Bizfi Appoints Alternative Finance and Payments Veteran John Donovan as CEO
October 24, 2016
New York – October 24, 2016 – Bizfi (www.bizfi.com), a leading fintech company with a platform that combines aggregation, funding and a marketplace for small businesses, announced its board of directors has appointed John Donovan as the Company’s chief executive officer (CEO). Donovan is a 30-year veteran in the payments and alternative finance industry serving both small businesses and consumers.
Over the course of his career, Donovan helped pave the way for the development of the fintech and alternative finance industry. Having worked for nearly two decades with MasterCard, Donovan was integral to conceiving and developing new products, launching a global card program and growing the Company’s global electronic payments offerings. As one of the founding employees of Lending Club, Donovan helped create the direct-to-consumer fintech industry that has transformed the way consumers and financial institutions interact with one another. During his tenure at Lending Club, he held various roles including chief operating officer, board member and executive vice president of corporate development.
“Bizfi is transforming the way small businesses are accessing growth and working capital. John Donovan brings a unique combination of industry-related expertise, strategic vision and proven management experience which will accelerate this transformation and further enhance our market-leading position in the fintech space,” said Tom Breitling, Bizfi Chairman.
“I have known the Bizfi team for many years and have been extremely impressed with the market presence the company has established in the fintech space,” said John Donovan. “I have spent my career building and operating companies, conceptualizing new products and increasing shareholder value. It is clear that the Bizfi team have built the single best way for small businesses to access capital in a quick, frictionless and simple way.”
With originations growing over 35% over the past year, Bizfi continues to demonstrate record volumes, and is on track to approach nearly $600 million of fundings this year, highlighting the strength and scalability of the overall platform and the company’s leading position in the fintech industry.
Since its creation in 2005, Bizfi has provided more than $1.9 billion in capital to more than 33,000 small business owners. Earlier this year, the Company announced partnerships with Western Independent Bankers (WIB) and the National Directory of Registered Tax Return Preparers & Professionals (PTIN). These partnerships are providing hundreds of thousands of small business owners across the country with access to financing through the Bizfi platform in addition to the ability to visit Bizfi.com, the Company’s lending marketplace.
About Bizfi
Bizfi is the premier fintech company combining aggregation, funding and a participation marketplace on a single platform for small businesses. Founded in 2005, Bizfi and its family of companies have provided in excess of $1.9 billion in financing to more than 33,000 small businesses in a wide variety of industries across the United States.
Bizfi’s connected marketplace instantly provides multiple funding options and real-time pre-approvals to businesses from a wide variety of funding partners. Bizfi’s funding options include short-term financing, franchise financing, lines of credit, equipment financing, medical financing, invoice financing, medium-term loans and long-term loans guaranteed by the U.S. Small Business Administration. The Bizfi API provides a turnkey white label or co-branded solution that easily allows strategic partners to access the Bizfi engine and present their clients with financial offers from Bizfi lenders all while maintaining their customer’s user experience. A process that once took hours, now takes minutes.
Media Contact:
Abbie Sheridan / Kenneth Cousins
KCSA Strategic Communications
asheridan@kcsa.com / kcousins@kcsa.com
212-896-1207 / 212-896-1254
Bizfi Sales:
855-462-4934
bizfisales@bizfi.com
Secretary Clinton Spoke About Small Business Lending in Goldman Sachs Speech, Wikileaks Reveals
October 16, 2016
On October 29th, 2013, former Secretary of State Hillary Clinton said that one of the biggest complaints she gets as she travels around the country is “how do we get more access to credit in today’s current system for small businesses?” This comment was made at a private Goldman Sachs event hosted at the Ritz-Carlton Dove Mountain in Marana, Arizona, according to a transcript published by Wikileaks.
As a contender to become the President-elect in just a few weeks, she appears to understand that small businesses lack access to capital and the shortcomings of the current system. Transcript excerpt below:
ATTENDEE: Secretary Clinton, I’m Patty Greene from Boston College’s Goldman Sachs 10,000 Small Businesses. And first off, thank you for all the work you’ve done with women entrepreneurs both domestically and globally over your career. That’s really meant a lot.
