Business Lending
OnDeck Announces New $200 Million Revolving Credit Facility with Credit Suisse
December 9, 2016
NEW YORK, Dec. 9, 2016 /PRNewswire/ — OnDeck® (NYSE: ONDK), the leader in online lending for small business, announced today the closing of a $200 million asset-backed revolving debt facility with Credit Suisse.
In addition to its other funding sources, OnDeck may now obtain funding under the new credit facility with Credit Suisse, subject to customary borrowing conditions, by accessing $125 million of committed capacity and an additional $75 million of capacity available at the discretion of the lenders.
“OnDeck has emerged as a leading provider of growth capital to small businesses around the country,” said Jon-Claude Zucconi, Managing Director, Credit Suisse. “The team’s innovative vision and commitment to financing is vital to expansion and growth in the small business community.”
Under the facility, loans will be made to Prime OnDeck Receivable Trust II, LLC, or PORT II, a wholly-owned subsidiary of OnDeck, to finance PORT II’s purchase of small business loans from OnDeck. The revolving pool of small business loans purchased by PORT II serves as collateral under the facility. OnDeck is acting as the servicer for such small business loans. The Class A Loans under the facility were rated by DBRS, Inc.
OnDeck intends to initially use a portion of this facility, together with other available funds, to optionally prepay in full without penalty or premium, the existing $100 million Prime OnDeck Receivable Trust, LLC facility which was scheduled to expire in June 2017. As a result, OnDeck will benefit from obtaining additional funding capacity through December 2018.
“This transaction marks a continuation of our financing strategy to diversify funding sources, extend debt maturities, and create additional funding capacity to pave the way for future loan growth,” said Howard Katzenberg, Chief Financial Officer, OnDeck. “We are pleased to have Credit Suisse, a leading global financial institution, support OnDeck in our mission to power the growth of small business through lending technology and innovation.”
About OnDeck
OnDeck (NYSE: ONDK) is the leader in online small business lending. Since 2007, the company has powered Main Street’s growth through advanced lending technology and a constant dedication to customer service. OnDeck’s proprietary credit scoring system – the OnDeck Score® – leverages advanced analytics, enabling OnDeck to make real-time lending decisions and deliver capital to small businesses in as little as 24 hours. OnDeck offers business owners a complete financing solution, including the online lending industry’s widest range of term loans and lines of credit. To date, the company has deployed over $5 billion to more than 60,000 customers in 700 different industries across the United States, Canada, and Australia. OnDeck has an A+ rating with the Better Business Bureau and operates the educational small business financing website BusinessLoans.com.
For more information, please visit www.ondeck.com.
About Credit Ratings
Credit ratings are opinions of the relevant rating agency. They are not facts and are not opinions of OnDeck. They are not recommendations to purchase, sell or hold any securities and can be changed or withdrawn at any time.
Safe Harbor Statement
This press release contains “forward-looking statements” within the meaning of the private Securities Litigation Reform Act of 1995 and other legal authority. Forward-looking statements include statements about the intended use of proceeds from the new facility and expected optional repayment in full of the existing facility, the extension of debt maturities and the availability of additional funding capacity, all of which are dependent upon compliance with the borrowing and other conditions of the new facility, as well as information concerning OnDeck’s business plans and objectives and financing plans including future loan growth. Forward-looking statements can also be identified by words such as “will,” “enables,” “expects”, “may,” “allows,” “continues,” “believes,” “intends,” “anticipates,” “estimates” or similar expressions. Forward-looking statements are neither historical facts nor assurances of future performance. They are based only on OnDeck’s current beliefs, expectations and assumptions regarding the future of its business, anticipated events and trends, the economy and other future conditions. Moreover, OnDeck does not assume responsibility for the accuracy and completeness of forward-looking statements. As such, they are subject to inherent uncertainties, changes in circumstances, known and unknown risks and other factors that are difficult to predict and in many cases outside OnDeck’s control.
