Industry News
Kabbage Reveals Plans for a ‘Reverse Play’
May 22, 2018
When it comes to lending, the business models of Square and PayPal may be too good to ignore.
According to Reuters, Kabbage plans to launch its own payment processing service by year-end. “The monoline businesses have a hard time succeeding long term,” Kabbage co-founder Kathryn Petralia is quoted as saying.
While Square and PayPal started off in payments and added lending, Kabbage sees the value proposition of the reverse play, to start off in lending and add payments.
But another Square and PayPal rival may not. Back in October, deBanked questioned OnDeck CEO Noah Breslow during an interview about this very thing. At the time, Breslow responded that they were not going to sell merchant processing. “Never say never,” he said, “but not in the near future.”
Square and PayPal’s lending businesses differ from other online lenders in that they can solicit their existing payments customer base at virtually no cost. OnDeck, meanwhile, spent $53 million last year alone on sales and marketing to acquire loan customers.
Square’s acquisition of payments customers is not cheap, however. The company spent $253 million in sales and marketing last year. The advantage is in not needing to shell out additional cost to convert them into loan customers.
OnDeck still held the lead over both Kabbage and Square last year in loan originations at $2.1B vs $1.5B and $1.17B respectively. PayPal was not ranked.
Andrew Smith Named Director, FTC’s Bureau of Consumer Protection
May 20, 2018
On Wednesday, Andrew Smith, former partner of the law firm Covington & Burling, was named the Federal Trade Commission’s Director of the Bureau of Consumer Protection.
This is not Smith’s first role in government. From 1997 to 2000, Smith worked as a lawyer for the Securities and Exchange Commission. And from 2001 to 2005, he worked as a lawyer for for the Federal Trade Commission (FTC), where he will now be returning.
Since leaving the FTC, Smith served as a partner at Morrison & Foerster and most recently at Covington & Burling. Smith’s recent appointment garnered criticism from government officials who pointed out that Smith has represented egregious offenders of consumer rights. Of the five FTC commissioners, the two Democratic commissioners voted against his appointment.
But a recent New York Times article, which stressed the fact that Smith has represented violators of consumer rights, also acknowledged that he is “regarded as a hard-working and knowledgeable lawyer even by critics.”
Chairman of the FTC Joe Simons, who appointed Smith, expressed dismay over his colleagues’ rejection of Smith.
“I am disappointed that two of my new colleagues have chosen to turn Mr. Smith’s appointment into a source of unnecessary controversy,” Simon said in an FTC statement. “I am highly confident that Mr. Smith will be an effective leader of the Bureau of Consumer Protection. He is widely respected as one of our country’s best and most experienced consumer protection lawyers.”
Smith has recently represented Facebook, Uber and Equifax, all companies with cases before the FTC. Because of this, it is most likely that Smith will recuse himself from these cases. Critics of Smith’s appointment, including Democratic U.S. Senators Elizabeth Warren, Richard Blumenthal and Brian Schatz believe that this makes him unfit to be director of the bureau. But Simon strong disagrees.
“When a political appointee is recused, the Commission relies even more heavily on these seasoned career professionals to allocate resources and tee up recommendations for the Commissioners, who are the ultimate decision makers,” Simon said in an FTC statement. “When Mr. Smith is recused on a matter, I know [the bureau’s] career managers and staff will ensure that American consumers are still well protected.”
The Broker Fair 2018 Story Through Photos
May 18, 2018Broker Fair 2018 was an amazing day of inspiration, education, and opportunities. We’ve posted some of our photo footage below:
JOIN US OCTOBER 4TH IN SAN DIEGO AT THE ANDAZ FOR A SPECIAL HALF-DAY INDUSTRY NETWORKING EVENT
Couldn’t find yourself in any of our photos? We’ll publish the full album in the following weeks.
Fundbox Partners with Eventbrite to Provide Credit to Event Organizers
May 17, 2018
Today Fundbox announced an integration with Eventbrite that will give small business event creators access to capital.
Fundbox Chief Business Officer Sebastian Rymarz told deBanked that event planners for small businesses often have to lay out a lot of money up front – to secure a venue, rent equipment or pay for a performer – before they get paid through ticket sales later.
“There’s this mis-timing between expenses and revenue,” Rymarz said. “There’s an acute need and we’re able to serve [event creators] by providing them with capital to fund those events.”
Funding a company as it anticipates future earnings sounds akin to factoring. But this solution for event creators is not a factoring product. In fact, Rymarz said that Fundbox does not have a factoring product. Instead, this new solution is a new application of what the company calls its Fundbox Line product. This is a line of credit that is paid back weekly over 12 to 24 weeks, regardless of when an invoice is paid, or when tickets are sold.
