Industry News
Entegra Bank Chooses Velocity Solutions to Power Its Small Business Digital Lending
December 18, 2018
Velocity Solutions announced today that its Akouba digital lending platform was selected by Entegra Bank to power the bank’s digital lending for its small and medium-sized business customers. Akouba provides community and regional banks with origination and underwriting services.
“We selected Akouba not only for their cutting-edge technology and willingness to work with us, but for the very positive impact we believe this will have on the bank’s bottom line and on the customer experience,” said Charles Umberger, Executive VP and Chief Lending Officer for the Franklin, NC-based Entegra Bank.
According to the Velocity Solutions statement, Akouba is the only small business digital lending solution endorsed by the American Bankers Association (ABA). Akouba was endorsed by the ABA back in February 2017.
“The ABA’s endorsement will give lending institutions the assurance that Akouba’s solutions meet the highest standards,” said CEO of Akouba Chris Rentner, when they received the endorsement from the ABA. “In a rapidly changing lending environment, and with marketplace lenders disrupting the business lending space, our platform will help banks bring their customers the technology they have been lacking.”
In the same way that OnDeck’s ODX is trying to improve online lending for large banks, like Chase and PNC, Velocity’s Akouba does the same thing for regional banks.
“The small business loan application process is very time-sensitive and costly for banks, and there is a need to simplify and accelerate the process,” said Bryan Luke, chairman of ABA’s Endorsed Solutions Banker Advisory Council.
Velocity Solutions, which operates Akouba, is based in Fort Lauderdale, FL and employs over 100 people, according to Crunchbase. Entegra provides personal and business banking serves at 20 retail branches throughout Georgia, North Carolina and South Carolina.
1st Global Capital Sues Capital Stack and Others Over Momentum Auto Group
December 18, 2018
The notorious $40 million merchant cash advance deal has a new twist, even more cash advances. On Friday, the now-bankrupt 1st Global Capital filed a lawsuit against Momentum Auto Group, related entities, and 4 merchant cash advance companies including Capital Stack.
According to documents filed in the case, Momentum Auto was behind on taxes and loans to floor plan lenders to the tune of $15.5 million in February this year. That’s in addition to their inability at the time to pay 1st Global Capital and other MCA funders millions of dollars in advanced funds.
To fix the problem, 1st Global Capital established themselves as the senior creditor in which they required rival funders to enter into Subordination And Standstill agreements. In return for 1st Global Capital keeping Momentum Auto solvent with additional funds, the subordinate funders were only permitted to collect a fraction of their originally-stipulated daily payments (and only if Momentum Auto had adequate liquidity and cash flow, otherwise they were not allowed to collect anything at all until 1st Global had been paid in full). In the case of Capital Stack, it was agreed they could only debit 20% of what they were normally entitled to. For others it was 10%.
1st Global Capital says both restrictions were violated, that the funders collected above their agreed percentage and that they also collected from Momentum Auto despite the business not having adequate liquidity and cash flow. As relief, 1st Global Capital is seeking that each MCA funder return all funds they collected from Momentum Auto Group to 1st Global Capital.
Momentum Auto Group is a conglomerate of car dealerships in California that shut their doors in November. Soon after, lawsuits flew, and in one case the judge has ordered the dealerships be placed into receivership.
1st Global Capital is itself in receivership, having filed bankruptcy in July this year. The company and its founder were also charged with fraud by the SEC after they allegedly relied on the sale of unregistered securities to more than 3,400 investors nationwide.
Business That Left Merchant Cash Advance Companies Hanging is Under FBI Investigation
December 16, 2018
In 2017, several judgments were issued in the New York Supreme Court against one Michael Willhoit, a resident and business owner in Springfield, Missouri. No lawsuits were filed, Willhoit had merely confessed judgment to nearly a half million dollars collectively.
By the following summer, a visitor would come knocking on the door of Willhoit’s fully-customized multimillion dollar safari-themed home, dubbed “The African Queen.” It was the FBI. He was under investigation for bank fraud.
According to the Springfield News-Leader, Willhoit’s wife told an investigator that her husband’s exotic car business was gone. But if so, several banks want to know where $4.25 million in unpaid loans went and what happened to the 33 vehicles that Willhoit had given them paperwork for. The banks, who sparked the FBI investigation, sued, and by November Willhoit’s wife filed for bankruptcy. Among her listed possessions were
- Two roaring lion masks
- Two 7-foot tall hand-carved wooden tusks
- An eight-legged genuine impala horn zebra-hide chair
- A 15-foot African warrior statue
- A 3,000-pound (approximately) bronze rhino
- Four gazelle taxidermy mounts
- A baboon, full-body mount
A youtube video tour of the home shows even more exotic paraphernalia. Realtor.com described the residence, which went on the market in July for $8.9 million, as a trophy showcase of African art. Willhoit told a News-Leader reporter in 2016 that he spent $3 million renovating the property including $400,000 for a 900-square-foot wood floor and $300,000 for landscaping.
More recently, News-Leader reported that Willhoit is the target of a federal grand jury investigation. In one of the bank lawsuits filed against him, Willhoit’s defense is reportedly that it’s the bank’s fault.
