Indicted Loan Brokers Out On Bond, 1 Still in Custody
April 5, 2019
Four of the five loan brokers indicted in a fake business loan scam that tricked an Ohio resident out of hundreds of thousands of dollars in upfront fees, have been released on bond. Only one, a defendant by the name of Haki Toplica, remains in custody. All of the defendants have entered pleas of not guilty.
In addition to the victim being asked for hundreds of thousands of dollars in upfront fees to apply for phony loans, he also signed over the title of 55 vehicles to the defendants to serve as the collateral. The vehicles included a Ford Mustang, several dump trucks, several tractors, several restored classic vehicles, a Freightliner motor home, and trailers.
Toplica was arrested in December and his co-conspirators in March. All of them are New York residents. The condition of one defendant’s release was that she remain working with her present employer. AltFinanceDaily determined that her most recent employment was ironically that of a business loan broker.
Business Loan Brokers Indicted
March 16, 2019
Five business loan brokers were named in a federal indictment in Ohio for defrauding a 69-year-old business owner out of his money and cars. In addition to being asked for hundreds of thousands of dollars in upfront fees to apply for the loan, the victim signed over the title of 55 vehicles to a broker to serve as the collateral. The vehicles included a Ford Mustang, several dump trucks, several tractors, several restored classic vehicles, a Freightliner motor home, and trailers.
In reality, there was no loan.
Text messages quoted in the indictment indicated that one of the defendants traveled from New York to Youngstown, Ohio by Greyhound Bus to begin driving the vehicles back to New York one-by-one, but their scheme faced challenges when they could not afford the gas to drive all of the cars. By the end, the victim was cooperating with the police and one of the defendants was lured back to Ohio in September to pick up a payment where he was then arrested.
AltFinanceDaily discovered a message board post that appears to be published by one of the defendants months after the alleged crime. In it, she attempts to recruit other brokers to send her business with promises of high commissions, same day approvals, free leads, and a policy of no backdooring.
For Some Brokers, Funding Never Sleeps
January 4, 2019
While holidays, including New Year’s Eve, are usually slow days for funding, for some brokers this year, New Year’s Eve was a strong day.
“New Year’s Eve was not a slow day here,” said Elana Kemp, a broker at Fundomate, in Los Angeles, who was in the office that day. “It was amusing to see so many people looking for money on the last day of the year. I’m also a procrastinator, so I can relate,” she said.
Zach Ramirez, Founder and Managing Director of ZR Consulting, LLC in Orange County, CA, said that New Year’s Eve was the second biggest funding day for his company in December, despite the fact he told his brokers that it was an optional work day, he said.
At the same time, for many other brokers, business was on the slow side, as expected. John Celifarco of Horizon Financial Group in Brooklyn, said it was a good day to organize and prepare for the new year. Meanwhile, Joe Cohen, of Business Finance Advance in Brooklyn, said he generally doesn’t go to work on major holidays.
“The holidays are to enjoy, regenerate and spend time with the family,” Cohen said. “That’s why you’re working anyway.”
New Jersey Moves to Regulate Small Business Loan Disclosures and Brokers
October 15, 2018
A committee within the New Jersey State Senate convened today at 1:30pm to discuss S2262, a new small business loan disclosure bill. Similar to SB1235 in California, this bill would require all of the following on small business loan contracts less than $100,000:
The APR(This was removed during the committee hearing)- The annualized interest rate
- The finance charge
- The maximum credit limit available
- The payment schedule
- A list of all broker fees and a description of the broker’s relationship with the lender and any conflicts of interest the broker may have
- These terms must be presented before a business accepts a loan
In addition, any change to the terms that would significantly affect the responsibilities or obligations of the small business concern under the loan must be noticed 45 days in advance.
During the hearing, the bill was amended to define merchant cash advances as small business loans. Kate Fisher of Hudson Cook, LLP who represented the Commercial Finance Coalition (CFC) during the hearing, strongly opposed that amendment. The CFC is a trade association representing small business lending and MCA companies.
Also testifying against it was PJ Hoffman of the Electronic Transactions Association. Other Trade groups are gearing up to oppose the bill as well, AltFinanceDaily has learned.
The bill was voted through the committee and will continue to move forward.
Kate Fisher’s testimony has been transcribed below:
Senator Pou and committee members: Thank you for the opportunity to present testimony today regarding business loan disclosures.
My name is Kate Fisher and I am here today on behalf of the Commercial Finance Coalition, a group of responsible finance companies that provide capital to small and medium-sized businesses through innovative methods. I also am an attorney who helps providers of commercial financing comply with state and federal law.
The Commercial Finance Coalition supports efforts to make business financing more transparent.
