Industry News
Letter From the Editor – March/April 2016
March 1, 2016
In early 2016, a recession seemed inevitable, until it didn’t. Rumors of rising defaults across a variety of marketplace lenders have been defended as falling within model estimates. The stock market’s sudden plunge recovered. And Madden v Midland’s long-term impact is being chalked up as overblown. All is well again, well mostly anyway. Institutional investors have gotten a little spooked and the once insatiable appetite seems to have become just a little bit satiable.
But we’re back, and so is the beast that has come to be known as “marketplace lending.” The FDIC says that term can encompass unsecured consumer loans, debt consolidation loans, auto loans, purchase financing, real estate loans, merchant cash advance, medical patient financing, and small business loans. It can “include any practice of pairing borrowers and lenders through the use of an online platform without a traditional bank intermediary,” they wrote in their Winter 2015 Supervisory Insights report.
In this issue, we examined one piece of marketplace lending that has created many success stories, the merchant cash advance industry. For years, it’s turned hungry 20 somethings into front-page worthy stars. Will that trend continue or has the moment passed? The quality of leads will play a role in who makes it big and who doesn’t, said some of the folks we interviewed. Ironically, while the industry is often considered to be online, the Internet is reportedly becoming a less reliable place to acquire customers because of competition and cost. Having problems with leads? You’re not alone, we’ve learned.
But not everyone is struggling. In March, we published a list of the top 8 alternative small business funders of 2015. The numbers were either reported to us directly or we determined them using publicly available information. In this issue, we’ve got the year-over-year statistics for 18 companies. Some of them might surprise you.
I don’t want to finish off my introduction to this issue with the R-word, but since there were signs of weakness earlier this year, we did ask the wider marketplace lending industry what to expect from the next recession. Everything is at risk, they said, from borrower defaults to institutional backing to regulatory action. Marketplace lending, however big and strong it is now, is not believed to be impervious to market forces. Will the beast prevail? Or is it destined to fail?
–Sean Murray
Lending Platform Orion First Appoints CTO
February 24, 2016
Lending platform Orion First hired Paul Marcoe as its Chief Technology Officer.
Marcoe joins Orion from Financial Pacific Leasing where he was the vice president of information systems and security where he spent 20 years spearheading the direction and development of several campaigns to update and improve internal systems.
“Paul is a talented Information Technology executive with proven industry experience.” said David T. Schaefer, CEO of Orion First. “His robust skillset, numerous successful projects managed and overall IT vision make him a perfect fit to lead technology initiatives here at Orion.”
Orion is a third-party servicer in small business commercial finance marketplace. In 2014, they secured a relationship with Raisworks, an online direct lending platform that connects small businesses with institutional lenders looking to lend directly to private businesses.
During a 2015 conference panel, Orion First CEO David Schaefer had said that humans should still play a role in underwriting.
Letter From the Editor – Jan/Feb 2016
January 1, 20162016 is here and the world of alternative finance isn’t slowing down. If you’re a commercial finance broker, the environment has gotten a little bit more competitive. Sorry folks, the Ferrari might have to wait, at least that’s what some of the sources we interviewed are saying.
But it’s not all bad, the path to success is just changing. Cold calling and direct mail are giving way to new ideas such as Times Square billboards, referral relationships, and diversified product lines. Along the way, regulatory compliance is permeating thought processes more than ever before. The SBFA (formerly NAMAA) is evolving and other groups are trying to make their presences felt as well.
Certain models may be tested by rising interest rates in 2016. Investors in marketplace lending may be wooed by safer investments that pay out a smaller, yet acceptable yield. Or perhaps a volatile or declining stock market will encourage more investors than ever before to flock to marketplace lending. Several predictions made by the “experts” in 2015 will be tested. It’s amazing to think that we really haven’t had economic or market conditions change in a long time.
The fact that it’s a presidential election year could also stir things up. Democratic contender Bernie Sanders for example, has pledged to wage war on lenders by instituting nationwide interest rate caps to levels that would likely cripple both marketplace lenders and credit card companies.
With all of these things to consider, perhaps the two guys that lost God and found $40 million (as told in Bloomberg this past October) are better off retired on a beach in Puerto Rico. Then again, we’ve got a more compelling story in this issue with two guys from somewhat similar circumstances. Jared Feldman and Dan Smith, co-founders of Fora Financial, sold a part of their company to Palladium Equity Partners LLC late last year. Fora fittingly means marketplace in Latin and the pair still run the company from New York City. The two entrepreneurs are featured on this issue’s cover and should serve as a reminder to anyone reading, that the industry has so much more room to grow.
–Sean Murray
deBanked’s Blog and Magazine Articles Now Accessible Through Our Mobile App
November 14, 2015
We’ve finally bridged the gap between deBanked’s blog content and our mobile app. Previously, the deBanked mobile app could only be used to access discussions on the forum. That’s because our forum and blog operated on independent backend systems. While they still do, we’ve managed to create a bridge without having to update the mobile app.
