New York State Loan Initiative Takes on Fintech Type Pitch
July 24, 2023
If a business owner told you they had been approved for a 3-6 year loan up to $150,000 with no origination fees, no prepayment penalties, and interest rates ranging from 9.25 – 12.25%, would you believe it was a real offer?
The criteria, after all, is just a matter of:
– having been in business at least 1 year
– having strong previous cash flow and projected cash flow
Not only is this real but it’s being rolled out by New York’s “Forward Loan Fund 2” as a working capital loan that can be used for equipment, payroll, utilities, rent, supplies, marketing and advertising, building renovations, and other expenses. The state stops short of calling itself a fintech platform or online lending platform, instead referring to itself as a “virtual platorm” that is “accessible anywhere in the state.”
This is the second run of this program. The first distributed loans to 1,700 small businesses.
“It was a godsend,” one testimonial posted on the NY loan fund site says. “NDC made it so easy. It took two weeks and the money was in our account. Can you feel my joy?”
The program offers more than just capital, promising that there is a “network of Entrepreneurship Assistance Centers (EAC) available to provide free support before, during, and after the loan application process.”
The program is backed by participating lenders that include Accion Opportunity Fund, Ascendus, NDC, Pursuit, and TruFund Financial Services. There is about $150M available to be loaned out “with plans to recycle and lend additional funds over the life of the program.”
“Due to a limited amount of funding availability and the high volume of applications expected, it is anticipated that not all applicants will be able to receive a loan,” a disclaimer says.
At a minimum, the documents required to be considered are:
1. Most recently filed tax returns OR internal financial statements.
2. Schedule of ownership
3. Personal guarantee from each individual owner greater than 19%
4. Articles of organization
5. Credit report
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…”
It Says “AI Powered” But Does It Matter?
July 6, 2023
It’s tempting to accept that if the internet claims something is AI-operated, then it must be, but AI is being held to an entirely new standard in 2023, thanks to the introduction of ChatGPT. That means everyone needs to be prepared to examine whether or not something is actual AI or if the use of AI is even integral toward achieving a goal.
“I think [it’s] a really important thing for people to do right now is to look at how they evaluate the AI marketing promise because there’s an opportunity now that people are capitalizing on to just launch with the name AI, that they’re using it, but not really, or they’re not doing anything you need,” said Robert Burke Jr., Founder and CEO of Sobo, a company that matches businesses with consultants. Burke says that one way to try and distinguish fact from fiction is to ask questions about the company’s AI team, their data strategy, and patents they might have, if any.
Jason Feimster, Founder of Moonshine Capital, said that a more fundamental question should be asked first, whether or not the use AI of really makes a difference to achieving the objective. “What is it that you want to achieve,” said Feimster. “Do you want to get funded? Can I fund you? Yes. That’s the only question that matters. Now, if I claim that I can get you funding through AI, and you care about how they work, we’re muddying the water, you’re still not closer to getting funded.”
At the same time, one shouldn’t hesitate to at least experiment with the technology. Jared Schulman, CEO at Lendica, says that “There are probably some small, idiosyncratic risks to interacting with AI but largely speaking, it’s a really exciting time. I think it’s right to be curious and to try, and some really great things are going to come from it.”
Meanwhile, Burke at Sobo said “I think this is the key to remember that AI is not a magic wand that instantly solves all your problems and challenges. It’s a tool that when it’s used properly, can provide benefits. But it also comes with its own challenges and limitations because it is such early stages.”
Can’t Watch Videos In the Office? AltFinanceDaily is On Spotify
June 30, 2023Can’t watch videos on company time? Catch up with what’s going on in the industry by listening to AltFinanceDaily’s podcast on your commute. With more than 500 AltFinanceDaily TV segments altogether since 2020, we’ve been adding some of the most memorable and informative ones to Spotify.
Recent interview guests include:
- Justin Thompson – National Funding
- Andrew Carman – PerCina Report
- Steve Geller – Leasing Solutions LLC
- George A. Parker – VenSource Capital
- Nancy Robles – Eastern Funding
- Alyssa Guglielmi – JRG Funding
- Porsha Brooks – Lenpick
CLFP Rolls Out in Australia
June 27, 2023
The US-based Certified Lease & Finance Professional (CLFP) designation is finally being rolled out in Australia. Fifteen Australian professionals are currently going through the program, according to Reid Raykovich, CEO of the CLFP Foundation. The launch, which was slowed down by covid, is the result of years of collaboration between two organizations, the CLFP Foundation in the US and the Commercial Asset & Finance Brokers Association (CAFBA) in Australia.
“Prior to partnering with the CLFP Foundation, CAFBA looked at offering specific commercial finance courses through Australian tertiary institutions,” CAFBA said, “however, after discussions it was felt that it would take too long to commence, would not provide content control and would not have recognition outside the tertiary institution. There are many advantages in being part of an internationally recognised accreditation that is industry specific.”