As a result, you should not rely on any forward-looking statements. OnDeck’s expected results may not be achieved, and actual results may differ materially from OnDeck’s expectations. Important factors that could cause actual results to differ from OnDeck’s forward-looking statements are the risks that OnDeck may not be able to manage its anticipated or actual growth effectively, that its credit models do not adequately identify potential risks, and other risks, including those under the heading “Risk Factors” in OnDeck’s Annual Report on Form 10-K for the year ended December 31, 2015, Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 and in other documents that OnDeck files with the Securities and Exchange Commission, or SEC, from time to time which are available on the SEC website at www.sec.gov. OnDeck undertakes no obligation to publicly update any forward-looking statements for any reason after the date of this press release to conform these statements to actual results or to changes in OnDeck’s expectations, except as required by law.
OnDeck, the OnDeck logo and OnDeck Score are trademarks of On Deck Capital, Inc.
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SOURCE On Deck Capital, Inc.
SBA ‘SmackDown’ In Linda McMahon, As Pick for Administrator Brings More WWE to Small Business Funding
December 8, 2016
President-Elect Trump’s pick to head the Small Business Administration is Linda McMahon, the former CEO of World Wrestling Entertainment (WWE). The publicly-traded company has produced many household names over the years, from The Undertaker to Bret “The Hitman” Hart to The Rock.
In a public announcement, Trump said “Linda has a tremendous background and is widely recognized as one of the country’s top female executives advising businesses around the globe. She helped grow WWE from a modest 13-person operation to a publicly traded global enterprise with more than 800 employees in offices worldwide.”
If confirmed by the Senate, McMahon will succeed Maria Contreras-Sweet, who has held the position since 2014 and has had a pretty open attitude about online lenders. The former WWE exec taking her place might find even more common ground with the non-bank finance community given that Bret the Hitman Hart is the official spokesperson for a merchant cash advance company.
Sharpshooter Funding in Canada, which heavily features Hart in their marketing campaigns, is affiliated with First Down Funding, a US-company that also does small business funding. A joint-company press release from earlier this year quotes Hart as saying, “When you sit down and listen to the whole format and how it provides money to much needed businesses and small business owners that need financial support and extra funding. It’s a worthwhile endeavor, and I’m actually very grateful that Paul Pitcher involved me with it so far.”
Meanwhile, McMahon says she is up to the task. “Our small businesses are the largest source of job creation in our country,” she said in an announcement. “I am honored to join the incredibly impressive economic team that President-elect Trump has assembled to ensure that we promote our country’s small businesses and help them grow and thrive.”
LendingMania might be just around the corner in 2017.
New deBanked Magazine Issue is On The Way
December 7, 2016
The Nov/Dec issue of deBanked magazine is on the way! Can you guess who is on the cover? Hint: his face is blurred out in this image so you can’t cheat!
This edition closes the end of 2016, celebrates the journey of an industry veteran, recaps late fall conferences, and reveals new clues and details into a former industry player’s devilish fall from grace.
Stay on top of the industry and finish out the year with our latest major stories that are released in print well before they’re online. If you’re not already subscribed to deBanked Magazine, register now for FREE!
Barbara Corcoran, OnDeck Contest Final Aired on Rachael Ray Show
December 6, 2016The OnDeck “Seal of Approval” contest led by company spokesperson Barbara Corcoran recently came down to one final challenge and the results were aired on the Rachael Ray Show on Tuesday.
Three small businesses were featured and each won $10,000 paid for by OnDeck. Corcoran couldn’t mention the company enough times. This kind of collaboration and publicity is probably the best kind of marketing an alternative lender can get, not to mention a great opportunity for small businesses. Watch the TV segment of it below:
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SmartBiz Loans Ranked Number One Provider of Traditional SBA 7(a) Loans Under $350,000
December 5, 2016SAN FRANCISCO, CA – December 5, 2016 – SmartBiz Loans, the first SBA marketplace and bank-enabling technology platform, has ranked as the number one provider of non-Express, SBA 7(a) loans under $350,000 for the 2016 government fiscal year. SmartBiz also ranked number five among providers of under $350,000 traditional SBA 7(a) and Express 7(a) loans combined.
“SmartBiz’s success in this year’s SBA 7(a) ranking demonstrates how technology can support banks in meeting the needs of small businesses,” said Evan Singer, CEO of SmartBiz Loans. “SmartBiz is committed to creating the leading marketplace for both banks and small business owners, by matching small business owners with the bank best suited to their needs and enabling a higher percentage of SBA loans to be approved.”
