Industry News
Capify Secures Massive Credit Facility from Goldman Sachs
January 16, 2019
Capify, which serves the UK and Australia markets, announced this morning that it has secured a £75 million (roughly $95 million) credit facility from Goldman Sachs.
“This credit facility validates our company as a leader in the marketplace and underlines the strength of our business model to provide simple, affordable and smart financial options to UK and Australian small businesses,” Capify founder and CEO David Goldin said.
The achievement is notable for a company that is not venture capital or private equity based.
“Capify is one of the leading small business providers in the UK and Australia,” said Pankaj Soni, Executive Director at Goldman Sachs Private Capital. “We have been impressed with the management team, business model and innovative finance solutions for small businesses [and] we look forward to supporting their growth in the years ahead.”
Capify provides MCA deals and business loans to small business merchants. Goldin told deBanked that MCA deals make up about 75% of Capify’s business in the UK, with about 25% in business loans. The ratio in Australia is the inverse, he said.
Goldin entered the UK and Australian markets in 2008 and said that they have become hyper competitive over the last three to four years. He acknowledged that both markets are still far smaller than the U.S. though.
“You don’t see these big crazy origination volumes [that you do in the U.S.]…[for us,] it’s about building a profitable, growing company.”
According to Goldin, another difference between the U.S. market and the UK and Australian markets is that the latter has embraced self-regulation much faster than the U.S. For instance, in Australia, there have been recommendations from semi-governmental organizations on how funders should perform, including the publishing of APR in contracts for business loans.
“These markets have moved quicker for self-regulation in the last two or three years than the U.S. market has moved in 10 years.”
This may be a matter of other countries learning from the experiences of the U.S., he said.
Goldin said that in addition to scaling Capify, the money from the facility will also be used to launch partner/broker programs in the UK and Australia. So far, the majority of Capify’s leads come from internal direct marketing efforts.
Capify employs more than 120 people divided between two offices, one in Manchester, England and the other in Sydney, Australia.
Goldin integrated the U.S. operations of Capify to Strategic Funding (now Kapitus) in 2017.
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.
LendUp Gets a Shake-up
January 11, 2019
Among other company news, LendUp announced yesterday that it has formed a separate company called Mission Lane that will be devoted to scaling its credit card business. LendUp will continue to operate under its name and will focus on personal loans, education and savings opportunities, according to the announcement. Along with the division of LendUp, company co-founder and CEO Sasha Orloff is stepping down and is being replaced by Anu Shultes, the former General Manager of LendUp Loans.
“Both organizations are focused on helping get consumers on a path to better financial health,” Shultes said of LendUp and Mission Lane, “one will do this through offering loans, and the other through credit cards. I appreciate the Board’s confidence in me and am excited to lead this fantastic organization,” said Shultes.
According to the company announcement, Orloff, who co-founded the company with Jake Rosenberg, will remain involved in LendUp as a board member and in Mission Lane as an advisor. LendUp’s office is in Oakland, CA while the Mission Lane team is in San Francisco.
“Anu brings the perfect combination of background, skills and vision to her role as CEO,” said Orloff. “She’s an absolutely fearless leader, and she’s the right person to shepherd LendUp through its next stage.”
Shultes didn’t say if the company headcount has changed as a result of the creation of Mission Lane, but she said that they plan to grow both businesses. Former Chief Operating Officer of LendUp is interim CEO of Mission Lane, while the company looks for a permanent CEO.
Additionally, with the creation of the new company, LendUp announced that they had received an investment for an undisclosed amount that will be used to scale Mission Lane. The investment was led by LL Funds LLC and Invus Opportunities.
LendUp provides unsecured loans of up to $1,000 to subprime borrowers who might otherwise go to payday lenders. Last year, Orloff told deBanked that one’s credit score is based primarily on two factors: on-time repayment and access to credit that you don’t use.
“So we design our loans and our card products to help people make sure they’re paying on time and make sure that they’re only using the credit that they need.”
Orloff also said that LendUp places an emphasis on financial education and offers customers more money at lower rates if they take the company’s education courses.
Meet CAN Capital’s New CEO
January 8, 2019
CAN Capital announced this morning the appointment of Edward J. Siciliano as its new CEO.
“There is still a huge delta between the need for capital for small businesses and the capital that banks are willing to provide,” Siciliano said. “And this creates an enormous opportunity for CAN to expand its business.”
Siciliano comes to CAN Capital from the equipment finance and small business lending company Marlin Business Services, based in New Jersey. He worked there for a decade in several roles including Chief Operating Officer and Chief Sales Officer.
