Revenue Based Financing
Rewarding Loyalty in Revenue Based Finance
November 13, 2024
Everyone’s heard the pitch that if a deal goes well there could be better terms on the next one, but how much better are we talking about precisely? Well, after conducting an internal study, Pennsylvania-based Funding Metrics decided to actually codify incentives for success into a fully fledged loyalty rewards program that enables merchants to get a precise factor rate reduction, origination fee discount, and additional estimated remittances on subsequent advances.
“Early 2023 we took a deep dive into our customer experience and how it directly correlated to merchant retention,” said Melissa Flagg, Vice President of Operations for Funding Metrics. “We listened to the pain points our ISOs shared, with customer retention always driving the conversation. Most ISOs we spoke with seemed to face similar retention challenges and were coming up short with solutions.”
The challenge is that merchants tend to shop around on subsequent deals even if they are happy with what they got the first time. The loyalty program was the eventual outcome of what they learned and it’s open to merchants funded by Lendini and Quick Fix Capital. As Flagg tells it, there are three ways for merchants to accrue points. First, points simply for opting in, which they must do in order to take advantage of it. Second, additional points for each 1% they remit toward the purchased amount, and third, points for each renewal. There are six total milestones that range from Bronze Level to Diamond+ Level. While the tiers, conditions, and corresponding discounts are published right on their website, merchants can easily track their points through the Funding Metrics mobile app.
“There’s no need for a redemption email or request,” said Flagg. “Points don’t deduct, they continually accrue as long as merchants continue to remit, and discounts automatically associated with the loyalty level apply on their next offer.”
She added that it’s quickly been recognized as a great way to incentivize a merchant not to shop around. It’s also been used to secure a renewal or win back an old customer that had left. This logically helps the ISOs involved.
Most readers are already familiar with the Lendini brand through their constant mix of on- and offline marketing. Members of their team usually show up in large numbers at major industry events, for example. Flagg said that 2024 has been a big year for the company. “In Q2, we successfully launched Instant Offers, and we’re proud to report that we’re now averaging a turnaround time of under 5 minutes for offers up to $75,000,” she said. Their new mobile app, while still in beta, allows merchants to track offers, remittances, and engage with the Resolutions Team.
“Over the past two years, we’ve prioritized elevating the customer experience by creating accessible tools that empower merchants to navigate the financing process with ease and transparency,” Flagg said. “This is only the beginning. Funding Metrics is dedicated to continuously enhancing these experiences that put merchants in greater control of their business financing and making every step from offer to origination as seamless as possible.”
OppFi Encouraged By Early Results With Bitty
November 10, 2024OppFi achieved a new record in Q3.
“The record quarterly net income was a result of credit initiatives that continue to drive strong loss payment and recovery performance, marketing cost efficiency and prudent expense discipline across the organization,” said OppFi CEO Todd Schwartz during the quarterly earnings call. One part of that organization is Bitty Advance, which it acquired a 35% stake in this past summer. “We are encouraged by the early results and potential opportunity of this platform and the strength of our relationship with Bitty,” Schwartz said of the progress so far. “We continue to explore similar opportunities that would be accretive and align with OppFi’s strategic vision.”
One analyst on the call inquired further about what similar opportunities Schwartz might be referring to on the M&A front.
Schwartz responded with the following:
I mean I think whatever it is, it’s got to be something that’s highly accretive. I mean, OppFi’s vision is to be a platform for digital alternative financial service products where we see large supply-demand imbalances in large addressable markets. There’s definitely different profiles of business out there, different situations are pretty — it’s pretty bespoke, but we’re prepared to handle either-or. So it has to make sense for us, though. And obviously, we’re going to protect and mitigate risk with anything we do to make sure that it’s successful and make sure that we’re going to be getting a return on our capital and it’s highly accretive to shareholders.
The State of Funding Right Now
September 19, 2023
“The first quarter was actually kind of slow, like abnormally slow,” said Daniel Dias, founder of Small Business Lending Source, a brokerage based in San Diego. “We came off actually a record-breaking year last year. First quarter this year turned out slow and then it was kind of weird. Maybe it was owners who are hesitant to see what’s going on because there’s a lot of uncertainty in the market.”
Dias says things changed dramatically in Q2, however, to the point of setting yet again a new record. And the momentum only continued into Q3.