SmartBiz generated $200 million in funded SBA 7(a) loans through its bank lending partners, which helped them earn the top spot. The data used is based on SBA lending data released in November, reflecting its 2016 fiscal year which ended on Sept. 30. Wells Fargo Bank, which was ranked just below SmartBiz, generated $155 million in funded non-Express SBA 7(a) loans under $350,000. This is the first time a technology platform and marketplace has achieved the number one position in SBA’s ranking of 7(a) loans.
“Small businesses are the driving force of the economy,” said Ann Marie Mehlum, retired Associate Administrator, Office of Capital Access, U.S. Small Business Administration. “By supporting them, the SBA and lending partners like SmartBiz are investing in the economy as a whole.”
SmartBiz is revolutionizing SBA lending. Its marketplace helps increase approval rates by automatically directing businesses to the right lender, while its advanced software streamlines the SBA loan application, underwriting and origination process. In this way, SmartBiz fills a critical gap in the small business loan market and enables small businesses nationwide to grow without settling for the sky-high rates of alternative online lenders or undergoing the typically slow and tedious traditional bank process.
About SmartBiz Loans
SmartBiz Loans is a unique combination of an online SBA loan marketplace and a bank enabling technology platform. The company’s online software provides SBA preferred lenders customized and automated origination, underwriting and documentation, making approval and funding fast and easy. Sophisticated algorithmic sorting in the SmartBiz marketplace also enables higher approval rates for small businesses because the right applications are automatically directed to the right bank. SmartBiz is based in San Francisco and was founded in 2009 by a team of experienced financial services entrepreneurs with backing from leading venture capital firms including Investor Growth Capital, Venrock, First Round Capital, Baseline Ventures, and SoftTech VC. Learn more at www.smartbizloans.com.
The Trump Effect and Bank Partnerships: Noah Breslow Chimes in on BloombergTV
November 30, 2016On BloombergTV in Canada, OnDeck CEO Noah Breslow answered questions about a Trump presidency, rising interest rates, and the future of bank partnerships. “Online lending is a secular trend that’s not going away,” Breslow said. “Any product that can be delivered over the internet will be delivered over the internet and money is the ultimate digital product.”
Watch the clip below:
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The CAN Capital Shakeup Is A Sign of the Times
November 30, 2016Update 11/30 7:30 pm: CAN says they are still open for business and still providing access to capital for current customers and renewal business. They are not actively seeking new business at this time, but will evaluate it as it comes in.
Part II of the industry’s season finale has begun. On Tuesday afternoon, CAN Capital confirmed that CEO Dan DeMeo had been put on a leave of absence. The chief risk officer and chief financial officer have also reportedly stepped down. Parris Sanz, the company’s chief legal officer, is now running the company, a CAN spokesperson said. His new title, acting head (which is how their statement referred to him), is perhaps a subtle clue that the company did not plan these moves far in advance. And it’s the phrasing that’s used to describe the departure of these executives that’s worth raising an eyebrow. A leave of absence? A curious fate indeed.
In an exclusive interview deBanked conducted with DeMeo last year, he said of CAN at the time, “it’s a self-sustaining business. We’re not forced to approach the capital market to cover our burn rate. We’re cash-flow positive.”
But more recently, there’s a different tone. A spokesperson for CAN said that the company had “self-identified that some assets were not performing as expected and that there was a need for process improvements in collections.” The sudden decapitation of the company’s top officers seems a harsh consequence for this apparent underperformance, especially given that CAN has long been on the short-list as a potential IPO candidate. DeMeo himself had been with the company since 2010, having started originally as the CFO and rising to the CEO position in 2013.
While CAN Capital is a private company, they are notable in that they have originated more than $6 billion in funding to small businesses since 1998 and secured a $650 million credit facility led by Wells Fargo just last year.
Some of CAN’s ISOs report being told that originations have been put on hold until January. A source with close knowledge of the company however, said that’s not correct. The Financial Times reported though that CAN had paused new business until the end of the year and would only be servicing current customers. And they might indeed need time to upgrade their systems since American Banker cited an unnamed source that said “problems arose when CAN Capital used old systems, which were not designed to require daily repayments, to collect money owed by term loan borrowers.”
