BFS Capital’s Marrache on Canadian Small Business Landscape
January 28, 2018
It’s been about five months since Michael Marrache took the reins as CEO of BFS Capital. He spoke with us then about the company’s algorithmic solutions, ISO relationships and product pipeline. He recently took some time to talk with deBanked about the key themes in the Canadian market in 2018 – from minimum wage, to the impact of US tax reform on the Canadian economy, to ISO opportunities — and BFS Capital’s role there.
deBanked: When did BFS Capital begin operating in Canada?
Marrache: BFS Capital funded its first loan in Canada in 2012. Traditionally, we have approached Canada’s market via our partner channel, both US and Canada based. We plan on increasing that effort in 2018.
deBanked: Is Canada a market that BFS Capital recognizes as growing?
Marrache: Canada is a growing market for BFS Capital, though our non-US markets, including Canada and the UK, currently represent less than 20% of our global $300 million in financings. We see significant upside in both Canada and the UK in the next 12 months.
deBanked: What are the themes as you see them for Canadian small businesses and BFS Capital in 2018?
Marrache: There might be more insecurity among Canadian small businesses this year. The 2018 minimum wage increase to $14 an hour in Ontario, expected to rise again in 2019, for example, might cause some small businesses to have to cut hours or reduce staff to make up for the expense. They may have to raise their prices, which could impact demand.
Additionally, recent policy and legislative changes in the US could also impact Canada. For example, tax reform in the US, specifically a reduction in the US corporate rate, will put the US on par with Canada in terms of tax rates and similar burdens. At the same time, US regulations are being reduced while Canada’s appear to be increasing. All of this is part of the current US government’s initiative to drive domestic business growth and we are not sure how it will affect Canada’s economy, business confidence and consumer spending.
The Canadian dollar is also forecast to remain weak and might continue to fall for a while longer. With US tax reform potentially boosting the economy here, the US Fed is likely to raise interest rates, which might reduce demand for the Canadian dollar. The CAN$ could further slide if Bank of Canada cuts rates again. [Scotiabank]
At the core, however, Canada has 1.1 million small businesses. Not a small number. There were more than 350,000 small businesses created in Canada in 2016 and 42% of job creation in the country in the past decade stemmed from firms with fewer than 100 employees (CIBC Capital Markets). These businesses need working capital for a variety of needs related to their everyday business and, importantly for where we fit in, it has traditionally been difficult for small businesses to obtain financing from banks.
BFS Capital financing has come into the mainstream because it’s more accessible than a bank loan, less expensive than equity, and less risky than bootstrapping. Our financing solutions also require less commitment than taking on a partner or getting venture capital. Moreover, the few big banks in the market have tended to shy away from small businesses, so we have seen an opportunity with our ISO partner-base and directly, for our lending solutions.
Today small businesses in Canada can get the money in their account in just a day or two and there are a variety of products with different rates and payment options. As the market in Canada gets more competitive the rates will continue to go down.
deBanked: The last time I spoke with you, you talked about automated solutions, transparency tied to ISOs and company culture. Are these at the forefront of the Canadian business as well? Explain.
Marrache: Yes. These initiatives are embedded in the company strategy at the top. We believe speed is required but not sufficient; the company must lead with a culture of service and transparency. We are also investing in data science to improve risk profiling and process efficiencies for every partnership and every financing, including in Canada. These initiatives have been instrumental to our strengthened partnerships in the US and we expect these to benefit our Canadian partners as well.
deBanked: Can you provide any illustration of the number of Canadian merchants on the BFS Capital platform or the amount in loans or MCAs you’ve deployed in the country?
Marrache: Although at a more modest volume than our business in the US, since entering the Canadian market in 2012, BFS Capital has achieved originations growth of approximately 100 percent on a compounded annual growth basis.
Sorodo’s Co-Founder: Alternative Financing Options ‘Unknown’ Amongst the U.K.’s Small Business Community
January 25, 2018Are small businesses across the pond aware of their alternative financing options? Manchester’s Sorodo Limited, a merchant cash advance company, feels that the word has far from spread.
