Bizfi Survives, Thanks to World Business Lenders Asset Purchase Deal
September 22, 2017
The Bizfi marketplace is slated to live on, according to Stephen Sheinbaum who joined World Business Lenders (WBL) as a managing director in July. On Wednesday, WBL purchased several assets from Bizfi including the brand, the marketplace, the Next Level Funding renewal book, and other related pieces of the company, he says. Sheinbaum founded Bizfi (then Merchant Cash and Capital) in 2005.
WBL, a Jersey City-headquartered small business lender will also be a lender on the platform.
Other key Bizfi personnel have joined WBL including former Managing Director of Renewals John BellaVia, VP of Sales Michael Caronna, and Sales Manager Ryan Bressler.
The asset purchase does not affect the deal forged with Credibly to service the $250 million portfolio, Sheinbaum explains, which is separate.
While lesser known among the mainstream fintech media, WBL has been a stalwart player in the non-bank lending industry for years. Their ambitions and size became more apparent when AltFinanceDaily attended their invite-only annual shareholder meeting at the Waldorf Astoria in NYC in 2015. The company went on to open a massive office in Jersey City in July 2016 that was attended by Jersey City Deputy Mayor Marcos Vigil, Councilwoman Candice Osborne, Archbishop David Billings and Mitchell Rudin, the CEO of Mack-Cali. At the ceremonial ribbon cutting, WBL CEO Doug Naidus said that he wanted to build a company that lasts, one that he can look back on and be proud of.
Now with the Bizfi brand and marketplace in tow, the company is uniquely positioned.
“[It’s a] game changer here,” Sheinbaum said. “2.0 here we come!”
The Top Small Business Funders By Revenue
September 14, 2017Thanks to the Inc 5000 list on private companies and earnings statements from public companies, we’ve been able to compile rankings of alternative small business financing companies by revenue. Companies that haven’t published their figures are not ranked.
| SMB Funding Company | 2016 Revenue | 2015 Revenue | Notes |
| Square | $1,700,000,000 | $1,267,000,000 | Went public November 2015 |
| OnDeck | $291,300,000 | $254,700,000 | Went public December 2014 |
| Kabbage | $171,800,000 | $97,500,000 | Received $1.25B+ valuation in Aug 2017 |
| Swift Capital | $88,600,000 | $51,400,000 | Acquired by PayPal in Aug 2017 |
| National Funding | $75,700,000 | $59,100,000 | |
| Reliant Funding | $51,900,000 | $11,300,000 | Acquired by PE firm in 2014 |
| Fora Financial | $41,600,000 | $34,000,000 | Acquired by PE firm in October 2015 |
| Forward Financing | $28,300,000 | ||
| IOU Financial | $17,400,000 | $12,000,000 | Went public through reverse merger in 2011 |
| Gibraltar Business Capital | $16,000,000 | ||
| United Capital Source | $8,500,000 | ||
| SnapCap | $7,700,000 | ||
| Lighter Capital | $6,400,000 | $4,400,000 | |
| Fast Capital 360 | $6,300,000 | ||
| US Business Funding | $5,800,000 | ||
| Cashbloom | $5,400,000 | $4,800,000 | |
| Fund&Grow | $4,100,000 | ||
| Priority Funding Solutions | $2,600,000 | ||
| StreetShares | $647,119 | $239,593 |
Companies who were published in the 2016 Inc 5000 list but not the 2017 list:
| Company | 2015 Revenue | Notes |
| CAN Capital | $213,400,000 | Ceased funding operations in December 2016, resumed July 2017 |
| Bizfi | $79,000,000 | Wound down |
| Quick Bridge Funding | $48,900,000 | |
| Capify | $37,900,000 | Wound down |
No, Able is Not Going Out of Business, Company Says
September 5, 2017
An industry blog appears to have stretched the truth, again.
On September 1st, Lending Times published a story that relied on an anonymous source to suggest that Austin,TX-based Able Lending is going bankrupt and selling their portfolio. No other compelling evidence is offered other than Lending Times not having their messages returned. No clues as to what kind of knowledge the source might have and why they have it is provided.
