Industry News
Elevate Funding Strengthens Compliance and Monitor Abilities
November 21, 2018Yesterday, Elevate Funding announced that it would be using the PerformLine Platform to enhance its compliance and email monitoring abilities.
“Terminology is very important in this industry,” said Elevate Funding CEO Heather Francis.
Francis said that much of Elevate’s decision to use PerformLine is to make sure that the correct terms are being used so that the company is consistent in how it presents its MCA product, both to merchants and to referral partners.
“We’ve always been very in tuned to our image, both with our referral partners and with our merchants, and we like to make sure it’s a consistent image,” Francis said.
Together with PerformLine, Elevate Funding created a list of 500 problematic words or phrases. If these terms are used in an email – written by an Elevate Funding employee, a merchant or a referral partner – the email will get flagged and brought to the attention of Francis. Some red flag key terms include “loan,” “term,” “payback” and “free.” Regardless of who wrote the word, the Elevate Funding employee will be asked to send a clarifying follow-up email.
For example, Francis said that if a merchant sends an email that reads “What is my loan balance?” this email would be flagged and the company employee would respond, clarifying that the MCA deal is not a loan. In addition to being clear with customers and referral partners, the PerformLine service is beneficial for compliance reasons.
“In today’s regulatory environment, Elevate must stay on top of its compliance procedures not only to satisfy industry requirements but to ensure the security of sensitive data,” Francis said. “This includes all levels of interactions with our referral partners and the small business owners we service. PerformLine has provided the opportunity to review this information with speed and accuracy, so our compliance team can address any issues as they occur.”
Other funders, like GreenBox Capital, have employed monitoring capabilities not just to protect themselves from legal liability, but to protect merchant data.
Based in Gainesville, FL, Elevate Funding employs about 20 people.
Bankers Healthcare Group Expands Beyond Healthcare
November 20, 2018Bankers Healthcare Group (BHG), which provides financing solutions to healthcare professionals, announced at the end of last week that it is expanding into small business lending with a new license to offer SBA loans through its wholly-owned subsidiary, FundEx Solutions Group. Fundex is now one of only 14 non-bank lenders in the country that offers an SBA 7(a) Loan Guarantee Program, according to the company.
“We’re thrilled to announce that we’ve earned licensure as a non-bank SBA lender,” said Mark Schmidt, CEO of FundEx. “Not only is this a great opportunity for the BHG brand to grow, but it’s a terrific new option for customers who may require loan amounts or terms that are not available through BHG in order to accomplish their business goals.”
BHG, through FundEx, will now be able to provide SBA-backed loans to licensed professions in a variety of sectors including accounting, architecture, law, engineering, financial services and insurance. Loans will go up to $5 million, with terms of up to 25 years. And the loans may be used for a number of different purposes, including real estate acquisition, renovation or expansion, purchase of equipment, business acquisition or commercial debt consolidation.
“There’s market demand for larger loans and we’re excited to offer another innovative lending solution to help licensed professionals grow their own businesses,” said Al Crawford, the original founder, Chairman and CEO of BHC. “We built FundEx Solutions Group based on our tenured success in medical financing to be flexible and fast with excellent customer service.”
Founded in 2001, BHG, based in Syracuse, New York, has provided more than $3.5 billion in funding to to over 110,000 healthcare professionals.
Happy Thanksgiving
November 19, 2018
Dan DeMeo is Back in Action… at Lendr
November 15, 2018
Daniel DeMeo has been hired as Chief Revenue Officer by the Chicago-based funder, Lendr.
DeMeo has been working as an independent consultant for the last two years, according to LinkedIn. Prior to that he was the CEO of CAN Capital, a company he had dedicated himself to for nearly seven years until an internal account performance issue led to several senior executives taking an immediate leave of absence.
Under DeMeo, CAN enjoyed success as one of the nation’s largest non-bank small business financiers, partially attributed to the company’s major head start in pioneering merchant cash advance products when the company was founded in 1998. DeMeo even landed on the cover of deBanked’s November/December 2015 issue, around the time when the company was widely believed to be planning an IPO.
