Industry News
OnDeck Reports Q1 Net Loss of $59M, Suspends Non-PPP Lending Activities
April 30, 2020O
nDeck has suspended the funding of its Core loans and lines of credit to new or existing customers (unless the loan agreement has already been executed).
The company has also suspended its pursuit of a bank charter. The company has instituted a 15% pay reduction for its full-time employees, a 60% pay reduction for part-time employees, and furloughed additional employees that will receive benefits but no salary. OnDeck CEO Noah Breslow and members of the Board took a 30% pay reduction.
The company said that PPP funding has not really reached real small businesses like the ones they serve and as such only a handful of their customers have received PPP funds. While OnDeck is approved to operate as a PPP lender themselves, they have been acting as an agent of them in the interim and will dedicated their resources almost entirely to this endeavor. The company anticipates that originations of its own products could contract by 80% or more in Q2.
The company has not tripped any covenants or triggers with its own lenders as of yet but is currently in discussions with them on a path forward in this environment.
OnDeck reported a Q1 net loss of $59M on Thursday morning. The first quarter loss was driven by an increase in the Allowance for credit losses to reflect the increase in expected credit losses related to the COVID-19 pandemic. Provision for credit losses was $107.9 million. The Allowance for credit losses increased to $206 million at March 31, 2020, up $55 million or 36.1% from year-end and $58 million or 39.5% from a year ago. The 15+ Day Delinquency Ratio increased to 10.3% from 9.0% the prior quarter and 8.7% a year-ago reflecting a broad-based decline in portfolio collections since mid-March.
Noah Breslow, chief executive officer, is quoted in the announcement:
“In the span of several weeks, the spread of COVID-19 led to government-mandated lockdowns for small businesses both in the US and globally, placing our customers under unprecedented economic stress.After a successful and rapid transition to remote work, we effected immediate changes to our business to preserve liquidity, support our customer base, manage our loan portfolio and reduce costs. With an uncertain timetable for the reopening of the economy, and the effectiveness of government stimulus for small businesses unclear, we will be reducing debt balances in the second quarter and focusing on managing our portfolio, delivering government stimulus to our customer base and ensuring the company has the runway to scale operations again when the economy reopens.”
The company fully utilized its initial $50 million share repurchase authorization in the first quarter of 2020. On February 10, 2020, the Board authorized the company to repurchase up to an additional $50 million of common shares, and the company has approximately $23 million of remaining capacity under that authorization. The company suspended share repurchases late February but maintains authorization to resume purchases at its sole discretion.
For 2020, OnDeck expects:
- Portfolio contraction reflecting an 80% or more reduction in second quarter origination volume
- Increased delinquency and charge-offs stemming from COVID-related economic deterioration
- Reduced Net Interest Margin reflecting a lower portfolio yield
- Reduced operating expenses, on pace to cut second quarter expenses by approximately 25%.
The company had been on a modestly positive trajectory as of year-end 2019.
The company’s stock had a somewhat minor rally on Wednesday, closing at $1.61. That’s still substantially down from where it stood on February 20th at $4.22. It hit a low of 66 cents on March 18th. The share price dropped by nearly 19% after earnings were released on Thursday morning.
This story will be updated as the information becomes available.
Fundry Donates $25,000 to Community FoodBank of New Jersey
April 29, 2020Jersey-City based Fundry made a $25,000 donation the Community FoodBank of New Jersey this week. CFBNJ is an organization that “fights hunger and poverty in New Jersey by assisting those in need and seeking long-term solutions.” In addition to the over 40 million Americans who struggle with hunger every day, an estimated 17.1 million more people will experience food insecurity during this crisis, the organization says on its website.
Thank you, @FundryC, for such a generous donation! Support like this is essential as we continue to meet the growing need. https://t.co/kLhDxn5orJ
— Comm. FoodBank of NJ (@CFBNJ) April 28, 2020
United Capital Source CEO Jared Weitz Appeared on Fox News
April 21, 2020This week, Jared Weitz, CEO of United Capital Source, appeared on Fox News to talk about the PPP, EIDL, and small business lending. Video below:
BFS Capital Hires Peter Ng as CRO
March 20, 2020
Last week BFS Capital announced that it has appointed Peter Ng as Chief Revenue Officer. Coming from BlackBerry, where he served as Senior Director of Global Alliances and Business Development, Ng will be responsible for leading all revenue-related functions as well as overseeing the development of partnerships.
“I’ve had the privilege of working with Peter over the past few years and have always been impressed with his unique ability to drive business growth through new, innovative and diverse channels,” CEO Mark Ruddock said. “BFS continues to develop our executive talent pool as we pursue our mission of reimagining small business financial services, and we are particularly thrilled to have him join our leadership team.”
At BlackBerry, Ng lead the company’s global Independent Software Vendor partnerships program. Here Ng oversaw the creation of new partnerships and revenue streams with the launch of BlackBerry’s ISV Affiliate program as well as the addition of over 120 partners in less than three years. Ng was also instrumental in starting up the BlackBerry World mobile app store. He joined BlackBerry after the Canadian multinational acquired Viigo, where Ng was Vice President of Sales and Services.