The problem is the proposed amendment would define a merchant cash advance as a loan. A merchant cash advance is not a loan.
We all know how a loan works – the lender advances money and the borrower promises to pay it back.
A merchant cash advance is a factoring transaction, in which a business sells a percentage of its future receivables at a discount.
Take for example, a pizza shop. The pizza oven breaks and the owner needs cash to replace it.
In a loan, the pizza shop borrows the money and promises to pay the money back to the lender with interest.
In a merchant cash advance, the pizza shop sells its future receivables to a merchant cash advance company. In exchange for the money to buy that pizza oven, the merchant cash advance company will take 10% of each dollar the pizza shop makes.
If the pizza shop’s sales go down, it will pay less. If the pizza shop’s sales go up, it will pay more. And if the pizza shop is damaged by a hurricane and has to close for repairs, it will pay nothing until it can reopen its doors.
This uncertainty of repayment is why a merchant cash advance is not a loan – the pizza shop in our example, only pays if it sells pizza. Courts have overwhelmingly agreed that a merchant cash advance is not a loan. To quote a recent court decision:
“Receivables purchasing is an accepted form of business transaction, and is not a loan.”
Because a merchant cash advance is not a loan, and there is no fixed payment term, requiring an APR or annual interest rate disclosure would be misleading. For a small business looking for financing, these types of disclosures would only add confusion.
I’m very optimistic that New Jersey can lead the way in providing businesses with disclosures that are helpful – and not misleading.
Thank you.
California Bill May Disadvantage Small Brokers
July 17, 2018A California State Assembly bill that carefully defines what a broker is, could significantly affect small, unlicensed brokers, according to Tom McCurnin, an attorney at Barton, Klugman and Oetting in Los Angeles.
Assembly bill 3207 enumerates the ways that the bill would depart from the current law. Most notably, the definition of a broker would be far more precise. The current California Licensing Law, which requires brokers to be licensed, defines a broker as “anyone who is engaged in the business of negotiating or performing any act as a broker in connection with loans made by a finance lender.”
Tom McCurnin – Barton, Klugman & Oetting LLP“It’s a circular definition,” McCurnin said. “It presently says that a broker is someone who is brokering transactions.”
Essentially, it defines a broker as a broker, leaving plenty of room for ambiguity.
“With respect to registering to conduct business in the state of California, we’ve got tons of brokers doing deals in California, but they’re not licenced here,” McCurnin said. “They do deals in California, but they’re located in Florida or New York or Michigan. They’re making money in the state of California. Why shouldn’t they pay their fair share of taxes?”
People can always evade the law and not get licenced. But the idea behind this bill is that by making the definition of a broker perfectly clear, it’s no longer possible for a broker to make an argument that they’re not really a broker. With the language in the bill, a broker would be in clear violation of the law if they don’t obtain a licence.
The new definition of a broker would be “anyone who, among other things, transmits confidential data about a prospective borrower to a finance lender with the expectation of compensation.” McCurnin notes that “expectation of compensation” is an important phrase, currently used to describe real estate brokers, because it states clearly that the broker intends to earn money from the consumer. The proposed definition in the bill continues to define a broker as someone who “participates in any loan negotiation between a finance lender and prospective borrower, participates in the preparation of loan documents, communicates lending decisions or inquiries to a borrower, or charges a fee to a prospective borrower for any services related to an application for a loan from a finance lender.”
This definition leaves little room for debate. So what does getting a California State broker licence entail? It requires that a broker have at least $25,000. Beyond this, McCurnin says it inquires primarily about three other things: 1) if you have a criminal record (fingerprints are required), 2) what type of loans you intend to broker (secured, unsecured, etc.), and 3) the size of the loans you intend to broker. There are different regulations for different loan sizes.
Being licensed requires being registered to conduct business in the state of California. And a registered business must pay taxes on earnings in the state. With this in mind, McCurnin said the passage of this bill could be a win for California in that it could result in more out-of-state brokers getting registered and paying taxes on their earnings in the state.
At the same time, should the bill pass, McCurnin thinks it would be a big loss for the small broker who is either unable to show $25,000 or who might have something unsavory to hide. But if the small broker working from his basement has enough capital and is willing to state what he intends to broker in California, then obtaining the license shouldn’t be a problem.
The bill passed in the state Assembly and is being reviewed in the Senate. An amendment to the bill was made on July 5. Another California bill of great significance to the alternative lending industry is SB-1235, which has passed in the state Senate and is being reviewed in the state Assembly. McCurnin said he believes that the broker bill will pass.
“California is a very liberal place,” McCurnin said. “It’s like another country.”