“We still have some way to go, as the product is still fairly unknown to the wider business community,” co-founder Rich Wilcock said via release earlier this month while discussing merchant cash advance alongside other non-traditional avenues. “We spoke to a lot of business owners in 2012 and 2013, and they were understandably frustrated by their situation. Many who were declined for traditional forms of finance by their banks didn’t look any further, which is why it’s so important we get the message out about alternative funding options, such as peer-to-peer lending, cash advances, crowdfunding, unsecured borrowing and so on.”
Wilcock labeled awareness of the merchant cash advance option and other alternatives at the dawn of 2018 as “disappointingly low.”
Typical Sorodo Limited customers include owners of hotels, restaurants, cafes, pubs, clubs, bars, independent shops (including e-commerce stores), convenience stores, beauty salons and garages.
“In 2014, the average independent retailer was struggling to stay open, let alone turn a profit,” said Wilcock. “Many shops, hotels, restaurants and leisure outlets closed down, but we knew this product had the ability to not only keep businesses trading but also to help them grow.”
After promoting the lending alternative and seeing growth in Sorodo’s business, Wilcock believes that there is still significant amount of campaigning left to do. Thus, Sorodo Limited is expanding it’s offerings with a new platform called Capalona.
The newcomer is designed to help U.K. business owners find alternative solutions besides merchant cash advance that may serve their individual needs better.
“The term ‘alternative business finance’ covers a variety of new funding models that allow businesses to access funds that are not readily offered by traditional lenders,” said Wilcock. “These include products such as asset-based lending, invoice finance, venture capital, pension-led funding and many more.”
Capalona, which is currently up and running, is also based in Manchester.
Jersey City is Quietly Becoming a Fintech Hub
January 11, 2018
Jersey City is luring yet another innovative small business finance company to their community. This time it’s NYC-based Pearl Capital. According to NJ state records, Pearl was approved on January 9th for a total of $5.6 million over 10 years to relocate under the Grow NJ tax program to boost jobs in the area.
Other finance companies that have relocated to Jersey City, thanks to Grow NJ, are Yellowstone Capital, World Business Lenders, and Principis Capital. But that’s not all, companies like BlueVine and Funding Metrics have also set up operational centers there.
We do not yet know what address Pearl intends to move to.
What’s Lending Got to do With Cryptocurrency?
January 10, 2018
Facebook and Snapchat might be the last things that employees are being distracted by these days. Instead it’s Coinbase and Blockfolio, two cryptocurrency apps, that are quickly stealing the attention of young finance professionals. And the interest in Bitcoin, Ethereum and alt coins is causing some in the industry to wonder if the phenomenon can somehow be connected to online lending and merchant cash advance.
A meetup hosted by partners of Central Diligence Group (CDG) on Tuesday night in NYC, for example, was geared towards cryptocurrency enthusiasts. CDG is a merchant cash advance and business lending consulting firm. Those that attended, talked candidly about Ripple, Bitcoin, Ethereum, and the hot topic of Initial Coin Offerings (ICOs). And it did seem all connected. Companies successfully raised more than $3 billion through ICOs in 2017, for example, some of them online lending companies.
ETHLend and SALT, blockchain-based p2p lenders, each raised $16.2 million and $48.5 million respectively through ICOs. What’s more, their crypto market caps currently stand at $325 million and $754 million respectively. The latter is nearly twice as valuable as online lender OnDeck. The founder of Ripple, meanwhile, briefly became one of the richest men in the entire world.
Whether these valuations are overdone is besides the point. A smart phone is all that’s required to get in on the action and trade thousands of cryptocurrencies online, many of which move up and down by astronomical percentages over the course of a day. Becoming a millionaire overnight by hitting on the right one is a dream sought after by many. And young people, especially millennials, are become unconsciously comfortable transacting in non-government-backed currencies through technology that completely shuts out banks.
And that may be the shift in all of this to pay attention to. It isn’t that a local restaurant is going to collateralize their Bitcoin to get a loan and outcompete an MCA company, but that a portion of the monetary system eventually starts to sidestep banks.