It never happened.
The systems issue that toppled CAN’s top execs including DeMeo, brought the company to its knees, putting all new funding on hold for six months until it was saved by a capital infusion from Varadero Capital in July 2017. CAN Capital survived while DeMeo has notably since then kept a low public profile.
Now he’s back in action at Lendr, an ambitious funding company that offers MCAs, small business loans, equipment financing, and just recently, factoring.
“Dan is a highly strategic and thoughtful leader with broad perspective of the industry that enables him to understand specific challenges we face as a growing company,” said Tim Roach, CEO of Lendr. “Dan’s experience is a perfect addition to the team as we accelerate our growth plans, raise Lendr’s brand recognition, and further increase our market share.”
“I’m thrilled to be joining such a dynamic and progressive company,” said DeMeo. “Lendr has emerged as one of the leaders in the financial solutions space and we are poised to build strategic partnerships and alliances with those who share the same zeal in helping small- and medium-sized businesses grow.”
Lendr is setting its sights high. “We’ll be north of $100 million in our first year of factoring,” Lendr co-founder and CEO Tim Roach told deBanked in September.
The company has also been showing off its technological and fundraising prowess as of late. This past March, they closed on a $25 million credit facility that’s expandable up to $50 million. That news was followed by the announcement of a new funding option made possible through virtual and physical debit cards.
Lendr has offices in Chicago and New York and employs over 45 people.
Prosper Tightens Credit and Introduces HELOCs
November 14, 2018
Today, Prosper announced its third quarter financial results, showing that originations were $640 million for the quarter, down from $822 million last year. And net loss was $19.8 million, an improvement of $7.2 million from the previous year. The lending platform also announced today that it will launch a new digital Home Equity Line of Credit (HELOC) product in 2019.
“As Prosper continues to focus on meeting investors’ return expectations, we have tightened credit and increased borrower rates this year in a rising interest rate environment,” said David Kimball, CEO of Prosper. “We have also focused our efforts and resources on expanding our business beyond personal loans with the development of a new home equity line of credit product.”
Prosper’s new HELOC product will be offered in conjunction with banks and the company is currently working with bank partners and welcoming new ones, according to a company spokesperson. She could not give the names of any of the bank partners, although she said that Prosper’s role will be to deliver cost estimates for the product in a matter of seconds, as opposed to weeks that it might take a bank to make a decision about eligibility and terms for a HELOC. As for the underwriting process, the bank will dictate the underwriting criteria and Prosper will execute on them.
“We are taking advantage of our expertise in consumer credit and personal loans to build a product that removes the complexity and time-consuming barriers in applying for a HELOC,” Kimball said. “For many of our customers, a HELOC could be a better choice for their financial needs and we’re thrilled to be working with our bank partners to render the traditional process obsolete with a new digital HELOC process that is simple, fast and painless.”
How will Prosper make money from these HELOCs? Prosper will charge the banks a fee for every deal that originates through Prosper’s platform, according to the company spokesperson. Founded in 2005 and based in San Francisco, Prosper makes personal loans from $2,000 to $40,000 to prime customers, with loan terms up to five years. At the Money 20/20 Conference in October, Kimball spoke about his openness and his approach to working with banks.
“You don’t go in the thinking [the bankers] are stupid,” Kimball said. “Assume that you have a really good partner.”
To date, over $13 billion in personal loans have been originated through the Prosper platform for debt consolidation and large purchases such as home improvement projects, medical expenses and special occasions.
Newtek Announces Growth in SBA Funding
November 8, 2018In its third quarter financial statements released yesterday, Newtek Small Business Finance, LLC (NSBF) announced that it had funded $122.4 million of SBA 7(a) loans during the three months ended September 30, 2018. This is an increase of about 18% year over year compared to $103.6 million in Q3 2017. The company forecasts full year 2018 SBA 7(a) loan funding of between $465 million and $485 million.
“We are extremely pleased to report yet another strong quarter, with double-digit year-over-year percentage growth,” said NSBF Chairman, President and CEO Barry Sloane.
