Lendr Launches New Business Debit Card
April 9, 2018
Chicago-based Lendr is launching a new business debit card program, according to an announcement the company made at LenditFintech.
This will give them the ability to fund business owners in real-time via an instant access virtual Mastercard followed up with a traditional plastic card. This system is different than pushing funds to a merchant’s existing bank debit card, which fellow online lenders Kabbage and LendingPoint announced at LendIt.
“The idea is to offer a product that makes access to capital as easy as ‘1-2-3,’” CEO Tim Roach told deBanked. “We will have the ability to deposit funds on the Mastercard in real time, making the process seamless for our clients.”
Funding a Deal Near the Holidays?
March 30, 2018
With the Easter / Passover holidays upon us, deBanked wondered if closing deals is easier or harder during this period. Josh Feinberg, founder of Everlasting Capital, a funding company, told deBanked that he thinks it’s easier to close a deal in the two weeks before a major holiday.
Why? Because he said that merchants are preparing to go on vacation and often want to get major decisions out of the way, while funders are looking to fund as much volume as possible.
At the same time, Feinberg said that application flow typically goes down the week before and after a major holiday as many people are out of their offices.
From the broker side, Anthony Frisone, founder of the ISO Nest Planner, told deBanked that there’s no shortage of merchant demand for capital during the holiday time.
“I’m overloaded with deals,” he said. “It’s busier than usual, but I also have fewer employees because they’re taking off for vacation.”
Pearl Beta Funding Decision a Boon to MCAs, as Long as They’re True to Their True-ups
March 26, 2018While the recent Champion Auto Sales, LLC et al. v Pearl Beta Funding, LLC decision was a win for MCA companies because it determined at the appellate level that an MCA contract issued by Pearl Beta Funding to Champion Auto Sales “was not a usurious transaction,” many lawyers are saying that, more than anything, this decision has demonstrated the importance of having strong contracts with merchants.
So what made Pearl Beta Funding’s contract so strong in the eyes the judges?
“I would say that there were a variety of factors,” said Steven Berkovitch, who represented Pearl Beta Funding in this case along with lawyers from DLA Piper. “The first thing that the judges look for is if there’s a way for the merchant to modify their payments.”
This, in essence, is what is known as the “true-up” in an MCA contract. More specifically, Berkovitch said that the true-up is a contractual obligation on the part of an MCA funder to adjust the daily payment it receives from a merchant to more accurately reflect the percentage of receivables it is owed.
Pearl Beta Funding CEO Sol Lax takes this seriously. He told deBanked: “Our front line servicing guys are well trained to respond when a merchant says ‘My deposits are down, my business is down, can I do something?’ They’re trained to know that the answer is ‘Yes. Send us some bank statements, we’ll look at it and we’ll adjust accordingly.’”
In this case, Berkovitch said that Champion Auto Sales did not use the true-up clause and did not request a payment modification when it was available to them.
“We have, literally, dozens upon dozens of cases where we’ve done the true-up,” Lax said. “So, it’s not just a contract. If [an MCA company] violates the true-up in practice and a merchant calls you and you say ‘hell no,’ that would be, not just a contractual violation, that would put a hole in your true-up clause.”
Many have remarked on how the decision of this case has already impacted the MCA industry. Berkovitch can see that himself. After the case was decided, he said that opposing attorneys have contacted him to withdraw their cases against his other MCA company clients.
Lax acknowledges, with modesty, what this decision means for the MCA industry at large: “You have a safe harbor now for the first time where, if you have a well-drafted contract, then you have active compliance [and] you’re pretty well off. Until this was settled in court, it was still up in the air.”
But Lax doesn’t take this victory for granted.
“You may still see challenges on specific [fact] patterns where a client can show that they had called, they asked for a true-up, and they were told ‘No true-up is available. You got to pay or we’re going to take all of your stuff,’” Lax said. “If they can show a pattern like that, then the MCA company is in trouble. They’ll have a hole blown right through their contract.”
SBFA Braved Snow Storm for Spring Fly-In
March 23, 2018
The Small Business Finance Association (SBFA) had their Washington DC Spring fly-in earlier this week. SBFA members met with Karen Kerrigan, the President and CEO of the Small Business & Entrepreneurship Council, on Tuesday afternoon, and Congressman Josh Gottheimer (D-NJ) in the evening.
Despite the blizzard, a handful of members continued to meet with members of Congress on the Hill on Wednesday.
Founded ten years ago, The SBFA is a non-profit advocacy organization dedicated to ensuring Main Street small businesses have access to the capital they need to grow and strengthen the economy.
2017 Small Business Financing Leaderboard
March 14, 2018Thanks to several companies filing their annual earnings statements and Funding Circle disclosing their USA origination figures for 2017, we’ve been able to put together a leaderboard in the small business financing space. This list is not comprehensive and omits key players like PayPal Working Capital and Amazon Lending.
