Industry News
PayPal Completes Sale of Consumer Credit Receivables to Synchrony
July 6, 2018Yesterday, PayPal (NASDAQ: PYPL) announced the closing of its sale of $7.6 billion of consumer credit receivables to Synchrony (NYSE:SYF) for roughly $6.8 billion. At the end of 2017, PayPay announced that it had agreed to sell consumer credit receivables to Synchrony Financial as a part of an expanded relationship between the two companies.
The completion of yesterday’s transaction means that PayPal and Synchrony have extended their existing co-brand consumer credit card program agreement, and Synchrony is now the exclusive issuer of the PayPal Credit online consumer financing program in the U.S., through 2028.
“We’re pleased that we’ve completed the sale of our U.S. consumer credit receivables portfolio,” said President and CEO of PayPal Dan Schulman. “Our agreement with Synchrony accomplishes every goal we set out for our asset light strategy. We look forward to working with Synchrony to double down on our innovative consumer credit experiences for our customers and profitably grow the portfolio over time.”
The relationship between PayPal and Synchrony is not at all new. The two companies have partnered to offer PayPal-branded consumer credit cards to consumers since 2004. Synchrony will update the financial impact of this transaction in its second quarter 2018 earnings call.
What Will Happen to HomeZen After the Breakout Capital Deal?
July 3, 2018
With today’s announcement of Breakout Capital Finance’s acquisition of HomeZen’s technology, deBanked wondered what will happen to HomeZen after the acquisition of its technology.
HomeZen’s co-founder and Head of Technology Mike Spainhower will work with Breakout Capital to help integrate the HomeZen technology into Breakout Capital’s system, Breakout Capital Chief Operating Officer Mendelsohn told deBanked. But Spainhower will not be joining Breakout Capital as an employee, nor will any other former HomeZen employees. HomeZen will still service its existing clients, but will no longer seek additional clients or operate under the HomeZen name. HomeZen, which provided software tools for home sellers to more efficiently sell their homes, was founded in 2016 in the Washington D.C. area.
Mendelsohn said that prior to this acquisition, BreakOut Capital founder and CEO Carl Fairbank and HomeZen co-founder and CEO Kevin Bennett knew each other as part of the Washington D.C.-area tech community.
The HomeZen website is currently down, which is not an error. Mendelsohn said that the transaction between the two companies meant that HomeZen would cease offering its technology, and website, to new customers.
While Mendelsohn acknowledged the real estate technology company Zillow as a potential competitor of HomeZen, he said that HomeZen’s offering was quite uncommon.
“They were pretty unique in offering sellers a suite of [real estate] tools to do it themselves really be empowered to direct the sales process yourself.”
Breakout Capital has grown its loan originations throughout the year and also obtained a $15 million facility at the end of May that has allowed it to build out a factoring product, called FactorAdvantage.
Of the acquisition, Mendelsohn said:
“You have to take the long view with this and say ‘They’re serving real estate sellers, we’re serving small business owners.’ This may seem a little discontinuous, but what they’re doing is the same thing we’re doing. They’re providing great tools, calculators and other ways to evaluate offers. And that’s exactly what we do. This will allow us to give our applicants and borrowers access to that high quality experience.”
Founded in 2015 by CEO Carl Fairbank, Breakout Capital is based in McLean, Virginia.
Yellowstone Capital Funded $68M in June
July 2, 2018Yellowstone Capital originated $68 million in funding to small businesses in June, according to the company. The figure topped their previous month of $64.5M.
Kalamata Capital Merges with Kings Cash Group
June 28, 2018
Kalamata Capital announced today that it has entered into an agreement to merge with Kings Cash Group, effective July 1. The new entity will be called Kalamata Capital Group, or KCG, retaining the Kalamata Capital brand. Together, the new entity and its affiliates will provide approximately $300 million of capital annually to over 5,000 small businesses.
