For Sale: 60,000+ Leads From 1st Global Capital
December 21, 2018
Since 1st Global Capital went out of business, the company’s treasure trove of leads has been up for sale. Beginning in October, 41 companies were propositioned by 1st Global Capital’s bankruptcy advisors to make a bid on the company’s data. Ten companies actually entered into non-disclosure agreements to access a data room. That led to four official proposals which was narrowed down to two formal negotiations and ultimately the selection of one final stalking horse bidder.
In Advance Capital’s high bid came in at $105,000 for data that includes 57,000 non-funded applications and 4,760 funded applications. That dollar figure is actually an upfront fee against future commissions because the arrangement requires the buyer to pay 1st Global Capital a commission for every merchant on the list that they end up funding in-house or elsewhere. The total purchase price therefore is likely to exceed $105,000 over time. The buyer is not permitted to stack any merchant on the list.
As the stalking horse, In Advance’s bid will be honored unless new companies outbid them between now and January 7. If two or more qualified bids are received, a formal auction will take place on January 8. A hearing on the outcome will take place on January 9.
1st Global Capital Sues Capital Stack and Others Over Momentum Auto Group
December 18, 2018
The notorious $40 million merchant cash advance deal has a new twist, even more cash advances. On Friday, the now-bankrupt 1st Global Capital filed a lawsuit against Momentum Auto Group, related entities, and 4 merchant cash advance companies including Capital Stack.
According to documents filed in the case, Momentum Auto was behind on taxes and loans to floor plan lenders to the tune of $15.5 million in February this year. That’s in addition to their inability at the time to pay 1st Global Capital and other MCA funders millions of dollars in advanced funds.
To fix the problem, 1st Global Capital established themselves as the senior creditor in which they required rival funders to enter into Subordination And Standstill agreements. In return for 1st Global Capital keeping Momentum Auto solvent with additional funds, the subordinate funders were only permitted to collect a fraction of their originally-stipulated daily payments (and only if Momentum Auto had adequate liquidity and cash flow, otherwise they were not allowed to collect anything at all until 1st Global had been paid in full). In the case of Capital Stack, it was agreed they could only debit 20% of what they were normally entitled to. For others it was 10%.
1st Global Capital says both restrictions were violated, that the funders collected above their agreed percentage and that they also collected from Momentum Auto despite the business not having adequate liquidity and cash flow. As relief, 1st Global Capital is seeking that each MCA funder return all funds they collected from Momentum Auto Group to 1st Global Capital.
Momentum Auto Group is a conglomerate of car dealerships in California that shut their doors in November. Soon after, lawsuits flew, and in one case the judge has ordered the dealerships be placed into receivership.
1st Global Capital is itself in receivership, having filed bankruptcy in July this year. The company and its founder were also charged with fraud by the SEC after they allegedly relied on the sale of unregistered securities to more than 3,400 investors nationwide.
BFS Capital Announces New CEO
November 28, 2018
BFS Capital announced today that it has appointed Mark Ruddock as CEO, effective immediately. Co-founder Marc Glazer, who has served as interim CEO since the departure of Michael Marrache earlier this year, will be Chairman.
“I sense there is tremendous potential in this firm,” Ruddock told AltFinanceDaily. “It has in its DNA an innate understanding of the needs of small business and I think the opportunity for it is to leverage significant increases in data science and technology to help scale and deliver on this potential.”
Most recently, Ruddock served as interim CEO for nearly two years at 4finance, one of the largest European consumer focused online lenders, with more than 3,000 employees and customers across 17 countries. Ruddock said that at 4finance, every day they would issue more than 16,500 loans and make about 22,500 risk decisions. And the entire process was automated.
“There is an opportunity to achieve real scale [in small business lending] through the use of leading edge technology,” Ruddock said, and that is what he intends to do at BFS Capital. Ruddock is relocating to Florida from Berlin, Germany.
Glazer will remain a key part of the operations at BFS Capital.
“One of the biggest assets this company has is Marc Glazer,” Ruddock said. “The two of us see this very much as a joint endeavor moving forward…and I’m going to hold him to remaining actively involved here.”
Their offices are right beside each other, Ruddock said.
“[Ruddock] has an outstanding track record of transforming financial services and technology companies by accelerating their innovation and business growth,” Glazer said. “His diversity of experience, from founder to growth stage executive, across a wide variety of industries and geographies makes him an exceptional choice for BFS Capital at such a pivotal stage in our evolution.”