Trying to collect on that judgment? Good luck tracing the money in cryptos.
Need to freeze funds? You can’t freeze someone’s Bitcoins if they’ve got them stored on their own hardware.
Evaluating a business’s bank statements? The transactions can only be verified on a blockchain.
You might not believe me, but it’s incredibly likely that you’ve encountered a client that has defaulted on an MCA or loan whose stash of money has been obscured in cryptos all the while their bank statements appear to show insolvency.
It’s also likely that you’ve encountered a client that has used the proceeds of their MCA or loan to buy a crypto. Maybe not the whole amount, but with some of it. One study, for example, revealed that 18% of people have purchased Bitcoin using credit. Bloomberg reported that the phrase “buy bitcoin with credit card,” just recently spiked to an all-time high.
People are even taking out mortgages to buy Bitcoin, according to CNBC.
If you think cryptocurrency is an industry completely independent of your business, consider that the market cap of cryptocurrencies is currently valued at more than $700 billion. That’s nearly twice the market cap of Goldman Sachs and JPMorgan, COMBINED. The #3 cryptocurrency by market cap, Ripple, is being pitched almost entirely to traditional financial institutions.
Bet all you want on the prediction that this bubble will burst. Maybe it will. But the underlying technology, transacting without banks in non-government backed currencies that may be difficult to trace and recover, is a genie that’s not returning to its bottle anytime soon.
In the meantime, now might be a good time to poll your employees or colleagues about their knowledge or use of cryptocurrency. You may be surprised by what you find, especially among the younger crowd.
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Disclaimer: I currently hold a material amount of Ether, the currency of the Ethereum blockchain.
In 2018, Sell More and Make More Money
January 4, 2018Did you hear about the MCA sales rep that made a $160,000 commission this week on a single deal? It was a monster deal, the largest ever approved by the company that funded it. Numbers like that are proof that facilitating commercial finance deals is still red hot.
That’s me in that photo above, wearing that shirt back in 2009 when the industry was not even a fraction of the size it is today. Hat tip to the friend who found this. I used to joke about putting on your funding pants but perhaps in 2018 it’s time to put on a selling shirt too.
In 2018, will you sell more and make more money?
If you want to operate at the top of your game, I highly suggest you register to attend Broker Fair 2018. With 24 major sponsors already signed on, Broker Fair will be the place to learn, get inspired, and connect with the right people to do even more business.
May the next big commission check belong to you.
Letter From The Editor
December 23, 2017
It was a year to remember, our sources declare
‘Twas the Jan/Feb issue I wrote about my loan from Square
Through March into April salespeople closed deals via text
As banks looked to fintech as their plan for what’s next
We went to Texas a nexus for finance and lending
It was May, maybe June when Bizfi’s final days were pending
Merchants talked, banks adjusted, it was a summer of learnings
For the pressure was on to produce solid quarterly earnings
September, October, liens and judgements were removed
But the world hardly noticed and deals still got approved
Winter coats and furry hats meant the year would end soon
But by golly 10k, no 19k! Bitcoin went straight to the moon!
And so boys and girls the story of ‘17 has been told
What a time for finance, for money, and a world to behold
See you in ‘18, in ‘19, and the roaring twenties my friend
We’ll be right there, whether you deal in receivables or lend
– Sean Murray
MCA’s Top Social Media Voice
December 18, 2017
LinkedIn has unveiled its top 10 voices for marketing and social media. Fintech did not make the list, but perhaps the social networking site didn’t look hard enough. If they had been following Jennie Villano, who on Dec. 1 joined Kalamata Advisors as vice president of business relationships, that list might have included a nod to the MCA industry.
By most standards she’s a newbie to fintech, having joined her previous employer Pearl Capital only two years ago. But that hasn’t prevented her from making her social media presence known. And while she reserves Facebook for her personal life, if you know Villano then you wouldn’t be surprised at her success on LinkedIn, as she seems to have a knack for social media.
