Business Lending
Shopify is Quickly Climbing the Ranks of the Largest Small Business Funders
February 12, 2019Shopify originated $277 million in merchant cash advances in 2018, according to their quarterly earnings reports. That figure already places them among the largest small business funding providers nationwide.
Below is a look of how they stack up thus far:
| Company Name | 2018 Originations | 2017 | 2016 | 2015 | 2014 | |
| OnDeck | $2,484,000,000 | $2,114,663,000 | $2,400,000,000 | $1,900,000,000 | $1,200,000,000 | |
| Kabbage | $2,000,000,000 | $1,500,000,000 | $1,220,000,000 | $900,000,000 | $350,000,000 | |
| Square Capital | $1,600,000,000 | $1,177,000,000 | $798,000,000 | $400,000,000 | $100,000,000 | |
| Funding Circle (USA only) | $500,000,000 | |||||
| BlueVine | $500,000,000* | $200,000,000* | ||||
| National Funding | $427,000,000 | $350,000,000 | $293,000,000 | |||
| Kapitus | $393,000,000 | $375,000,000 | $375,000,000 | $280,000,000 | ||
| BFS Capital | $300,000,000 | $300,000,000 | ||||
| RapidFinance | $260,000,000 | $280,000,000 | $195,000,000 | |||
| Credibly | $180,000,000 | $150,000,000 | $95,000,000 | $55,000,000 | ||
| Shopify | $277,100,000 | $140,000,000 | ||||
| Forward Financing | $125,000,000 | |||||
| IOU Financial | $91,300,000 | $107,600,000 | $146,400,000 | $100,000,000 | ||
| Yalber | $65,000,000 |
*Asterisks signify that the figure is the editor’s estimate
With Interest Rates Up, OnDeck’s Cost of Funds Comes Way Down
February 12, 2019
OnDeck’s cost of funds dropped significantly in 2018, according to their last quarterly report. The rate was 5.6% in Q4, compared to the 6.8% it started off at in Q1.
During the earnings call, OnDeck CEO Noah Breslow said, “We improved the terms and structures of our credit facilities and increased the number and quality of our funding providers, adding new banks and life insurance companies.”
That’s all before OnDeck even closed on an $85 million revolving credit facility with a lender group consisting of four banks earlier this month. The rate on that came in at 1 month LIBOR (currently around 2.5%) + 3.00%.
OnDeck’s loan yield in Q4 was the highest its been in the last 2 years at 36.6%.
The company enjoyed record earnings for Q4 2018 ($14 million) and full year 2018 ($27.7 million). They also had record origination volume of $658 million, a 2% increase from Q3 and a 21% increase from Q4 2017. Their sales and marketing expense for acquiring new customers remained flat compared to last quarter.
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.