My question is more domestic based. We have the rather unusually organized Small Business Administration, we have the Department of Commerce, and we have programs for entrepreneurs with small business pretty much scattered across every single other agency. How do you see this coming together to really have more of a federal policy or approach to entrepreneurship and small businesses?
SECRETARY CLINTON: I would welcome your suggestions about that because I think the 10,000 Small Business Program should give you an opportunity to gather a lot of data about what works and what doesn’t work. Look, neither our Congress nor our executive branch are organized for the 21st Century. We are organized to be lean and fast and productive. And I’m not — I’m not naive about this. It’s hard to change institutions no matter who they are. Even big businesses in our country are facing competition, and they’re not being as flexible and quick to respond as they need to be.
So I know it wouldn’t be an easy task, but I think we should take a look at how we could, you know, better streamline the sources of support for small businesses because it still remains essential. You know, one of the things that I would love to get some advice coming out of the 10,000 Small Businesses about is how do we get more access to credit in today’s current system for small businesses, growing businesses, because that’s one of the biggest complaints I hear everywhere as I travel around the country. People who just feel that they’ve got nowhere to go, and they don’t know how to work the federal system. Even if they do, they don’t feel like they’ve got a lot of opportunities there. So we do — this is something we need to look at.
You know, I don’t think — I don’t think our credit access system is up to the task right now that is needed. I mean, there are a lot of people who would start or grow businesses even in this economic climate who feel either shut out or limited in what they’re able to do. So we need to be smarter about both private and public financing for small businesses.
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More recently, Clinton’s campaign has publicly stated that she wants to “harness the potential of online lending platforms and work to safeguard against unfair and deceptive lending practices.”
Sunshine and Deal Flow: Who’s Funding in Puerto Rico?
September 1, 2016
Lots of small businesses need capital in Puerto Rico and not many companies are trying to provide it. Combine that with the island’s tax incentives, tourist attractions and gaggle of ambitious entrepreneurs, and America’s largest unincorporated territory can seem like an archipelago of opportunity for the alternative small-business finance community – a virtual paradise.
But for alt funders, the sunshine, sandy beaches, swaying palms, picturesque rocky outcroppings, rich history and renowned cuisine can’t change two nagging facts about this tropical commonwealth that 3.4 million people call home. Alternative finance remains largely unknown on the island, and it’s difficult if not impossible to split credit card receipts there.
Let’s start with the good part. “If you call a restaurant in Los Angeles at 2 o’clock in the afternoon, you’re the 15th person to call them that day, but if you’re calling a business in Puerto Rico, you might be the only one,” says Andrew Roberts, director of partnership development for Merchant Cash Group, which funds some deals on the island. “So it’s not the same cutthroat competitiveness that we have here.”
But consumers in Puerto Rico’s tourist areas rely on PIN debit cards, which don’t qualify for split funding between merchants and finance providers because the cards don’t have Visa or MasterCard logos and thus merchants can’t run them as credit transactions, Roberts says. Besides, processors on the island don’t want to split the revenue from credit card transactions between funders and merchants, either, Roberts notes. “If there’s a processor in Puerto Rico that will split fund, I haven’t been unable to find them,” he says. “Believe me, I have looked.”
The two main processing platforms on the island, Global and First Data, require ISOs to carry 100 percent of the risk on a split, according to Elevate Funding CEO Heather Francis, who was involved in the island market at another company before taking her current job. That’s why split remittance “remains almost nil” in Puerto Rico, she says.
Splitting funds by using a “lockbox” – which works like an escrow account and distributes a certain percentage of receipts to the merchant and the rest to the funder – doesn’t provide a solution because banks in Puerto Rico decline to use the option, Roberts maintains. That’s why he advises that it’s easier to offer ACH-based products on the island.
Merchants on the island have to meet the same requirements for ACH that apply on the mainland, Roberts notes. That includes a reasonable number of checks returned for non-sufficient funds and a reasonable number of negative days. “The underwriting procedure on the island is pretty much the same as it is here,” he says.