Michael Jaffe and Albert Gahfi have been designated the co-Presidents of Kalamata Capital Group LLC, the direct funding and operating entity, and they will run the day-to-day operations. Steven Mandis, Brandon Laks, Carlos Max, and Connor Phillips will be the Chairman, Chief Operating Officer, Chief Financial Officer, and Chief Credit Officer, respectively, of the holding company, Kalamata Holdings LLC. All are members of the Executive Committee of Kalamata Holdings LLC.
“With this partnership we become the preeminent one stop solution for merchants and strategic partners in the industry,” Gahfi said. “Strategic partners can submit one application, and we will quickly develop competitive, actionable solutions.”
Laks, Chief Operating Officer of KCG told deBanked that employees of both companies will be retained and the former Kalamata Capital offices, both in Bethesda and New York, will remain in place. The Manhattan office of Kings Cash Group will also remain and all products that the two companies used to offer separately, will now be offered by KCG, including small business loans, SBA loans, factoring, equipment leasing and merchant cash advance, among others. Kalamata Capital offered all of these products while Kings Cash Group focused on merchant cash advance.
“With no debt, Kalamata Capital has one of the strongest balance sheets in the industry,” Jaffe, co-President of the newly formed KCG said. “Their Chairman Steven Mandis worked at Goldman Sachs, was a Senior Advisor to McKinsey, has a PhD from Columbia University and teaches at Columbia Business School. He has utilized that experience to build a distinctive partnership culture, established brand, and institutional-grade processes and procedures.”
Mandis, Chairman of KCG, said: “We know and value KCG’s technology platform and people, and we believe their talent and capabilities will further strengthen our overall merchant value proposition. The partnership will enable us to better serve more small businesses by enhancing our underwriting capabilities to provide access to affordable business financing solutions to help them and their communities grow and thrive.”
American Express Partners with Amazon on SMB Credit Card
June 28, 2018
American Express announced plans this week to partner with Amazon to introduce a co-branded Amazon credit card for small businesses. Amazon does have a co-branded card with J.P. Morgan Chase for consumers shopping on Amazon’s site, and elsewhere. But this would be Amazon’s first card for small business owners.
“At American Express, we have been helping business owners grow for more than 50 years and we know that millions of them rely on Amazon,” said Glenda McNeal, President of Enterprise Strategic Partnerships at American Express in a statement. “We’re delighted to expand our partnership with Amazon by offering a new cobranded small business card, and by also harnessing the collective insights and expertise of our companies to deliver tangible value to our mutual customers who use Amazon’s services.”
This was quite a win for American Express as J.P. Morgan was competing for this partnership as well, according to CNBC. This deal puts American Express in an enviable position to court more small business customers in its effort to become a leading lender to small and mid-sized companies. Small business cards can be very lucrative for banks. Compared to consumers who might spend a few thousand dollars a month on credit cards, businesses can spend up to hundreds of thousands of dollars in monthly bills, according to CNBC.
“We selected American Express as our partner for the upcoming small business credit card because of our shared commitment to helping small businesses grow,” said Max Bardon, Vice President at Amazon in a statement. “Offering the best of both brands, the cobranded small business credit card program will combine the buying power, convenience and value small businesses have come to know and love from Amazon backed by the world-class service, benefits, access and security of American Express.”
Amazon launched Amazon Lending in 2011 to help small businesses finance and sell more goods on its platform. From the 2011 launch to June 2017, Amazon Lending reported that it issued $3 billion across 20,000 business in the US, Japan, and the UK. And the bulk of the growth has been from small businesses in the US, where the company originated $1 billion in loans in 2017 alone. So small business lending, particularly in the US, is big business for Amazon.
This new co-branded Amazon/American Express card for small businesses is part of a series of new partnerships between the e-commerce behemoth and banks. In February of this year, it was reported that Amazon had partnered with Bank of America Merrill Lynch to provide loans to merchants (on an invitation-only basis) from $1,000 to $750,000.
