Loans
PayPal Credit Commits $25 Million to Help Unpaid Government Workers
January 21, 2019
PayPal announced Friday that it was devoting $25 million to a program that offers interest-free cash advances of up to $500 to federal workers who have been impacted by the record long partial government shutdown.
“No matter where you stand on the issues, the fact is that 800,000 of our fellow Americans suddenly find themselves without a paycheck,” PayPal CEO Dan Schulman wrote in a blog post. “We think that the private sector and the public sector need to come together to think about creative solutions, to be able to help,” he said in a video.
Josh Criscoe, a PayPal spokesperson told deBanked that borrowers need only make the minimum monthly payment, generally equal to 3% of the outstanding balance. The APR is 0% until the cash advance is repaid.
Crisco said that any government worker who has gone without pay due to the shutdown qualifies for a $250 cash advance, while most of the others who meet certain credit criteria, are eligible for the full $500.
“We’ve seen strong interest since Friday and through the weekend,” said Criscoe.
PayPal is using public records to confirm that applicants seeking the interest-free cash advances are, indeed, unpaid government workers. And they are asking for certain forms of verification as well.
PayPal is not the only lending institution that is trying to help unpaid government workers. In California, nearly a dozen credit unions are providing financial assistance to their members affected by the shutdown.
“The uncertainty as to when the shutdown will end has created stress and hardship for many credit union members who are now struggling to pay their bills and provide for their families,” said Elizabeth Dooley, President and CEO of the Educational Employees Credit Union, in a statement.
“Credit Unions are offering options to federal employees affected by the partial shutdown – such as skipping a loan payment or zero percent loans – to help their members get through this challenging time.”
LendUp Gets a Shake-up
January 11, 2019
Among other company news, LendUp announced yesterday that it has formed a separate company called Mission Lane that will be devoted to scaling its credit card business. LendUp will continue to operate under its name and will focus on personal loans, education and savings opportunities, according to the announcement. Along with the division of LendUp, company co-founder and CEO Sasha Orloff is stepping down and is being replaced by Anu Shultes, the former General Manager of LendUp Loans.
“Both organizations are focused on helping get consumers on a path to better financial health,” Shultes said of LendUp and Mission Lane, “one will do this through offering loans, and the other through credit cards. I appreciate the Board’s confidence in me and am excited to lead this fantastic organization,” said Shultes.
According to the company announcement, Orloff, who co-founded the company with Jake Rosenberg, will remain involved in LendUp as a board member and in Mission Lane as an advisor. LendUp’s office is in Oakland, CA while the Mission Lane team is in San Francisco.
“Anu brings the perfect combination of background, skills and vision to her role as CEO,” said Orloff. “She’s an absolutely fearless leader, and she’s the right person to shepherd LendUp through its next stage.”
Shultes didn’t say if the company headcount has changed as a result of the creation of Mission Lane, but she said that they plan to grow both businesses. Former Chief Operating Officer of LendUp is interim CEO of Mission Lane, while the company looks for a permanent CEO.
Additionally, with the creation of the new company, LendUp announced that they had received an investment for an undisclosed amount that will be used to scale Mission Lane. The investment was led by LL Funds LLC and Invus Opportunities.
LendUp provides unsecured loans of up to $1,000 to subprime borrowers who might otherwise go to payday lenders. Last year, Orloff told deBanked that one’s credit score is based primarily on two factors: on-time repayment and access to credit that you don’t use.
“So we design our loans and our card products to help people make sure they’re paying on time and make sure that they’re only using the credit that they need.”
Orloff also said that LendUp places an emphasis on financial education and offers customers more money at lower rates if they take the company’s education courses.
Selling a Home, Selling Commercial Financing – What’s the Difference?
November 16, 2018
Alternative funding brokers come from all different backgrounds, but for many them, being a broker is not their first job in sales. Some sold equipment, some sold cars and others sold homes. They were realtors. deBanked found two alternative funding brokers with a background in residential real estate and we asked them to compare the similarities and differences between selling a home and selling money.