Perhaps the difficulties of setting up the split in Puerto Rico shouldn’t cause any uneasiness about entering the market because the bulk of alternative funding on the island relies on daily debits—just as it does on the mainland, Roberts says. Still, he notes that some merchants in both places may qualify for split funding but fail to measure up for daily debit.
Though merchants and funders have those commonalities, the banking systems differ on the mainland and on the island. Banco Popular, which has held sway in Puerto Rico for nearly 120 years, controls much of the island’s banking and inhibits the growth of alternative funding for small businesses there, Francis says. Still, Puerto Rican merchants should have some familiarity with alternative finance or high-fee products because of the island’s high concentration of title loan companies, she notes.
Similarities and and differences aside, the Puerto Rican market provides a little business to some mainland alternative finance companies. United Capital Source LLC, for example, has completed five deals for small businesses on the island, says CEO Jared Weitz. Companies can provide accounts receivable factoring there, he says.
Alternative funding has yet to post runaway growth in Puerto Rico, Weitz says, because it’s not marketed strongly there, only a few mainland funders are willing to do business in Puerto Rico, the range of products offered there is limited, and small business remains less prevalent there than on the mainland.
But a handful of mainland-based companies have been willing to take on the uncertainties of the Puerto Rican market, and Connecticut-based Latin Financial LLC serves as an example of an ISO that has enthusiastically embraced the challenge. The company got its start in 2013 by offering funding to Hispanic business people on the mainland and began concentrating on Puerto Rico early in 2015, says Sonia Alvelo, company president.
Alvelo built a strong enough portfolio of business on the mainland that funders were willing to take a chance on her and her customers in Puerto Rico. Latin Financial now maintains a satellite office on the island, and the company generates 90 percent of its business there and 10 percent on the mainland.
Latin Financial has a sister company called Sharpe Capital LLC that operates on the mainland, says Brendan P. Lynch, Sharpe’s president. Alvelo describes Lynch as her business partner, and he says he’s started several successful ISOs. He credits her with helping Puerto Rican customers learn to qualify for credit by keeping daily balances high and avoiding negative days.
“It’s a small company with a big heart,” Alvelo says of Latin Financial. She was born in Puerto Rico and came to Connecticut at the age of 17. “For me it’s home,” she says of the island. She’s realizing a dream of bringing financial opportunity to business owners there.
To accomplish that goal, Alvelo spends much of her time teaching the details of alternative finance to Puerto Rico’s small-business owners, their families, their accountants and their attorneys. “You want to make sure they understand,” she says, adding that the hard work pays off. “My clientele is fantastic,” she says. “I get a lot of referrals.”
Latin Financial started small in Puerto Rico when a pharmacy there contacted them to seek financing, Alvelo says. It wasn’t easy to get underway, she recalls, noting that it required a lot of phone calls to find funding. Soon, however, one pharmacy became three pharmacies and the business kept growing, branching out to restaurants and gas stations. Already, some merchants there are renewing their deals.
Growth is occurring because of the need for funding there. Puerto Rican merchants have had the same difficulties obtaining credit from banks as their peers on the mainland since the beginning of the Great Recession, Alvelo says. “It’s the same story in a different language,” she notes.
Speaking of language, Alvelo considers her fluency in Spanish essential to her company’s success in Puerto Rico. “You have to speak the language,” she insists. “They have to feel secure and know that you will be there for them,” she says of her clients. Roberts agrees that it’s sound business practice to conduct discussions in the language the customer prefers, and his company uses applications and contracts printed in Spanish. At the same time, he maintains that it’s perfectly acceptable to conduct business in English on the island because both languages are officially recognized.
People in Puerto Rico have been speaking Spanish since colonists arrived in the 15th Century, and English has had a place there since the American occupation that resulted from the Spanish-American War in 1898. Still, more than 70 percent of the residents of Puerto Rico speak English “less than well,” according to the 2000 Census, but that’s changing, Alvelo says.
Whatever the linguistic restraints, the products Latin Financial offers in Puerto Rico have been short-term, most with a minimum of six-month payback and a maximum of 12 months, but Alvelo hopes to begin offering longer duration funding. She also believes that split funding will come to Puerto Rico. “It’s in the works,” she asserts, noting that she is campaigning for it with the banks and processors.
