Industry News
$400M A Year: Fora Financial / US Business Funding Deal to Make Fora an Originations Leader
June 5, 2018
Fora Financial’s newly acquired stake (a significant one) in US Business Funding will put them on track to originate $400 million a year, the company said. Those numbers will place them on the list with industry titans like BFS Capital, Strategic Funding and National Funding.
The co-founders of Fora were previously featured on deBanked’s Jan/Feb 2016 magazine issue.
US Business Funding (USBF), who is based in Santa Ana, CA facilitates different financing products for small businesses including vendor programs, capital equipment loans, and leasing solutions.
“This is an exciting time for all of us at US Business Funding,” said USBF CEO Peter Ribeiro in a published statement. “We have rapidly built one of the top sales organizations in the industry, and now we have the opportunity to leverage the expertise and resources of Fora Financial to fuel our growth even further. Jared and Dan have established Fora Financial as one of the top lenders in the space, and we are motivated to build on our terrific relationship with them to create even more opportunities for our companies to succeed.”
Study Reveals Positivity and Concerns of Small Business Owners
June 5, 2018According to a survey conducted by SmartBiz Loans and released today, almost 57 percent of small business owners said their outlook on business growth over the next 12 months was “fairly positive” or “positive.” And 35 percent of respondents reported that the new tax plan has already caused them to make changes in their business, with ten percent reporting that they are actively investing in new equipment or staffing.
“This positivity points to the resiliency of small business owners,” said CEO of SmartBiz Evan Singer. “They know circumstances are changing, and they’re adapting as needed.”
As for concerns, according to the survey, 31 percent of respondents said that securing lower cost financing was a priority concern. Twenty-two percent of small business owners “agree” or “strongly agree” that access to credit has become easier in the last few years, however 49 percent of small business owners “agree” or “strongly agree” that the cost of credit has increased.
Regarding non-credit related concerns, 53 percent of small business owners named the cost of providing health insurance for employees and a key business consideration. And 49 percent said that finding and hiring quality employees was a top concern.
Nine out of 10 small business owners said they value experience over education in new hires, while 31 percent said they were willing to hire candidates who lack some qualifications and train them. In what the report described as a “difficult hiring environment,” in order to retain employees, 51 percent of owners said they were offering more flexible work arrangements and 33 percent said they were increasing wages.
LeaseQ Partners with SEFA
June 5, 2018
LeaseQ, an online marketplace for equipment financing, announced a partnership yesterday with SEFA, a non-profit association of leading supply and equipment dealers in the food industry.
“SEFA is a group of 62 companies that work together like a big family to add value wherever they can,” said Vernon Tirey, founder and CEO of LeaseQ. “Unlike many buying groups, value-add is very important to them [and] that’s why we’re so excited to be part of the team.”
Tirey expressed enthusiasm about working with SEFA to develop financing solutions to meet the individual needs of each of SEFA’s members. LeaseQ has three kinds of clients: businesses seeking equipment financing, equipment dealers (like members of SEFA), and funding companies. LeaseQ earns money by charging a processing fee to funding companies for financing deals, Tirey told deBanked. But the funding company rolls LeaseQ’s fee into its fee to the borrower, so the fee is ultimately paid by the borrower. Typically, for a five-year lease, LeaseQ’s fee is under two percent.
Aside from the benefit of LeaseQ getting new business from SEFA members, SEFA members will benefit by receiving certain perks from LeaseQ . For instance, Tirey said that LeaseQ has introduced a kiosk program for SEFA members where, among other offerings, SEFA members will be able to receive instant funding for transactions under $15,000.
LeaseQ facilitates equipment finance in over 20 different vertical markets, including agriculture, construction, oil and gas, medical devices.
Founded in 2012, the company is based in Burlington, MA, and employs 27 people.
