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Shopify Capital Originates $837M in Business Loans & MCAs in Q3
Shopify Capital originated $837 million in business loans and merchant cash advances in Q3, putting the grand total at $2.1B for the first 3 quarters. During the earnings call, Shopify said that loss ratios remained within the consistent range.
Compared to some of their competitors in the online space, Shopify Capital ranks third:
Q3 originations:
Square Loans: $1.38B
Enova: $1B
Shopify Capital: $837M
Taycor Financial to Become the Vendor Division of North Mill Equipment Finance
NOVEMBER 8, 2024, NORWALK, CT – North Mill Equipment Finance, LLC (“NMEF”), a leading commercial equipment lessor located in Norwalk, Connecticut, announced today the acquisition of 100% of the stock of TF Group, Inc., (“Taycor Financial”), a preeminent, technology-driven finance provider in El Segundo, California. Taycor Financial will continue to operate as an independent division of NMEF, with a focus on developing direct and vendor origination programs.
NMEF’s partnership with, and substantial capital investment in, Taycor Financial over the past four years has been instrumental in expanding our commercial footprint,” said David C. Lee, Chairman and CEO of North Mill. “As we take this next step to bring our companies even closer, we want to underscore that our dedication to our existing partners remains unwavering. This integration will further empower each division to build on its core strengths – with NMEF committed to nurturing and expanding our referral partner relationships, while Taycor focuses on developing vendor and direct programs.”
Michael Hong, President of Taycor Financial, stated, “This partnership with NMEF represents an exciting opportunity to expand our capabilities and enhance our service speed across underwriting, documentation, and funding. While we look forward to leveraging our combined technology and resources, our dedication to exceptional customer care remains at the heart of everything we do. We will continue to operate under the Taycor Financial name with the same steadfast commitment to our clients and partners, fostering strong relationships, and delivering personalized, responsive support.”
About North Mill Equipment Finance (NMEF)
NMEF is a national, premier lender who works with third-party referral (TPR) sources to finance small to mid-ticket equipment commercial leases and loans ranging from $15,000 to $3,000,000 and up to $5,000,000 for investment grade opportunities. NMEF accepts A – C credit qualities and finances transactions for many asset categories including but not limited to medical, construction, franchise, technology, vocational, manufacturing, renovation, janitorial and material handling equipment. NMEF is majority owned by an affiliate of InterVest Capital Partners. The company’s headquarters are in Norwalk, CT, with regional offices in Irvine, CA, Voorhees NJ, and Murray, UT. For more information, visit www.nmef.com. One of NMEF’s controlled affiliates, BriteCap Financial LLC, is a leading non-bank lender providing small businesses with fast, convenient financing alternatives such as working capital loans since 2003 from its main office in Las Vegas, NV. For more information, visit www.britecap.com.
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View PostRewarding Loyalty in Revenue Based Finance
Everyone’s heard the pitch that if a deal goes well there could be better terms on the next one, but how much better are we talking about precisely? Well, after conducting an internal study, Pennsylvania-based Funding Metrics decided to actually codify incentives for success into a fully fledged loyalty rewards program that enables merchants to get a precise factor rate reduction, origination fee discount, and additional estimated remittances on subsequent advances.
“Early 2023 we took a deep dive into our customer experience and how it directly correlated to merchant retention,” said Melissa Flagg, Vice President of Operations for Funding Metrics. “We listened to the pain points our ISOs shared, with customer retention always driving the conversation. Most ISOs we spoke with seemed to face similar retention challenges and were coming up short with solutions.”
The challenge is that merchants tend to shop around on subsequent deals even if they are happy with what they got the first time. The loyalty program was the eventual outcome of what they learned and it’s open to merchants funded by Lendini and Quick Fix Capital. As Flagg tells it, there are three ways for merchants to accrue points. First, points simply for opting in, which they must do in order to take advantage of it. Second, additional points for each 1% they remit toward the purchased amount, and third, points for each renewal. There are six total milestones that range from Bronze Level to Diamond+ Level. While the tiers, conditions, and corresponding discounts are published right on their website, merchants can easily track their points through the Funding Metrics mobile app.
“There’s no need for a redemption email or request,” said Flagg. “Points don’t deduct, they continually accrue as long as merchants continue to remit, and discounts automatically associated with the loyalty level apply on their next offer.”
She added that it’s quickly been recognized as a great way to incentivize a merchant not to shop around. It’s also been used to secure a renewal or win back an old customer that had left. This logically helps the ISOs involved.
Most readers are already familiar with the Lendini brand through their constant mix of on- and offline marketing. Members of their team usually show up in large numbers at major industry events, for example. Flagg said that 2024 has been a big year for the company. “In Q2, we successfully launched Instant Offers, and we’re proud to report that we’re now averaging a turnaround time of under 5 minutes for offers up to $75,000,” she said. Their new mobile app, while still in beta, allows merchants to track offers, remittances, and engage with the Resolutions Team.
