Financial Service Associations Urge Legislation on IRS Income Verification
January 25, 2024
The IRS doesn’t want financial service companies to be able to verify the income of customers, at least not through official channels like the Income Verification Express Services (IVES) system. On January 2 and 3, the IRS announced it would only allow IVES transcripts to be made available “to mortgage lending firms for the sole purpose of obtaining a mortgage on residential or commercial real property (land and buildings).” Government agencies will also not be allowed to use IVES.
“The IRS is implementing the provisions of the Taxpayer First Act (P. Law 116-25) with increased privacy and security requirements for access to confidential tax information,” it announced. “If tax transcript information is required by your firm for other than securing a mortgage, we recommend requesting it directly from the taxpayer.”
But relying on getting the information directly from the taxpayer defeats the whole purpose in more ways than one, many financial service trade associations say. On Wednesday, a letter jointly signed by the American Bankers Association, America’s Credit Unions, American Fintech Council, Consumer Data Industry Association, Electronic Transactions Association, Financial Technology Association, Innovative Lending Platform Association, Independent Community Bankers Association, Mortgage Bankers Association, Responsible Business Lending Coalition, and Small Business Finance Association urged senior ranking members of Congress to pass H.R. 3335. Dubbed the IRS eIVES Modernization and Anti-Fraud Act, it would “ensure the IRS follows the original intent of Congress to modernize the system and prevent disruptions to the consumer and commercial lending industries.”
Back to Business Lending in Canada
November 2, 2023
“There’s a need for products and services like ours across all cycles,” said Cato Pastoll, CEO of Loop, on the small business lending panel held at the Lenders Summit this week in Toronto.
It’s unclear what cycle the industry is in exactly. The Lenders Summit, put on every year by the Canadian Lenders Association, was not only sold out but packed wall to wall with more than 500 attendees. The tone was relatively upbeat despite Canada’s key interest rate holding steady at 5% and economic headwinds blowing in the background.
OnDeck Canada COO Harley Greenspoon said that his company just had their best October in four years and that they’ve returned back to pre-pandemic growth. “Demand is actually not the issue at all,” Greenspoon said.
Not only is the demand for business loans there but OnDeck Canada has not had to pass on the rising costs of capital thanks to greater efficiencies unlocked by reducing headcount and increasing automation.
Lauren Thompson, VP of Specialty Finance for Peoples Group, whose organization partners with fintechs and lenders, said that from a bird’s-eye view banks would probably continue to restrict capital being loaned to small businesses for the foreseeable future. “I don’t think that small businesses are best served through the traditional banking system,” said Thompson.
Pastoll of Loop pointed out an irony with this, that banks tend to under serve the underserved when they actually need it most. “90% of the private sector workforce is employed by small businesses so if you want to stimulate the economy, we as fintechs can do it faster…” Pastoll said.
Thompson explained that the traditional financial system can be hamstrung by reviewing data that is already stale such as financial reports that reflect a moment in time six months ago while a fintech lender has more of a live pulse on what’s going on.
Greenspoon of OnDeck Canada, for example, could rattle off the top of his head industries that are experiencing challenges, the most notable being transportation.
Finally, Pastoll was asked if Loop had contemplated ever having to deal with a high interest rate environment back when he founded the company almost nine years ago. Pastoll explained that his whole inspiration for founding Loop in the first place was to help small business owners precisely during difficult times. Both of his parents were small business owners and he had watched firsthand how hard it was to find financing.
“Again, I just think about what my parents had to go through,” he said.
Small Business Financing Industry Representatives Testified in New York Senate Hearing on Licensing
April 26, 2023Several representatives from across the small business finance industry testified in a New York State Senate hearing on Tuesday. Up for debate was Senate Bill S1450, which would require a license to engage in commercial financing. As part of that, Banking Committee Chairman Senator James Sanders Jr. fielded testimony and asked questions about bad actors, usury caps, non-compliance penalties, and more. Those called upon at the hearing included:
- Natalie Pappas, Deputy General Counsel, Rapid Finance, on behalf of the SBFA
- Amy Carpenter Holmes, Deputy Counsel, Kapitus
- Chris Grimm, Head of State Government Relations, ILPA
- Katherine C. Fisher, Esq., Partner at Hudson Cook, LLP, on behalf of the RBFC
- Phil Goldfeder, CEO, American Fintech Council
- Chuck Bell, Programs Director of Advocacy, Consumer Reports
Almost all of the organizations were in favor of some form of licensing system in New York except for the Innovative Lending Platform Association (ILPA). The ILPA, more famously known for its previous SMART Box initiative, explained that high compliance costs, inflation, and rising interest rates were putting significant pressure on its member’s businesses.
