Catching Up With Marketplace Lending – A Timeline
April 20, 20172/17
- Prospa, an online small business lender based in Australia, was valued at $235M (AUD) in a $25M capital raise
- Square announced funding $248 million worth of business loans in Q4 2016
2/21 A Massachusetts state court vacated a merchant cash advance COJ
2/24 SoFi raised $500M in a financing round led by Silver Lake Partners that reportedly gave SoFi a $4.3B valuation
2/27 Prosper Marketplace closed a loan purchase agreement with a consortium of lenders for up to $5 billion of loans that has a provision that also enables the lenders to buy up to 35% of the company
2/28 BlueVine secured a warehouse line of up to $75M from Fortress
3/1 Lendio launched a new franchise program, allowing local offices around the country to become Lendio franchisees
3/3 Citing Madden v Midland, Colorado regulator brought a federal lawsuit against Marlette Funding for violating the state’s usury cap
3/5 Two trade associations, the Innovative Lending Platform Association (ILPA) and the Coalition for Responsible Business Finance (CRBF), joined forces. The merged company will continue to be known as ILPA
3/6 Upstart raised $32.5M
3/7
- It’s reported that former CAN Capital CFO Aman Verjee is now the COO of 500 Startups
- Kabbage priced a $525M securitization. It was oversubscribed
3/9 Citing Madden v Midland, Colorado regulator brought a federal lawsuit against Avant for violating the state’s usury cap
3/13
- Melvin Chasen, the founder of Rewards Network (originally Transmedia Network, Inc.) passed away. He was 88.
- The New York State Assembly rejected the Governor’s proposal to grant the Department of Financial Services (DFS) regulatory authority over any online lender doing business in the state
3/15
- The New York State Senate also rejected the proposal to further regulate lending
- The OCC published a manual on how it will evaluate charter applications from fintech companies
- The New York DFS published a statement rejecting the OCC’s plans
- The WSJ reported that Marlette Funding was cutting nearly 1/5th of its workforce
3/16 WebBank announced that it had a net income of $29.2M for 2016 and that it had a market valuation of $319.4M
3/20 Prosper Marketplace announced that it had originated $2.2B in loans in 2016, down from $3.7B in 2015, and had a net loss of $119M.
3/21 It’s reported that Kabbage will set up its European headquarters in Ireland
3/22 OnDeck expanded its credit facility with Deutsche Bank by $52M to a total of up to $214M
3/27 IOU Financial wins Gold Stevie Award for Best Use of Technology in Customer Service
3/30 In Advance Capital announced that they had secured access to an additional $50M
4/5
- Budget passes in New York. Proposed lending legislation was not included in it.
- Kabbage surpasses $3 billion funded to small businesses
See previous timelines:
12/16/16 – 2/16/17
9/27/16 – 12/16/16
Innovative Lending Platform Association and Coalition for Responsible Business Finance Join Forces
March 5, 2017NEW YORK, Early Release — The Innovative Lending Platform Association (ILPA) and the Coalition for Responsible Business Finance (CRBF) today announced they are joining forces and will now operate as the ILPA – the leading trade organization representing a diverse group of online lending and service companies serving small businesses. Joining ILPA’s existing members, OnDeck® (NYSE: ONDK), Kabbage® and CAN Capital, are CRBF member companies Breakout Capital, Enova International’s (NYSE: ENVA) The Business Backer™, PayNet and Orion First Financial. United by a shared commitment to the health and success of small businesses in America, the newly expanded ILPA is dedicated to advancing best practices and standards that support responsible innovation and access to capital for small businesses.
In addition, leading national small business organizations that formerly served as the CRBF Advisory Board will now represent small business customers as formal advisors to the ILPA. The Advisory Board includes individuals from the National Federation of Independent Business (NFIB), the National Small Business Association (NSBA), the Small Business & Entrepreneurship Council (SBE Council), the U.S. Chamber of Commerce, and new representatives from the Association for Enterprise Opportunity (AEO). These small business organizations have provided key input into the collective group’s best practices and standards initiatives over the past year, ensuring that the needs of their small business constituents are addressed.