I’m ashamed to say that we hadn’t even considered that mobile app users would want to be able to read everything all in one place. Thanks to those that pointed this out to us. The bridge we’ve created isn’t perfect but it’s better than what we had before, which was nothing. =\
iPhone mobile app users can click the button at the top and then click “Blogs” from the menu.
The process should be similar on the Android app but admittedly I’m currently without an Android device.
At present, the app will only display deBanked created content.
Advertising in deBanked’s E-mail Newsletters is Sold Out
November 1, 2015deBanked’s twice-monthly email newsletters have had such tremendous industry reach that advertising space in them is currently sold out.
Thanks to everyone that has made them such a huge success. Our readership continues to get bigger and bigger.
deBanked still has limited availability in its other channels including website sponsorship, print magazines, and email blasts. If you are interested in that, please give us a shout.
Letter From the Editor – November/December 2015
November 1, 2015Somehow 2015 is already over. It started off as the year of the broker but it ended up as a culmination of many things. It was the year of capital raising and rebrands, the year of regulatory interest and RFIs, the year of unicorns and leaderboards. 2015 solidified alternative lending’s place across multiple continents. Bankers started talking like technologists and technologists like bankers.
In 2015, we introduced William Ramos who went from working at a Lowes Home Improvement store to driving a Maserati after he landed a temporary job as a financial cold caller. We also showed you Jared Weitz, who went from working as a plumber to running a financial company that’s now on pace to originate $100 million in small business funding a year.
As we close out 2015 here, we’ll introduce you to the man whose company is producing billions (that’s billions with a ‘b’) of small business funding. Daniel DeMeo is the CEO of CAN Capital, a company who has weathered both the dot-com bust and the financial crisis and still manages to be one of the industry’s top players. DeMeo shared what he’s all about and the story of CAN you haven’t read anywhere else.
That’s the good stuff, but there’s some bad stuff too. While critics have broadcast some of the not so flattering stories in alternative lending’s rise, there’s a darker side that no one has dared write about, bad borrowers. Perhaps a byproduct of rapid technological change, merchant fraud has become an all too common occurrence. These predatory merchants are causing chaos, damaging margins, exploiting underwriting weaknesses and potentially driving up the cost for the good guys. In this issue, we explore the reality of bad guys and their tactics.
And that’s not all we have of course. In 2015, we compiled the first report on merchant cash advance and small business lending in collaboration with Bryant Park Capital. We measured the industry’s growth, learned of its diversity, and got a numerical sense of the confidence for the future. A sample of that report is included within.
That was 2015 summed up, the year that Marty McFly met us all in the future. 2016 will undoubtedly mean robots, laser beams and interplanetary colonization. Sprinkled in between all that will be online loans, merchant cash advances, bitcoins, and financial disruption. In 2016, the world may become deBanked once and for all.
–Sean Murray
Letter From the Editor – September/October 2015
September 1, 2015If you hadn’t noticed, we’ve got an executive on the cover of this issue. And why shouldn’t we? However alternative the industry’s roots might be, today’s small business funders are more like bankers than ever before.
But they didn’t all start off that way. Some of the industry’s leaders come from modest backgrounds outside of finance and we explore one of those stories in this edition.
Jared Weitz got his start in the industry at a company that was founded before the financial crisis. And that got me wondering if the funders that have been around for a decade or more possessed some secret recipe or knowledge that made them so successful. In The Decade Club, we reached out to several leaders to hear their perspectives and glean advice for you, the reader, somebody who potentially has not been in this business for at least ten years.
And if you’re new and just now walking through the industry’s front door, you’ll want to make sure your deals don’t slip out the back door. As some brokers have shared here, there is a potential for a deal to end up somewhere you may not have intended it to.
There is a reason that the term ‘deal’ is most often used to describe some of the business financing products we cover and that’s because at the heart of each transaction is a deal worked out between at least two commercial entities. A small business is still a business (just smaller) but there are folks that don’t exactly agree. I consider it important to point out the distinction and the extent to which the differences are respected in American culture. Even if you disagree with my assessment, surely there are opinions and viewpoints where we can find common ground.
A wide array of ideas has been shared lately and some of those have been expressed more vocally and more publicly than others. One thing that I have learned is that there is no perfect concept or methodology for success in this business. All you can try to do is serve your clients and yourselves as best you can.
–Sean Murray
Deal Alert: Angelo Gordon Acquires Reliant Funding
July 14, 2015
Angelo, Gordon & Co, a $27 Billion private equity firm has acquired San Diego-based Reliant Funding. Reliant was recognized a year ago as the 385th fastest growing private company in the nation on the Inc. 500 list as well as the 28th fastest growing financial services company.
A person who claims to have worked on the deal and is currently employed by the company shared the news publicly.
The deal is at least the second in the space for the private equity firm, who acquired Long Island-based Merchants Capital Access last year.