“Ed is a proven leader with deep industry knowledge and a strategist who is skilled at driving business growth,” said CAN Capital’s founder and Executive Chairman Gary Johnson. “Throughout his career, he has served the needs of small businesses while building loyal teams that deliver innovative products and a great customer experience.”
Siciliano is relocating from Princeton, NJ to live near CAN Capital’s headquarters in Kennesaw, GA, near Atlanta. In September 2018, the company announced that it would be moving its finance and executive functions to Kennesaw from New York City. A CAN Capital spokesperson at the time said that Parris Sanz, the former CEO, did not want to move to the Atlanta area for personal reasons. Now, Siciliano said that there is no longer a New York City office, but there is a roughly eight person finance team in White Plains, NY, that will eventually be moved to the Georgia headquarters.
“I really value the work that [Sanz] has done…and we’re going to stay the course out of the gate. However, I’ve been tasked with accelerating the business,” Siciliano said.
In this effort, Siciliano said he will continue to invest in technology, but will also focus on the small business customer rather than a specific product. Instead, Siciliano said that he would like to see CAN Capital expand its product offerings to serve more needs of small business customers.
He also said that he would like to expand the company’s referral partners beyond brokers to include other players such as manufacturers, attorneys and accountants.
For Siciliano, there are two key elements to focus on for any funding company. The first is credit, or underwriting.
“CAN is one of the very few fintechs that lived through 2008, the recession. You get information about your credit portfolio and your credit model in stressful times like that, that is invaluable…I feel like we have great credit models, which will constantly be enhanced and will always be a focus. Your credit model is the Achilles heel of any lending company.”
The other element that Siciliano focuses on is lowering customer acquisition costs. He said he wants to broaden product offerings to attract different and more partners who will, in turn, bring their small business customers to CAN Capital.
Currently, Siciliano said that the company originates $25-30 million a month and 95% of the business is providing working capital and business loans while the remaining 5% is merchant cash advance. CAN Capital works with brokers but also has an internal sales team. There are about 100 employees at the Kennesaw headquarters, including the company’s executive, marketing, and analytics teams. There is also a technology team of about 20 people located in Costa Rica and Siciliano said that the company works with business development people who work independently throughout the country.
Founded in 1998, CAN Capital has provided more than $7 billion to more than 81,000 small businesses.
Kornfelds Settle With SEC Over Woodbridge Ponzi Scheme
January 3, 2019Barry M. Kornfeld and Ferne Kornfeld, both fundraising agents for 1st Global Capital, have settled with the SEC for their role in Woodbridge Group of Companies LLC, a $1.2 billion ponzi scheme. Woodbridge was another Florida-based company that is unrelated to 1st Global Capital. As part of the settlement, the Kornfelds agreed to disgorge $3.69 million plus $690,497 in prejudgment interest on top of $650,000 in combined penalties. They also agreed to be permanently barred from selling securities.
Barry Kornfeld was already barred by the SEC for previous securities violations.
No wrongdoing has been alleged against the Kornfelds in the 1st Global Capital case thus far, but court records revealed that Barry Kornfeld raised $8 million from investors for the company. 1st Global Capital is currently in bankruptcy and was charged with securities fraud by the SEC.
deBanked’s Most Popular Stories of 2018
December 22, 2018
Five of the top 10 most read stories of 2018 were related to the saga of 1st Global Capital; The bankruptcy, SEC charges, the revelation that they had made a $40 million merchant cash advance, and finally the devastating news of that deal falling apart. We decided to lump all of them together in our #1 slot, but first, the following story was the most independently read of 2018:
The Saga of 1st Global Capital
1. Largest MCA Deal in History Suffers Multiple Closures was picked up by ABC News in California, placing deBanked’s website on TV for the first time.
These were the other most read stories related to 1st Global Capital
- 1 Global Capital Files Chapter 11
- Syndication at Heart of SEC and Criminal Investigation into 1st Global Capital
- 1st Global Capital Charged With Fraud by SEC
- The Largest Merchant Cash Advance in History
Bloomberg Businessweek began publishing a series in November about the allegedly scandalous merchant cash advance industry. An initial review by deBanked uncovered questionable holes in their reporting, but when the series’ senior editor thanked a state senator for proposing legislation in response, suspicious ties were uncovered, followed by one Bloomberg reporter wiping his twitter account clean. Bloomberg’s exaggerated series dubbed #signhereloseeverything has spawned a highly popular counterseries that has challenged Bloomberg’s reporting. We call it #tweetherewipeeverything. The following stories were all in the year’s top 12 most read, but we’ve lumped them together here at #2.