“Over the past two years, we’ve prioritized elevating the customer experience by creating accessible tools that empower merchants to navigate the financing process with ease and transparency,” Flagg said. “This is only the beginning. Funding Metrics is dedicated to continuously enhancing these experiences that put merchants in greater control of their business financing and making every step from offer to origination as seamless as possible.”
View PostUndercover Agents Working for Federal Regulators Posed as Merchants, Inquired About Business Loans
If you want to get a sense of what CFPB oversight of small business financing is going to look like when it goes into effect in 2025, then consider the federal regulator just revealed that it hired undercover agents last year to pose as business owners, had them inquire about business loans, and recorded it all. All with the assistance of the DOJ.
Focused entirely on Nassau County, NY and Fairfax, VA, the undercover agents pretended their fake businesses did $100k – $400k in annual revenue and be open for less than 5 years with 700+ FICO. With what amounted to more than 100 total in-person visits across 23 financial institutions (all of which were bank branches) for the duration of the operation, the CFPB allegedly hoped to gauge potential racial discrimination with the lenders they spoke with.
The undercover agents, described as testers, were instructed to tell representatives at banks that they were “looking to expand their business and to inquire about financing through business loans and business lines of credit.”
“All calls and visits with the lenders were audio recorded,” states the official report issued by the CFPB. The CFPB paid close attention to whether or not bank representatives suggested alternative financing products and whether or not they encouraged or discouraged to do one thing versus another.
While anyone is free to opine on what the findings of this investigation actually were and the context of which they were found (FULL REPORT HERE), readers are reminded that the CFPB will be tasked with reviewing these very demographic metrics, like the ones they inquired about during this investigation, for almost all small business finance companies starting in July 2025 (even if you’re a broker). These regulations apply to revenue based financing providers just the same as lenders unless the incoming administration intervenes.
The CFPB’s role in small business finance was dictated in 2010 during the passage of Dodd-Frank, but it has taken nearly 15 years for the rules to finally go into effect. While the statute empowering the regulator to collect demographic data from small business finance companies does not specifically state that it has been granted any authority to bring enforcement actions based upon that data, the revelation that the regulator conducted an undercover operation that included them pretending to be business owners looking for loans across two states with the assistance of the Department of Justice should be a good indication of where things were at least planning to go. The current head of the CFPB, for example, Rohit Chopra, had expressed publicly that his plan was to wipe out all companies engaged in merchant cash advance. It is not known at this time who, if anyone, might replace Chopra under Trump. The last time Trump became president, the CFPB head that had been installed by Obama, famously claimed at the time that the President of the United States did not possess the authority to remove him. He was later removed.
View PostCloudsquare Broker Announces Fall ’24 Release: New Automation and Efficiency for Small Business Lending Brokers
Los Angeles, CA – November 12, 2024 – Cloudsquare, a leading innovator in lending technology, is proud to announce the Fall ’24 release of Cloudsquare Broker, its powerful CRM solution for small business lending brokers. This latest update introduces groundbreaking features designed to streamline deal management, boost productivity, and provide greater visibility and control over lending operations.
A Game-Changer for Small Business Lending Brokers
Cloudsquare Broker’s Fall ’24 release focuses on solving key pain points for brokers by providing tools that enhance process automation, increase transparency, and optimize workflow efficiency. These updates come in response to the growing need for comprehensive, adaptable solutions that can scale with a company’s growth.
New Features in the Fall ’24 Release Include:
- Notification Management: Users can now stay up-to-date on deal milestones with customizable, no-code triggers and real-time alerts, ensuring no crucial updates are missed.
- Enhanced Lender API File Submissions: Full transparency is achieved with individual status tracking, allowing brokers to monitor each file’s journey and resubmit swiftly as needed.
- Advanced Workflow Enhancements: Designed to optimize the submission user experience, these targeted improvements empower teams to manage submissions with greater precision, control, and speed, enhancing overall operational efficiency.
“Our team has worked tirelessly to deliver features that align with our customers’ needs for automation, efficiency, and adaptability,” said Jeffrey Morgenstein, CEO of Cloudsquare. “The Fall ’24 release of Cloudsquare Broker exemplifies our commitment to empowering small business lending brokers to maximize their potential with tailored solutions built on Salesforce.”
Availability
The Fall ’24 update is now available to all existing Cloudsquare Broker users. New customers can explore the full potential of this update through tailored demos and consultations.
For more information about the Cloudsquare Broker Fall ’24 release or to schedule a demo, please visit Cloudsquare.
About Cloudsquare
Cloudsquare is the leading end-to-end lending platform, uniquely powered by Salesforce to deliver unparalleled flexibility and innovation for lenders and brokers. With a commitment to optimizing lending processes through cutting-edge technology, Cloudsquare provides robust, scalable solutions that empower clients to achieve greater efficiency and growth. Celebrated by industry leaders, Cloudsquare has earned a place on the Inc. 5000 list as one of America’s fastest-growing companies and is consistently rated a top service provider on platforms like Salesforce AppExchange, G2, Clutch, and Manifest.