Square Capital Loaned $405 Million in Q3
November 8, 2018
Square Capital originated more than 62,000 business loans for a total of $405M in Q3, up from $390M in the previous quarter, according to the company’s latest earnings report.
By contrast, OnDeck, a Square Capital competitor, reported loan originations of $648M for the quarter. Both companies find themselves facing new competition from a growing field of tech players like Shopify (who last quarter originated $76.4M in merchant cash advances).
Thanks to an early investment in Eventbrite, the online events company that went public in September, Square turned its regularly scheduled quarterly losses into a profit in Q3. On the company’s earnings call, Square CFO Sarah Friar said that the company would have had a $17 million loss if it weren’t for a windfall related to the IPO of Eventbrite.
The big news that Square CEO Jack Dorsey had to share on the earnings call was the introduction of Square Terminal, a portable, all-in-one payment device that prints receipts.
“People don’t want to use their personal device to accept payments,” Dorsey said of many small business owners.
Dorsey said that this device is essentially meant to replace “those black rectangular boxes,” referring to the ubiquitous credit card processing machines which he described as “dinosaurs.”
Another theme of the earnings call was Friar’s departure from Square. Friar announced in October that she will be taking the job of CEO at Nextdoor, a social network. Dorsey thanked Friar for her contribution to Square and in a tweet expressed sadness that she was leaving. He said that a search to replace Friar is currently underway.
Dorsey also expressed pleasure with the continued success of Square’s Cash app, a peer to peer payments app that he said allows the “underserved and unbanked” to transfer money.
“I’m excited [about] what we can build on top of it,” Dorsey said.
Elevate Posts Loss in “Unexpectedly Challenging” Third Quarter
November 7, 2018Elevate reported a $4.2 million loss for the third quarter of 2018 and also lowered its outlook for full-year 2018 net income to between $10 million to $14 million.
“Despite strong year-to-date growth in revenue and stable credit quality, the third quarter of 2018 was unexpectedly challenging,” said CEO of Elevate Ken Rees in prepared remarks. “We experienced delays in rolling out new technology and credit models that are needed to drive continued improvements in credit quality for our US products. As a result of these and other issues, new customer acquisition and credit quality were both relatively flat with the prior year and anticipated improvements in margins were not realized.”
Rees also explained in the company earnings call that Elevate incurred unexpected costs in its UK operation related to an increase in complaints about its Sunny product, encouraged by UK claims management companies.
“We found many batches of complaints from claims management companies in which the majority of complaints that are made about Sunny, don’t even come from actual Sunny customers,” Rees said.
Still, year over year revenue did increase nearly 17% for the third quarter of 2018, totaling $201.5 million compared to $172.9 million last year at the same time.
The third quarter loss comes not long after a robust first quarter of 2018 which saw a 459% increase in net income year over year from $1.7 million in Q1 2017 to $9.5 million in Q1 2018.
During the third quarter earnings call, Rees announced an agreement between Elevate (NYSE: ELVT) and Utah-based FinWise Bank that will expand Elevate’s RISE product to an additional 18 states. According to Rees, FinWise will use Elevate’s marketing and underwriting expertise for the RISE branded loans that the bank originates. This is similar to Elevate’s current relationship with Republic Bank, which originates Elevate’s Elastic line of credit.
“FinWise clearly appreciates what we’ve built and wanted to take this established product and offer it to more consumers in more places,” Rees said. “This will not only offer more Americans more and better credit options, but it will also make marketing the RISE product much more efficient, spreading out the per-loan cost of national advertising,” Rees said during the earnings call.
At Money 20/20 this year, Rees conveyed that he’s an advocate for banks working with fintech companies and expressed an interest in working with more banks.
Elevate offers three products to non-prime customers: RISE, a state-licensed online lender that offers up to $5,000 in unsecured installment loans and lines of credit, Elastic, a bank-issued line of credit, and Sunny, a short-term loan product for customers in the UK. RISE and Elastic serve the US market.
Founded in 2014, the Fort Worth, TX-based company has originated $6.3 billion in credit to more than 2.1 million consumers.