The video below, which curates just the relevant parts of the day, consists of two separate panels on the same subject. Be sure to watch them both.
BEFN: A New Networking Space for Black Equipment Finance Professionals
March 30, 2023
“The event’s theme, ‘forging inclusive excellence in equipment finance,’ set the tone for the group’s mission to advance diversity, equity, and inclusion (DEI) in the industry,” said George Parker, Co-CEO at VenSource Capital LLC.
Newly formed in January, the Black Equipment Finance Network (BEFN), is a non-profit organization focused on increasing the attendance of black professionals in the equipment finance industry. While providing network opportunities for people in the industry, the organization assists in promoting business collaboration, industry support and outreach, professional development, and Diversity, Equity and Inclusion (DEI) advocacy.
“I think the industry, given the mixer that we had last week in San Diego, is poised for [even more growth]. Many people showed up in support of what we’re looking to do,” said Lovern Gordon, National Sales Executive at Boston Financial & Equity Corp. “And that was a huge, huge, huge show of a vote of confidence that we’re headed in the right direction.”
The organization recently had their first inaugural mixer to kick off NEFA’s 4-day event, last week in San Diego. Filled with members and allies, the mixer dedicated a one-hour block to networking with people of color (POC).
“It was the most people that I and many others in the room have seen in terms of numbers for black people in the equipment finance industry in one space ever,” said Gordon.
For many POC, working in equipment finance can feel intimidating as the field is predominately a white-male led industry. The network is an all-around safe space for people that share in their likeness while being able to address issues of feeling left out of conversations or not feeling understood by their peers. The leadership team alongside Gordon (Secretary/Director), consists of George Park (President), Nancy Robles (Director), Kareem Jernigan (Treasurer/Director), Andre Olaofe (Director), and Eric McGriff (Director).
“This is a long overdue group of primarily black and people of color professionals in the equipment finance industry, that have just come together to form a small group within the industry to create an awareness of the black professional in the equipment finance industry,” said Andre Olaofe, President at Select Funding.
An active member of BEFN will typically attend monthly virtual meetings, have the option to be on panels, opportunity to come to regional and national events, advocate for laws and policies to improve within the industry, have access to the member directory, and mentorship.
“I’m on the steering committee,” said Cheryl Tibbs, CEO at Equipment Lease & Co. “The steering committee, we meet to set the agenda for the organization for our meetings. Just really to set the agenda for the group.”
The support from non-POC peers in the industry has been fantastic, Gordon explained. Several sponsors such as Dedicated Financial GBC, Wells Fargo Capital, North Mill Capital, and Wintrust Specialty Finance attended and donated, which contributed to pulling the mixer off. Tibbs noted the overwhelming response of non-black professionals that wanted to be involved who also saw a need for DEI within these organizations.
“The president of the National Equipment Finance Association, the board members of NEFA, the other members for funding sources, other brokers, all welcomed the group in San Diego, and came out to the mixer,” said Olaofe, “and were actively involved in at least sharing in the celebration of coming together and this inaugural mixer.”
New California Disclosure Rules Reduce Capital Available to Small Businesses
March 21, 2023In a poll conducted by a leading trade association, since new CA disclosure rules were implemented in December 2022, 40% of respondents were found to be “no longer lending” to prospective borrowers who fall within the regulations’ threshold of less than $500,000. The poll was conducted by The Secured Finance Network (SFNet), an 80-year-old nonprofit with members representing the $4T U.S. secured finance industry. The new law, requiring sweeping financial disclosures, introduced by CA State Senator Steven M. Glazer in 2018, faced four years of strong opposition before being rolled out in December of 2022.
According to the poll, commercial finance companies would rather not lend to small businesses than comply with what they believe are “misguided and un-compliable” requirements. Mark Hafner, president and CEO of Celtic Capital Corporation, based in Calabasas, CA, said, “Unfortunately, we must now shy away from smaller deals (under the $500k threshold) as the disclosure requirements are extremely complicated to figure out and would require getting our attorneys and CPAs involved to ensure compliance. It’s just not worth the costs involved to fund a small deal anymore. The statute is not user friendly and, frankly, not representative of the true costs as there are numerous assumptions that have to be made to calculate the APR based on the state’s requirements. I honestly don’t think it was designed to meet the stated goal of the statute.”