For media inquiries, please contact:
Cloudsquare Marketing
Email: marketing@cloudsquare.io
Ready Capital Grows as Leading Non-Bank Small Business Lender
“Ready Capital has become a leading national non-bank lender to small businesses providing a full suite of loan options from $10,000 unsecured working capital loans to $25 million plus real estate-backed USDA loans,” said Ready Capital CEO Thomas Capasse during the company’s Q3 earnings call.
Ready, in some ways, has flown under the radar in recognition. On the one hand the company is the top non-bank SBA lender in the country and fourth overall SBA lender in the country. On the other hand, the company has previously acquired Knight Capital, iBusiness Funding, Madison One Capital, select non-SBA assets of Fountainhead, and Funding Circle USA. The result is that the overall organization is a powerhouse with a current public market cap of $1.25B.
iBusiness Funding, once the technology arm of Knight Capital, has played an integral role for the company. For example, when Ready acquired Funding Circle USA, it did it through the iBusiness Funding brand.
“[In 2019, iBusiness Funding was] a leader in unsecured small business lending,” Capasse said on the call. “And then they adopted their tech to the PPP which was very accretive. And since then there’s been the initiative within the SBA to emphasize small loans below $350,000, which many times are minority women-owned businesses, and so that’s been a significant initiative by the SBA& and so what we’ve done is iBusiness has developed a tech stack, which is now being marketed as a third-party underwriting model for banks. Banks just do not focus on that at all. Even if they do SBA loans, it’s mostly for larger loans again above the $350,000 to the $5 million. So the idea with iBusiness is to grow the revenue stream from this software-based business.”
On Funding Circle, Capasse said that the newly acquired subsidiary would be “accretive to earnings once fully ramped.” The numbers offered so far was that $6.6 million growth in Q3 origination income came from small business working capital loans through the Funding Circle platform.
View PostOppFi Encouraged By Early Results With Bitty
OppFi achieved a new record in Q3.
“The record quarterly net income was a result of credit initiatives that continue to drive strong loss payment and recovery performance, marketing cost efficiency and prudent expense discipline across the organization,” said OppFi CEO Todd Schwartz during the quarterly earnings call. One part of that organization is Bitty Advance, which it acquired a 35% stake in this past summer. “We are encouraged by the early results and potential opportunity of this platform and the strength of our relationship with Bitty,” Schwartz said of the progress so far. “We continue to explore similar opportunities that would be accretive and align with OppFi’s strategic vision.”
One analyst on the call inquired further about what similar opportunities Schwartz might be referring to on the M&A front. Schwartz responded with the following:
View PostI mean I think whatever it is, it’s got to be something that’s highly accretive. I mean, OppFi’s vision is to be a platform for digital alternative financial service products where we see large supply-demand imbalances in large addressable markets. There’s definitely different profiles of business out there, different situations are pretty — it’s pretty bespoke, but we’re prepared to handle either-or. So it has to make sense for us, though. And obviously, we’re going to protect and mitigate risk with anything we do to make sure that it’s successful and make sure that we’re going to be getting a return on our capital and it’s highly accretive to shareholders.
Square: Our Customers Actually Grow Faster With a Square Loan Than Without One
On average, Square customers that used the Square Loan product grew 6% faster than those that did not use it, the company revealed. Jack Dorsey, the CEO of Square’s parent company, Block, used the 3rd quarter earning’s period as an opportunity to discuss its lending operations. The relevant parts are excerpted in non-sequential order below:
“In 2013, we began offering capital to sellers because we saw a meaningful gap in the market: small businesses were often denied access to credit, in the same way they were once denied access to accepting credit cards. We utilized our deep understanding of the seller and their business to build a technology that invited them to accept a loan with transparent rates, and pay back simply by making sales to their customers. We called it Square Capital (which is now known as Square Loans).
Since then, we’ve underwritten more than $22 billion in loans globally, with aggregate loss rates below 3%. And we’ve proven we can expand access: 58% of Square Loans are to women-owned businesses, and 36% are to minority-owned businesses, both of which are higher than the benchmark we track If our sellers grow, we grow – and we believe Square Loans has a direct impact on our sellers’ growth. Sellers who take out a Square Loan grew on average 6% faster than sellers who did not take out a loan.
Many financial products trap borrowers in cycles of revolving debt. We don’t allow customers to take on new loans if they have an overdue balance. And repayment is built into how our products work: Square sellers repay loans through a fixed percentage of their revenue, creating a manageable-real-time payment flow.
On credit risk management, we have a long history of maintaining stable loss rates and these products act as working capital, which means they are usually short in duration. What that means for us is that a dollar used on our balance sheet can turn multiple times, driving capital efficiency while providing us with high-quality data to continually refine our technology-driven underwriting.””
-Jack Dorsey
Square shared some stats as well, showing that the average loan term was 150 days and average loan size is only $10,208.
Loss rates on Square Loans have historically been less than 4%. Square is a company to watch considering it is likely the largest online business lender in the United States.
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