LendingPoint Gets Increase in Financing
June 28, 2018
LendingPoint announced today that it closed an increase of its mezzanine financing, bringing the total of the facility from Paragon Outcomes Management to $52.5 million. Mezzanine financing is a hybrid of debt and equity financing. Paragon and LendingPoint initiated a relationship with its first credit facility in January 2017 for $20 million. It was then upsized seven months later, and has now been upsized for the second time to $52.5 million.
“We believe this shows a tremendous amount of confidence in the way our portfolio continues to perform,” LendingPoint Chief Marketing Officer Mark Lorimer told deBanked. “It’s a great vote of confidence.”
Among other things, the new credit facility provides an increased advance rate for more efficient equity usage. Today’s announcement comes on the heels of more than a billion dollars worth of senior credit financing that LendingPoint has closed in less than a year. The company secured an up to $500 million senior credit facility in August 2017 and an up to $600 million senior credit facility last month, both arranged by Guggenheim Securities.
“[Paragon’s] support has been critical as we grow our origination volume and balance sheet, and march towards profitability next year,” said Tom Burnside, LendingPoint co-founder and CEO. “We’re proud that LendingPoint’s performance to date means companies like Paragon Outcomes want to be part of our future.”
In March, LendingPoint debuted a point of sale lending platform for merchants that Lorimer said is going well.
“We’re continuing to build it out, add more merchants to the platform and increase the funding levels,” Lorimer said.
Founded in 2014 and based in Kennesaw, GA, LendingPoint and its Merchant Solutions platform have originated more than 70,000 loans totaling more than $500 million.
Why KeyBank Acquired Small Business Lending Platform from Bolstr
June 25, 2018
KeyBank announced last week the acquisition of a digital lending platform for small businesses created by Bolstr. The lending platform will allow KeyBank to more efficiently serve small businesses for their SBA and traditional lending needs, according to Jamie Warder, Head of KeyBank Business Banking.
“We found Bolstr to have a very flexible capability…and we believe that having the platform will allow us to get to a decision faster,” Warder told deBanked.
Founded in 2010 by Charlie Tribbett and Larry Baker in the Chicago area, Bolstr created a marketplace that connected small business borrowers to institutional and retail accredited investors, or individuals. KeyBank acquired the platform that facilitated this, but not the company. Bolstr no longer operates as it had, but it will continue to work with its current clients, according to Warder.
Warder said that with this acquisition, KeyBank, a regional bank, hopes to attract more small business customers who are looking for speed and ease in obtaining a loan. He thinks that with Bolstr’s platform, KeyBank can be more competitive, although he didn’t say that the bank’s qualifications for obtaining loans would necessarily change.
The Bolstr platform includes features like easy eSignatures, information gathering and digital questionnaires. Already, KeyBank has hundreds of thousands of small business customers, Warder said. The bank, which is headquartered in Cleveland, OH, is more than 100 years old and operates in 15 states.
Gusto Enables Employees to Choose Their Own Payday
June 21, 2018
Gusto announced today the launch of Flexible Pay, a new feature that allows employees to choose their own pay schedule. Employees will no longer have to adjust their finances around employers’ typical twice monthly payments.
“My kids have a better payroll system than I do,” said Josh Reeves, CEO of Gusto, in reference to kids who babysit or mow lawns and get paid immediately after the job is done.
With Flexible Pay, employees can get paid weekly or for work they did the previous day. Gusto gives an advance to the employer to pay the employee. Since this service is brand new, Gusto will be making these loans and keeping them on their own balance sheet. But Gusto spokesperson Rick Chen told deBanked that they are currently in talks with banks.
“Employees are essentially giving loans to their employers,” Chen said regarding the current system.
While Gusto is a payroll company, it is trying to disrupt the payday lending industry and other online lenders that focus on short-term lending. So far, this service is free. Gusto charges neither the employer nor the employee. The only catch is that the employer has to use Gusto’s payroll system in order to get this perk for its employees. The hope is that this program will incentivize employees to ask their employers for this perk and Gusto will gain new clients, according to Chen.
Founded in 2011, Gusto has over 60,000 payroll customers nationwide and offices in San Francisco and Denver.
