Defunct MCA Company Tried to Escape Signed Confession of Judgment
December 13, 2018
When a Florida-based merchant cash advance company, World Global Financing (WGF), declared bankruptcy this past May, it entered into a binding settlement agreement with its largest creditor, a hedge fund known as Eaglewood.
There was a caveat.
Eaglewood required that WGF sign a Confession of Judgment (COJ) as part of the agreement that would afford Eaglewood the right to file and obtain a judgment without further litigation if WGF breached the settlement. On August 3, that’s exactly what happened. After WGF failed to make the stipulated payments to Eaglewood, the COJ was filed in the New York Supreme Court so as to obtain a nearly $6 million judgment against WGF and company founder Cyril Eskenazi.
While it can be virtually impossible to invalidate a COJ, the courthouse Clerk nonetheless refused to enter it because of alleged technical defects, one of which involved WGF’s use of an out-of-state notary to witness a New York State affidavit.
“The alleged Affidavit of Confession of Judgment upon which Eaglewood’s request for a Judgment by Confession stands like a house of cards is no affidavit at all under New York law, and cannot be used in a New York litigation,” WGF’s attorney argued.
The absurdity of the argument was not lost on Eaglewood because the notary WGF challenged on technical grounds was the notary that WGF and its counsel had themselves chosen and approved. Eaglewood called the charade of contesting the validity of one’s own affidavit signed in the presence of counsel, utterly frivolous and a fraud upon the Court.
Defects or not, the judge concurred with Eaglewood because WGF had irrevocably and unconditionally agreed to the entry of judgment if they breached the settlement agreement in the first place, which they did, rendering the alleged technical errors with the COJ itself a moot point.
The COJ was therefore deemed valid and the judge ordered the Clerk to enter the judgment.
On Nov 29, a judgment for $5,866,477 was entered against WGF and Eskenazi. The index # is 651489/2018 in the New York Supreme Court.
Senate Bill Introduced to Ban Confession of Judgments Nationwide
December 6, 2018
Senators Sherrod Brown and Marco Rubio have called for a nationwide ban on Confessions of Judgment in response to the Bloomberg Businessweek series published last month. The bill, which would amend the Truth in Lending Act, may be named the Small Business Lending Fairness Act.
You can download the bill here
Though Businessweek has been successful in pressuring regulators to conduct inquiries into several merchant cash advance companies and the New York City marshals, authors Zachary Mider and Zeke Faux have remained notably silent on the gaping holes in their narrative. Questions posed to each reporter have yet to receive any responses.
deBanked researched the accuracy of Businessweek’s findings only to determine that two of the purported victim’s stories were not credible. In one case, a business owner that was said to have been “wiped out,” was bragging about his new luxury race car on facebook while public records revealed he was still paying himself six figures a year from the allegedly defunct company that had more than $700,000 running through its bank accounts. In another case, a victim that claimed to be selling off household furniture to buy food after a run-in with a predatory lender, turned out to be a multimillionaire TV station owner.
OnDeck Expands Canadian Business with Merger
December 5, 2018
OnDeck announced today that it has entered into an agreement to merge its Toronto-based Canadian business with Evolocity Financial Group (Evolocity), an online small business funder headquartered in Montreal. OnDeck will have majority ownership of Evolocity and the combined entity will be rebranded as OnDeck Canada.
“The combination of OnDeck’s Canadian operations with Evolocity will create a leading online platform for small business financing throughout Canada and represents a significant investment in the Canadian market,” said Noah Breslow, Chairman and CEO of OnDeck. “There is an enormous need among underserved Canadian small businesses to access capital quickly and easily online.“
According to the announcement, “the transaction will combine the direct sales, operations, and local underwriting expertise of the Evolocity team with the marketing and business development capabilities of the OnDeck team.”
As part of the merger, Neil Wechsler, who is the CEO of Evolocity, will become the CEO of OnDeck Canada. And the management team will include Evolocity co-founders David Souaid as Chief Revenue Officer and Harley Greenspoon as Chief Operating Officer. OnDeck Canada will be governed by a Board of Directors chaired by Breslow and composed of existing OnDeck and Evolocity management.
