Yoel Wagschal Becomes Last Chance Funding’s CFO
October 10, 2018
Yoel Wagschal, an accountant who specializes in servicing MCA funding companies, told deBanked today that he will now be the CFO for Last Chance Funding (LCF), which has been one of his clients for about five years. Wagschal said he will maintain his private accounting practice, spending half the week working for LCF and the other half running his own business, serving other clients, mostly in the MCA space.
“I always treated my clients like I was a part time CFO,” Wagschal said. “Yes, it’s a little different to be the officer of one particular company, and that’s why I feel it’s important to make this announcement so my clients or prospective clients know that I am an officer, officially, of Last Chance. You can either embrace it, or not.”
For those who might see this arrangement as a conflict of interest, he argued that this has essentially always been the case since he has two dozen MCA clients.
“If the accountant is honest and doesn’t exchange information from one client to another, his knowledge will only be better, and [the client] will gain from having an accountant with other clients in the same space.”
Wagschal said he believes that every company needs a CFO. And being a part-time, per diem CFO, largely in the MCA space, has been his niche for the past 15 to 20 years.
Already, Wagschal has eliminated some jobs in LCF’s accounting department by creating a more efficient system, he said. (No one was fired; a few employees were just moved elsewhere). Wagschal believes that many accounting departments are often too big and that great leadership actually frees up time for a company.
“If you have proper accounting procedures in your company, then the compliance and the reporting comes so easy, it’s a piece of cake,” Wagschal said.
LCF’s owner and CEO Andy Parker is very excited about Wagschal’s new role at the company.
“I have never come across a more talented accountant in the MCA space,” Parker said of Wagschal.
Parker said that since he co-founded the Long Island-based company in 2011, they have seen triple digit growth year after year.
“As we continue to grow, we really needed a serious level accountant and we’re glad Yoel accepted the position,” Parker said.
Wagschal’s introduction to the MCA industry was a dramatic one. As a forensic accountant, he had contacts with tax attorneys, one of whom introduced him to the owner of an MCA firm whose partner had made a really costly mistake. Instead of sending an agreed-upon $9,600 to a merchant, he accidentally added an extra zero to the end and $96,000 was sent to that merchant. In what Wagschal described as a “very intense” experience, Wagschal drove to the town where the merchant operated from and said he rescued the money within 48 hours of being contacted.
But beyond this initial Indiana Jones-esque introduction to the MCA industry, Wagschal said that he began to see a void.
“It was a very new industry. People were confused, and I saw an opening,” Wagschal said.
The Largest Merchant Cash Advance in History
September 28, 2018
How would you like to be the funder to do a $40 million MCA transaction? According to the Securities & Exchange Commission, a deal of such magnitude was one of the many negligent acts that 1st Global Capital CEO Carl Ruderman did with investor money. Though the SEC refers to the merchant as an auto dealership in California, it’s roughly 9 dealerships with common ownership that collectively gross more than $550 million a year in sales. It’s the deal of a lifetime except that the ISO who brokered it has become the largest unsecured creditor to file a claim in the 1st Global bankruptcy. Records show they are owed approximately $3.9 million in unpaid commissions.
And its performance has not been without challenges, according to emails disclosed in the SEC case.
In April 2018, 1st Global employees discussed what to do about the dealerships’ lingering cash flow problems after becoming aware that the owner intended to either recapitalize the debt or sell the dealerships. The choice by then had come down to either continuing to fund them or to cut their losses, an email says.
“If they were to become insolvent, everyone loses,” wrote the Director of Accounting and Finance.
1st Global continued to fund them. The $40 million (approximate amount) was not disbursed all at once but in increments over the course of a year.
One week before 1st Global filed for bankruptcy, they signed a Binding Letter of Understanding with the dealerships acknowledging that the owner would be selling them. At that time the merchant had unpaid taxes of at least $9 million and had an outstanding receivable balance with 1st Global of $43 million. The Letter said that 1st Global would accept “whatever amount it receives [..] at this point as complete satisfaction” of the current RTR when the business is sold. 1st Global also agreed to forever release the dealerships’ owner personally from all legal claims. It was signed by Carl Ruderman 8 days before he resigned.
The merchant has not returned deBanked’s inquiries. The banker named in the Binding Letter as having been exclusively hired to sell the dealerships, told deBanked over the phone that he has never heard of 1st Global. 1st Global ceased operations on July 27th. The SEC filed a complaint against Ruderman and the company on August 23rd and an amended complaint on September 26th. The dealership transaction is used as an example of malfeasance in it twice.
New Record
No longer candidates for the largest merchant cash advance in history, two ancient deals that were famous during their eras for their size, ended up in default, and in doing so showed the industry that there was such a thing as too big.