Another blog piled on top of that story by circulating an email this afternoon with “Able Lending closing down?” in the subject line. That blog also wrote that their messages were not returned.
I personally reached out to Able and received an immediate response. Company CEO Will Davis pointed out a flaw with Lending Times’ anonymous source. “This anonymous source doesn’t seem to be anyone close to Able, because Able does not own a portfolio of loans (it originates and distributes loans to direct lenders, who then hold those loans on their balance sheet) and therefore has no portfolio to sell,” he said.
Davis also speculated that there could be an ulterior motive. “We believe this story originated by the fact that we’ve been in active discussions with a number of originators to acquire Able, and there’s a non-zero chance this story was placed in order to throw an interested party off the trail,” he explained.
“In any event, we have no plans to go out of business and no plans to declare bankruptcy,” he concluded.
Letter From The Editor – July/August 2017
August 30, 2017Happy end-of-summer. It’s been a remarkable year so far.
In this issue, we talked to small business owners about what works and what doesn’t. Several of them advocated for more personal attention and to shift away from old fashioned marketing tactics like cold calling. If you’re a salesperson, you’ll want to read what your clients told us.
On the bank side, the companies disrupting banking are… other banks, ones that have embraced digital technology and partnerships with online lenders. They’re tech companies with bank charters, or at least that’s how they appear. And it’s working for them quite well. To become a better bank, these banks are taking an entirely different approach than their predecessors.
We’ve got a lot more of course and I want to thank everyone that has supported AltFinanceDaily all these years, whether as a paying advertiser or as a regular reader. One of the most rewarding things for myself personally has been to see copies of this magazine appear in the lobbies of funding companies all over the country as reading material for visitors. That has given us incredible reach, but I think we can reach even farther. Stay tuned for plans we have in 2018. As the industry turns a page, I hope that you’ll continue turning ours.
–Sean Murray
Funding Circle’s Hodges Talks $250 Billion Opportunity
August 3, 2017
Funding Circle, a marketplace that matches small businesses with lenders, broke a new barrier in the first half of 2017 with an 80 percent spike in global lending by about GBP 800 million. The U.S. marketplace lending arm, which was merged with UK-based Funding Circle in 2013, has experienced rising momentum over the same period.
Sam Hodges, Funding Circle co-founder and U.S. managing director, told AltFinanceDaily that small business lending remains an underserved and untapped market, attaching a USD 250 billion value on the annual lending opportunity.
“I co-founded Funding Circle in the U.S. after experiencing firsthand how hard it is for established, successful businesses to access financing from the traditional banking system. The traditional banking system is broken and restricted by legacy issues, and most banks don’t view smaller-ticket commercial lending as their bread and butter.”
Since 2010, when Funding Circle was launched, investors including 60,000-plus individuals, financial institutions and the UK government have poured more than USD 4 billion into 32,000 businesses globally.
Currently the Funding Circle U.S. platform is only open to accredited and institutional investors. “Over time, we would love to offer this investment product to anyone in the U.S.,” said Hodges.
He further explained that Funding Circle marketplace enables investors to diversify their fixed-income portfolios with secured business term loans. All of the loans on the Funding Circle platform are pre-screened with a risk-rating and coupon rate attached, ranging from 4.99 percent to 27.79 percent, by seasoned credit professionals using proprietary data analytics.
“While there will always be some risk attached to any type of investing, Funding Circle concentrates on providing loans to established businesses that have operating history, cash flow and a strategic plan for growth,” said Hodges.
Main Street USA
Funding Circle borrowers have typically been in business for around a decade and generate annual revenue of $2 million with a staff of about 10 people. One key differentiator from the likes of industry giant Amazon Lending is that borrowers on the Funding Circle platform could be brick and mortar shops.
“Amazon is an impressive organization, but what we’re doing is different in a variety of ways. Where they are focused on helping merchants that sell on their marketplace, our borrowers include restaurateurs, gas stations, medical clinics, construction firms, IT consultants and more,” said Hodges.