Cross River Bank Raises $100 Million
December 11, 2018Cross River Bank, which provides banking services to fintech companies, announced last week the completion of a funding round of roughly $100 million. This was comprised of a $75 million equity investment from KKR, along with capital from Andreessen Horowitz, Battery Ventures, Rabbit Capital, and funding from new investors CredEase and Lion Tree. This adds to a $28 million raise a little over two years ago.
Cross River, which originated more than $5 billion in loans as of the end of August 2018, has developed partnerships with fintech leaders to build fully compliant and integrated products within the lending marketplace and payment processing spaces. They have about 15 lending platform partners, including fintech clients Affirm, Best Egg, RocketLoans, Coinbase and TransferWise.
According to the announcement, this new capital will be used to allow Cross River to continue building a complete banking platform where fintech companies can leverage best-in-class banking technology coupled with compliance.
“Cross River offers solutions to fintech companies by giving them access to a full suite of banking solutions and services in a single, fully compliant and innovative platform, making it an increasingly attractive and valuable franchise in a dynamic marketplace,” said Dan Pietrzak, Member and Co-Head of Private Credit at KKR, Cross River’s leading investor.
According to its website, Cross River was named “most innovative bank” by LendIt in 2017 and 2018. Founded in 2008, the Fort Lee, NJ, business-oriented bank has more than 180 employees.
Finitive Appoints Neil Wolfson to Board
December 10, 2018
Finitive announced today that it has appointed Neil Wolfson to its Board of Directors. Wolfson also serves on the Board of Directors at OnDeck.
“Finitive has established an innovative platform to provide institutional investors with direct access to alternative lending investments,” said Wolfson. “Finitive’s platform brings further transparency to this asset class.”
According to an April 2018 deBanked story, Finitive was founded in August 2017 and has two kinds of clients: institutional investors and alternative lending companies. Back in April, the company had only four alternative lender clients. Today, they have eight.
“We are very selective [with our lending clients],” Finitive founder and Executive Chairman told deBanked. “We are not a list service.”
Wolfson spent the last decade as President and Chief Investment Officer of SF Capital Group, a private investment group for high net worth families. There, he invested in over 30 direct debt and equity investments in emerging technology companies with a focus on FinTech companies.
Prior to this, Wolfson spent five years as Chief Investment Officer and President of Wilmington Trust Investment Management, a $40 billion investment management firm, and before that, he was the National Partner in charge of KPMG’s Investment Consulting Practice, representing over $100 billion of assets.
“Neil’s experience investing in global technology companies, coupled with a deep understanding of alternative lending markets, makes him an ideal fit for Finitive’s board,” said Barlow.
Finitive is based in New York and has more than 10 employees.
OnDeck Expands Canadian Business with Merger
December 5, 2018
OnDeck announced today that it has entered into an agreement to merge its Toronto-based Canadian business with Evolocity Financial Group (Evolocity), an online small business funder headquartered in Montreal. OnDeck will have majority ownership of Evolocity and the combined entity will be rebranded as OnDeck Canada.
“The combination of OnDeck’s Canadian operations with Evolocity will create a leading online platform for small business financing throughout Canada and represents a significant investment in the Canadian market,” said Noah Breslow, Chairman and CEO of OnDeck. “There is an enormous need among underserved Canadian small businesses to access capital quickly and easily online.“
According to the announcement, “the transaction will combine the direct sales, operations, and local underwriting expertise of the Evolocity team with the marketing and business development capabilities of the OnDeck team.”
As part of the merger, Neil Wechsler, who is the CEO of Evolocity, will become the CEO of OnDeck Canada. And the management team will include Evolocity co-founders David Souaid as Chief Revenue Officer and Harley Greenspoon as Chief Operating Officer. OnDeck Canada will be governed by a Board of Directors chaired by Breslow and composed of existing OnDeck and Evolocity management.
Currently, OnDeck offers a variety of loans up to $500,000 and lines of credit up to $100,000. Evolocity offers small business loans and an MCA product, from $10,000 to $300,000. deBanked inquired with OnDeck to see if OnDeck Canada will retain the MCA product from Evolocity, but has yet to hear back. Since OnDeck entered the Canadian market in 2014, it has originated over CAD $200 million in online small business loans there. Evolocity has provided over CAD $240 million of financing to Canadian small businesses since 2010.
Investment in online small business lending in Canada is growing. IOU Financial, a Montreal-based small business funder that primarily funds American small businesses, told deBanked last month that they made a concerted marketing effort in the third quarter to reach Canadian small business owners. Meanwhile, Thinking Capital, a Canadian online small business funder, announced in July the launch of BillMarket, a service that provides Canadian small businesses with a credit grade (A through E), making it easier for them to get funded.
“BillMarket represents a cash flow revolution for the Canadian small business market,” said Jeff Mitelman, CEO of Thinking Capital, which has roughly 200 employees between its Toronto and Montreal offices.
