Please Send Four Months Bank Statements
July 20, 2023
At some point in time the industry decided that the most recent four months bank statements constituted a solid baseline to understand a business’ financial picture. So deeply rooted is this precise number of statements that certain states like California now require that underwriters collect a minimum of four months statements to calculate a business’ average monthly historical sales. Curiously, there’s also a maximum. California does not want funders using more than twelve months of historical data in their calculations.
“The current four bank statements just give us a general idea of how the current position and standing with the business is, if they’re paying their proper overheads and their expenses,” said Ken Tsang, the Head Underwriter and VP at Fundkite. “And more of a general idea of what revenue they’re making right now…”
For deeper underwriting, however, he said they may ask for more, a common trend in the industry.
Gary Jules, Underwriter at Power Capital, also asserted that they rely on four statements as a baseline.
“If it’s a seasonal business, we may ask for more [statements],” Jules said. “Basically, we just want to see get a general broad picture of how much the business is generating a month.”
For Jason Hausle, who does Sales and Business Development at Quikstone Capital Solutions, the requirement is only two months bank statements but they also need six months worth of merchant processing statements because they specialize in split-funding. Although the merchant processing statements give them a feel for historical revenue figures, they find value in the bank statements for other reasons.
“We like to use the bank statements,” said Hausle, “the two most recent just to make sure there’s no other positions or liens that would pose risk for underwriting.”
Requests for statements industry-wide generally seem to top out at twelve months. Indeed, states like California limit funding providers to using a maximum of twelve months data in their monthly historical average sale calculations.
Tsang at Fundkite expressed that a limit of twelve is generally enough anyway.
“I would say, to an extent, yes, anything exceeding 12 months might be an issue because after all, we have to keep our business relationship with our ISO partners and with the merchant in general,” said Tsang. “We don’t want to create any issue where it becomes excess–pretty much excessive, and it might create any issues with our relationships…”
Judge Grants Restraining Order Against Deceptive Funding Company
May 6, 2018
JTT Funding, the company previously accused of having forged a Confession of Judgment, stands accused now of stealing the identity of a rival funding company. On May 3rd, New York Supreme Court Judge W. Franc Perry granted an injunction against JTT Funding from using the name, logo and likeness of Accel Capital from its marketing and contract materials.
Similar to the forged COJ suit (which was brought by FundKite), JTT Funding did not answer or contest the claims.
Plaintiff Accel Capital demonstrated in their papers that an agent of JTT was using a gmail address with “accelcapital” in the name and the company’s logo in its contracts. When a merchant funded by JTT Funding (who pretended to be Accel) inadvertently contacted the real Accel Capital, the scheme was revealed.
JTT Funding went on to ignore Accel’s Cease and Desist letter, court papers say, which led to the lawsuit and demand for an immediate injunction.
According to the Financial Times, JTT Funding is owned by Queens-born mixed martial arts fighter Jim “The Tyrant” Boudourakis. In his October 2017 interview with the publication, Boudourakis said, “There was a learning curve, going from being a fighter to a salesman. But I’m good with people.” FT also reported that his company had 18 full-time salespeople and was funding $4 – $5 million per month.
In the FundKite suit, it is alleged that Boudourakis’ first name Jim is an alias.
The Accel Capital suit can be found in the New York Supreme Court under Index Number: 153447/2018
Defendants in Forged COJ Case Failed to Respond to The Complaint
January 16, 2018The lawsuit brought by FundKite against defendants alleged to have forged a Confession of Judgment (COJ) is not going so well for the defendants. Last week, FundKite filed a proposed order for a default judgment since none of the defendants ever appeared to defend themselves.
Meanwhile, circumstances surrounding the suspicious notary stamp on the COJ in the case have become a lot more clear. Originally, the merchant asked how a New York notary stamp ended up on the documents he claims are forged when the merchant himself resides in Florida.
According to an affidavit by Jennifer Gately, the notary, she was asked by someone employed by the ISO to sign off on a document for a merchant without the merchant present. She refused. Soon after, her notary stamp was stolen. She not only reported this theft to the National Notary Association, but she also filed a police report.
The relationship between the person working for the ISO and her, is that they both lived at the same address, explaining how the theft would’ve been relatively easy to carry out.
“I have never worked with any of the listed defendants on any matters, including concerning financial transactions,” she declared.
The case is filed under Index Number: 656692/2017 in the New York Supreme Court. You can download the original complaint here.
Ford, MCA Funders Take Pages from Tech-Based Underwriting
August 29, 2017
Alternative lending fever has spilled over into the auto sector, evidenced by the financing arm of automaker Ford’s decision to move beyond FICO and deeper into machine learning for credit decisions. Ford is moving toward alternative lending strategies in an attempt to capture a wider swath of borrowers, including those with “limited credit histories,” and bolster auto sales.