One was a $4 million advance made by Strategic Funding Source in 2011 to a tourist attraction being produced at the Tropicana Hotel in Las Vegas. The Las Vegas Mob Experience, billed as the most technologically advanced interactive presentation of historical artifacts ever devised and set up in a 26,000 square foot total immersion facility, it was predicted to bring in 1.5 million visitors per year. But the deal quickly spiraled out of control, the exhibit shut down, and allegations of fraud were lodged in court. Though the Mob Experience was dubbed the largest merchant cash advance in history, it depends on whether or not you’re counting common ownership of multiple businesses as individual deals or one deal.
Dozens of advances made by Global Swift Funding in 2007 and 2008 to businesses controlled by the same west coast-based restaurateur, led to Global Swift’s demise. When the “restaurant king,” as he was known, filed for bankruptcy across all of his entities, Global Swift had outstanding future receivables with his businesses of approximately $8 million. Dan Chaon, a then representative of Global Swift, told a local newspaper at the time that the restaurateur was “a helluva sales-talk artist… he provided false financial statements, and everyone got caught up in that game.”
The Broker: How Elana Kemp Turns Values into Value
September 26, 2018
Title: Broker at Fundomate, a commercial finance brokerage in Los Angeles.
Background in business:
I started four years ago when I was living in Israel and I was working American hours. It was tough because I have four kids…A [non business] opportunity brought me to LA where my dad lives and where I’m from originally. So I jumped on that and continued doing brokerage part-time as a one man show for about a year. I met some people in the industry here in LA and started working with them. From there I went to Fundomate, then somewhere else. And then I came back to Fundomate.
What’s the difference between working for yourself and for a brokerage company?
Generating leads is so challenging to do on your own. If it wasn’t for that, I’d be a one man show all day long. I have to admit, though, that after a year, I did miss the infrastructure of working with people and the energy.
Why is it so hard to find leads?
It’s hard to find an honest lead generator. They promise you a lot, but at the end of the day, you don’t get much. I tried many different avenues [when I was working alone.] And I had one lead guy who I was really happy with and then he ended up in the hospital. So there went that. But otherwise, most of them didn’t perform the way they promised.
What’s your morning like with four kids?
Well, I’m not the first in the office. I work for someone who’s very understanding of my situation. I have a kind of cart blanche in terms of my hours. Of course, though, I’m awake at 6 / 6:30, and the second I’m awake, I’m on my phone, checking my emails. So [while] I’m not physically in the office, the second I’m awake, my workday starts. So I don’t make it to the office until 8:15 / 8:30.
Is there any ritual you have to close a deal?
If I have a big deal pending, like a $250,000 deal, I definitely take the time to envision the funding email and kind of manifest that. I definitely believe in the power of energy. If I don’t make a deal, I try not to take it home with me. I believe it’s meant to be and I’ll get the next one. I do believe there’s enough out there for everyone.
I recently read a fun fact – that elephants eat 400 lbs of food a day. It blew me away. And I thought “if an elephant can find 400 lbs of food to eat a day, then I can find enough deals to fund and support my family.”
Largest deal funded:
$325,000. Commission was $26,000.
Her style:
I get really close to my merchants. Some people think I get too close to them. Everybody has a different [style]. Sometimes [getting very close to a merchant] will make me win a deal. Sometimes it will make me lose a deal. Everybody has a different vibe that they feel comfortable with.
I get close to people very quickly. It’s just who I am. And in my opinion it works to my advantage because I have merchants that renew with me multiple times a year. And I know, no matter how many calls they get [from other brokers], they’re going to turn to me. I know that they trust me. I’ve had one merchant come over for dinner at my house. I have some merchants I check in with every few months and sometimes we don’t talk about money at all. We just talk about life.
On honesty:
I try to imagine that the merchant is like my dad. I want to treat them properly. And I believe in karma. I also say that if I get a deal funded but it was not 100% honestly done, then I like don’t want to feed my kids with that money.
Advice for brokers:
Don’t give up on your values for a deal. Values are more valuable than one deal funded. You can always fund another deal…a [reputation] can be broken down in like 2 minutes.
Dress for Sales at deBanked CONNECT – San Diego
September 17, 2018
The first 100 salespeople to check in to deBanked CONNECT in San Diego on Thursday, October 4th will receive a FREE shirt to help them close more deals 24/7. It says I Can Fund Your Business on the front and Ask Me How on the back.
“There is no mention of deBanked anywhere on the shirt,” said deBanked president and event organizer Sean Murray. “We simply want to create opportunities for salespeople to do more business. They can wear it on Main Street, at the gym, or while patronizing small businesses. Someone is bound to ask you how to get funded. Whether you’re offering small business loans, factoring, MCAs or something else, it still applies. Pitch what you do.”