He went on to describe Funding Circle borrowers: “Walk down Main Street in any American town, and you’ll see examples of our borrowers. These are established businesses who have been underserved by the traditional financial sector — they have assets and cash flow to secure loans, and a legitimate plan for growth. We actually have many borrowers who choose our loans over a traditional bank loan, because they are faster and easier.”
Full Circle
Funding Circle started off the year with a bang, having raised USD 100 million in equity capital to help accelerate growth not only in the U.S. but also the UK and continental Europe. Meanwhile the startup continues to invest heavily in technology and talent.
“We are focused on building a world-class technology platform that can handle millions of transactions daily and deliver a best-in-class customer experience for borrowers and investors,” Hodges told AltFinanceDaily.
Along those lines, Funding Circle recently bolstered its executive team both stateside and globally, including the recent addition of Sean Glithero as CFO, who is to be based in London when he begins in his new role this fall.
“Sean shares our enthusiasm for building a better financial world by revolutionizing the financial system and securing a better deal for everyone. Sean’s record at Auto Trader, helping drive strong profit growth and shaping a digital marketplace into a dominant position, makes him ideally suited for this role,” Hodges said.
Meanwhile the U.S. executive team is also expanding, evidenced by the recent additions of Joanna Karger as U.S. Head of Capital Markets and Richard Stephenson, who joined as U.S. Chief Compliance Officer.
He is taking the reins of a balance sheet whose UK business achieved profitability in the first half of 2017. “Here in the U.S. we are doing quite well and continue to invest in growth” concluded Hodges.
Yellowstone Capital Originated $45M in Funding in July
August 1, 2017NJ-based Yellowstone Capital originated $45 million in funding for small businesses last month, according to a company email obtained by AltFinanceDaily. Two sales reps alone funded 170 deals and 139 deals respectively for a combined $7.45 million.
The monthly volume was only $2 million shy of the $47 million originated in June.
Tips From the Source: Small Businesses Told AltFinanceDaily How They Wanted Loans to be Marketed to Them
July 31, 2017
Small business owner Jim Moseley is inundated with calls from online funders—and he hates it. They frequently use unscrupulous tactics to try and get his attention. More than one has claimed to be a close friend so his assistant transfers their call. Then they try to reel him in with stories they’ve concocted about past personal connections. The unprofessional-sounding calls also irk him—where a salesman insists he’s local, but his voice sounds muffled and distant. In these instances, Moseley usually hangs up within a few seconds.
“The layer of sleaze is as thick as lard in the calls that I get,” he says.
Like many small business owners, Moseley, the chief executive of TransGuardian Inc., a shipping solutions company based in Petersham, Massachusetts, finds these types of calls extremely off-putting. In fact, it’s what made him hesitant to do online funding to begin with—until it became absolutely necessary since he couldn’t get a bank loan.
He’s not alone. As online financing proliferates, several small business owners say they are increasingly being bombarded with stacks of snail mail, multiple cold calls a day and numerous unsolicited emails offers—many of which they don’t understand and therefore won’t accept. Rather, small business owners say they prefer to work with companies that are forthcoming, provide sound advice and have taken steps to prove their credibility. They offer several tips on how funders can win more of their business.
Tip No. 1: Can the cold-calls
Several small business owners say they don’t mind when lenders follow up with them after a legitimate interaction. But they could do without the boiler-room tactics.
“It feels like a loan shark situation,” says Sean Riley, co-founder of DUDE Wipes, a Chicago-based company that makes flushable wipes for men. Riley, who has several good experience obtaining loans through Kabbage, finds the constant phone calls from firms he doesn’t know particularly vexing. He suggests lenders drop the high-pressure routines and find more effective ways to promote their services to small businesses. “These companies could be very credible. I don’t know. But I don’t perceive them as credible—and perception is reality,” he says.