An ISO Brokers Main Street Deals – on Main Street
June 25, 2018
Envision a giant office filled with rows of commercial finance brokers on the phone, aggressively selling deals to faceless small town merchants. Then step into the office of Horizon Financial Group and meet brothers and business partners James and John Celifarco. The contrast could not be more striking.
The most dramatic difference between their office and that of almost every other broker, or ISO, is that you enter the office from the sidewalk. There’s no lobby and no elevator. It’s just the two brothers (plus one salesperson and one assistant) working on the other side of a glass storefront window.
The store isn’t on Madison Avenue or Rodeo Drive. It’s on a modest, roughly three-block commercial strip on Avenue S in a working class section of Brooklyn called Marine Park. There’s a deli, a pizzeria, a barbershop, a pet grooming store and a bunch of other stores that you’re likely to find on Main Street, U.S.A. In other words, Horizon Financial Group’s neighbors are the exact kind of small business owners they seek as customers. And since they opened up shop on this quaint stretch at the end of October, many of their store owner neighbors have already become customers.
“It’s a different relationship with the customer,” James said of their neighborhood clients. “You’re not on the phone. You’re face to face with these people. You’re meeting them, you’re shaking their hands, you’re getting to know them personally, which helps with the longevity of the relationship itself.”
Sitting at the glass conference table by their storefront window, James, 34, and John, 37, counted up to six clients by simply pointing out the window at other small stores across the street. Horizon Financial Group is an ISO that brokers working capital deals and does credit card processing, equipment leasing, ATM machines and commercial mortgages. (James has his New York real estate license, so he can also help local store owners buy or sell a house.) The brothers said that about 40 percent of their business is facilitating deals brought to them by other ISOs, another 40 percent comes from merchants that they find directly, and about 20 percent comes from these local customers they’ve developed from having a physical presence in the neighborhood.
“Obviously you can’t build an entire business on just these two streets,” John said, “but it’s extra business that we wouldn’t have had if we weren’t here. And when we came here, we stopped thinking ‘Who are we going to buy leads from?’ and started thinking more outside of the box.”
An example of this was their decision to approach the Brooklyn Chamber of Commerce where they are now one of the chamber’s preferred vendors, which brings them business from the entire borough.
James said they’ve made contributions to the local little league and kids football, and whenever a new store opens in the area, they introduce themselves and explain what they do. It also doesn’t hurt that they grew up in Marine Park, so they already know the town pretty well. James recognized someone on the sidewalk and ran outside to say hi. It was someone who used to be a next door neighbor. There is a truly old-fashion sense of community on Avenue S.
“I buy my pizza from [the pizza store owner] and he does his credit card processing with us,” James said. “When the dry cleaner needed equipment, we got them capital, and I actually got to see the piece of equipment I helped finance. That almost never happens.”
Because there is no building guard or front desk person, customers can stop by whenever they like. As if in a sitcom, a man walked into the store saying to the brothers, “Don’t be mad at me.” It was a customer, the owner of a local paint store. “It’s not completely my fault, but I broke the phone swiper on the job.”
Reassuringly, John told him to come to his desk and he helped the customer with a replacement for a piece of credit card processing equipment.
The brothers have each been working in the small business financing industry independently for more than a decade. James established Horizon Financial Group by himself in 2009 while John was working for a different company in the credit card processing and MCA space. John joined James at Horizon Financial Group in September 2017.
John said he prefers co-leading Horizon Financial Group, itself a small business, to running a larger operation in Manhattan.
“Compared to somebody in the city with a huge rent and a huge payroll, I don’t need to do the same numbers he’s doing to end up making the same amount of money.”
John also noted that he doesn’t have to sit on a train for an hour and a half because he lives just six blocks away from the storefront office.
“A lot of people don’t like to say they’re a small company,” John said. “I couldn’t be happier that we’re a small company.”
Running a small business is familiar to the Celifarcos. Horizon Financial Group gets its name from Horizons Dance Center, a successful Brooklyn dance school founded by James and John’s mother. It has been in business for 46 years and is still going strong.
“The name is good luck,” James said.
James lives a short drive away in Rockaway with his wife and daughter. On running a small business like Horizon Financial Group, James said: “It’s also about quality of life. You don’t need to work 7 to 7. I can be on the beach with my daughter. It’s really a different approach.”
How One Company is Helping MCA Brokers and Clients Through Credit Repair
March 5, 2018
Venture Credit Solutions, a New Jersey-based credit repair business, was created in 2016 by founder and CEO Joe Clapman. Because of extensive licensing and other legal conditions required to run a credit repair shop, the company didn’t start operating until the beginning of this year, with a soft launch at AltFinanceDaily’s Miami event in January.
Formerly an MCA broker, Clapman saw firsthand that really bad personal credit could hinder one’s ability to get cash advances for their businesses, along with home mortgages and even jobs. So he started a consumer credit repair business. He is very clear about what he can and cannot do.