$15 Million Facility Allows for Growth of Breakout Capital Factoring Program
June 1, 2018
Breakout Capital announced that it obtained a $15 million facility on Wednesday, with a fund managed by Medalist Partners. While the facility is not earmarked for any single product, Chief Marketing and Sales Officer James Mendelsohn told deBanked that the facility will certainly help fund the company’s relatively new and popular FactorAdvantage product.
“With the [FactorAdvantage] program, we work in concert with the factor and the small business to maximize the small business’s access to capital,” Mendelsohn said. “We work with factors to enable a factoring relationship with a small business.”
Introduced in January of this year, Mendelsohn said that the FactorAdvantage program generally works in one of two ways, depending on the client. If the client is new to a factoring company and the client has a tax lien or something that prevents the factor from working with that client, FactorAdvantage will come in and help finance a consolidation or whatever it is to prepare the client to work with the factor.
The other common use of the FactorAdvantage product is for existing clients of the factoring company that want access to more capital. Factors will sometimes provide additional capital in what is called an overadvance. But when the factor is not able to, or not able to provide enough capital, FactorAdvantage will provide that additional capital.
“The access to more capital [will allow] us to grow,” Mendelsohn said. “We’ve had February, March, April and now May – each month, we’ve broken our own record for origination volume. We want to break that record every month going forward, so this [facility] will help us have plenty of dry powder.”
Mendelsohn also said that a boon of the FactorAdvantage program is that “the tickets are much bigger.” The maximum financing on Breakout Capital’s other products is $250,000, while the maximum for the FactorAdvantage product is $500,000. Breakout Capital was founded in May of 2015 and also provides Business loans, SBA loans, Lines of credit, Equipment leasing and Merchant cash advance, among other financing products. The bulk of the company’s volume comes from their distribution partners, including brokers, ISOs, and more recently, factoring companies.
Based in McLean, VA, Breakout Capital employs almost 50 people.
Uplyft Updates Logo and More
May 31, 2018
Uplyft Capital announced the launch of its new branding yesterday, including a new logo and website.
“We were looking for a sleek, stylish icon that would have brand recognition in the industry as simple and fun, but also uplifting,” said CEO Michael Massa.
The rising purple arrow represents growth for small businesses, “looking to get out of the current box they are in,” according to the press release.
“All of our online portals have been revamped and redesigned,” Massa said, “our client, investor and partner portals.”
Massa prides the company he founded in 2012 for its innovation. Uplyft, which provides cash advance exclusively, uses Artificial Intelligence for underwriting and signing up new ISO partners electronically.
“We need to evolve in order to keep up with demand,” he told deBanked.
Uplyft has a direct sales team of about 25 people and roughly 500 ISO sales partners, according to Massa. Headquartered in Miami, the company employs about 45 people altogether with a small office of three people in New York.
IOU Planning for 25%-30% Originations Growth
May 29, 2018IOU Financial CEO Phil Marleau spoke confidently this afternoon on a public conference call to discuss the company’s first quarter performance. The company had a net income of $797,198 from the start of the year to March 31, which is notable because it produced a $995,085 loss during the same period last year.
On the call, Marleau said that the company plans to increase loan originations next year by 25 to 30 percent.
An analyst at TD Wealth asked if the company’s plan for a 25 to 30 percent increase in loan originations should produce a similar increase in earnings.
“We’re working on getting our numbers back on a growth trajectory,” Marleau said. [To do this…] we may need to increase marketing spend in order to increase the direct channel and the referral channel.”
Marleau explained that IOU Financial has three channels: the wholesale sales channel, which is responsible for the bulk of its business, the direct channel, which is driven by marketing, and the referral channel, which involves strategic partnerships with associations, payment processors, suppliers to small businesses and others. The company makes business loans of up to $300,000.
“We’re not going to lose sight of the bottom line,” Marleau said. “We’re not going to grow at the expense of profit.”