Currently, OnDeck offers a variety of loans up to $500,000 and lines of credit up to $100,000. Evolocity offers small business loans and an MCA product, from $10,000 to $300,000. deBanked inquired with OnDeck to see if OnDeck Canada will retain the MCA product from Evolocity, but has yet to hear back. Since OnDeck entered the Canadian market in 2014, it has originated over CAD $200 million in online small business loans there. Evolocity has provided over CAD $240 million of financing to Canadian small businesses since 2010.
Investment in online small business lending in Canada is growing. IOU Financial, a Montreal-based small business funder that primarily funds American small businesses, told deBanked last month that they made a concerted marketing effort in the third quarter to reach Canadian small business owners. Meanwhile, Thinking Capital, a Canadian online small business funder, announced in July the launch of BillMarket, a service that provides Canadian small businesses with a credit grade (A through E), making it easier for them to get funded.
“BillMarket represents a cash flow revolution for the Canadian small business market,” said Jeff Mitelman, CEO of Thinking Capital, which has roughly 200 employees between its Toronto and Montreal offices.
According to a recent Canadian government report cited by OnDeck in its announcement today, there are 1.14 million small businesses in Canada that represent 97.9 percent of all businesses in the country. Also, small businesses employed over 8.2 million people in Canada, or 70.5 percent of the total private workforce.
Evan Marmott, founder of Canadian small business funder, Canacap, told deBanked earlier this year that unlike the saturated small business market in the U.S., the Canadian small business market is still ripe for growth. Not only this, he said that while the market is smaller in Canada, the default rates are generally lower and he found that Canadian merchants do less shopping around. He also said he has seen less fraud in Canada than in the U.S.
“For brokers, while commissions are lower, you could actually speak to business owners who are not being bombarded with calls [as they are in the U.S.] and have a much higher closing rate,” Marmott said.
Evolocity has 70 full-time employees and offices in Montreal, Vancouver and Marham, in the Toronto area. OnDeck has funded over $10 billion to small businesses and became a public company (NYSE: ONDK) in 2014. OnDeck is headquartered in New York.
“We are excited to join forces with OnDeck…to enhance our best in class digital financing solutions to small businesses across Canada,” said Wechsler, Evolocity CEO. “Additionally, this transaction will augment our data science and analytics capabilities to help deliver an unparalleled merchant experience.”
Popular Business-Lending Marketplace Dealstruck Restructures
December 3, 2018VALLEY STREAM, N.Y., Dec. 3, 2018 — Innovative online business-lending marketplace Dealstruck.com (which has been featured in CNBC, The New York Times, Forbes and many other publications) has reorganized. A private investment group of fintech experts acquired the company. “This acquisition represents a significant strategic opportunity for our client base,” said Dealstruck CEO Anthony Porrata.
Dealstruck is a leader in the alternative lending space. The company provides small and medium-sized business owners with seamless access to capital. Advances in technology make the process quick and efficient with minimal paperwork.
During the restructuring process, the company paused providing loans. “Recently, many people have asked, ‘What happened to Dealstruck?’ There were rumors that Dealstruck shut down but that was not true,” noted Porrata. “We’re happy to announce the Dealstruck news that a group of private investors has created a new ownership coalition that is leading a bold evolution for the company.” The new investment group combines a portfolio of existing small business capital providers with the highest technological advances in the field of online business loans.
Company leaders expect the change will help small businesses immensely. “Clients will see quicker approval turnarounds and a more streamlined process,” said Porrata. “This will also help clients who would not otherwise have equal access to growth opportunities.”
Vice President Chris Jones expects small business owners will be excited about the Dealstruck news. “This restructuring will allow us to approve more clients than ever before,” he smiled. “I’m looking forward to joining many new business ribbon-cutting ceremonies. Nothing gives us more pride than a grand opening.”
The reorganization allows Dealstruck to expand its mission while maintaining the personalized service that makes it so well known. The new management team has access to more capital and creative financing terms for Dealstruck clients.
About Dealstruck: As a leading online capital facilitator, Dealstruck connects small and medium-sized businesses with access to a variety of working capital options. These options help business owners find custom-tailored loans, so they can better manage their time and achieve their goals. For more information, visit dealstruck.com.