The Bloomberg Blitz
2. Multimillionaire CEO Claims Predatory Lenders are Causing Him to Sell His Furniture for Food
The other two were:
Arrested for Data Theft
3. CAUGHT: Backdoored Deals Leads to Handcuffs was the year’s third most read story.
MCAs are Not Usurious
4. It’s Settled: Merchant Cash Advances Not Usurious came in at #4 this year, ending the debate that has persisted in hundreds of cases at the trial court level in New York State.
In October 2016, the plaintiffs sued defendant Pearl in the New York Supreme Court alleging that the Confession of Judgment filed against them should be vacated because the underlying agreement was criminally usurious. As support, plaintiffs argued that the interest rate of the transaction was 43%, far above New York State’s legal limit of 25%. The defendant denied it and moved to dismiss, wherein the judge concurred that the documentary evidence utterly refuted plaintiffs’ allegations. Plaintiffs appealed and lost, wherein The Appellate Division of The First Department published their unanimous decision that the underlying Purchase And Sale of Future Receivables agreement between the parties was not usurious.
Debt Settlement Company Sued
5. ISOs Alleged to Be Partners in Debt Settlement “Scam” in Explosive Lawsuit was #5 in 2018. The lawsuit ultimately settled and resulted in a big payout to the MCA companies.
A Broker’s Bio
6. The Broker: How Zach Ramirez Makes Deals Happen was #6. deBanked interviewed Zachary Ramirez to find out what makes a successful broker like him tick, how he does it, and what kinds of things he’s encountered along the way.
Ban COJs?
7. Senate Bill Introduced to Ban Confession of Judgments Nationwide was #7. Although this is related to the Bloomberg Blitz, the introduction of this bill fits more neatly into a category of its own.
Who’s Funding How Much?
8. A Preliminary Small Business Financing Leaderboard was #8. Despite this being published early in the year and offering detailed origination volumes for several companies all in one place, it wasn’t as well-read as all the drama that unfolded later in the year. Unsurprisingly, a chart of The Top 2018 Small Business Funders by Revenue ranked right behind this one, but we’ve lumped it in with #8 since it’s related.
Thoughts by Ron
9. Ron Suber: ‘This Industry Will Look Very Different One Year From Now’ was #9. Known as the Magic Johnson of fintech, the 1-year prediction by former Prosper Marketplace president Ron Suber, originally captured in the LendAcademy Podcast, resonated all throughout the fintech world. Will he be proven correct?
A Rags to Riches Tale
10. How A New Hampshire Teen Launched A Lending Company And Climbed Into The Inc. 500 was #10.
Josh Feinberg was not a complete newbie when he started in the lending business in 2009, but he also had a long way to go to find success. His dad had been in the business for 15 years and shortly after graduating high school, Josh started to work in equipment financing and leasing at Direct Capital in New Hampshire, his home state. He then had a brief stint working remotely for Balboa Capital, but he wasn’t sure that finance was for him.
He was 19, with a three year old daughter, and he took a low paying job working at a New Hampshire pawn shop owned by his brother and a guy named Will Murphy.
“I was making $267 a week at the pawn shop and I was having to ask friends to help me pay my rent for a room,” Feinberg said. “So at that point, I realized that something needed to change.”
For Sale: 60,000+ Leads From 1st Global Capital
December 21, 2018
Since 1st Global Capital went out of business, the company’s treasure trove of leads has been up for sale. Beginning in October, 41 companies were propositioned by 1st Global Capital’s bankruptcy advisors to make a bid on the company’s data. Ten companies actually entered into non-disclosure agreements to access a data room. That led to four official proposals which was narrowed down to two formal negotiations and ultimately the selection of one final stalking horse bidder.
In Advance Capital’s high bid came in at $105,000 for data that includes 57,000 non-funded applications and 4,760 funded applications. That dollar figure is actually an upfront fee against future commissions because the arrangement requires the buyer to pay 1st Global Capital a commission for every merchant on the list that they end up funding in-house or elsewhere. The total purchase price therefore is likely to exceed $105,000 over time. The buyer is not permitted to stack any merchant on the list.
As the stalking horse, In Advance’s bid will be honored unless new companies outbid them between now and January 7. If two or more qualified bids are received, a formal auction will take place on January 8. A hearing on the outcome will take place on January 9.