At the same time, mainland alternative finance companies are learning that the threat of Puerto Rican government default does not mean merchants there don’t deserve credit, notes Lynch. “Just because the government is having trouble paying its bills,” he says, “doesn’t mean these merchants aren’t successful. The island is full of entrepreneurs.” In fact, many of Puerto Rico’s merchants use accountants and keep their business affairs in better order than their mainland counterparts do with their homemade bookkeeping.
Alvelo also knows many merchants there are worthy of time and investment. She strives to listen to her customers when they express their needs and then help them fill those needs. “I’m very, very proud to be doing this in Puerto Rico now,” she says.
IT’S A BROKER’S WORLD
August 31, 2016
From east to west, small businesses are getting funded. But how they’re found and who they work with depends on where they are. In the US, where brokers tend to have a love/hate relationship with the funding companies they work with, they are no doubt a driving force in the market. In other countries, they might not even exist, are just starting to bloom or they add balance to a mature market. Is the world built for brokers? AltFinanceDaily traveled far and wide to find the answers.
Down under in Australia where American-based merchant cash advance and lending companies have expanded, the ISO (which stands for Independent Sales Office and is synonymous with broker) model has not really followed. David Goldin, CEO of Capify, an international company headquartered in New York, told AltFinanceDaily that there’s very few ISOs in Australia.
He believes that’s because there’s next to no payment processing ISO market there, a foundation that was a major precursor in the US towards the development of ISOs reselling merchant cash advances and business loans.
Luke Schmille, President of CapRock Services, echoed same. The Dallas-based company founded Sprout Funding in Australia earlier this summer as part of a joint venture with Sydney-based family office Huntwick Holdings. “Direct marketing is the primary method [of acquiring deal flow],” he said. “The credit card processing space is controlled by several large banks, so you don’t see ISO efforts in the acquiring space either.”
Big bank dominance was only one reason why another country’s emerging alternative small business funding market developed slowly. In Hong Kong, non-bank alternatives like merchant cash advances faced legal uncertainty for a long time. For example, Global Merchant Funding (GMF), once the only merchant cash advance company in the Chinese special administrative region, had been relentlessly pursued for years by the Secretary for Justice for conducting business as a money lender without a license. GMF fought it. And won.
In May of this year, the legality of merchant cash advances ultimately prevailed after the highest court ruled the agreements were not loans. Emboldened, several companies have stepped up their marketing of the product. But whether they’re doing daily debit loans or split-processing merchant cash advances (both of which exist there), marketing tends to be directed at merchants, not a middle market of brokers.
Gabriel Chung of Hong Kong-based Advanced Express Capital said that there are a handful of large brokers typically comprised of former bankers, but the rest of the broker market is highly fragmented, mostly made up of individual freelancers.
Adrian Cook, the Founder and CEO of Hong Kong-based Asia Capital Advance, agreed that marketing is usually aimed at merchants directly but that it’s changing. “Since the market is still very new and MCA is only beginning to gain popularity, brokers on the market are only starting to recognize MCA,” he said. “There is a lot of room for the brokerage market to grow.”
In the UK, where Capify also operates, CEO David Goldin explained that the UK doesn’t have a lot of credit card processing ISOs so there wasn’t a major migration from that business to MCA like there was in the US. But that doesn’t mean there is no middleman market at all.
Paul Mildenstein, executive director of London-based Liberis, said that brokers are an important channel, but not as dominant as they are in the US. “Our brokers are usually members of the NACFB, an organisation in the UK that actively supports and provides operating principles to the furtherance of the commercial finance broker community,” he wrote. The National Association of Commercial Finance Brokers claims to have 1600 members, one among them is Liberis.
“Many clients want the support of an experienced professional who can discuss the financial options available to them in their specific circumstances,” said Liberis’ CEO, Rob Straathof. “Given relatively low awareness of the Business Cash Advance product in the UK, this means that brokers have a key role to play in educating potential customers on when this is the right option for them,” he added.