Another question came in asking what the status was on the company’s strategy of taking aggressive legal action against merchants that default on loans. President and Chief Operations Officer Robert Gloer answered this question by noting that once a lawsuit is filed against a merchant, it generally takes about a year for any money to be recovered. But the company has recovered money from defaults.
“We have started to see recoveries and we see that as a huge success,” Gloer said.
Another question dealt broadly with alternative financing in Canada as opposed to elsewhere, like the US. Marleau said that compared to the US, there is a lot less competition in Canada and that there are higher margins and usually fewer defaults.
IOU Financial is headquartered in Montreal and has an office in Kennesaw, GA.
IOU Financial Has Profitable Q1
May 29, 2018
IOU Financial reported a net income of $797,198 (CAD) in Q1, according to their latest quarterly financial statements. Despite primarily lending to US-based small businesses, IOU is headquartered in Canada, where the company is listed on the TSX Venture Exchange. IOU’s market cap at the market’s close on Friday, was less than $15 million. For comparison’s sake, rival small business lender OnDeck, currently has a market cap of $438 million.
IOU originated $24.5M (CAD) in loans in Q1, up $2.5M from the same period last year. $21.8M of those loans were sourced “via relationships with third-party business loan brokers,” according to their report.
The company proudly noted a 50% reduction in their provision for loan losses. “This decrease is primarily attributable to lower defaults by borrowers as well as by the smaller size of the loan portfolio,” the report said. “The improvement in the provision for loan losses (net of recoveries) is a result of changes made in 2017 in the Company’s lending policies and in the loan servicing and collection process, which includes an aggressive litigation strategy against businesses who default on their loan obligations.”
In a published statement, IOU CEO Phil Marleau said, “Following the positive results in the fourth quarter of 2017, IOU has delivered even stronger results in the first quarter of 2018. This is a testament to the measures taken to bring down loan defaults and control costs. IOU expects to continue to grow loan originations and generate profits over the coming quarters.”
GreenSky Lists on the Nasdaq
May 25, 2018
Yesterday, GreenSky announced its initial public offering of 38,000,000 shares of Class A common stock at $23.00 per share. The shares of common stock now trade on the NASDAQ under the symbol “GSKY” and are valued at $24.77, as of the close of trading today.
GreenSky facilitates point-of-sale financing that enables over 12,000 merchants to offer easy payment options to over 1.7 million consumer customers. Valued at $4.4 billion, according to Trefis, an independent financial data company, it is among the largest fintech companies in the lending space. But it is not a lender. Instead, it facilitates loans through its proprietary technology for prime and super prime borrowers to make high priced purchases. GreenSky’s merchant partners include home improvement businesses and clinics that offer costly elective medical procedures. The average FICO score of a GreenSky borrower is 760.
“Our roadmap to capture growth opportunities and deliver profitability to our shareholders is clear: continue to grow our current business, expand our network of merchants, enter new verticals, and broaden the solutions we offer to both businesses and consumers,” said GreenSky CEO David Zalik following the company’s IPO.
Zalik founded the company in 2006 and has kept a pretty low profile until the growth of GreenSky made it difficult for him to remain obscure. According to a September 2016 interview with Bloomberg, Zalik, whose company was then valued at $3.6 billion, said he had never given an interview before.
His personal story is as impressive as his company’s. He came to the U.S. from Israel when he was four and grew up in Alabama. Because of remarkably high standardized test scores, he started taking classes at Auburn University (in Auburn, AL) when he was 12, according to the same 2016 Bloomberg story. He sold his first company for a few million dollars when he was 22, at which point he moved to Atlanta.
In 2016, Zalik was the winner of the Ernst & Young Entrepreneur of the Year award for Financial Services. In his acceptance speech he said:
“My family and I came to this country in 1978 with two suitcases, and the dream of America. I am the child of two generations of refugees, and a proud American. This country has given my family everything. Freedom of opportunity [and] freedom from fear.”
GreenSky is based in Atlanta and employs more than 600 people. The company was unable to provide comments in time for this story’s publication.