Alex Alpert is the owner and CEO of Philadelphia-based Solomon Commercial Lending, which provides clients with a wide variety of funding from SBA loans, equipment leasing, factoring and some MCA. Before starting his company, he had worked as a residential realtor for about five years. When asked about his approach to selling a home versus selling money, he sees them as very different.
“When I consider non-investment home ownership, it is 100% emotional,” Alpert said. “If you think about it, the most expensive and most intimate and emotional purchase that you’re ever going to make is going to be your home. As people, we pour ourselves into our homes. Our homes speak so much about our personalities – what we like, what we don’t. It’s literally like a biography [of someone.]”
Alpert spoke about the intangibles involved in residential real estate, how a lot of it is about the feel of a home, which is highly subjective.
“Instead of you manipulating what they want, it’s just guiding them to reach that ‘ah-ha’ moment,” Alpert said. “I didn’t walk around the house with them and say ‘This is the bedroom and this is the bathroom.’ I would stay back and just say ‘Take a walk around, see how it fits, jump in the bed if you want to, and see how you feel.’ And when they came back down, one of my common first questions would be, ‘Can you picture yourself living here?’ Because that question makes you visualize yourself waking up there. If you can pick up on what the person is showing at that moment, you can guide them better…I think I’m successful because I’m honest, I’m transparent, and I will tell you things you won’t expect. And at the end of the day, that’s how you build referrals and address the needs of an emotional transaction.”
On the other hand, Alpert sees non-primary home deals as more transactional.
“When it comes to business, it’s much less personal,” Alpert said. “People will certainly do their research on who they engage with. Most all of my business comes from referrals. But still, you don’t know me from Adam, and you’re sending me over everything…With [business transactions,] it’s based on need and your ability to serve that need. The emotional part, just from the start, is not that present. It’s a need and solution type of approach.”
Alpert will work with clients with tens of millions of dollars in revenue. But he acknowledged that for some of his smaller “mom and pop shop” clients, transactions can be emotional, like with a small town dance studio client he is helping to secure a 7(a) SBA loan for.
James Celifarco, President of Horizon Financial Group in Brooklyn, which offers mostly small business loans and MCA, currently works as a realtor as well. He doesn’t see much of a difference in the way he approaches residential real estate clients versus small business merchants.
“I think they’re very similar in that if [people] are buying or selling a home, it’s their most coveted possession,” Celifarco said. “It’s what they’ve worked the hardest to obtain. It’s their biggest asset. And it’s the same thing when dealing with a business owner. Business owners are probably more passionate than a homeowner. Either way, if you’re dealing with a business owner or a homeowner, it’s their prized possession.”
While not using the word “emotional,” Celifarco seemed to suggest that non-residential real estate deals are just as emotional.
“[For both homeowners and business owners,] you really have to deal with kid gloves in that they play very close to the vest,” Celifarco said. “You have to have a certain approach where they feel comfortable speaking with you about their home and their finances or their business and their finances. They want to know that their information is protected.”
Celebrity residential real estate agent Ryan Serhant, who spoke at Broker Fair 2018, said that he lives be three rules to successful in real estate: Follow up, Follow through and Follow back. The last refers to following back a client on social media. This part might not always apply, but Celifarco said that the same persistence is required regardless of the sales client.
“It’s all sales,” he said. “You eat what you kill. You close a deal, you make money. You sell a house, you make money. If you don’t, if you’re not reaching out to your clients, you’re not going to make any money. It’s the same in that you get paid for how hard you work.”
SoFi Has Another Loss in Q3
November 12, 2018According to the WSJ, SoFi experienced a $12 million EBITDA loss in the 3rd quarter. That follows a $150 million loss in Q2.
“We optimized for investing over profitability this quarter, and expect this to continue given the opportunity in front of us,” SoFi CEO Anthony Noto wrote in a letter to shareholders obtained by the WSJ.
At Money2020 last month, Noto suggested that the company would eventually need to open physical locations to manage cash transactions.