“I’m excited to accept the role as Chief Revenue Officer,” Ng said in a statement. “This will be the third opportunity I’ve had to work with Mark Ruddock, who is truly a transformational leader. Having built an app ecosystem from scratch, I see a similar opportunity to create one for the small business owner. I’m looking forward to bringing my extensive global partnership experience and passion for startups to BFS Capital to help grow and diversify sales channels. The BFS Capital platform, combined with a robust partner ecosystem, will unlock exciting new financial products and services for underserved small businesses and drive an unparalleled customer experience.”
OnDeck’s Chief Accounting Officer is Leaving The Company
March 16, 2020On March 9th, OnDeck filed a disclosure with the SEC that their Chief Accounting Officer, Nicholas Sinigaglia, would be leaving the company on May 1st. Sinigaglia was with the company for more than 5 years.
OnDeck said it was doing this as part of changes it had made to streamline its finance organization.
Shares of OnDeck have dropped by more than 50% since that time, likely wrought by the sudden economic disruption.
Funding Metrics Deal Puts Them On The Map
March 4, 2020
A new $100 million revolving credit facility is poised to give a big boost to small business funding provider Funding Metrics. The company operates the Lendini and QuickFix Capital brands, and this new credit facility comes as the company seeks to increase its base of more than 9,500 small businesses served so far.
“We now have the money to grow over all aspects of that spectrum,” President Jim Carnes said. Since 2014, the company has provided more than $500 million dollars of funding to small businesses in a variety of industries, including healthcare, real estate, construction, restaurants and others.
The $100 million worth of revolving credit comes from what the company called a “a multi-billion dollar institutional credit fund,” with Brean Capital serving as Funding Metrics’ exclusive financial advisor for the transaction. The new credit line as well as a newly developed website and streamlined funding process will allow for growth and fantastic customer service. Among the company’s main ideals is to provide funding request approvals or denials within three hours or less.
One of the main challenges for online small business funding and its related activities in 2020, said Funding Metrics co-founder David Frascella, is increasing awareness of all the offers and products out there, including from his company. “There are plenty of options in today’s market,” he said. Increasing that awareness, he added, is something the industry should come together to better address. “We look forward to additional submissions from the ISO network and funding the next wave of small business leaders nationwide,” he said.
Funding Metrics is also a platinum sponsor of Broker Fair 2020 on May 18th in New York City.
Lendio Plans Development and Growth With $55 Million Series E
February 27, 2020
Today Lendio announced that it raised $55 million as part of its series E funding round. This included $31 million in equity led by Mercato Partners Traverse Fund and a $24 million debt facility from Signature Bank.
“We think that we’re just getting started, that there’s a really large opportunity in front of us and we’re excited that this round will give us the fuel that we need to continue to grow,” Lendio CEO Brock Blake told deBanked in a call. “We have a few different reasons for pulling together the round, but primarily, it’s all around investing in organic growth through partnerships and different marketing channels.”
Asked where these funding rounds may continue in an F, G, and H, Blake was unsure, saying that “every time we raise a round we do it with the expectation that it will be the last round.”
The funds in part will be used to further develop Lendio’s integrated lenders services, which are a set of tools used to identify which loan product and lender are the best match for a business owner; as well as the expansion of Sunrise, the bookkeeping platform Lendio acquired in 2019.
Intuit Agrees to Buy Credit Karma For $7.1 Billion
February 26, 2020
This week the news broke that a deal had been reached between Credit Karma and Intuit that will see the latter purchase Credit Karma for $7.1 billion, paid for with cash and stock. After rumors of the deal leaked over the weekend, the agreement was confirmed on Monday by chief executives from both companies.
Under the deal, Credit Karma will continue to operate as a stand-alone business and its CEO, Kenneth Lin, will stay on and run the company. Beyond that, some believe that the merger will see Intuit rise as a go-to platform for financial services. Owning TurboTax as well as Mint, tools for filing taxes and budgeting, respectively, the addition of Credit Karma, which allows customers to view their credit score for free, would advance Intuit’s product suite as well as bolster the data it already has on users.
“There hasn’t been that much innovation in the financial services world in the past two decades,” Credit Karma Founder and CEO Kenneth Lin said. “The combination of the two companies will really be able to move consumers forward.”
Credit Karma claims to have 100 million customers, with half of all American millennials being included within that number. It also states that it has over 2,600 data points on each customer, including their social security number as well as loan history. The company makes its money by selling customer information to third parties who advertise new credit cards and loans on the Credit Karma site. Credit Karma also receives a couple of hundred dollars for each card and loan that is acquired through ads on its site. Being one of the few tech startups that actually turn a profit, Credit Karma claimed to have received $1 billion in revenue in 2019.
Speaking on the deal, Intuit’s CEO, Sasan Goodarzi, said that “This is very core to what we’ve declared around helping our customers make ends meet and make smart money decisions.”