Ruddock was the founder and CEO of INEA Corporation, an enterprise software firm focused on the financial services industry that was acquired in 2005. Following INEA, he became CEO of mobile software company Viigo, whose flagship app became one of BlackBerry’s most downloaded apps of all time by the time the company was acquired by RIM (Blackberry) in 2010. He held a number of other positions before becoming interim CEO at 4finance in 2017.
Headquartered in Coral Springs, FL, BFS Capital funds American and Canadian small businesses with merchant cash advances and business loans. Through its affiliate, Boost Capital, the company also provides funding to small businesses in the UK. Since 2002, BFS Capital has funded more than $1.9 billion. The company also has offices in New York, California and the UK.
Square Capital Loaned $405 Million in Q3
November 8, 2018
Square Capital originated more than 62,000 business loans for a total of $405M in Q3, up from $390M in the previous quarter, according to the company’s latest earnings report.
By contrast, OnDeck, a Square Capital competitor, reported loan originations of $648M for the quarter. Both companies find themselves facing new competition from a growing field of tech players like Shopify (who last quarter originated $76.4M in merchant cash advances).
Thanks to an early investment in Eventbrite, the online events company that went public in September, Square turned its regularly scheduled quarterly losses into a profit in Q3. On the company’s earnings call, Square CFO Sarah Friar said that the company would have had a $17 million loss if it weren’t for a windfall related to the IPO of Eventbrite.
The big news that Square CEO Jack Dorsey had to share on the earnings call was the introduction of Square Terminal, a portable, all-in-one payment device that prints receipts.
“People don’t want to use their personal device to accept payments,” Dorsey said of many small business owners.
Dorsey said that this device is essentially meant to replace “those black rectangular boxes,” referring to the ubiquitous credit card processing machines which he described as “dinosaurs.”
Another theme of the earnings call was Friar’s departure from Square. Friar announced in October that she will be taking the job of CEO at Nextdoor, a social network. Dorsey thanked Friar for her contribution to Square and in a tweet expressed sadness that she was leaving. He said that a search to replace Friar is currently underway.
Dorsey also expressed pleasure with the continued success of Square’s Cash app, a peer to peer payments app that he said allows the “underserved and unbanked” to transfer money.
“I’m excited [about] what we can build on top of it,” Dorsey said.
Capital Stack Hit With Class Action Lawsuit
October 10, 2018A class action lawsuit brought by former employees of Capital Stack, LLC was filed in federal court on Tuesday for damages resulting from alleged labor law violations. David Rubin, Brian Stulman, eProdigy ACH, LLC, and eProdigy Operations, LLC are also among the named defendants. Capital Stack is a merchant cash advance company based in New York.
The 22-page complaint lays out seven claims including failure to pay the minimum wage required by New York Labor Law.
The suit can be downloaded here.
The case is 1:18-cv-09230 in New York Southern District Court.
Greenbox Capital Introduces On Demand Loan Checkout Process
October 3, 2018Miami Gardens, Fl, 10-03-18
This latest on demand loan process function grants ISO partners the ability to increase term and funding amounts up to one month and 10%, respectively, without submitting a request. “The Box” was developed by CEO Jordan Fein and the innovative Greenbox IT team to give brokers additional flexibility.
The development mandate was to eliminate extraneous steps between the merchant and the broker which would further enhance those relationships and promote long lasting partnerships. “The Box” is now considered the most efficient, convenient user technology available.
“When the difference between winning and losing a deal is time, Greenbox Capital has provided a solution that allows our brokers to make more favorable terms, instantly! We have our pulse on the industry and the needs of our ISO partners. We regularly request feedback and implement upgrades to our technology to meet industry needs,” states Fein.
Greenbox Capital specializes in alternative funding options for small-and medium-sized business averaging at least $7,500 in revenue in each of the past 3 months. Greenbox Capital’s fast business cash advances and short-term small business loans make goals attainable.
The company’s small business financing programs include:
- Merchant Cash Advances (in available USA regions)
- Small Business Loans (in available USA and Canada regions)
- Invoice Factoring
- Business Lines of Credit
- Unsecured Financing
- Collateral-backed Funding
“We empower business owners to succeed by providing what they need most: access to working capital. We are committed to industry leadership in technology and will continue to develop processes that lead to a positive outcome for both merchant and broker,” adds Fein.