Tip No. 2: Step up legitimate marketing efforts
Donna Cravotta chief executive and founder of Social Pivot PR, a Bedford, New York social media and marketing communications firm, says online funders should seek out simple, cost-effective ways to get their name in front of small businesses. For relatively little money they can sponsor local small business events. She also suggests that online lenders volunteer to speak at small business events and teach small businesses how to leverage online lending opportunities. They could also appear as guests on financial podcasts or broadcast Webinars to the small business community, says Cravotta, who has taken a few loans to fund her business, two of which were with Lending Club.
R.T. Custer, co-founder and chief executive of Vortic Watch Company in Fort Collins, Colorado, offers some additional advice: Customers don’t believe when you self-publish your testimonials. When he sees a review on a website, he wants to know how much a company has paid for that review. Instead, he relies on third party confirmations of a company’s worth. “When it’s clearly something that is not paid for, that is the best kind of advertising,” says Custer, an OnDeck customer whose business turns antique pocket watchers into wrist watches.
Tip No. 3: Deliver personal attention
As much as they hate aggressive salespeople, small businesses love personal attention from their lenders. Dana Donofree, founder and chief executive of AnaOno Intimates, a Philadelphia-based company that designs and sells apparel for breast cancer survivors, appreciates the stellar customer service she gets with OnDeck. The sales rep follows up appropriately to make sure everything is going well, but doesn’t bombard her constantly. She gets an occasional email asking if she needs more funds—but the communications aren’t overly aggressive. “Some institutions can really be sales pushy and call you several times a day. I’ve blocked more numbers than I would like to admit,” she says.
Tip No. 4: Be a resource for small business owners
Online lenders can also gain traction by helping customers better understand the financing process; many small business owners often don’t know much about financing and would appreciate getting sound advice from lenders, according to Sandy Lieberman, who co-owns Artemis Defense Institute in Lake Forest, California.
She and her husband started the business a few years ago to offer reality-based training to law enforcement, military personnel and civilians. When the business needed cash, Lieberman began searching online for a bank loan, but wound up taking a merchant cash advance instead. After a few rounds, she started getting bombarded with solicitations. “I think the stacks of mailings from companies must have been four-inches thick,” she recalls.
After additional research, she reached out to Lendio to broker an $85,000 term loan; she later took another loan for $204,000 through Lendio. While these funds have brought her business to a better place—and she has learned a lot in the process—she feels online lenders are missing out on a prime teaching opportunity.
“Some lenders think business owners know more than they already do. Some really don’t know a lot and could use more hand-holding,” she says.
In hindsight, Lieberman—who nearly destroyed her personal credit while trying to run her business—wishes a funding company had offered her a short class on financing; she would have attended, even for a small cost. Access to a finance coach—someone at the lending company who could help business owners plan proactively without ruining their personal credit—would also be a boon, she says.
“Small business owners are wearing many hats—customer service, payroll, financing, strategic planning. In the midst of all that they don’t know necessarily know how to make wise funding decisions,” she says.
Tip No. 5: Advertise
There are plenty of small businesses that need funds, but many simply don’t know where to turn. Consider a TD Bank survey of 553 small business owners in late March that found 21 percent have or will seek a loan or line of credit in the next 12 months. While the majority of these businesses plan to try their bank first, a sizeable number—11 percent—don’t know how to seek credit when they are ready. While many small businesses have found lending partners by Googling for information, others simply feel stymied by the process.
Take the case of Scott Deuty, who is having trouble obtains funds for Coolbular Inc. in Cheyenne, Wyoming, which serves as an umbrella for his kiddie ride business and his writing and publishing services. He wants to raise funds but has bad credit and doesn’t meet the revenue requirements for certain lenders. There are so many lenders; he doesn’t know how to find the right one—or one that might be willing to take a chance on him. “It’s very difficult,” he says.
Deuty’s case is an example of the paralysis that can happen when small businesses don’t know where to turn. It’s an opportunity for alternative funders to gain a leg up by marketing more appropriately to small businesses that may not know they exist—or how to find them.