Some outsiders are not surprised by what’s going. Alex Gemici, the chief revenue officer of World Business Lenders (WBL), said that it’s an indicator that uncollateralized lending is not the panacea everyone thought it was. “What we’ve been saying all along is right there on deBanked,” Gemici said, while directing me to the prediction they made a year ago that appears right on this website. At a December 2015 event at the Waldorf Astoria, WBL CEO Doug Naidus told a crowd comprised mostly of his company’s employees that he believed the bubble was about to burst. He doubled down on that prophecy in an interview four months ago in which he chided companies for having forsaken sound underwriting.
Is he right? In the last six months, the CEOs of Lending Club, Prosper and CAN Capital have all stepped down. Avant shed a lot of its staff. Dealstruck, Circleback Lending and Windset Capital have stopped funding. Confidence in the business side of alternative finance has also started to slip on a measurable basis before the election even happened.
“I believe companies are experiencing higher than normal losses due to a serious lack of proper underwriting practices, policies, and procedures,” said Andrew Hernandez, a managing partner at Central Diligence Group, a company that specializes in risk analysis who wasn’t commenting about any lender specifically. “As I say to people not familiar with the space, ‘putting the money out is the easy side of the business; getting it back is what proves to be the most difficult.'”
But CAN has not specifically fingered underwriting practices as the reason for their management shakeup, instead leaning towards it being a lapse in their process as the company grew. “It became clear that our business has grown and evolved faster than some of our internal processes,” they said in their statement.
The only alternative business lender funding more annually is OnDeck, a company that has garnered its fair share of criticism over its lackluster financial performance. Their stock is currently down a whopping 77% from the IPO price, but they have put on a good face for the industry they lead. The familiarity of their famous CEO and the decade in business under their belt arguably even has a calming effect on the tumultuous world of financial technology startups.
OnDeck too though, has been referenced in the context of bursting bubbles. Less than two years ago, RapidAdvance chairman Jeremy Brown voiced concern that the industry was heading into unsustainable territory, even going so far as to call out OnDeck by name. “When I see some of the business practices, offers, terms and other aspects of our business today, I am worried,” he wrote. “I am worried because I believe that 2008 has been too quickly forgotten, and very few, other than those of us that were on the front lines on the funding side at that time, appreciate what happened to outstanding portfolios at that time when average duration was 6 months and no deals were written over 8 months.”
For risk experts like Hernandez of Central Diligence Group, he thinks the newness of everything has been part of the problem. “I believe [funding companies] have faced a big hurdle in acquiring talent,” he said while adding that funding companies can be forced to hire underwriters with no prior knowledge of the product just to keep up with the growth.
While still very little is known about what exactly happened at CAN Capital, most people that deBanked spoke with were shocked that anything could happen there at all. “It’s insane,” said the chief executive of another competitor who wished to remain anonymous. “This is CAN we’re talking about.”
A sign of the times?
It’s Here: Artificial Intelligence Changes MCA Broker’s Business, Improves Bank Underwriting and Debt Collection
November 22, 2016In this age of man versus the machine, the case for artificial intelligence and machine learning does not need many vociferous advocates.
Some predict that revenues from fintech startups using AI and predictive models is set to jump by 960 percent or to $17 billion by 2021. We might be closer to that number than we think, considering 140+ AI startups raised a total of $958M in funding in Q3’16, alone.
While healthcare, cybersecurity and advertising are frontiers of AI innovation, the growth and momentum of big data in finance (spurred by online lending) is fast bringing fintech to the forefront. In lending, specifically, data has become the new currency. It’s not so much that lenders didn’t use data for decision making earlier, but the data available then, wasn’t as rich or as extensive. A loan approval decision that just required a decent FICO score and assessment of character has expanded to include data points like a business’ social media presence, reviews, and owners’ background history.
Today, artificial intelligence in fintech has grown to tackle cybersecurity threats, act as a personal assistant, track credit scores and perform sentiment analysis to predict risk — making automated underwriting just the tip of the iceberg for what artificial intelligence and machine learning can do for the financial services industry. deBanked spoke to three fintech upstarts that have taken AI beyond underwriting.