“We get erroneous items that do not belong on your credit report, off,” he said.
He cannot recoup people’s money or eliminate credit card debt. He does not guarantee that he will improve your credit score, but he maintains that when negative erroneous data is removed, generally FICO scores go up and people become eligible for more credit or better credit.
This can benefit MCA brokers by allowing them to take unfundable or less fundable MCA clients and turn them into additional clients for credit repair. Clapman said that brokers for credit repair can get a commission similar to a $15,000 to $20,000 MCA deal.
“We don’t have some secret handshake with Equifax and Experian,” Clapman said. “We can’t do anything you can’t do on your own.”
Instead, Clapman told AltFinanceDaily that Venture Credit Solutions is a service-based company of researchers, who he calls “information givers,” that are trained in determining the accuracy of data on personal credit reports.
“Any data on your credit report has to be accurate to the letter,” he said.
Clapman and his team make money only when they are able to successfully prove inaccurate data and remove it from a customer’s credit report. Every line of a customer’s report is itemized and the customer is told beforehand how much they will pay Venture Credit Solutions if the company is able to prove that the data is inaccurate.
And data is either accurate or it isn’t.
“If someone tells me that something is accurately described on their credit report, it’s actually illegal for me to try and get it removed,” Clapman said.
While Venture Credit Solutions provides services to individual consumers, they do not advertise to the general public. Instead, they get business from brokers, who Clapman calls “referral agents.” These are MCA and real estate brokers, among others, who are trying to improve their client’s credit – if it has been inaccurately reported.
Clapman gave the example of an MCA merchant who signed a document allowing his broker to submit an application to only one funder. But the broker sent the application out to like 93 funders, severely damaging his credit because of all the credit inquiries.
“We can help him to get all these inquiries off,” Clapman said.
One of the core mantras at Venture Credit Solutions is “The client is your client.” This is important to Clapman because he wants to communicate to his referral agents that the company is not trying to steal their clients – by, for instance, finding the client a lower mortgage. Doing something like this would adversely affect the customer’s credit, which is exactly what Venture Credit Solutions is trying to improve.
“We’re trying to create a win-win process,” Clapman said. “The broker is winning because he’s not losing a client, he’s helping a client [and getting a commision.] And the client is winning because his credit is getting better.”
Clapman said that he is in talks with the New York and New Jersey police and fire departments to potentially help their members who might have erroneous data on their credit reports.
Venture Credit Solutions also has a program for startup companies, designed to improve and build the credit of entrepreneurs. The company now has 15 people working at its office in New Jersey and it plans to be onboarding at least an additional 30 within the next two weeks. Some will work remotely, but all will be in the US, Clapman said.
Broker Fair 2018 – The Inaugural Conference for Merchant Cash Advance and Business Loan Brokers
October 5, 2017
New York, NY – Foinse, LLC, in collaboration with AltFinanceDaily, is excited to announce Broker Fair 2018, the inaugural conference for merchant cash advance (MCA) and business loan brokers. Broker Fair 2018 is being held at The William Vale in Brooklyn on May 14, 2018. It will be the largest gathering of MCA and business loan brokers in the country.
This exclusive one-day event in New York City’s most vibrant and creative corner will offer brokers, lenders, funders, and service providers opportunities to learn, connect, and grow their businesses.
Broker Fair founder and AltFinanceDaily Chief Editor Sean Murray, said “Online business lenders, MCA providers, and independent brokers employ thousands of salespeople to connect business owners with sources of capital. There are numerous products, tools, and resources out there now but the landscape remains fractured. Through Broker Fair, I want to empower the salespeople, empower the brokers. They’re the ones on the frontlines with America’s small business owners. I’ve been covering this space for seven years and was actually an MCA broker myself prior to that. I know the industry. A lot of folks and companies want to be successful but I know that they also want to have a positive impact on their customers and the industry they’re a part of. I want to facilitate that and more at Broker Fair.”
The three central tenets of the conference will be education, inspiration, and opportunities.
Registration is already open at http://brokerfair.org/pages/register/
To become a sponsor or inquire about the benefits of sponsorship, contact info@brokerfair.org or call 917-722-0808. Event sponsors can be viewed at: https://brokerfair.org/sponsors/
About Foinse, LLC
Foinse, LLC is an events company and the owner of Broker Fair 2018. For more information, visit: https://brokerfair.org/
About AltFinanceDaily
AltFinanceDaily® is a registered trademark of Raharney Capital, LLC and is the name of a print and online publication that has covered alternative finance including merchant cash advance and online business lending since 2010. AltFinanceDaily is a presenting partner of Broker Fair 2018. For more information, visit: ../../