Custer, of Vortic Watch, reached out to OnDeck for a bridge loan after seeing a television ad that ran during an episode of Shark Tank. He also suggests funders use online advertising to gain broader exposure. “If a business owner is trying to find a loan, they are going to Google, ‘I need a loan,’” he says.
Tip No. 6: Ramp up business referrals
Another way small businesses hear about lending opportunities is through business referrals. Azhar Mirza, founder of SomaStream Interactive, an e-learning solutions provider in Berkeley, California, says funders should actively seek out more referral partnerships. In 2015, his company couldn’t afford its online marketing costs. Then a lifeline came its way. Mirza received an offer from Google telling him his company was eligible for a loan to help finance the online advertising it was doing through the Google AdWords program. The offer was part of a new pilot program between Google and Lending Club to extend credit to smaller companies that use Google’s business services. SomaStream got access to the funds it needed, but in lieu of cash, the company received advertising credits with Google.
The pilot program between Google and Lending Club ended in the first quarter of 2016, but Mirza believes similar partnerships would be a great tool for online lenders. Certainly for Mirza, the timing was precipitous, he says.
Push notifications from trusted business partners can also be an effective marketing tool, when used in moderation. When Yvonne Denman-Johnson, co-founder of HootBooth Photo Booth, a Lago Vista, Texas, manufacturer of photo booth kiosks, needed money, she happened to receive a notice from Shopify, the company’s e-commerce software and hosting provider, talking about its merchant cash advance services. She has one outstanding advance through Shopify, which she is working to pay off.
Tip No. 7: Be transparent
Denman-Johnson got the funds she needed, but she feels MCA providers need to be more transparent about the effective interest rate—at the advertising stage, not at the approval stage—so small businesses can make more informed decisions without having to do all the calculations themselves. Otherwise, some small businesses might decide not to pursue this form of funding because of the unknowns. Her company almost walked away, but decided to go through the full application process. At this point, Shopify provided the effective interest rate, which was in the 12 percent range. Other funders she researched were in the 30 percent range—which she describes as “outrageously” expensive.
Indeed, small business owners want to work with funders that outline the terms clearly and offer comparisons. Lisa Ayotte, founder of Soul’y Raw, a specialty pet food provider in San Marcos, California, has had good experiences with Kabbage, On Deck and Fundbox.
She wishes, however, that all online lenders offer more detailed information about the loan programs they offer on their website—so small businesses can weigh their options before they go through the actual application process. Small businesses want to know, for instance, whether a lender offers debt consolidation. They also want funds to spell out clearly on their websites the various types of loans offered and the underwriting criteria. Ayotte also suggests lenders provide links to online loan calculators so small businesses can understand what the terms mean to them.
Small business owners want to be told like it is. That’s one major appeal of online lending—if you’re going to be turned down, you typically know right away says Ricardo Picon, the co-owner of The Sandwich Shop, a restaurant and catering business in Williamsburg, New York.
He took an $88,000 loan in February issued by Excelsior Growth Fund, a U.S. Treasury-certified Community Development Financial Institution, but in the future, he says he would consider using a different type of online lender. It would depend on the rates, the economic times, monthly payments and closing fees, among other things. “I want transparency. I want to know if they are going to give me the money or not so I can move on. This way there are no false hopes,” he says.
Tip No. 8: Make the process as easy as possible
Small business owners also prefer to work with online lenders that make the process seamless. AJ Saleem, founder of Suprex Learning, a Houston-based private tutoring and test prep company, was proactive about searching for online lending options. He chose a loan with Lending Club in part because the process was so easy. Some applications he started, but never finished because the process was too onerous. With Lending Club, the process was quick, there were fewer questions asked and the funder asked for less documentation than some competitors, Saleem says.
To be sure, rates are really important to small businesses, but they also want to work with funders they feel are on the up-and-up. “We want a square deal,” says Moseley, the chief executive of TransGuardian. “Tell us what the deal is in an honest and professional way and if we like it we’ll do business.”