The expanded ILPA remains committed to advancing online small business lending education, advocacy and best practices. In October, the ILPA introduced the SMART Box™ (Straightforward Metrics Around Rate and Total cost), a first-of-its-kind model pricing disclosure and comparison tool launched in partnership with the AEO. The SMART Box is focused on empowering small businesses to better assess and compare finance options and is now available for broader adoption by lending platforms. More details can be found at: http://innovativelending.org/smart-box/
As a leading voice for responsible business funding, CRBF launched in January 2016 with the mission to create a concrete code of ethics for the industry and to educate policymakers on the value of non-bank small business financing. The organization outlined responsible and transparent business practices for both providers as well as customers, and the expanded ILPA has leveraged that work to formulate an updated industry Code of Ethics that will guide the ILPA moving forward.
The expansion of the ILPA follows a period of broad stakeholder engagement and a demonstrated shared commitment to serving small businesses. With this unification, the cross-industry effort to bring innovative and responsible solutions to improve access to capital for Main Street small businesses continues to gain momentum.
“Fostering responsible innovation and empowering small businesses to better assess and compare finance options are priorities for the ILPA. We are delighted to join forces with the CRBF as we work together to advance small business online lending education, advocacy and best practices,” said Noah Breslow, Chief Executive Officer, OnDeck. “We are proud to be part of this growing cross-sector effort to help improve capital access on behalf of small businesses across the United States.”
“The combination of these leading organizations represents a landmark moment in the industry, signifying how major players in the small business lending space are increasingly aligned on values and best practices that benefit small businesses,” said Carl Fairbank, founder and chief executive officer, Breakout Capital. “Founded on the fundamental principles of responsible lending, education and transparency, Breakout Capital is thrilled to partner with other premier players in the industry who share our vision and believe that a unified industry voice can promote small business success more effectively. “As a founding member company of CRBF, The Business Backer is thrilled with the merger between the CRBF and the ILPA,” said Jim Salters, president of The Business Backer and CRBF Advisory Board member. “The move creates an even larger platform of industry leaders with a common voice to help ensure small businesses have access to honest and transparent funding sources.”
“The ILPA was launched as a self-regulatory exercise and is focused on empowering small businesses with clear and transparent ways to compare financing options,” said Rob Frohwein, co-founder and chief executive officer of Kabbage. “Kabbage and the ILPA are excited to join with the CRBF in order to advance ubiquitous industry standards. Together, we are eager to continue working with regulators and policymakers to expand small businesses’ ability to easily access technology-driven financing products.”
“Access to capital is a high priority for America’s small businesses. As our economy grows, small business owners need diverse sources of capital to hire new employees and expand their businesses. The U.S. Chamber of Commerce applauds the innovative capital providers in the ILPA for their dedication to fueling growth on Main Street,” said Tom Sullivan, vice president, small business, U.S. Chamber of Commerce.
“CAN Capital has been a supporter of transparency throughout our 19 year history, and we are excited to see the ILPA expand as it continues to support small business owners,” said Parris Sanz, chief executive officer of CAN Capital.
“Small business lending continues to be stubbornly elusive for many small firms and what we need is not just more lending, but better lending options,” said Todd McCracken, National Small Business Association president and chief executive officer. “This merger will expand on efforts to connect small business with a variety of fair and responsible lending resources.”
“We are excited to be part of an organization whose purpose is to create a vibrant, healthy, small business lending marketplace that serves the engine of the U.S. economy – small businesses,” said David Schaefer, chief executive officer of Orion First Financial. “As a loan servicer to small business lenders, we are particularly enthusiastic that the ILPA is embracing a diverse membership and participation from small business associations through its Advisory Board.”
“SBE Council looks forward to partnering with the expanded ILPA to continue advocating for the innovative and responsible sources of funding to which entrepreneurs and small businesses need access,” said Karen Kerrigan, president and chief executive officer of the Small Business & Entrepreneurship Council.
“It is critical that these and other responsible lenders come together to advance initiatives like SMART Box,” said Connie Evans, president/chief executive officer of the Association for Enterprise Opportunity. “The time is ripe for united voices and action to give more people the opportunity and the tools to realize a brighter future for their businesses.”
Together, the members of the expanded ILPA have provided access to more than $14 billion dollars in capital to small businesses to help drive growth and hiring.
Are Fintech Companies a Step Closer to Getting a Nonbank Charter?
September 15, 2016Pushing the agenda further on a limited-purpose charter for non banks, the head of the Office of the Comptroller of the Currency (OCC) Thomas Curry at an industry event on Tuesday said that the bureau is investigating “unique risks” that fintech companies might pose to the banking system and the economy.