Greenbox Capital
855.442.3423
Info@greenbox.capital
The Largest Merchant Cash Advance in History
September 28, 2018
How would you like to be the funder to do a $40 million MCA transaction? According to the Securities & Exchange Commission, a deal of such magnitude was one of the many negligent acts that 1st Global Capital CEO Carl Ruderman did with investor money. Though the SEC refers to the merchant as an auto dealership in California, it’s roughly 9 dealerships with common ownership that collectively gross more than $550 million a year in sales. It’s the deal of a lifetime except that the ISO who brokered it has become the largest unsecured creditor to file a claim in the 1st Global bankruptcy. Records show they are owed approximately $3.9 million in unpaid commissions.
And its performance has not been without challenges, according to emails disclosed in the SEC case.
In April 2018, 1st Global employees discussed what to do about the dealerships’ lingering cash flow problems after becoming aware that the owner intended to either recapitalize the debt or sell the dealerships. The choice by then had come down to either continuing to fund them or to cut their losses, an email says.
“If they were to become insolvent, everyone loses,” wrote the Director of Accounting and Finance.
1st Global continued to fund them. The $40 million (approximate amount) was not disbursed all at once but in increments over the course of a year.
One week before 1st Global filed for bankruptcy, they signed a Binding Letter of Understanding with the dealerships acknowledging that the owner would be selling them. At that time the merchant had unpaid taxes of at least $9 million and had an outstanding receivable balance with 1st Global of $43 million. The Letter said that 1st Global would accept “whatever amount it receives [..] at this point as complete satisfaction” of the current RTR when the business is sold. 1st Global also agreed to forever release the dealerships’ owner personally from all legal claims. It was signed by Carl Ruderman 8 days before he resigned.
The merchant has not returned AltFinanceDaily’s inquiries. The banker named in the Binding Letter as having been exclusively hired to sell the dealerships, told AltFinanceDaily over the phone that he has never heard of 1st Global. 1st Global ceased operations on July 27th. The SEC filed a complaint against Ruderman and the company on August 23rd and an amended complaint on September 26th. The dealership transaction is used as an example of malfeasance in it twice.
New Record
No longer candidates for the largest merchant cash advance in history, two ancient deals that were famous during their eras for their size, ended up in default, and in doing so showed the industry that there was such a thing as too big.
One was a $4 million advance made by Strategic Funding Source in 2011 to a tourist attraction being produced at the Tropicana Hotel in Las Vegas. The Las Vegas Mob Experience, billed as the most technologically advanced interactive presentation of historical artifacts ever devised and set up in a 26,000 square foot total immersion facility, it was predicted to bring in 1.5 million visitors per year. But the deal quickly spiraled out of control, the exhibit shut down, and allegations of fraud were lodged in court. Though the Mob Experience was dubbed the largest merchant cash advance in history, it depends on whether or not you’re counting common ownership of multiple businesses as individual deals or one deal.
Dozens of advances made by Global Swift Funding in 2007 and 2008 to businesses controlled by the same west coast-based restaurateur, led to Global Swift’s demise. When the “restaurant king,” as he was known, filed for bankruptcy across all of his entities, Global Swift had outstanding future receivables with his businesses of approximately $8 million. Dan Chaon, a then representative of Global Swift, told a local newspaper at the time that the restaurateur was “a helluva sales-talk artist… he provided false financial statements, and everyone got caught up in that game.”
1st Global Capital’s Activities Spilled into Cryptocurrency and ICOs
September 14, 2018Curious details are emerging in the wake of the 1st Global Capital bankruptcy and subsequent SEC charges. Among them is that $161,000 of company funds were used to purchase cryptocurrency.
Many of those purchases were made in February of this year for a total of $92,492. The cryptocurrency market has slumped since then. Bitcoin, for example, is down 35%.
In May, less than three months before 1st Global filed Chapter 11, a purchase of $61,000 in cryptocurrency was addressed to TraNexus Ireland LTD. TraNeXus is an Ireland-based travel technology blockchain company that is currently raising capital via an Initial Token Offering (aka an Initial Coin Offering, ICO). “TraNexus is committed to changing the way people travel and revitalizing the travel and tourism industry by making travel easier, greener, more valuable and more fun,” the company says of itself in a recent press release. 1st Global Capital owner Carl Ruderman is something of a vanguard in the global tourism business whose acumen includes ownership of Elite Traveler magazine.
Separately, 1st Global is alleged to have funded a $40 million merchant cash advance to an auto dealership in California. Though it remains unconfirmed, industry insiders say it wasn’t even a 1st position deal and that the dealership had multiple advances.
On Wednesday of this week, the SEC served a subpoena on a JPMorgan Chase in Miami demanding all documents and payments related to 1st Global, Ruderman, and his companies.