Straathof stressed a robust criteria for the brokers they work with and explained that brokers are their eyes and ears in the market. “The relationships we have with them are not transactional, but transformational for our business,” he said.
The NACFB was also praised by Alexander Littner, Managing Director of Chelmsford, Essex-based Boost Capital. The company, which is actually a subsidiary of Coral Springs, FL-based BFS Capital in the US, sees a balance between their use of brokers and their efforts to acquire customers directly.
“As the alternative finance market is still relatively new here in the UK these brokers are important for this independent advice, and to help educate the market and establish trust,” Littner said. “At Boost Capital we work very closely with brokers across the UK, they are a critical part of our growth and fundamental to our ongoing success.”
In the US, brokers play such a dominant role in customer acquisition that some MCA funding companies rely on them to source the entirety of their business. Back in February, Jordan Feinstein of NY-based Nulook Capital told AltFinanceDaily, “We decided that the best way to grow is to build relationships to avoid the overhead, compliance, training and manpower that a sales team would require.” Nulook markets its broker-only approach as a strength.
Others take a more blended approach, like Justin Bakes, CEO of Forward Financing, for example. “While our priority is to self originate, it is essential to create and maintain partnerships in this business,” he said earlier this year.
Notably, no such guiding authority like the UK’s NACFB exists for brokers in the US so it’s not easy to track exactly how many there are or how they operate, but their role in the industry cannot be understated. AltFinanceDaily actually labeled 2015 The Year Of The Broker, when it published an article in its March/April 2015 issue that tried to capture the essence of the industry at the time. Tom McGovern, who was then a VP at Cypress Associates LLC, said of brokers, “They’re like the missionaries of the industry going out to untapped areas of the market.”
But preaching the gospel of alternative funding exists at different stages across the world. And Goldin, whose company Capify operates in four countries including the US, thinks that many middlemen here at home may not ultimately survive. In an interview, he predicted that the stronger ones over time will be acquired by funding companies and that direct marketing will only increase. “I think more and more companies are going to start building their own internal sales forces,” he said.
Other brokers are not convinced that acquisition costs will lead to the death of their businesses, especially if they’ve already found ways to reduce overhead costs. Several brokers have discreetly mentioned running operations from Costa Rica, Nicaragua or elsewhere as a way to keep things profitable. Still more, like Excel Capital Management based in Manhattan, have found that offering a suite of products allows them to monetize more customers. Chad Otar, a managing partner for Excel, said that they recently brokered a $4.9 million SBA loan. MCA is just one of their options these days. “As long as there’s small businesses, there’s always going to be opportunity,” he said.
In the US, the brokers have certainly seized it, but that’s because most funding companies offer big bucks and quick payment to those that are capable of sourcing customers. In other countries, compensation for services rendered might be the responsibility of the broker to arrange with the merchant since it may not be customary for funding providers to pay commissions. That would mean more work and more risk for the broker.
Ironically, some brokers in the US will tap into both sides, earning a commission from the funder and charging a fee to the merchant for services rendered. And if the broker has payment processing roots, they can go a step further and earn merchant account residuals as well.
Brokers can’t exist without funding companies willing to support their endeavors, of course. While their prevalence around the world varies, most of the funding companies AltFinanceDaily spoke to, appear eager to nurture the middleman’s role, so long as they act responsibly.
“Brokers in the UK are incredibly important as independent advisors to small businesses on the various sources of finance to suit their needs,” said Littner.
And as long as those customers, wherever they may be, are getting the value they want from a broker, that role, so long as it can continue to be done profitably, will likely have a place in the world for the foreseeable future.
Chinese Regulators to Cap P2P Investments
August 24, 2016Thanks to the Ezubao ponzi scheme that opened up a can of worms and sent a slew of Chinese P2P lenders packing, the government is considering placing caps on the P2P lending sector to protect investors.
As part of the crackdown on Chinese P2P lenders, the central bank began collecting data on the process of assessing risk and deploying capital for loans made online after authorities arrested executives from two other Shanghai-based wealth management firms in May.
As per the new proposed cap, an individual investor can only provide loans upto RMB200,000 (US $30,000) on one lending platform, and cannot lend more than RMB1 million (US $150,000) in total.