Curry said that the true test for the industry will come under a “less favorable credit cycle.”
He revisited the topic of creating a limited-purpose charter for fintech companies akin to credit card banks and other non-deposit taking entities. The agency which was evaluating its authority to extend the same status to fintech companies might be a step closer. Should that happen, “the institutions who receive the charters will be held to the same strict standards of safety, soundness and fairness that other federally chartered institutions must meet,” Curry was quoted as saying in Reuters.
Short of advocating for a charter, the Innovative Lending Platform Association (ILPA) with companies such as Kabbage, OnDeck and CAN Capital have suggested a licensing system that would eliminate the duplicative patchwork of federal and state laws.
Apart from this, fintech companies have also urged regulators to put up a united front by coordinating better among themselves and to take a principle-based approach instead of a rules-based one.
Transparent Pricing Creates a Level Playing Field, says Kabbage’s Kathryn Petralia
June 7, 2016
Loan matchmaking site Lending Tree has joined the Innovative Lending Platform Association (ILPA) to participate in developing a universal small business lending disclosure system to raise transparency with lenders. It will work closely with the association over a 90-day “national engagement period” to create and implement the SMART Box (Straightforward Metrics Around Rate and Total Cost).
AltFinanceDaily spoke to Kathryn Petralia, cofounder of Kabbage Loans, which is spearheading the association with OnDeck and CAN Capital. Below are the edited excerpts from the interview:
Tell us about how the ILPA came about?
We (OnDeck, CAN Capital and Kabbage) represent the largest non bank lenders. We have collectively lent $12 billion through the course of our businesses and so we thought it will be great for us to make a statement through ILPA. We came from a perspective that there are a lot of different products for small businesses on the market like merchant cash advance, equipment financing, invoice factoring and lines of credit. All of these serve different needs and are ambiguously priced. So we wanted to find some methodology which is transparent to borrowers so they can know the exact price and total cost of borrowing.
We want to keep it open and hope that everyone participates in the disclosure methodology so borrowers can have a clear understanding of the fees they are paying.
What is SMART Box. How does it work?
Different loan products have different fees — some have maintenance fees, some have broker fees, usage fees and so on and they are all structured very differently. It can get very confusing and so we came up with all the products to understand what disclosures would be necessary to know the total cost of borrowing. We’re working with OnDeck and CAN Capital to gather comments and disclose a series of methodologies that will create the ‘Straightforward Metrics Around Rate’ and Total Cost or SMART Box. Those who want to participate will have to disclose it on loan agreements to their customers.
What about disclosures by companies? Would you say the industry needs more regulation on that front?
Kabbage and other companies in the industry are all regulated and go through FDIC audits. We all follow KYC, CIP, FFIEC guidelines that refer to lenders. We all follow these regulations and I would argue vociferously that we are regulated businesses already. All companies are very different and there are a bunch of things happening — states like California, Illinois and New York and CFPB are all taking interest in small business lending and it’s a positive that they recognize the partnership between banks and tech companies. On the general lending side, we have Dodd-Frank and Madden vs Midland which look at lending issues. Some of the regulation is around how loans are sold and some of it is around how they are limited. And on the small business lending side, there is push for more transparency which is the reason we launched ILPA. We wanted to set the standard for what that would look like. And having it done comprehensively is beneficial for us as it gives us a level playing field.
On the consumer lending side, there is transparency but it’s still lacking a comprehensive system that encapsulates the total cost of borrowing. APR is a great metric but the total cost of borrowing must be included.
Give us a snapshot of what the industry looks like to you
All businesses serve different markets, are different in the way they fund their loans and operate in different geographies, so it’s hard to say but in general those who have done a good job at incorporating data and tech and streamlined operative process will have an advantage and will make it through economic turbulence.
What’s your short-term prediction?
Companies that are not well capitalized will have a tough time raising capital in 2016 and we have already been approached by a number of businesses that are looking to sell or find a partnership because they aren’t well capitalized.
Tell us what’s happening at Kabbage?
We have two businesses – the direct lending business which we are trying to grow and the second is the platform business where we have seen sustained growth, with existing partnerships with ING in Europe, Santander in the UK and Scotia Bank in Canada. More partnerships are in the offing – both domestically and in Latin America.