“I felt like I needed a very strong presence in this industry to get anywhere,” Villano told deBanked. “It’s funny, I think a lot of people associate sales with a type A personality and being pushy. I’m not an aggressive, pit-bull woman. You don’t have to be that type of woman to get ahead. I thought about how am I going to show this to the industry? Social media was my answer. My Facebook and LinkedIn attract a lot of views.”
Indeed, it was because of her Facebook profile that Villano was featured by a famous painting by David Uhl. The painting, dubbed Steampunk Seduction, is the first in Uhl’s Steampunk series. “I got that through Facebook,” Villano explained. “Someone saw my profile on Facebook, reached out and said, ‘you should contact the artist.’ I told them they were crazy. They insisted, and he chose me. It’s been a blessing.”
Meanwhile, her LinkedIn posts designed for MCA ISOs have similarly caught on like wildfire, and she only “amped up” her activity on the site in July. Villano has been posting on LinkedIn once per week, and the proof is in the pudding. “Since then, in September, October, and November, we broke funding records every month. It works,” said Villano of her previous employer Pearl Capital.
Underpinning that deal flow has been a flow of new relationships she’s forming, evidenced by more than 500 ISOs having contacted Villano on LinkedIn via her previous employer’s Salesforce network.
“That was from posting one time per month and just educating; not posting pictures of me on a beach sipping a Pina Colada,” said Villano. Instead, she was educating them about Pearl’s funding options, the types of deals they wanted, their bonus structure, etc. “So, it’s very basic information. I was just letting them know what they can expect from Pearl, what kind of fundings we were doing, just being a constant reminder,” she added.
While Villano is no longer employed by Pearl Capital, her posts from her tenure there have had a lasting impact. “[Last month] I put up a post announcing that I was leaving Pearl Capital,” Villano said. “The post generated more than 35,000 views.” Meanwhile, since she’s been posting, she’s seen the number of LinkedIn connections skyrocket.
Villano is continuing her social media push at her new employer, Kalamata Advisors.
“Kalamata has a partnership-culture mentality. It’s an amazing opportunity to be elected a partner, like a partner at Goldman Sachs or McKinsey, here after a couple of years. Then you have a real stake in the company and work at a firm where everyone wants to pitch in,” she explained. “Second is their great reputation. The partners put their mission and values first. They’ve grown so fast; but they’ve grown with the purpose to genuinely help people. And lastly, they’re very respected in the industry. Everyone here is very responsive, honest and professional.”
And while she’s no longer employed by Pearl Capital, she has nothing but respect for her former employer as well. The feeling is mutual, evidenced by a going away party that they threw for her on her way to Kalamata.
Gender Gap
So why isn’t social media more pervasive among MCA market participants? According to Villano, the reasons are two pronged, the first of which is compliance. “It’s very important to make sure we convey ourselves properly,” she said.
The other has to do with the fact that MCA is a male-dominated industry. “Women are more conversationalists through texting or social media. I find women are more intimate with it on a professional level. I have to say that I have the most active social media in our industry,” said Villano, who again only joined fintech two years ago. She’s inspired by the many women who are behind the scenes at ISO shops, many of whom she explained work as processors.
We asked Villano about whether sharing her trade secrets with competitors in the industry made her uncomfortable. “Not at all. I’m not made like that,” she said. “And Kalamata believes trust is the importance of every brand. With transparency, there is trust. Everyone is authentic and unique. Everyone should have the opportunity to share his/her own self in any industry.”
deBanked Connect: Miami — SOLD OUT
December 12, 2017deBanked’s cocktail networking event on January 25th in South Beach is now SOLD OUT!
If you missed out on your chance to RSVP, you can still register for our much bigger, better, and more comprehensive event on May 14, 2018 in Brooklyn; Broker Fair 2018.
With 20 sponsors already signed on, Broker Fair is sizing up to be the biggest event in the MCA and small business lending industry of the entire year! During this exclusive full-day conference, brokers, lenders, funders and service providers alike can expect education, inspiration and opportunities to connect and grow their business. You can view our preliminary agenda here.
DON’T GET LEFT OUT. REGISTER FOR BROKER FAIR 2018 TODAY!. Got questions? E-mail: info@brokerfair.org