Chinese media reported that over 515 P2P platforms have shut down in the first half of the year, with fraud being a pervasive reason. Despite problems, China continues to have the largest p2p lending sector in the world.
Lending Club Hires BlackRock’s Patrick Dunne to Head Investor Group
July 18, 2016Lending Club has a new chief capital officer.
The company hired Patrick Dunne who headed iShares Global Markets and Investments at BlackRock. With 25 years of industry experience, Dunne has overseen 700 investment products with over $1 trillion assets under management.
As the resurging online lender looks to amend investor relations, as the new chief capital officer, Dunne will manage Lending Club’s Investor Group which spans individual investors, strategic partnerships with retail distribution partners, banks and other institutional investors including asset managers, pensions, foundations, and endowments. “Patrick will play a key role in reaffirming our continued commitment to our investors,” CEO Scott Sanborn said in a statement.
After founder and initial CEO Renaud Laplanche exited the company on May 9th, Lending Club has been playing musical chairs with its management team while slashing 179 jobs. At the company’s last annual shareholder meeting held last month, Scott Sanborn was named CEO while executive chairman Hans Morris was appointed chairman of the board.
The challenge for most online and marketplace lenders in this credit environment lies in diversifying their capital sources and roping in more investors to buy their loans. And, lenders are turning to investment bankers for this purpose. Last week, UK P2P lender Funding Circle roped in Nomura’s European head, Jeremy Bennett as chief financial officer who designed and ran UK’s Asset Protection Scheme, which insured risky assets of big banks like Royal Bank of Scotland.
Lack of deposits as a capital source has led non-bank lenders to depend on securitization and retail and institutional investors. The road is long and the trudge is harder. Will the new crop of hires lead the way?
Russian Startup Blackmoon Wants to Play Middleman in Marketplace Lending
July 6, 2016Russian startup Blackmoon, that screens other company’s loans before selling them to investors, has launched in the US, drawn to the lure of its $1 trillion addressable market. Blackmoon aims to reach a billion dollar in loans by the end of 2017 and is targeting business, consumer, student and car loans.
The company provides ‘marketplace lending as a service’ working as a middleman between debt investors, lenders as well as banks. Its platform brokers deals between balance sheet lenders and investors. The company was founded in Moscow City last year by investor and entrepreneur Oleg Seydak. Seydak was a partner at venture capital fund Flint Capital and managing director of private equity firm FINAM Global.
Cofounder Ilya Perekospky in an interview with Venturebeat said that the US market is ripe with opportunity for companies like Blackmoon. “We believe that existing marketplace lenders have only scratched the surface with respect to the volume of loans being originated in the U.S. today,” he said. “The size of the marketplace lending market is measured in billions of dollars, whereas balance-sheet lender loan origination volume is nearly a trillion U.S. dollars or more.”
American Express Expands Business Loan Options
July 5, 2016
American Express is expanding beyond their merchant financing program. The new Working Capital Terms program makes small business owners who are simply Amex cardholders, eligible for funding as well.
There’s a catch however. The funds must be used to pay vendors, according to Bloomberg, a process which Amex controls by paying the vendors on the borrower’s behalf. The program is more a way to enable small businesses to pay vendors using their Amex card in situations where vendors don’t accept Amex, rather than providing businesses with capital to use on a discretionary basis like OnDeck and Square Capital offer.
The Bloomberg story headline, “AmEx Challenges Square, On Deck With Online Loan Marketplace” is pretty misleading. They actually quote Susan Sobbott, AmEx’s president of global commercial payments, as saying “It’s a big opportunity for us to go into an area where businesses want to pay vendors that don’t accept any credit cards.”
There does not appear to be any “marketplace.”
In April, AmEx made their merchant financing program available on the Lendio platform. That product, which is different than the new Working Capital Terms program, was called a hybrid between a merchant cash advance and a bank loan, according to Lendio CEO Brock Blake. Merchants with a minimum revenue of $50,000 and two years of operating history can apply for that loan based on cash flow and historical credit card sales activity.