Fundbox doesn’t purchase invoices. It doesn’t even verify if an invoice exists. Instead, the company relies on its technology. Once an application is submitted, its proprietary system reveals a company’s payment history, its clients, vendors and other information that paints a picture of its creditworthiness. The data system, which Rymarz calls a “ledger graph,” is a web of thousands of small and medium-sized businesses that contains information about the businesses’ relationships to one another.
“Every customer that applies makes our algorithms smarter,” Rymarz said.
He also explained that Fundbox does not employ a single underwriter. Rather, the company invests heavily in developing technology, like its ledger graph. Rymarz said that of the company’s roughly 170 employees, 60 percent of them are either machine learning experts, data scientists or engineers.
The company, co-founded in 2013 by CEO Eyal Shinar, is headquartered in San Francisco and has a research and development team in Tel Aviv.
Broker Fair 2018 Pre-Show Photos
May 17, 2018Photos from the Broker Fair 2018 May 13th Pre-show party at The William Vale in the Vale Garden Residence. Photos from the conference will be published separately. We hope you had fun.
LendingPoint Secures Facility of up to $600 Million
May 17, 2018
LendingPoint announced today that it has closed on a credit facility for up to $600 million, arranged by Guggenheim Securities. The direct consumer lender secured a facility in September 2017 for $500 million, bringing its recent combined credit facility to $1.1 billion, in just nine months.
LendingPoint Chief Marketing Officer Mark Lorimer told deBanked that he was thrilled about the new facility for a number of reasons.
“But what I’m most excited about is the fact that we need it,” he said.
In the first quarter of 2018, LendingPoint processed more than 850,000 applications from borrowers requesting more than $9.2 billion in loans. These numbers are up from a year ago and also up from the fourth quarter of last year.
This rapid increase in demand has mostly been for the company’s primary loan product, a consumer loan for people with credit scores between 580 and 700, which LendingPoint calls “near prime.” These loans are between $2,000 and $26,500 with terms of 24 to 48 months.
“While our competition will occasionally dip down [to our level], they tend to be more comfortable in the 680 and up type of range, and that means that many of [the near prime] customers will come to us.”
With LendingPoint’s acquisition of merchant onboarding company LoanHero in December 2017, LendingPoint started offering a point of sale product to merchants at the begin of 2018. This loan product offers between $500 and $15,000 to consumers making specific purchases and these loans (with terms from from 12 to 60 months) have also been in very high demand, according to Lorimer.
This product has only been offered for six months, but Lorimer said that he would not be surprised if it becomes the larger contributor to overall originations within the next few years. For now, though, the company’s direct consumer loan product is responsible for the lion’s share of originations.
Since company issued its first loan in 2015, LendingPoint has originated more than 50,000 loans totaling more than $500 million. Headquartered in Kennasaw, GA, outside of Atlanta, the company employs about 160 people.
World Business Lenders Secures Credit Facility
May 16, 2018
World Business Lenders announced yesterday that it obtained a $30 million credit facility from a Cayman Islands fund created by a group of Asian banks and investors.
“The terms [of the facility] are very attractive,” said World Business Lenders CFO Tom Wills. “Single digit fixed interest rate and high advance rates.”
The new facility will be used to continue funding a loan product that is a hybrid of a business loan and a mortgage, Wills told deBanked. He said that World Business Lenders invented this product three years ago.
“Three years ago, we saw some credit weakness coming into the market and we decided to develop this real estate collateralized product,” Wills said.
World Business Lenders provides business loans that range from $5,000 to $2 million and are paid back between six and 36 months. Their average loan size is $150,000.
Wills said that the hybrid product is becoming more institutionally accepted and that they have been seeing more demand for it. Created in 2011, the company employs over 100 people at its office in Jersey City, NJ.
Welcome to Broker Fair
May 13, 2018Update: Thanks to everyone who attended, participated, and sponsored!
Registration on Monday starts at 7am where you will be able to pick up your badge. The continental breakfast will be available at 8am and the opening remarks begin at 8:45am.
The lunch, sponsored by National Funding, begins at 12. There will be a kosher option available.
Later at the end of the day, the cocktail reception at Westlight, which is upstairs on the 22nd floor, will begin at 5:30pm. Westlight offers amazing outdoor views of the Manhattan skyline. That event is sponsored by RapidAdvance and all you need to enter is your Broker Fair badge.
The agenda will also be available on the backside of your badge.
Thank you also to our Gold Sponsors: National Business Capital, CFG Merchant Solutions, BFS Capital, and CanaCap