According to a recent Canadian government report cited by OnDeck in its announcement today, there are 1.14 million small businesses in Canada that represent 97.9 percent of all businesses in the country. Also, small businesses employed over 8.2 million people in Canada, or 70.5 percent of the total private workforce.
Evan Marmott, founder of Canadian small business funder, Canacap, told deBanked earlier this year that unlike the saturated small business market in the U.S., the Canadian small business market is still ripe for growth. Not only this, he said that while the market is smaller in Canada, the default rates are generally lower and he found that Canadian merchants do less shopping around. He also said he has seen less fraud in Canada than in the U.S.
“For brokers, while commissions are lower, you could actually speak to business owners who are not being bombarded with calls [as they are in the U.S.] and have a much higher closing rate,” Marmott said.
Evolocity has 70 full-time employees and offices in Montreal, Vancouver and Marham, in the Toronto area. OnDeck has funded over $10 billion to small businesses and became a public company (NYSE: ONDK) in 2014. OnDeck is headquartered in New York.
“We are excited to join forces with OnDeck…to enhance our best in class digital financing solutions to small businesses across Canada,” said Wechsler, Evolocity CEO. “Additionally, this transaction will augment our data science and analytics capabilities to help deliver an unparalleled merchant experience.”
What We Learned About Credibly From Credibly’s Securitization
November 29, 2018Today, Credibly CEO Ryan Rosett told deBanked that the company’s October securitization will be used, in part, to roll out its new Market Expansion Product (MXP), which will allow Credibly to service merchants with FICO scores as low as 500 and those that have been in business for less time.
“We believe the MXP will open up the funnel by allowing us to serve business owners that we previously couldn’t,” Rosett said.
Kroll Bond Rating Agency assigned preliminary ratings to three classes of notes as part of Credibly’s first securitization. Rosett said this securitization follows a large warehouse line of credit from SunTrust Bank which is also the primary underwriter, of the securitization.
In addition to the new MXP product, Rosett said that Credibly intends to launch a line of credit product in 2019. Currently, Credibly provides merchant cash advances up to $150,000, business expansion loans up to $250,000, with terms up to 24 months, and working capital loans up to $250,000 with terms up to 17 months. Rosett said that the company’s working capital loan is its most popular product.
In an interview yesterday with Benzinga, Rosett said that he has seen a strong increase in demand for Credibly’s products and that they are currently evaluating over 10,000 applications per month.
2017 net revenue before provisions: $33 million
2017 earnings: $1.4 million
Total shareholder equity: $18.7 million
Lifetime funding volume: $700+ million
Raw # of fundings: 17,000+
Majority owned by: Flexpoint Ford
# of employees: 140
Notable deal: Acquired the rights to service BizFi’s $250 million MCA portfolio in August 2017
Provides: Small business loans (in 37 states and D.C.) and merchant cash advances
Founded: 2010 by co-CEOs Edan King and Ryan Rosett
Generates deals via: Brokers and inside sales
BFS Capital Announces New CEO
November 28, 2018
BFS Capital announced today that it has appointed Mark Ruddock as CEO, effective immediately. Co-founder Marc Glazer, who has served as interim CEO since the departure of Michael Marrache earlier this year, will be Chairman.
“I sense there is tremendous potential in this firm,” Ruddock told deBanked. “It has in its DNA an innate understanding of the needs of small business and I think the opportunity for it is to leverage significant increases in data science and technology to help scale and deliver on this potential.”
Most recently, Ruddock served as interim CEO for nearly two years at 4finance, one of the largest European consumer focused online lenders, with more than 3,000 employees and customers across 17 countries. Ruddock said that at 4finance, every day they would issue more than 16,500 loans and make about 22,500 risk decisions. And the entire process was automated.
“There is an opportunity to achieve real scale [in small business lending] through the use of leading edge technology,” Ruddock said, and that is what he intends to do at BFS Capital. Ruddock is relocating to Florida from Berlin, Germany.
Glazer will remain a key part of the operations at BFS Capital.
“One of the biggest assets this company has is Marc Glazer,” Ruddock said. “The two of us see this very much as a joint endeavor moving forward…and I’m going to hold him to remaining actively involved here.”
Their offices are right beside each other, Ruddock said.
“[Ruddock] has an outstanding track record of transforming financial services and technology companies by accelerating their innovation and business growth,” Glazer said. “His diversity of experience, from founder to growth stage executive, across a wide variety of industries and geographies makes him an exceptional choice for BFS Capital at such a pivotal stage in our evolution.”
Ruddock was the founder and CEO of INEA Corporation, an enterprise software firm focused on the financial services industry that was acquired in 2005. Following INEA, he became CEO of mobile software company Viigo, whose flagship app became one of BlackBerry’s most downloaded apps of all time by the time the company was acquired by RIM (Blackberry) in 2010. He held a number of other positions before becoming interim CEO at 4finance in 2017.
Headquartered in Coral Springs, FL, BFS Capital funds American and Canadian small businesses with merchant cash advances and business loans. Through its affiliate, Boost Capital, the company also provides funding to small businesses in the UK. Since 2002, BFS Capital has funded more than $1.9 billion. The company also has offices in New York, California and the UK.