LendingClub Hits Another Record for Originations
November 7, 2018LendingClub’s Q3 earnings report yesterday revealed a record high in loan originations of $2.9 billion, up 18% compared to originations of $2.4 billion last year at the same time. Consequently, revenues increased, also to a record high of $184.6 million, up 20% year over year.
“The strength of our marketplace is enabling us to responsibly grow revenues and expand margins in a competitive and rising rate environment,” said LendingClub CEO Scott Sanborn. “Our strategy in execution is focused on borrower demand generation and conversion, broadening our investor base with products that meet their diverse needs and driving operating efficiency.”
The veteran online lending company has been growing steadily with originations of $2.8 billion in the second quarter of this year. Regulatory challenges, namely an April 2018 lawsuit filed against LendingClub by the FTC for misleading language to customers, seem to be resolving and have not impeded the company’s growth.
In October, Sanborn spoke at the Money 20/20 conference about the connection between financial health and physical health and LendingClub’s goal of trying to improve both for its customers.
“LendingClub wants to become America’s financial health club,” Anuj Nayar, Lending Club’s newly minted Financial Health Officer, told deBanked at Money 20/20. In his new role, Nayar, who also serves as head of communications, will communicate and try to affect better financial health.
Lending Club offers fixed rate business loans from $5,000 to $300,000 and personal loans of up to $40,000. The company also offers auto refinancing. Founded in 2007, Lending Club is headquartered in San Francisco and went public on the New York Stock Exchange in 2014.
SoFi CEO Ponders Opening Physical Locations
November 5, 2018
At Money 20/20 a few weeks ago, SoFi CEO Anthony Noto said that eventually the online lender will need to open some physical locations, not unlike ATM machines, for people who get paid in cash.
The notion of an online lender opening up physical locations sounds ironic. But it would not be the first time a company that started by providing an online solution then opened up physical locations. Amazon’s book stores, which first opened in New York in 2017, is a prime example. The e-commerce giant, which started as a uniquely online-only company, now has more than a dozen book stores. Similarly, Bonobos, which started as an online-only men’s clothing solution – that simplified shopping by avoiding physical stores – now has over 50 brick and mortar locations.
“A few years ago, being online and having a fast-growing Instagram was enough to drive market share away from main street and into our e-commerce stores,” according to a Forbes post this year, “but the amount of brands selling online is reaching such a high number that getting noticed is becoming harder and harder.”
While retail and lending are different businesses, the idea of getting noticed could apply to both.
With the increasing popularity of e-commerce and digital solutions to everything, including banking and lending, some have said that brick and mortar banking is on its way out. But data contradicts this. According to an American Banker story from March of this year, JPMorgan Chase said it intends to open as many as 400 new branches in Boston, Philadelphia and Washington, D.C. And Bank of America announced plans to add about 500 branches. On the other hand, according to the story, Wells Fargo closed 214 bank branches in 2017 and said it plans to close more than 1,000 by 2020.
But a survey released this year by J.D. Power, a research company, found that most customers prefer to open accounts and get financial advice in person.
The ultimate brick and mortar location in the world of lending is the payday lending store, which serves – or targets – the low end of the consumer market living paycheck to paycheck. Still, that is industry is alive and well, with about 12 million American taking out loans at physical stores like these, according to Finder.com. And online lenders like Elevate are actively trying to poach customers of these stores.
Lending professionals are using of brick and mortar spaces creatively these days. Brother James and John Celifarco recently moved their ISO shop to a storefront in Brooklyn, and many of their clients are neighboring small businesses.
“Obviously you can’t build an entire business on just these two streets,” John said, “but it’s extra business that we wouldn’t have had if we weren’t here.”
Elevate Tests ‘Geofencing’ to Lure Customers Away from Competition
November 1, 2018
During a session at Money 20/20 last week, Elevate CEO Ken Rees mentioned a fairly new marketing technique they have been testing called geofencing. According to a story in CIO, a trade publication for Chief Information / Chief Technology Officers, geofencing is “a service [using GPS technology] that triggers an action when a device enters a set location.” For Elevate, these set locations are payday loan stores and the idea is for the company to detect and then market to prospective customers who may have recently visited a payday loan store. People visiting such stores would likely be good candidates for Elevate’s Rise product.