This kind of marketing works. Of course, it can’t hurt to wear your own company’s attire as well. You can combine it with your company hat, for example. The idea is to get the right person who you otherwise might never engage with, to ask you the question, “Can you fund my business?”
And once you’re approached, use your training to diagnose what the prospect needs. Several industry experts say the “Consultative Sale” works best. If you happen to be offering MCAs or competing against an MCA product, articulating the details (pros & cons) will go a long way in building credibility. The MCA Basics course is something that can really make a difference for salespeople, for example.
THERE’S ONLY TWO WEEKS LEFT TO REGISTER FOR DEBANKED CONNECT – SAN DIEGO. Register now and check in as early as 1:30PM on October 4th to get your free shirt.
1st Global Capital’s Activities Spilled into Cryptocurrency and ICOs
September 14, 2018Curious details are emerging in the wake of the 1st Global Capital bankruptcy and subsequent SEC charges. Among them is that $161,000 of company funds were used to purchase cryptocurrency.
Many of those purchases were made in February of this year for a total of $92,492. The cryptocurrency market has slumped since then. Bitcoin, for example, is down 35%.
In May, less than three months before 1st Global filed Chapter 11, a purchase of $61,000 in cryptocurrency was addressed to TraNexus Ireland LTD. TraNeXus is an Ireland-based travel technology blockchain company that is currently raising capital via an Initial Token Offering (aka an Initial Coin Offering, ICO). “TraNexus is committed to changing the way people travel and revitalizing the travel and tourism industry by making travel easier, greener, more valuable and more fun,” the company says of itself in a recent press release. 1st Global Capital owner Carl Ruderman is something of a vanguard in the global tourism business whose acumen includes ownership of Elite Traveler magazine.
Separately, 1st Global is alleged to have funded a $40 million merchant cash advance to an auto dealership in California. Though it remains unconfirmed, industry insiders say it wasn’t even a 1st position deal and that the dealership had multiple advances.
On Wednesday of this week, the SEC served a subpoena on a JPMorgan Chase in Miami demanding all documents and payments related to 1st Global, Ruderman, and his companies.
Thanks to Expansion Capital Group, South Dakota is On The Alternative Lending Map
September 11, 2018
Expansion Capital Group (ECG), which secured new financing at the beginning of the month for a total senior debt capacity of nearly $60 million, is based in Sioux Falls. That’s in South Dakota. With most alternative lenders based in New York, Florida or California, ECG is definitely unique geographically. But the company’s CFO Tim Mages told deBanked that despite the relative obscurity of the city, with a respectable population of 183,000, the city is a very good place to start a business. Particularly in the finance sector.
According to a 2017 survey conducted by CNBC and SurveyMonkey, Sioux Falls is among the top 15 American cities optimal for starting a business. Why? Because South Dakota has no individual or corporate income tax and business costs are more than 20 percent below the national average. As one of the fastest-growing areas in the country, Sioux Falls has a rate of population growth that’s nearly four times the national average, according to the survey.
Also, Wells Fargo and Citibank both have a significant presence there, so there is an existing pool of talent in the lending space.
In addition to ECG’s unusual geography, the way it obtains the bulk of its business is also uncommon. Mages said that 50% of its business comes from other lenders who either turn down the applications or don’t have enough capital to lend to merchants. Mages said they can “turn coal into diamond.” The company primary funds B- to C- paper deals and services a variety of industries with the bulk coming from transportation/trucking, construction and business services. ECG provides loan products, which compose about 80% of the business, as well as merchant cash advance, which makes up the remaining 20%.
Mages expressed a lot of enthusiasm for the company’s technology, which he said is very helpful because it can save a lot of time. For instance, he said their system auto-declines 25 to 30% of the applications they receive, which can be between 3,000 and 7,000 a month.
“We then want to get as competitive as we can [for the right applications,]” Mages said.
ECG ranked #802 on 2018’s Inc. 5000 list of fastest growing U.S. privates companies. Founded in 2013, ECG now employs 65 people. According to Mages, there are 23 underwriters and 11 internal salespeople, plus in-house legal and regulations team, a marketing team and a merchant support team. There is a tiny office of two people in Delaware.
1 Global Capital Charged With Fraud by SEC
August 29, 2018
The Securities & Exchange Commission unsealed a 10-count complaint against 1 Global Capital LLC (“1st Global Capital”), its owner Carl Ruderman, and related parties on Wednesday.
The South Florida firm “fraudulently raised more than $287 million from more than 3,400 investors to fund its business offering short-term financing to small and medium-size businesses,” the complaint begins.