Robert Meyers, president of Republic Business Credit, which does business with many California-based businesses, explained, “While the fines and penalties are clear under the regulations, the state has been unwilling to confirm our compliance or anyone else’s compliance. That fear is what has stopped 40% of our non-banks from doing business in the state, thus reducing access to capital for small- and medium-sized businesses. I expect this number to increase as time goes on. If the goal of this law was to better inform, it is actually doing the opposite as APR just doesn’t apply to our products.”
SFNet reports that its member companies provide “tens of billions” of capital annually in California to small businesses for essential working capital that funds everything from inventory, to work in process to payroll.
“Forty percent of billions is a large number,” said SFNet CEO, Richard D. Gumbrecht. “In attempting to find a one-size-fits-all solution to financial transparency, the State has created a complex set of requirements that misrepresent the actual cost of borrowing. Lenders are saying it’s not worth the cost and risk of complying. If this sample of 50 lenders is indicative of what we can expect, clearly that was not the intent of the legislation. And considering the demise of Silicon Valley Bank, it’s more important than ever that capital is not restricted in California.” The trade association is working with State legislatures to revise the statute. “Other states have found a simpler and more accurate way to protect small borrowers, and given the unintended consequences we are seeing, we are hopeful California will be receptive to these alternative approaches.”
To demonstrate how vital small businesses are to the U.S. economy, and the importance of not curtailing funding, consider these statistics: According to the U.S. Small Business Association (SBA), small businesses of 500 employees or fewer make up 99.9% of all U.S. businesses and 99.7% of firms with paid employees. Of the new jobs created between 1995 and 2020, small businesses accounted for 62%—12.7 million compared to 7.9 million by large enterprises. A 2019 SBA report found that small businesses accounted for 44% of U.S. economic activity.
About Secured Finance Network
Founded in 1944, the Secured Finance Network (formerly Commercial Finance Association) is an international trade association connecting the interests of companies and professionals who deliver and enable secured financing to businesses. With more than 1,000 member organizations throughout the U.S., Europe, Canada and around the world, SFNet brings together the people, data, knowledge, tools and insights that put capital to work. For more information, please visit SFNet.com.
Media Contact:
Michele Ocejo, Director of Communications
Secured Finance Network
mocejo@sfnet.com, 551-999-5283
Register for The 4th Annual Alternative Finance Bar Association Conference
May 12, 2022
The fourth annual Alternative Finance Bar Association conference is BACK IN PERSON. This is the go-to event for and with the industry’s leading attorneys.
Mark your calendars for June 15th and June 16th in New York City and register by emailing Lindsey Rohan at lindsey@lrohanlaw.com. Registration is subject to approval and space availability.
Two-day program includes the following panels:
The State of the Industry: Industry experts discuss pending legislation, case law and market hurdles. They have both a regulatory panel ready to discuss what’s new in Virginia, Utah, NY and California as well as a Courtroom panel ready to discuss the winning and losing case law that has come out in the past year.
Bankruptcy: The aftermath of Chicago v. Fulton, In re Shoot the Moon and other pivotal bankruptcy cases that shape industry practices.
Ethics: Challenges faced by internal counsel and ways to navigate those pressures.
Collections: Trends in the post-COJ, post-COVID era.
Employment/Labor Law: The rise of labor use outside the U.S. What challenges arise from having call centers outside the U.S. Tax implications, oversight and practical benefits/detriments. Post-COVID remote work implications. What you need to be aware of to avoid creating liabilities.
The Art of Arbitration: The importance of a carefully drafted Arbitration Clause and the pro/cons of this venue.
Thinking Ahead: What technologies and market conditions will shape the future of the industry. Broad discussion of Blockchain technology, CRM systems, cannabis and what we can imagine will shape the future of Alternative finance.
WEDNESDAY KEYNOTE: David Picon, Esq. – It is with great pride that David Picon of Proskauer Rose will be the Keynote speaker. For years the AFBA has admired his work from afar. Attendees now have an opportunity to learn directly from David what makes for an unstoppable litigator.
THURSDAY SPECIAL EVENT: AFBA Game Show Mash-Up with the Industry’s Legendary Attorneys. Special Guests you will not want to miss!
Speakers:
- Andrew Smith, Covington & Burlington LLP
- Brian Simon, Hollis Public Affairs
- Jamie Polon, Mavrides Moyal Packman & Sadkin, LLP
- Patrick Siegfried, Rapid Finance
- Natalie Pappas, Rapid Finance
- Keith Ellis, Expansion Capital Group
- Kate Fisher, Hudson Cook LLP
- Cathy Brennan, Hudson Cook LLP
- Blake Sims, Hudson Cook LLP
- Steve Denis, Small Business Finance Association
- Christopher R. Murray, Murray Legal PLLC
- Mark Stout, Padfield & Stout
- Shanna Kaminski, Kaminski Law Group
- Michael W. Davis, DTO Law
- John Viskocil, Fora Financial
- Gabriel Mendelberg, Mendelberg P.C.