AI Assist
When Roman Vinfield started his ISO, Assure Funding in early 2015 with 16 openers, five chasers and three closers, little did he know that a business intelligence software would replace 85 percent of his staff for the same productivity. He stumbled onto Conversica, a AI-powered virtual sales assistant and was convinced to give it a try.
“I hadn’t heard anything like an artificial-intelligence sales assistant,” said Vinfield. “The results we got within a month of using it were unbelievable.” Within the first month, Vinfield made $35,000 in revenues by spending just $4,000 and eventually reduced his staff of 24 to 4 people. He was so sold on its potential for the merchant cash advance industry that after prolonged negotiations, he secured the rights to be the exclusive reseller of the software, and called it AI Assist. The software is now used by leading MCA companies like Yellowstone, Bizbloom and GRP Funding.
While Conversica’s clientele includes auto and tech giants like Oracle, Fiat, Chrysler and IBM, for the financial services industry, it’s marketed and sold to MCA and lending companies through AI Assist. It integrates easily with CRM software like Salesforce and creates a virtual sales assistant avatar that tracks old leads and reestablishes engagement. In the lead generation race, where a 3-5 percent response rate could be considered good, the response rate for Conversica has been 38 percent.
Designed to be akin to a human sales assistant, Conversica’s technology can determine a lead’s interest based on the response and set up a conversation with the sales department to follow up. “Your Conversica virtual assistant is an extremely consistent, personable and tireless worker. She doesn’t get sick and never needs a break. She never gets discouraged, and she improves with each engagement,” says the AI Assist website.
True Accord
Personal chat assistants for money management and sales is one of the popular modes of AI implementation in fintech, given it’s scalability in lending for functions like debt collection. One company that does this, is True Accord. True Accord, similar to AI Assist uses automation software to schedule and send messages to customers by the company’s “Automated Staff”
The San Francisco-based company was founded by Ohad Samet who has over 11 years of machine learning experience in finance. The idea came to Samet while he was working as a chief risk officer at payments and e-commerce company Klarna, underwriting loans worth $2 billion. “While working at Klarna, I realized how big a piece debt collection is and I did not like the way it was done,” said Samet. “I needed machine learning to change it.”
Samet founded True Accord in 2013 to develop a debt collection AI assistant and today the company works with leading banks, credit card companies and food delivery services and has collected over half a billion dollars. It establishes targeted communication with the customer less frequently than traditional collection agencies and allows customers to pay their dues over mobile, which accounts for 35 percent of collections for the company.
“We humans don’t want to accept it but the reality is that, when it comes to scale, machines make better decisions than humans,” said Samet. “Machines are consistent, they are not tired, not angry, don’t fight with the significant other and all of this makes for better accuracy, better cost structure and better returns of scale.” While this might be true, building an efficient, compatible and compliant model is harder than it might seem.
James.Finance
Since AI tools do not come in a one-size-fits-all package, its application can be as varied as the range of companies that use it. Building an AI framework that aligns with a company’s targets while being compliant to regulatory mandates can be an uphill task.
Recognizing this opportunity, James.Finance, a Portugal-based startup is using artificial intelligence to help financial institutions like banks build their own credit scoring models. Founder and CEO Pedro Fonseca, describes James as a “narrow AI” for a specific purpose of guiding risk officers to build machine learning models that follow regulatory compliance.
The startup works with consulting agencies or partners to reach out to banks. It offers a trial run of the software, which it calls a ‘jumpstart,’ where a risk officer is provided with James’ technology and in 24 hours, he or she will have to beat it with their in-house AI software.
“And we are consistently able to beat the models,” said Fonseca. The company won the startup pitch at Money 20/20 in Copenhagen earlier this year after receiving an uproarious response in Europe. Fonseca wants to divert his attention to the US’s fragmented banking market, which is dotted with smaller banks and credit unions. “The US is a perfect target for us. We are looking to work with local consultancies that know the problems of a bank intimately.”
As these entrepreneurs vouch for it, the current state of AI use in fintech is just the tip of the iceberg. And anything man can do, machines can do faster and better, right?
