Business Lending
IOU Partners with FINSYNC to Fuel Growth
November 27, 2018
Montreal-based IOU Financial announced yesterday that it is partnering with FINSYNC in an effort to improve their customers’ experience and broaden access to new customers. FINSYNC is a cash flow management software and platform that allows businesses to collect income, pay bills, process payroll, automate accounting, and access financing through FINSYNC’s Lending Network.
“FINSYNC’s innovative cash flow management solution helps business owners better assess the opportunity to access working capital based on past and projected cash flow,” said Christophe Choquart, VP of Strategic Partnerships at IOU Financial. “This is a totally new way to [support] growing businesses.”
FINSYNC provides almost all financing-related services except for the actual financing. According to its website, FINSYNC has partnerships with a number of other alternative funders, including OnDeck, Breakout Capital, BFS Capital and The Business Backer.
“This partnership greatly enhances the convenience of applying for working capital,” said Robert Gloer, President and COO of IOU Financial. “It gives merchants insight into what a cash infusion would look like [before they take out a loan.”
Through this partnership, IOU Financial’s marketing efforts will introduce potential merchants to FINSYNC’s payment, payroll and accounting services, while FINSYNC will offer IOU Financial an enhanced user experience, according to IOU Financial CEO Philip Marleau. He said that, for now, neither company is exchanging money with one another. It is purely a mutually beneficial partnership.
IOU Financial offers business loans of up to $300,000 to small business merchants in the U.S. and Canada. The company, which is traded publicly on the Toronto Stock Exchange, had a strong third quarter, with $36.1 million in originations, an 85% increase from the prior year. The lender’s average loan is $100,000 with a 12 month term, although they do offer terms up to 18 months.
Founded in 2009 by Gloer and CEO Phil Marleau, the company also has an office in Atlanta and has a total of about 40 employees.
SBA Loans Increase Slightly in 2018
November 26, 2018SBA total loan volume exceeded $30 billion with more than 72,000 approved loans for FY18 (October 1, 2017 through September 30, 2018), according to the SBA. The total volume is about the same as last year and there were approximately 4,000 more SBA loans issued this year compared to FY17.
Of the 72,000 SBA loans approved this year, 60,353 of them were 7(a) loans, totaling $25.37 billion. And 5,874 of the loans were 504 loans, totaling over $4.75 billion. This year, the SBA launched the 25-year Debenture, which offers an additional 60 months of financing at a fixed rate for small businesses. Since its introduction in April, over 1,000 debentures had been sold in FY18.
“The 25-year Debenture is designed to help free up cash flow and offer fixed rates in a rising interest rate environment for 504 borrowers and we are pleased to see over $1 billion has been disbursed in less than six months,” Associate Administrator for SBA’s Office of Capital Access William Manger said.
In FY18, there was notable growth in the SBA’s Microloan and Community Advantage Programs. In particular, over 5,000 loans were approved for over $72 million in the Microloan program and over 1,000 loans were approved for over $150 million in the SBA Community Advantage program.
Study Shows Small Business Loan Demand Highest Since 2012
November 26, 2018
A study released today reveals that American small businesses are eager to take business loans, with 48% planning to take out a loan in the next year, the highest level of demand since 2012. The study, called “Gimme Credit: Faster, Simpler, Safer Credit Main Street America,” was conducted by PayNet, which provides small business credit data, and Raddon, a research provider to financial institutions.
According to the study, almost 65% of small businesses anticipate an increase in sales, the highest percentage in over 14 years. And 43% of small businesses have overall confidence in the economy.
“Small businesses are in full-on growth mode,” said PayNet President William Phelan. “They’re looking to banking partners for reasonable capital infusions, but are discouraged by slow reviews, impersonal processes and denials. This creates a huge opportunity for nimble community banks, credit unions, and alternative lenders to fill the void.”
Already, some larger banks like Chase and PNC have partnered with OnDeck’s ODX to enhance speed and fill this void.
Still, small business loan demand is often met with uncertainty from banks that remain wary of lending to small businesses in the wake of the financial crisis, according to the study. But Bill Handel, Chief Economist at Raddon, believes that lenders can change their ways, while still being fiscally responsible.
“It’s a recurring cycle,” Handel said. “Cumbersome underwriting practices increase the likelihood that lenders are either unwilling or unable to extend favorable terms to small businesses, which in turn discourages applications. Fortunately, lenders can take steps to improve their efficiency and profitability in this area.”
What are some of these steps? The study recommends the following:
- Segment applications by loan request size and reviews by loan risk profile.
- Deploy technology to assist in preparing applications, collecting data, and analyzing the business/loan.
- Optimize procedures by leveraging industry intelligence to improve their “decision engines.”
Selling a Home, Selling Commercial Financing – What’s the Difference?