Investors were offered low-risk, high-return investments that 1st Global would use to fund merchant cash advance deals. Ruderman, who owned the company through a trust, misappropriated $35 million of the funds, paying a lot of it to himself and companies he controlled that had nothing to do with MCA, the SEC alleges. Beyond that, millions more went towards other pet projects like a $50 million purchase of distressed credit card debt.
But the deception went deep, the complaint lays out. 1st Global touted a default rate of only 4% despite the fact that 15-18% of their deals over the last 2 years had resulted in collections lawsuits.
By October 2017, the statements investors received showing their monthly performance were faked with the value and performance significantly inflated. By June 2018, one line item on monthly statements (labeled “cash not deployed”) reported that investors collectively had $70 million in idle cash ready to be put into deals. Meanwhile, the company itself only had about $20 million in all of its bank accounts combined, money that was being used for everything including operating expenses, salaries, and commissions.
1st Global’s alleged auditor, Daszkal Bolton, LLP, says they never audited 1st Global’s statements and haven’t had anything to do with the company since 2016. Nonetheless, 1st Global placed Daszkal Bolton’s name on statements given to investors and stated on their website that investor balances were validated by an accounting firm quarterly.
The Google Battle for Lending & SMB Finance Keywords Revisited
August 29, 2018When it comes to Google’s organic search for major keywords, companies like Nerdwallet and Fundera still dominate. A few players, however, have gained or lost significant ground since last year.
The Small Business Administration relinquished its place on the first page for words like “business loan” and “business line of credit” while PayPal and Credit Karma have begun to make major appearances as their activity in these markets increases.
Take a look:
| Keywords | Fundera | Fundera | PayPal | PayPal | Credit Karma | Credit Karma | Kabbage | Kabbage | OnDeck | OnDeck |
| Date | 9/14/17 | 8/29/18 | 9/14/17 | 8/29/18 | 9/14/17 | 8/29/18 | 9/14/17 | 8/29/18 | 9/14/17 | 8/29/18 |
| business loan | 1 | 1 | 2 | 3 | 4 | 5 | ||||
| merchant cash advance | 3 | 2 | 2 | 4 | ||||||
| working capital | 8 | 9 | ||||||||
| commercial loan | 3 | 1 | 5 | |||||||
| small business loans | 2 | 1 | 3 | 5 | 4 | |||||
| business line of credit | 2 | 2 | 5 | 3 | 3 | |||||
| fast business loan | 4 | 5 | 1 | 4 | ||||||
| business loan with bad credit | 7 | 5 |
| Keywords | Lending Club | Lending Club | Nerdwallet | Nerdwallet | National Funding | National Funding | Traditional Banks | Traditional Banks | SBA.gov | SBA.gov |
| Date | 9/14/17 | 8/29/18 | 9/14/17 | 8/29/18 | 9/14/17 | 8/29/18 | 9/14/17 | 8/29/18 | 9/14/17 | 8/29/18 |
| business loan | 9 | 6 | 3 | 7,8 | 5 | 4,7 | 6 | |||
| merchant cash advance | 4 | 1 | 8 | 9 | ||||||
| working capital | 4 | |||||||||
| commercial loan | 2,7 | 3,8,9,10 | ||||||||
| small business loans | 9 | 3 | 7,8 | 5 | 7 | 1 | 2 | |||
| business line of credit | 11 | 1,4 | 1 | 6,7,8,9,10 | 4,6,7,9,10 | 5 | ||||
| fast business loan | 2 | 3 | 5,6 | 8 | ||||||
| business loan with bad credit | 1,4 | 1 | 2 | 2 | 3 |
As mentioned in previous posts, this is not a scientific analysis. Keywords are measured using a wiped browser on my own computer.
The value of a Page-1 ranking too, is not as valuable as it once was, due to the heavy placement of paid ads above the search results. Ads, however, are not a factor for the keyword “merchant cash advance” since Google banned all advertising for that search term last Fall. Originally it was theorized that the ban was accidental, but ten months later it is still in place.
No such ban exists on Bing.
Read my previous analyses on the industry’s search war over the years:
September 2017 The Google Battle for Lending and SMB Finance Keywords
December 2015 Google Serves Low Blow to Merchant Cash Advance Seekers
March 2015 Google Culls Online Lenders – Pay or Else?
October 2014 Merchant Cash Advance SEO War Still Raging
August 2014 Six Signs Alternative Lending is Rigged: Do Lending Club and OnDeck have a helping hand?
October 2013 Google Penguin 2.1 takes swing at the MCA industry
August 2013 Your merchant cash advance press release may be hurting you
December 2012 Is Google your only web strategy?
July 2012 The other 93% [of leads]
April 2012 The SEO war continues
February 2012 The SEO War for Merchant Cash Advance: The first story on this topic
