Industry News

Kabbage Re-enters Small Business Funding Arena

When Kabbage stopped lending in the Spring of 2020, many assumed they would pick up where they left off when they were acquired by American Express. Not quite. Since the deal in August 2020, Kabbage had been repurposed as a checking account service.

On Wednesday, however, Kabbage finally announced a return to funding.

“Kabbage from American Express today launched Kabbage Funding™, offering eligible small businesses flexible lines of credit between $1,000 and $150,000—now with the powerful backing of American Express. With Kabbage Funding, small businesses can apply in minutes to access working capital 24/7 to help manage their company’s cash flow.”

The only strange thing about it is the marketing that makes it sound as if Kabbage had never actually been in the funding business until just now.

Kabbage had been one of the largest online small business lenders in the country in 2019, generating approximately $2.7 billion in loan originations. At the time, it was more than Square, OnDeck, ClearCo, Funding Circle, Amazon, and Shopify.

Bert Goldberg, IFA Founder, Passes Away

If you needed to know anything about the factoring industry, you had to know Bert Goldberg.

Goldberg, who passed away on November 27th, founded the International Factoring Association in 1999. We first crossed paths in April 2016 when he emailed me about a fintech course he had in the works. At the time, the IFA had an astounding 425 member companies.

A model organization, Bert lured me to an IFA Conference in Fort Worth, TX in 2017, which was one of the best events I have ever been to. He was then kind enough to invite me to speak at an IFA Fintech Training Class later that year in Las Vegas, which I took him up on.

Though I did not know him that well, we did share some calls and conversations. His ideas and concepts certainly served as a model for me to follow. He was a very kind and intelligent leader. Rest in Peace.

In an IFA announcement, Heather Villa, Managing Director of the IFA said, “We appreciate the support that the IFA community has provided over these past few months. The IFA is a community that comes together during tough times and we are so grateful to have the group of friends and colleagues that makes up the organization. Bert founded the IFA in 1999 and since then his vision has turned the Factoring industry into an expansive and important resource for small businesses all over the world. We are proud to continue the legacy that Bert built.”

Enova Posts Q3 Results, Admits It is Dealing With Regulatory Situation

Enova’s Q3 report is very brief and to the point. Through both its consumer loan and business loan operations, the company generated a net income of $52M on $320M in revenue.

“We are pleased to again report a strong quarter of growth across all of our businesses,” said David Fisher, Enova’s CEO.

There was no mention of OnDeck by name this time around, its major small business lending division. Instead, Enova was sure to draw attention to a regulatory inquiry it had received from the CFPB.

“The Company has received a Civil Investigative Demand (‘CID’) from the Consumer Financial Protection Bureau (‘CFPB’) concerning certain loan processing issues,” the company stated. “Enova has been cooperating fully with the CFPB by providing data and information in response to the CID. Enova anticipates being able to expeditiously complete the investigation as several of the issues were self-disclosed and the Company has provided, and will continue to provide, restitution to customers who may have been negatively impacted.”

The language is particularly concessive. Whatever happened, they felt the need to self-report it and to provide restitution to customers.

This is likely to be queried in more detail during the company’s earnings call this evening.

Update on the Direct Lending Investments Case

More than two years after the SEC charged Direct Lending Investments with fraud, work is still being done to manage the fallout. The firm was placed into receivership and since then $102.83M has been distributed back to 739 investors. Overall, the Receiver expects to recover somewhere between $215M and $265M, far short of the $789.6M supposed portfolio value at the time the Receiver took over.

Much of the shortfall can be attributed to poor investments in businesses that fell outside of what it promoted to investors. For example, $191M is tied up (and likely unrecoverable) in international telecom receivables, a far cry from the online lending industry it claimed to deal exclusively with.

Direct Lending’s former CEO, Brendan Ross, is still out on bail pending trial on related criminal fraud charges. He was indicted in August 2020. The trial was recently postponed and is now scheduled to take place on March 1, 2022.

One party that took heat over Direct Lending Investments, was the firm’s auditor, Deloitte. The Receiver sued Deloitte over the firm’s “improper clean audit opinions” in 2016 and 2017 that helped create the perception that Direct Lending Investments was managing its business on the up and up. Deloitte settled the case and agreed to pay $31M.