CAN Capital Resumes Funding
July 6, 2017
CAN Capital is back in business, thanks to a capital infusion by Varadero Capital, an alternative asset manager. Terms of the capital arrangement were not disclosed.
CAN Capital stopped funding late last year and removed several top officials after the company discovered problems in how it had reported borrower delinquencies. The discovery also resulted in CAN Capital selling off assets, letting go more than half its employees and suspending funding new deals, among other things.
Now, however, the company has a new management team and its processes have been revamped and staff retrained in anticipation of a relaunch, according to Parris Sanz, who was named chief executive in February. He was the company’s chief legal officer before taking over the helm after then-CEO Dan DeMeo was put on leave of absence.
As of today (7/6), CAN Capital has resumed funding to existing customers who are eligible for renewal. Within a month, the company plans to resume providing loans and merchant cash advance to new customers. It will have two products available in all 50 states—term loans and merchant cash advances with funding amounts from $2,500 to $150,000.
To be sure, getting back into the market after so many months will be a challenge. “I think we’re absolutely going to have to work hard, no doubt about it. In many ways, given our tenure and our experience, the restart may be easier for a company like us versus others. Based on the dynamics in the market today, I see a real opportunity and I’m excited about that,” Sanz said in an interview with DeBanked.
Since its founding in 1998, CAN Capital has issued more than $6.5 billion in loans and merchant cash advances. It’s one of the oldest alternative funding companies in existence today, and, accordingly, it shook the industry’s confidence when the company’s troubles became public late last year.
The new management team includes Sanz, along with Ritesh Gupta, the chief operating officer, who joined CAN Capital in 2015 and was previously the firm’s chief customer operations officer. The management team also includes Tim Wieher as chief compliance officer and general counsel; he initially joined the company in 2015 as CAN Capital’s senior compliance counsel. Ray De Palma has been named chief financial officer; he came to CAN Capital in 2016 and was previously the corporate controller. The management team does not include representatives from Varadero.
Varadero is a New York-based value-driven alternative asset manager founded in 2009 that manages approximately $1.3 billion in capital. In the past five years, Varadero has allocated more than $1 billion in capital toward specialty finance platforms in various sectors including consumer and small business lending, auto loans and commercial real estate. In 2015, for instance, Varadero participated in separate ventures with both Lending Club and LiftForward.
Varadero began working with CAN Capital as part of its efforts to pay down syndicates. Varadero bought certain assets from CAN Capital last year and provided enough funding to allow CAN Capital to recapitalize. “The recapitalization enabled us to pay off the remaining amounts owed to our previous lending syndicate and provided us with access to additional capital to resume funding operations,” Sanz says. He declined to be more specific.
“We were impressed with the overall value proposition of CAN’s offerings as evidenced by the strength of its long standing relationships, the company’s core team, sound underwriting practices, technology and the strong performance of their credit extension throughout the cycle,” said Fernando Guerrero, managing partner and chief investment officer of Varadero Capital, in a prepared statement. “We’re confident the company’s focused funding practices will allow it to serve small business customers for many years to come.”
Guerrero was not immediately available for additional comment.
DLA Piper served as legal counsel for, and Jefferies was the financial advisor to, CAN Capital, while Mayer Brown was legal counsel to Varadero Capital, L.P.
Since its troubles last year, CAN Capital had been working with restructuring firm Realization Services Inc. for assistance negotiating with creditors. It also worked with investment bank Jefferies Group LLC for advice on strategic alternatives.
Sanz declined to discuss other options CAN Capital considered, noting that the Varadero deal provides the firm the opportunity it needs to jump back into the market—this time with “tip top” operations in place.
He declined to say how many employees the firm still has, other than to say it is now “appropriately staffed.” In addition to getting rid of the prior management team, CAN Capital reduced staffing in numerous parts of its business. That includes nearly 200 positions at its office in Kennesaw, Ga, according to published reports.
The company will still be called CAN Capital. “We feel that that brand has a recognition in the market, in particular with our sales partners,” Sanz says.