| Company Name | 2017 Originations | 2016 | 2015 | 2014 |
| OnDeck | $2,114,663,000 | $2,400,000,000 | $1,900,000,000 | $1,200,000,000 |
| Kabbage | $1,500,000,000 | $1,220,000,000 | $900,000,000 | $350,000,000 |
| Square Capital | $1,177,000,000 | $798,000,000 | $400,000,000 | $100,000,000 |
| Yellowstone Capital | $553,000,000 | $460,000,000 | $422,000,000 | $290,000,000 |
| Funding Circle (USA only) | $500,000,000 | |||
| BlueVine | $500,000,000* | $200,000,000* | ||
| National Funding | $427,000,000 | $350,000,000 | $293,000,000 | |
| Strategic Funding | $393,000,000 | $375,000,000 | $375,000,000 | $280,000,000 |
| BFS Capital | $300,000,000 | $300,000,000 | ||
| RapidAdvance | $260,000,000 | $280,000,000 | $195,000,000 | |
| Credibly | $180,000,000 | $150,000,000 | $95,000,000 | $55,000,000 |
| Shopify | $140,000,000 | |||
| Forward Financing | $125,000,000 | |||
| IOU Financial | $91,300,000 | $107,600,000 | $146,400,000 | $100,000,000 |
*Asterisks signify that the figure is the editor’s estimate
The Underwriters – How A Small Team Is Turning Underwriting Into Big Business
March 13, 2018
A keen eye can spot a good deal. And for New York-based Central Diligence Group, an underwriting-focused company founded in 2015 by four partners, it has been a boon for business. The company has lately been providing its underwriting expertise to a wider variety of clients, including some outside the MCA space.
“We started to gear towards a more underwriting-centric model [where] a deal would come in, we underwrite it once, we assess the risk, we determine what box it would fall under and where it would qualify, and depending on what that pedigree of information [was], we would essentially [fulfill] the full underwriting [job,]” said Nick Gregory, one of the founding partners at Central Diligence.
Initially, the company provided underwriting services mostly to smaller funders, syndication brokers and ISO clients that service MCA merchants in the construction and trucking businesses, among others. But close to three years later, its roster of clients is far more diverse.
Over the past six to eight months, Central Diligence has been working with a west coast-based credit card processing company with a portfolio of over 100,000 clients, according to Andrew Hernandez, another Central Diligence partner. The credit card processing company has just built out its own MCA product, but they don’t have an underwriting team, which is where Central Diligence comes in. Hernandez said that this company, the identity of whom he could not disclose, just renewed its contract with them.
Another unique client is an institutional investor, with offices in New York and Dallas, that just formalized a new working relationship with Central Diligence over the last week to go beyond just underwriting and into the realm of funding and servicing. According to Hernandez, this client is looking to make investments in MCA at the higher end of the market.
“In our space, $50,000 to $250,000 is pretty easy to come by, but $250,000 to $1 million, not so much,” Hernandez said. “So they see that there’s a gap with small businesses…and they’re using us to do [due] diligence [on companies.]”
Finally, Central Diligence is finishing an agreement with another unconventional client, an overseas mortgage company with interest in MCA. According to Hernandez, it is looking to execute a kind of beta test in the U.S. and then take the business model to Europe if it works.
In addition to the four founding partners, who work as underwriters, there are four additional underwriters and two junior underwriters for a total of ten on staff.
Hernandez attributes these new opportunities to the reputation they have built in the MCA space, including the 10+ years of experience that each of the founding partners have.
“Because of our experience and history in the space, a lot of our relationships have been built because of our credibility,” Hernandez said. “That’s the most important.”
Thinking Capital Acquired by Canadian Finance Firm Purpose Financial
March 12, 2018
Thinking Capital, a leader in the fintech lending industry in Canada, was acquired last week by Canadian finance company, Purpose Financial, based in Toronto.
“Under the Purpose Financial umbrella, our time to market on product innovation and funding capacity will be greatly amplified,” said Jeff Mitelman, CEO and co-founder of Thinking Capital.
Mitelman, who co-founded Thinking Capital in 2006, has long been an advocate for improving the way small business credit is evaluated and communicated in Canada.
“The challenge in Canada is that our lending institutions historically either don’t lend to small business or don’t lend to enough of our small businesses,” Mitelman told deBanked. “And that’s driven by the fact that so many of the measures of small business credit worthiness simply don’t exist. Our credit bureaus don’t report on it, there aren’t metrics or scores unique to small business, and most significantly, small business credit has never been attached to retail or institutional conduits for funding.”
This is where Purpose Financial comes in. Mitelman believes that Purpose Financial’s investment arm and its relationship with Omers, a large Canadian pension fund, will provide small businesses with “access to conduits that historically small businesses have never been able to access.”
Thinking Capital provides an MCA product, which it calls Flexible, as well as a term product, which it calls Fixed. It also helps power loans provided by large companies like Staples.
Purpose Financial has three verticals: Investment Management (retail and institutional), Digital Technology, and Capital / Funding.
“Thinking Capital is a clear leader in the small to medium-sized business lending space…” said Som Seif, CEO of Purpose Financial. “[And] this acquisition brings together leading origination, asset management, and technology platforms as a unified entity, and enables us to bolster our product capabilities and optimize the technology, distribution, and funding model of our combined business.”
Enova’s TBB Did $15M in Merchant Cash Advance Revenue in 2017
March 12, 2018International online lending conglomerate, Enova, generated $843.7 million in revenue last year, according to their recent annual report. More than $15 million came from merchant cash advances (MCAs) made through The Business Backer (TBB), a small business financing company they acquired in 2015. That’s down from $18.6 million in MCA revenue generated in 2016.
Though MCA revenue may be down, TBB began offering an installment small business loan product in 2017. They’re available in 10 states, according to the company.
Enova refers to MCAs as RPAs in their reports, short for Receivable Purchase Agreements. “Small businesses receive funds in exchange for a portion of the business’s future receivables at an agreed upon discount,” they state.”A small business customer who enters into a RPA commits to delivering a percentage of its receivables through ACH or wire debits or by splitting credit card receipts until all purchased receivables are delivered.” That is a textbook explanation of MCAs.
Their average “RPA” customer averages $1.5 million in annual sales and has 10 years of operating history.