After an initial meeting between the two organizations in 2015, CAFBA CEO David Gill travelled to the US two years later to participate in the CLFP training and examination. Thus kicked off the plan to bring the CLFP designation to Australia and the partnership was officially announced in March 2022. The Handbook, training, and exam are all based on the same framework that was established in the US. However, certain areas had to be modified to ensure it was relevant and consistent with the Australian structure.
Australia isn’t the only country targeted for program expansion. The aim is to make the CLFP the preeminent credential throughout the world.
“We are also working with the Canadian Finance and Leasing Association (CFLA) to make the designation available in Canada as well,” said Reid Raykovich. “Last year, I announced the initiation of the designation in Prince Edward Island, Eastern Canada. There have been discussions with other countries as well, but nothing official yet.”
Federal Legislators Jump on Commercial Financing Disclosure Bandwagon, Renew Push to Give CFPB Authority Over Industry
June 16, 2023
Feel like there’s a lot of state-level disclosure going around lately? Well now some members of Congress believe another layer is needed at the federal level. In a bill titled the “Small Business Financing Disclosure Act of 2023,” the language looks awfully familiar. There’s a Double Dipping clause in it, for example, which was a term first seen in a New York State law.
The federal bill, which was introduced by US Senator Robert Menendez and Congresswoman Nydia M. Velázquez, seeks to place the small business finance industry under the authority of the Consumer Financial Protection Bureau (CFPB). As part of that, the Director (currently Rohit Chopra) would be responsible for devising all the rules and formulas, according to the bill. Furthermore, with regards to sales-based financing, the bill specifically states:
1. The provider must disclose an APR.
2. The estimated term of repayment and periodic payments based on projected sales volume must be disclosed.
“Small businesses are the lifeblood of the American economy,” said Congresswoman Velázquez. “But for too long, predatory lenders have taken advantage of businesses in need of capital by offering loans and similar products with unclear terms and exorbitant interest rates.”
Supporters of the bill, including Senator Sherrod Brown and Senator Ron Wyden, also stated that the bill is aimed at “predatory lenders.”
In Senator Menendez’s press statement for the bill, it cites Funding Circle, a small business lending company, as a supporter.
“We believe a free and fair market operates most efficiently when there is transparency in pricing, terms and conditions,” said Ryan Metcalf, Head of U.S. Public Affairs at Funding Circle U.S. When a small business has all of the necessary information up front including the annual percentage rate (APR), they can comparison shop and make informed decisions that are best for their business. Funding Circle supports one national uniform small business financing disclosure law because it is in the best interests of small businesses and interstate commerce.”
The push for a small business financing bill is not new. A similar bill introduced by Velázquez last year did not move forward, nor did the one from 2021, nor the one from 2019. The difference is that previous versions focused on Confessions of Judgment and fairness in small business lending. The latest version takes on the air of disclosure while attempting to subjugate the whole industry to CFPB regulatory authority.
CFG Merchant Solutions Surpassed $1 Billion in MCA Originations in Q1 2023
June 15, 2023
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Capify Wins SME Lender of the Year Award
June 5, 2023Specialist finance provider Capify were recently crowned SME lender of the year at the 2023 Credit Awards.
The awards, which took place at London’s prestigious Grosvenor House on the 1st June and were hosted by television’s Katherine Ryan, recognise innovation and best-practice in the financial services industry.
In a fiercely competitive segment, which included banks, fintechs, asset finance providers, invoice finance companies, and P2P businesses, Capify was recognised as the SME lender of year (up to £1m lend).
Reflecting on their win, John Rozenbroek, Capify COO/CFO said “This award is recognition of the amazing work the whole Capify team have undertaken over the past year and our commitment to serving the UK’s vital SME community. For many UK SMEs, access to finance can be a real barrier to growth and we are delighted that our innovative and flexible approach to serving this segment of the economy has been recognised”.
Capify’s Q1 2023 business confidence survey revealed that 55% of SMEs are uncertain in their ability to secure finance from their traditional banking partners. “This is where we step in”, Rozenbroek adds. “As an alternative lender, we pride ourselves on our agile yet responsible approach, enabling us to promptly provide the much-needed funds to this underserved audience. In fact, we can approve and transfer funds to the applicant’s account in as little as 24 hours.”
Launched in 2008, Capify was born out of the desire to offer small businesses an alternative way to quickly access responsible business finance when many firms were struggling to navigate the impact of the global financial crisis. With offices in the UK and Australia and approximately 120 employees, it continues to support smaller businesses with funding to meet the challenges and opportunities of today’s economic climate.
About Capify
Capify is an online lender that provides flexible financing solutions to SMEs seeking working capital to sustain or grow their business. Alongside its sister company, Capify Australia, the fintech businesses have been serving their respective markets for 15 years.
For more details about Capify, visit: http://www.capify.co.uk
Capify Media Contact:
Ian Wood, Marketing Director
iwood@capify.co.uk
0161 393 9536