Ford’s decision comes on the heels of a study with fintech play ZestFinance, the results of which favor a machine-learning based approach to credit decisions.
Ford’s decision comes on the heels of a study between Ford Credit and fintech play ZestFinance, the results of which favor a machine-learning based approach to credit decisions.
“There is absolutely no change in Ford Credit’s risk appetite. Ford Credit is maintaining the consistent and prudent standards it has applied for years. This enhanced ability to look at data will help us more appropriately place applicants along the full spectrum of the risk scale. The result will be some that some people may appear on that scale who did not before, and some applications that are approved today might not be approved in the future. The risk appetite remains the same,” Ford Credit spokesperson Margaret Mellott told AltFinanceDaily.
Until now, there has been no aspect of machine learning in Ford Credit’s underwriting process.
“The study showed improved predictive power, which holds promise for more approvals … and even stronger business performance, including lower credit losses,” according to Joy Falotico, Ford Credit chairman and CEO, in a press release.
Ford is targeting consumers with a lack of credit history, especially the millennial generation.
Tech-Driven Underwriting
While Ford embraces tech-driven underwriting, this style is already knit into the fabric of the MCA and online lending communities.
To name a few, Upstart takes a machine learning approach. FundKite developed algorithmic-based underwriting. UpLyft’s underwriting process has an automated component to it.
Alex Shvarts, CTO and director of business development at FundKite, a balance-sheet based funder, said the company has been writing algorithms since the early days. Now the tech- and algorithm-driven funder wants to expand into small business lending in Q1 2018.
“We’re building our technology to the point that by Q1 next year, we will get into automated loan products. Our technology will be able to underwrite loan products within seconds. We have a lot of data we put together, which allows us to price deals and make offers relatively quickly,” he said.
By a lot of data, Shvarts is referring to hundreds of data points that are used to measure merchant performance. FundKite, which has a default rate of far less than 10 percent, takes the data, reworks and combines it, leading to a fast result.
“Besides the data points we look at the merchant from a collections point of view. If this person or business runs into trouble, could they go out of business or would they be okay?” he said.
That’s where the human element to the underwriting process comes in.
Human Element
While FundKite relies on algorithm-driven underwriting, the funder is not running an online app yet. There is still a need for human participation surrounding data input, information that is then verified by machines.
“The human element is entering the information correctly, and the machine spits out predetermined pricing based on the business data points and industry,” said Shvarts, adding that FundKite views that information in the context of micro-trends in the industry as well as the overall market environment.
“We know that during certain seasons some merchants perform worse than others. The numbers say the merchant should get this, but we dig a little deeper and say no, this merchant can’t handle this much of an advance and repayment along those lines. The final touches are done by humans. Our technology is advanced so that we are able to get to that point a lot faster and more accurately,” Shvarts said.
Second Opinion
Michael Massa, CEO and founder of Uplyft Capital, points to a hybrid approach in the company’s credit underwriting, referring to the automated scoring portion of Uplyft’s underwriting model as a second opinion. “We believe there must be a hybrid of human and automated technology,” said Massa.
Uplyft relies on a proprietary scoring model. The model includes an automated function that attaches a unique rating to the small business based on certain features in the prospective borrower’s profile, such as a home-based versus business location and the number of years the company has been in business, to name a couple.
“It’s only as second opinion for our underwriters, really,” he said, adding that cash flow and affordability are major drivers of the credit decision. “In most cases we price at max affordability for the client while protecting them from overleveraging their accounts, allowing us to provide real help and establish merchant loyalty.”
Second opinion or not the automated function is part of what makes Uplyft a fintech play, setting the funder apart from the banks. “They’re like the payphone and we’re the iPhone. They’re yellow cab and we’re Uber,” said Massa, adding better yet, “we’re Lyft.”
Uplyft is in the process of developing a trio of portals designed for merchants, sales partners and investors to be released shortly. “We are API-ing that now into our CRM,” said Massa.
Merchants can access the portal to apply for funding while sales partners use it to submit files and view a status. Investors can track their participation via the portal. The new portals will be available on the website and through a mobile app that Uplyft is in the final stages of developing.
Uplyft also recently inked an exclusive partnership with an undisclosed software company allowing merchants to link their bank account to the application, capturing six months of actual PDF bank statements in the process.
“It can help us with the initial credit decision and when we’re conducting final verifications. We get the actual bank statement. It’s a legitimate bank statement, not a rendition,” said Massa.
Fintech & Auto Finance
As for the auto industry, don’t be surprised to hear about further collaboration between the automakers and the fintech market. “Financial technology is key … as fintech can contribute to an even more seamless and better personalized vehicle financing experience for the consumer,” according to the Ford press release.