November 16, 2018
Alternative funding brokers come from all different backgrounds, but for many them, being a broker is not their first job in sales. Some sold equipment, some sold cars and others sold homes. They were realtors. deBanked found two alternative funding brokers with a background in residential real estate and we asked them to compare the similarities and differences between selling a home and selling money.
Alex Alpert is the owner and CEO of Philadelphia-based Solomon Commercial Lending, which provides clients with a wide variety of funding from SBA loans, equipment leasing, factoring and some MCA. Before starting his company, he had worked as a residential realtor for about five years. When asked about his approach to selling a home versus selling money, he sees them as very different.
“When I consider non-investment home ownership, it is 100% emotional,” Alpert said. “If you think about it, the most expensive and most intimate and emotional purchase that you’re ever going to make is going to be your home. As people, we pour ourselves into our homes. Our homes speak so much about our personalities – what we like, what we don’t. It’s literally like a biography [of someone.]”
Alpert spoke about the intangibles involved in residential real estate, how a lot of it is about the feel of a home, which is highly subjective.
“Instead of you manipulating what they want, it’s just guiding them to reach that ‘ah-ha’ moment,” Alpert said. “I didn’t walk around the house with them and say ‘This is the bedroom and this is the bathroom.’ I would stay back and just say ‘Take a walk around, see how it fits, jump in the bed if you want to, and see how you feel.’ And when they came back down, one of my common first questions would be, ‘Can you picture yourself living here?’ Because that question makes you visualize yourself waking up there. If you can pick up on what the person is showing at that moment, you can guide them better…I think I’m successful because I’m honest, I’m transparent, and I will tell you things you won’t expect. And at the end of the day, that’s how you build referrals and address the needs of an emotional transaction.”
On the other hand, Alpert sees non-primary home deals as more transactional.
“When it comes to business, it’s much less personal,” Alpert said. “People will certainly do their research on who they engage with. Most all of my business comes from referrals. But still, you don’t know me from Adam, and you’re sending me over everything…With [business transactions,] it’s based on need and your ability to serve that need. The emotional part, just from the start, is not that present. It’s a need and solution type of approach.”
Alpert will work with clients with tens of millions of dollars in revenue. But he acknowledged that for some of his smaller “mom and pop shop” clients, transactions can be emotional, like with a small town dance studio client he is helping to secure a 7(a) SBA loan for.
James Celifarco, President of Horizon Financial Group in Brooklyn, which offers mostly small business loans and MCA, currently works as a realtor as well. He doesn’t see much of a difference in the way he approaches residential real estate clients versus small business merchants.
“I think they’re very similar in that if [people] are buying or selling a home, it’s their most coveted possession,” Celifarco said. “It’s what they’ve worked the hardest to obtain. It’s their biggest asset. And it’s the same thing when dealing with a business owner. Business owners are probably more passionate than a homeowner. Either way, if you’re dealing with a business owner or a homeowner, it’s their prized possession.”
While not using the word “emotional,” Celifarco seemed to suggest that non-residential real estate deals are just as emotional.
“[For both homeowners and business owners,] you really have to deal with kid gloves in that they play very close to the vest,” Celifarco said. “You have to have a certain approach where they feel comfortable speaking with you about their home and their finances or their business and their finances. They want to know that their information is protected.”
Celebrity residential real estate agent Ryan Serhant, who spoke at Broker Fair 2018, said that he lives be three rules to successful in real estate: Follow up, Follow through and Follow back. The last refers to following back a client on social media. This part might not always apply, but Celifarco said that the same persistence is required regardless of the sales client.
“It’s all sales,” he said. “You eat what you kill. You close a deal, you make money. You sell a house, you make money. If you don’t, if you’re not reaching out to your clients, you’re not going to make any money. It’s the same in that you get paid for how hard you work.”
Dan DeMeo is Back in Action… at Lendr
November 15, 2018
Daniel DeMeo has been hired as Chief Revenue Officer by the Chicago-based funder, Lendr.
DeMeo has been working as an independent consultant for the last two years, according to LinkedIn. Prior to that he was the CEO of CAN Capital, a company he had dedicated himself to for nearly seven years until an internal account performance issue led to several senior executives taking an immediate leave of absence.
Under DeMeo, CAN enjoyed success as one of the nation’s largest non-bank small business financiers, partially attributed to the company’s major head start in pioneering merchant cash advance products when the company was founded in 1998. DeMeo even landed on the cover of deBanked’s November/December 2015 issue, around the time when the company was widely believed to be planning an IPO.
It never happened.
The systems issue that toppled CAN’s top execs including DeMeo, brought the company to its knees, putting all new funding on hold for six months until it was saved by a capital infusion from Varadero Capital in July 2017. CAN Capital survived while DeMeo has notably since then kept a low public profile.
Now he’s back in action at Lendr, an ambitious funding company that offers MCAs, small business loans, equipment financing, and just recently, factoring.