- Anthony F. Giuliano, Giuliano Law P.C.
- Jeffrey S. Cianciulli, Weir Greenblatt Pierce LLP
- David Picon, Proskauer Rose
- Jonathan Nelson, Dedicated Financial GBC
- Lindsey Rohan, BasePoint Capital LLC
- Christina Grigorian, Katten; Zach Miller, Burr & Foreman
- Renata Buhkman, Delta Bridge Funding
- Vanessa Petty, Settle
- Alexis Shapiro, Forward Financing
- Jan Owens, Manatt Phelps
- Scott Pearson, Manatt Phelps
- Jesse Michael Carlson, Kapitus
- Robert Zadek, Buchalter
When:
Day 1 – June 15
9:00am – 4:30pm: Offices of Proskauer Rose (includes light breakfast and lunch)
5:30pm – 7:30pm: Cocktails at Dear Irving
Day 2 – June 16
9:30am – 6:00pm: 15 W. 38th Street, 2nd Fl, Sinatra Room (includes light breakfast and lunch)
4:00pm: Wine & Cheese
Register soon, SPACE IS LIMITED!
AltFinanceDaily is a sponsor of the event. Industry attorneys are highly encouraged to attend.
Not Just For Salespeople: Becoming a Certified Small Business Finance Professional
November 23, 2021
Its aim is to become an industry standard. The newly launched Certified Small Business Finance Professional (CSBFP) program will first become available at Broker Fair in New York City on December 6th.
But what’s the difference between this one and others? Steve Denis, Executive Director of the Small Business Finance Association (SBFA), says that his organization’s backing of the CSBFP makes all the difference.
“We’re the largest trade group in the space without question,” Denis said, adding that the group has about 30 members, several of which are among the largest in the country.
“It’s going to be a signal that you’re doing things the right way and want to go out of your way to show that you are doing things the right way,” Denis said.
The certification will require applicants to complete a course centered on understanding products, laws governing the industry, and compliance. The certification exam will focus on testing applicants’ ability to understand key concepts and best practices.
This course is designed to be taken in person. While it will be available at Broker Fair, Denis said that they plan to partner with other events as well.
“We’re going to focus on as many in-person training sessions as possible,” he said.
And it’s not just salespeople they’re targeting. Underwriters, collectors, support staff, and more are not only all welcome to obtain their certification, but are also encouraged.
“It’s open to anyone in the industry,” Denis said. “The more the better. […] It will send a very strong message that there is a diverse group of people that want to take a certification and take it very seriously.”
In the official announcement, it was stated that it would be more than just a stamp and that certified professionals would also be provided with “a way to connect, learn and grow beyond the initial education process.”
Denis compared the CSBFP standard to CFPs (Certified Financial Planners) in the financial advisor space.
Attendees of Broker Fair 2021 can take the course at the event at no extra charge.
SBFA Launches Industry Certification for Small Business Finance Providers
November 16, 2021Washington, D.C.— The Small Business Finance Association (SFBA) today launched a new certification for the small business finance industry. The Certified Small Business Finance Professional (CSBFP) program will bring education and accountability to all providers of alternative finance products. The certification will require applicants complete a four-section training course, abide by industry best practices, provide industry references, pass an exam and be subject to a background check. The certification will also require applicants to complete continuing education classes every two years.
“This certification is a message to our customers that we want them to feel confident they are being offered fair capital options from responsible lenders,” said Steve Denis, the executive director of SBFA. “There are countless companies offering a proliferation of products and services and we believe it’s business owners deserve the comfort of knowing they are working with a certified professional.”
The certification will require applicants to complete a course centered on understanding products, laws governing the industry and compliance. The certification exam will focus on testing applicants’ ability to understand key concepts and best practices. Those who become certified will be allowed to use CSBFP branding in their marketing materials, have access to key regulatory updates and gain entry to a networking platform that will allow them to connect to industry and legal professionals.
“Our goal is to offer a fully immersive experience for certified professionals. We don’t simply want to give them a stamp but provide them a way to connect, learn and grow beyond the initial education process. It’s in the interest of our industry to offer best-in-class professionals, but more importantly, it’s in the interest of better serving our small business customers,” said Denis.
The certification is open to anyone working in the alternative small business finance industry. Interested professionals can learn more at www.csbfp.org or www.sbfassociation.org.
Contact:
Steve Denis 202.213.9506
sdenis@sbfassociation.org