Contact:
Anthony Porrata – CEO
855-610-5626
info@dealstruck.com
What We Learned About Credibly From Credibly’s Securitization
November 29, 2018Today, Credibly CEO Ryan Rosett told deBanked that the company’s October securitization will be used, in part, to roll out its new Market Expansion Product (MXP), which will allow Credibly to service merchants with FICO scores as low as 500 and those that have been in business for less time.
“We believe the MXP will open up the funnel by allowing us to serve business owners that we previously couldn’t,” Rosett said.
Kroll Bond Rating Agency assigned preliminary ratings to three classes of notes as part of Credibly’s first securitization. Rosett said this securitization follows a large warehouse line of credit from SunTrust Bank which is also the primary underwriter, of the securitization.
In addition to the new MXP product, Rosett said that Credibly intends to launch a line of credit product in 2019. Currently, Credibly provides merchant cash advances up to $150,000, business expansion loans up to $250,000, with terms up to 24 months, and working capital loans up to $250,000 with terms up to 17 months. Rosett said that the company’s working capital loan is its most popular product.
In an interview yesterday with Benzinga, Rosett said that he has seen a strong increase in demand for Credibly’s products and that they are currently evaluating over 10,000 applications per month.
2017 net revenue before provisions: $33 million
2017 earnings: $1.4 million
Total shareholder equity: $18.7 million
Lifetime funding volume: $700+ million
Raw # of fundings: 17,000+
Majority owned by: Flexpoint Ford
# of employees: 140
Notable deal: Acquired the rights to service BizFi’s $250 million MCA portfolio in August 2017
Provides: Small business loans (in 37 states and D.C.) and merchant cash advances
Founded: 2010 by co-CEOs Edan King and Ryan Rosett
Generates deals via: Brokers and inside sales
Multimillionaire CEO Claims Predatory Lenders are Causing Him to Sell His Furniture for Food
November 22, 2018
Two months ago, a billionaire hedge-fund manager named Philip Falcone, the 377th richest person in the United States who once “put the squeeze on Goldman Sachs,” led a Virginia-based investment group to make a strategic purchase of a local Telemundo TV station in Columbus, Ohio. The seller, a company led by local businessman Richard Schilg, pocketed a lavish sum of $850,000, according to the Columbus Dispatch.
Two months later, Schilg, who is 61-years old, had become so poor and destitute that he would have to sell his furniture just to buy food. That’s what Bloomberg Businessweek says of Schilg in its purported tell-all piece about predatory lending. Though Schilg successfully negotiated a deal with a Wall Street billionaire, he apparently was outmatched and “unable to defend himself” when it came to much less sophisticated transactions at his other business, Pathmark HR, a human resources company located 15 miles outside of Columbus.
Pathmark HR is anything but small. At the end of 2017, Schilg’s company was on track to gross $20 million a year in sales. Along the way, he engaged in commercial finance transactions that required the sale of future receivables, non-loan arrangements that businesses use to fuel their growth.
They did not go as planned. Multiple financial companies obtained judgments to enforce the contracts that Pathmark HR had entered into, NY State court records confirm. Schilg told Bloomberg Businessweek that “your life is ruined by their contract.”
But if that’s the case, it stands to reason he wouldn’t enter into one again.
Pathmark HR kept applying for more of these things, industry insiders told deBanked, though the stream of judgments filed against his business from competitors offering similar products have served as a veritable red flag for underwriting departments. That would’ve created a problem for Pathmark HR if it intended to rely on that type of capital going forward.
That’s when a straw man appeared.
According to a purported (and admittedly unauthenticated) corporate resolution reviewed by deBanked, Schilg appears to have transferred his majority interest in Pathmark HR to an 82-year old minority shareholder named Robert Renzetti, who lists a small mobile home more than 1,000 miles away in Sarasota, FL as his residence.
There’s a catch. The corporate resolution (dated in 2017) says that Schilg can just buy the shares back from Renzetti in the future. Either way, several finance companies said they received applications for capital from Pathmark HR up through and including this year, with only Renzetti’s name and information included. Schilg’s is nowhere to be found.
Schilg, who Bloomberg Businessweek portrays as so poor that he’s more-or-less eating his household furniture to stay alive, is the former founder, chairman and CEO of Team America Corp, a staffing organization that grew to more than $350 million in annual sales by 1999. That’s more than $500 million at today’s value, larger than almost every single alternative funder that deBanked ranked in 2018.