“This quarter is actually turning out really well,” he said.
It’s also going really well for Greenbox Capital, a small business funding company based in Miami.
“Q3 has been our best quarter this year,” said Jordan Fein, Greenbox’s CEO. “We positioned the company well over the last 8 months, ready for whatever the economy throws our way. We are running lean and growing again.”
Greenbox began to tighten its credit policies late last year, according to Fein and by continuing this strategy into 2023, it has allowed the company to evolve. “Our momentum has been building ever since we tightened credit and refined our spending in Q4 2022,” Fein said.
Optimism is also in the air at The LCF Group, a small business funding company based on Long Island. “Navigating Q3 and approaching Q4, we anticipate our positive trajectory to continue given the consistent demand from merchants,” said Andy Parker, LCF’s CEO. “Despite certain sectors of the economy facing challenges and the appearance of recession indicators, we’ve adapted our underwriting to reflect these conditions without any major tightening of our guidelines.”
LCF recently announced that it had acquired key strategic assets from Reliant Funding.
Revenue-Based Financing? This Team of Entrepreneurs Learned The Trade in Argentina
May 26, 2023
Javier Alvarez Wrobel and Juan Cruz Alvarez Wrobel, brothers from Argentina, have worked in the lending business together for years. They’re even co-founders of a company that’s based in Buenos Aires.
It’s taught them a lot. While Americans fret over single digit inflation, Argentina’s rate of inflation soared past 100% earlier this year, the highest rate since it began dramatically increasing in 2018. That makes it very challenging to lend in the country.
“Due to the recent complicated economic situation, lots of lending companies in Argentina have closed,” said Javier. “I’d say there are only around 30 to 40 companies in the country doing what we do right now.”
For a population that largely also has little or no credit history, credit reports generally can’t be relied upon to approve loans at scale.
“That is why a lot of the underwriting in Argentina, when people request a loan, is made based on the cash movements on the consumers bank accounts,” said Javier.
That’s what they learned how to do. And with such a skillset as theirs, they were intrigued to learn that a similar model had taken off in the United States, one where business owners can get approved for funding based on data mostly available in their bank statements, revenue-based financing. The result was an expansion to the US and their launch of Upfunding Capital in Miami, FL in 2022. There, they teamed up with a third co-founder named Paula Sborovsky, who previously worked in Entre Ríos, a province directly north of Buenos Aires that sits along the border of Uruguay.
In the process, they’ve established a niche, a clientele mostly made up of immigrant business owners that have an Individual Tax Identification Number (ITIN) but not a social security number. The thin credit or lack of credit that may come with that is something they’re already used to.
“As we work with the Latino community, most of our clients are actually non-US citizens or at least not US born,” Javier said.
Javier said that the best and most reliable information they use for approvals is the way business owners conduct transactions on a day-to-day basis. Nevertheless, the company is pacing itself, testing out its technology and its underwriting models. Upfunding hopes to ramp up its volume in the second half of this year.
The work so far has been personally rewarding for the Upfunding team.
“It’s amazing to see,” said Javier, “for example, I got the chance to speak to a guy that is actually Argentinian living [in the US], trying to sell shoes, and seeing that we can actually offer a product for them to improve their own business that’s just starting out, for us is amazing because we are actually doing the same right now.”
In The Funding Biz? Here’s What to Know
March 9, 2023Are you in the biz of funding small biz? Listen to these execs tell you how to make it work!
Effective Broker Training
Successful Digital Marketing With Zack Fiddle
Measuring the Impact of Technology on Your Funding Business With Adam Schwartz
Building a Successful Funding Brokerage With Frankie DiAntonio
Virginia Hops on the Commercial Finance APR Disclosure Bandwagon
January 14, 2022
Add Virginia to the list of states introducing initiatives to codify disclosures in commercial finance. Virginia House Bill 1027 is aimed squarely at “sales-based financing providers.”
The Virginia bill calls for an estimated APR to be disclosed on sales-based financing contracts using methods conceived in New York’s recent legislation.
As has been witnessed, however, New York’s regulators recently discovered weaknesses in their own law.
The Virginia bill is in its very early stages. It was introduced on Wednesday, January 12th by Delegate Kathy K.L. Tran (D).