“It can’t be a completely [random person,]” Elevate’s COO Jason Harvison told deBanked. He explained that the prospective customer had to have somehow engaged previously with Elevate, which could mean that they visited Elevate’s website.
Daniel Rhea, Elevate’s Senior Communications Manager, said that they don’t have the ability follow people. Instead, what they can do is tell when someone gets near one of their targets (payday loan stores) and then present them with ads. The mobile ads are not served immediately. Rhea said that ads could be served to someone who entered the target zone up to 90 days later.
“We’re not trying to get you at that exact moment,” Harvison told deBanked. “It’s not something that’s going to interfere with your transaction at a payday loan store, but it’s going to inform you that there is a better option out there.”
According the CIO article, retailers use geofencing to market to people who are in the vicinity of their stores. The technology is also being used for home convenience (to turn on a thermostat when someone arrives at their house) and for security (to alert a someone when others enter or leave their home or business).
Many of these uses of geofencing require that an app is downloaded to the user’s phone. Elevate system does not involve an app, but the individual’s location services on their phone must be turned on. So how can Elevate identify people within its target zones? As an example, Rhea said that if you use the public wifi at a Starbucks, Elevate can identify you. And he said that the same applies for when someone uses bluetooth.
“There’s a lot of people [using] this,” Rhea said. “Politicians are microtargeting around polling stations. It’s not that it’s uncommon. It might be uncommon in our space.”
Rhea said that this program, which started at the beginning of 2018, is still in a pilot phase, but that Elevate hopes to place geo-targets around every payday loan store in the country.
“[If you’re going to a payday loan store,] we want to try to entice you to not take out a product in a storefront and use a more consumer-friendly product that we take to market,” Harvison said.
Prime and Non-prime Lenders Exchange Notes
October 25, 2018
Ken Rees, CEO, ElevateAt Money 20/20 Ken Rees, CEO of Elevate, a non-prime consumer lender, sat down with David Kimball, CEO of Prosper, a prime consumer lender. As they discussed a number of topics, listeners got insight into how these lenders think, and how they think differently based on the customers they serve.
On Partnering with Banks
Rees said that he is eager to partner with banks and that banks have spoken to him about a gap they have – namely, the fact that they have thousands, if not millions, of checking account customers with low Fico scores for whom they have no other products to offer. Elevate has products for these banks’ non-prime customers.
“Banks have customers and we want to work with them,” Rees said.
Rees said that the very large banks may have the resources to develop new products on their own, but that there are thousands of mid-sized banks to partner with.
Kimball, who was CFO of USAA Federal Savings Bank, had some advice for fintechs on how to approach a potential partnership with a bank.
“Don’t go in thinking they’re stupid,” he said. “Assume that you have a really good partner.”
Furthermore, Kimball said that having worked at a bank during the recession, “when you break things, regulators aren’t so happy to work with you again.” By this, he meant that bankers may have very legitimate concerns about taking on risk by working with a fintech company.
Kimball continued, “You need a good champion at the right level [at a bank] to move you forward.”
David Kimball, CEO, ProsperOn a Looming Recession
Kimball said that Prosper is being more conservative with its underwriting now. On the other hand, Rees said that a recession doesn’t concern him as much.
“Our customers are always living in a recession,” Rees said.
On Speed vs. Rate
“For prime customers, it’s all about rate. For non-prime, it’s all about speed, how fast they can get the money,” Rees said.
On Marketing
Kimball said that direct marketing still works best to get new customers, while Rees mentioned a new geo-marketing tool that alerts Elevate when a potential customer approaches a payday lending shop. Someone visiting a payday lending shop would likely be a good customer for Elevate. Rees conceded that “this could be kind of creepy.” But it’s a new approach.