Meanwhile, the only thing that separates Schilg from the sale of his TV station to a billionaire is FCC approval. Hopefully the man has enough furniture to see it through.
This is the second in a series of articles relating to a fanciful tale in Bloomberg Businessweek
Dan DeMeo is Back in Action… at Lendr
November 15, 2018
Daniel DeMeo has been hired as Chief Revenue Officer by the Chicago-based funder, Lendr.
DeMeo has been working as an independent consultant for the last two years, according to LinkedIn. Prior to that he was the CEO of CAN Capital, a company he had dedicated himself to for nearly seven years until an internal account performance issue led to several senior executives taking an immediate leave of absence.
Under DeMeo, CAN enjoyed success as one of the nation’s largest non-bank small business financiers, partially attributed to the company’s major head start in pioneering merchant cash advance products when the company was founded in 1998. DeMeo even landed on the cover of deBanked’s November/December 2015 issue, around the time when the company was widely believed to be planning an IPO.
It never happened.
The systems issue that toppled CAN’s top execs including DeMeo, brought the company to its knees, putting all new funding on hold for six months until it was saved by a capital infusion from Varadero Capital in July 2017. CAN Capital survived while DeMeo has notably since then kept a low public profile.
Now he’s back in action at Lendr, an ambitious funding company that offers MCAs, small business loans, equipment financing, and just recently, factoring.
“Dan is a highly strategic and thoughtful leader with broad perspective of the industry that enables him to understand specific challenges we face as a growing company,” said Tim Roach, CEO of Lendr. “Dan’s experience is a perfect addition to the team as we accelerate our growth plans, raise Lendr’s brand recognition, and further increase our market share.”
“I’m thrilled to be joining such a dynamic and progressive company,” said DeMeo. “Lendr has emerged as one of the leaders in the financial solutions space and we are poised to build strategic partnerships and alliances with those who share the same zeal in helping small- and medium-sized businesses grow.”
Lendr is setting its sights high. “We’ll be north of $100 million in our first year of factoring,” Lendr co-founder and CEO Tim Roach told deBanked in September.
The company has also been showing off its technological and fundraising prowess as of late. This past March, they closed on a $25 million credit facility that’s expandable up to $50 million. That news was followed by the announcement of a new funding option made possible through virtual and physical debit cards.
Lendr has offices in Chicago and New York and employs over 45 people.
IOU Continues to Post Positive Earnings
November 14, 2018
Loan originations for IOU Financial’s third quarter were $36.1 million, an 85% increase over last year’s Q3 originations of $19.6 million. This is also IOU’s fourth consecutive quarter with positive earnings.
“IOU continued to deliver strong loan origination growth and earnings performance during the third quarter of 2018 and we have successfully managed loan defaults as a result of measures implemented last year,” said IOU Financial CEO Phil Marleau.
The measures implemented last year refer, in part, to changes in collection efforts, such as using a more aggressive litigation strategy against businesses that default on their loan obligations, Marleau told deBanked. Provisions for loan losses in Q3 were $1.2 million, a decrease of 51% compared to last year at this time.
Most of IOU’s revenue comes from making loans of up to $300,000 to American small businesses. Marleau said the average IOU loan is for $100,000 with a 12 month term, although they do offer terms up to 18 months. A significant percentage of IOU’s merchants use the business loans to purchase equipment. Other loans are used for business expansion and temporary cash flow. To date, IOU has originated nearly $600 million in loans.
Despite the fact that the lender mostly services the American market, with its headquarters in Montreal and its stock listed on the Toronto Stock Exchange, IOU made a marketing push this quarter to expand its service in Canada.
“We’ve been getting the word out to brokers that we’re looking to serve Canadian merchants,” Marleau said.
Ironically, in many cases, that has meant telling American ISOs who market to Canada that IOU is open for business in its own country.
Marleau, who is Canadian, met cofounder and IOU President Robert Gloer at a fintech conference in San Francisco, and the company’s first loan was made in 2009. Gloer had ties to Atlanta, which is why IOU’s U.S. office is located there. While the company’s headquarters is in Montreal, the Atlanta office is larger and is where the company’s sales operations take place. The company has about 40 employees, but only about ten work at the Montreal headquarters.