“Dan is a highly strategic and thoughtful leader with broad perspective of the industry that enables him to understand specific challenges we face as a growing company,” said Tim Roach, CEO of Lendr. “Dan’s experience is a perfect addition to the team as we accelerate our growth plans, raise Lendr’s brand recognition, and further increase our market share.”
“I’m thrilled to be joining such a dynamic and progressive company,” said DeMeo. “Lendr has emerged as one of the leaders in the financial solutions space and we are poised to build strategic partnerships and alliances with those who share the same zeal in helping small- and medium-sized businesses grow.”
Lendr is setting its sights high. “We’ll be north of $100 million in our first year of factoring,” Lendr co-founder and CEO Tim Roach told deBanked in September.
The company has also been showing off its technological and fundraising prowess as of late. This past March, they closed on a $25 million credit facility that’s expandable up to $50 million. That news was followed by the announcement of a new funding option made possible through virtual and physical debit cards.
Lendr has offices in Chicago and New York and employs over 45 people.
Square Capital Loaned $405 Million in Q3
November 8, 2018
Square Capital originated more than 62,000 business loans for a total of $405M in Q3, up from $390M in the previous quarter, according to the company’s latest earnings report.
By contrast, OnDeck, a Square Capital competitor, reported loan originations of $648M for the quarter. Both companies find themselves facing new competition from a growing field of tech players like Shopify (who last quarter originated $76.4M in merchant cash advances).
Thanks to an early investment in Eventbrite, the online events company that went public in September, Square turned its regularly scheduled quarterly losses into a profit in Q3. On the company’s earnings call, Square CFO Sarah Friar said that the company would have had a $17 million loss if it weren’t for a windfall related to the IPO of Eventbrite.
The big news that Square CEO Jack Dorsey had to share on the earnings call was the introduction of Square Terminal, a portable, all-in-one payment device that prints receipts.
“People don’t want to use their personal device to accept payments,” Dorsey said of many small business owners.
Dorsey said that this device is essentially meant to replace “those black rectangular boxes,” referring to the ubiquitous credit card processing machines which he described as “dinosaurs.”
Another theme of the earnings call was Friar’s departure from Square. Friar announced in October that she will be taking the job of CEO at Nextdoor, a social network. Dorsey thanked Friar for her contribution to Square and in a tweet expressed sadness that she was leaving. He said that a search to replace Friar is currently underway.
Dorsey also expressed pleasure with the continued success of Square’s Cash app, a peer to peer payments app that he said allows the “underserved and unbanked” to transfer money.
“I’m excited [about] what we can build on top of it,” Dorsey said.
Cerebro Capital’s Trick? Automating Compliance in a Loan Marketplace
October 29, 2018
Cerebro Capital CEO Matthew Bjonerud spoke to deBanked last week at Money 2020 in Las Vegas. He was standing at his booth in the “Startup” section of the conference’s Expo Hall.
Bjonerud and his team have created a marketplace for middle market loans, from $1 million to $100 million. And Bjonerud said that borrowers can anonymously search for lenders to determine which ones are the right fit for them.
“We can show borrowers the lenders that can do the deals they want without telling the lenders that the borrowers are even looking, Bjonerud said. “It’s a great benefit [for borrowers] to using our platform.”
In addition to being a marketplace for middle market loans, the Baltimore, Maryland-based startup also simplifies the compliance process for lenders.
“Once loans are closed…we will automate the compliance,” Bjonerud said. “We’re the only ones who allow that to happen in the marketplace – where we will actually create the compliance certificates for the lenders based on automatically [using] financial statements and other elements.”
This compliance service is billed to the lender as a subscription fee. Otherwise, when a loan deal is closed via Cerebro Capital’s marketplace, it is the borrower, not the lender, that pays Cerebro Capital.
“We’re providing the borrower with better terms than they would otherwise get in the market,” Bjonerud said.
Breslow Shows What a Fintech/Bank Partnership Looks Like
October 24, 2018
In the wake of OnDeck’s announcement of ODX, a new subsidiary that will service banks, OnDeck CEO and Money 20/20 veteran Noah Breslow took to the stage for a discussion with his new business partner, Lakhbir Lamba, Head of Retail Lending at PNC Bank. PNC will now be using ODX to originate lines of credit for the bank’s small business customers, while everything will stay on PNC’s balance sheet.
“We’re keeping a laser focus on small business lending,” Breslow said, when asked if OnDeck would begin to serve other segments of the market, like student or auto loans.
“The problems that small businesses face are worldwide,” Breslow said, indicating that the company has interest in expanding service to small businesses internationally. Already, OnDeck operates in Canada and Australia.
The moderator asked if an application that is rejected by PNC would become a lead for OnDeck. Breslow and Lamba said that is not currently the arrangement, but that it may be a possibility.
“Our goal [with ODX] is to service banks,” Breslow said, while acknowledging that banks serve a different kind of small business customer than OnDeck.
“We will make sure that we underwrite based on PNC’s risk appetite,” Breslow said.
