focus on the bigger picture,” he said.
Now, he said that he very rarely speaks to funders anymore. He has two processors on staff whose job is to organize the paperwork from the brokers and send it to the funders. They organize the company pipeline, he said.
Ramirez said that it can be quite difficult to find the right mix of funders.
“Some funders who you think will be great turn out not to be and other funders who you’ve never heard of turn out to be real diamonds in the rough,” Ramirez said.
And like many brokers feel, Ramirez agrees that when it comes to funders, less is more.
“Having a very precise and small list of funders is incredibly important…because it simplifies your process [and] having a simple process is one of the keys to scaling your business,” Ramirez said.
Ramirez said that a common mistake brokers make is to test out a bunch of brokers all at once. He said that brokers need to try working with new funders intelligently, which means one at a time.
“When you bring on a new lender, you carefully watch every submission to them,” Ramirez said. “You want to make sure they’re not backdooring you. So usually you want to put your phone number and your email address in the contact info so you can catch them if they’re trying to be sneaky. [If they are,] they’ll call asking for the client and you know you only sent that deal to one lender.”
He’ll sometimes then pretend he’s interested and record the call. On about three occasions, he said that he has sent recordings like this to the backdooring lender and he’ll write “this is why I don’t send deals to you.”
Ramirez’s small group of trusted funders are OnDeck, National Funding, BFS, and Orange Advance.
As Ramirez expands, he says he only hires brokers by referral. He said that 90% of his business is short term business loans and MCAs, and 10% is SBA loans and real estate transactions.
Ramirez said that so far, ZR Consulting has originated $15 million in deals since inception and has earned $1.5 million in revenue.
For Some Brokers, Funding Never Sleeps
January 4, 2019
While holidays, including New Year’s Eve, are usually slow days for funding, for some brokers this year, New Year’s Eve was a strong day.
“New Year’s Eve was not a slow day here,” said Elana Kemp, a broker at Fundomate, in Los Angeles, who was in the office that day. “It was amusing to see so many people looking for money on the last day of the year. I’m also a procrastinator, so I can relate,” she said.
Zach Ramirez, Founder and Managing Director of ZR Consulting, LLC in Orange County, CA, said that New Year’s Eve was the second biggest funding day for his company in December, despite the fact he told his brokers that it was an optional work day, he said.
At the same time, for many other brokers, business was on the slow side, as expected. John Celifarco of Horizon Financial Group in Brooklyn, said it was a good day to organize and prepare for the new year. Meanwhile, Joe Cohen, of Business Finance Advance in Brooklyn, said he generally doesn’t go to work on major holidays.
“The holidays are to enjoy, regenerate and spend time with the family,” Cohen said. “That’s why you’re working anyway.”
What We Learned About RapidAdvance From RapidAdvance’s Planned Securitization
January 1, 2019
RapidAdvance is raising money through their first-ever securitization. This is what we’ve learned about the company as a result so far, thanks to the bond ratings process:
2017 origination volume: $260 million | See how this ranks against their peers
Lifetime funding volume: > $1.5 billion
Total shareholder equity: $54 million
Majority owned by: Rockbridge Growth Equity LLC
# of employees: 168
Notable strategic partnerships: Office Depot and Worldpay
Provides: Mainly Business loans (≈80%) but also merchant cash advances (≈20%)
Founded: 2009
Generates deals via: 62% ISO & Funding Partner Channel / 38% Direct
Other funders that recently did their first securitizations include Credibly and Strategic Funding Source.
How a Computer Game Master Applied His Talents to Online Lending
December 28, 2018Eden Amirav is co-founder and CEO of Lending Express. The 29 year old spends his days trying to grow his company, an online lending platform for small businesses. But about 15 years ago, as a teenager in Israel, he spent his evenings and school breaks fighting orcs, defending construct units and mostly defeating enemies in a fictional world called Azeroth. He was a master player of the computer game, Warcraft III, released in 2002. But calling Amirav “a master player” is even an understatement since Amirav was the master player in his country. He was Israel’s #1 champion in Warcraft III for four consecutive years from 2003 to 2006.
Amirav started when he was about 12 and by the time he was 14, he became his country’s best competitive player. “I was very nervous,” Amirav said about the final game of his first national tournament. He was 14 and his opponent was 18.
“I saw him as a real adult,” Amirav said.
His family and friends were among more than one thousand people watching the final game in an auditorium – rooting him on as they observed the virtual duel projected on a big screen above the stage.
“I was an underdog and my winning was a big surprise,” Amirav said. “It was a shock when I won the tournament because I was very young.”
Amirav played the game as the humans (as a opposed to the race called the “orcs”) and his chosen hero was Archmage, known for its ability to “regenerate sorceresses,” among other things. If this makes absolutely no sense, you’re not alone.
What is clear, though, is that Amirav said that his mastery of Warcraft III helped him years later when he started creating companies.
“I think the most direct connection between gaming and becoming an entrepreneur is speed,” Amirav said. “To play [the game] on a professional level you have to be very quick with computers. Having those skills led me to programming…and when you’re working on a startup and developing code, if you do this stuff very quickly, you can accomplish a lot in a shorter time than your competition, [which] really gives you an advantage.”
Amirav said that in his heyday as a computer gamer, he performed more than 200 actions per minute. (That means either clicks on the mouse or taps on the keyboard.) Amirav has used his ability to move fast to expand Lending Express rather quickly in the U.S. The platform, which connects small business owners to funders, launched first in Australia in October 2016. In June of this year, the company announced its official entrance into the U.S. market, and Amirav said that Lending Express has assisted in funding almost as much volume in the U.S. in a little over six months as it has in Australia in over two years.
He said he expects the U.S. to surpass Australia in funding volume in 2019 and he plans to grow its U.S. office, which is now a one-person operation in San Matteo, CA.
Also, Amirav said that they should be announcing shortly $100 million in funding facilitated by Lending Express. He said their total volume is about $98 million right now.
Even though Amirav competed one-on-one, he did not practice alone. In fact, he said he was always part of what he called a “clan,” where gamers would practice together. Now, instead of practicing with a clan, Amirav works with and leads a team of more than 30 employees at the Lending Express headquarters in Tel Aviv.
“You get to know these people and it’s like a band,” Amirav said of the his gaming clan. “You need everyone to be playing at the right tempo.”
Editor’s note: A profile on Amirav in Forbes incorrectly attributed his gaming background to World of Warcraft. That is another game with an entirely different style of play and objectives. Amirav was a champion of Warcraft 3, a Player vs. Player (PvP) game format. World of Warcraft is a Massive Multiplayer Online Role Playing Game (MMORPG).
