Thanks to Expansion Capital Group, South Dakota is On The Alternative Lending Map
September 11, 2018
Expansion Capital Group (ECG), which secured new financing at the beginning of the month for a total senior debt capacity of nearly $60 million, is based in Sioux Falls. That’s in South Dakota. With most alternative lenders based in New York, Florida or California, ECG is definitely unique geographically. But the company’s CFO Tim Mages told AltFinanceDaily that despite the relative obscurity of the city, with a respectable population of 183,000, the city is a very good place to start a business. Particularly in the finance sector.
According to a 2017 survey conducted by CNBC and SurveyMonkey, Sioux Falls is among the top 15 American cities optimal for starting a business. Why? Because South Dakota has no individual or corporate income tax and business costs are more than 20 percent below the national average. As one of the fastest-growing areas in the country, Sioux Falls has a rate of population growth that’s nearly four times the national average, according to the survey.
Also, Wells Fargo and Citibank both have a significant presence there, so there is an existing pool of talent in the lending space.
In addition to ECG’s unusual geography, the way it obtains the bulk of its business is also uncommon. Mages said that 50% of its business comes from other lenders who either turn down the applications or don’t have enough capital to lend to merchants. Mages said they can “turn coal into diamond.” The company primary funds B- to C- paper deals and services a variety of industries with the bulk coming from transportation/trucking, construction and business services. ECG provides loan products, which compose about 80% of the business, as well as merchant cash advance, which makes up the remaining 20%.
Mages expressed a lot of enthusiasm for the company’s technology, which he said is very helpful because it can save a lot of time. For instance, he said their system auto-declines 25 to 30% of the applications they receive, which can be between 3,000 and 7,000 a month.
“We then want to get as competitive as we can [for the right applications,]” Mages said.
ECG ranked #802 on 2018’s Inc. 5000 list of fastest growing U.S. privates companies. Founded in 2013, ECG now employs 65 people. According to Mages, there are 23 underwriters and 11 internal salespeople, plus in-house legal and regulations team, a marketing team and a merchant support team. There is a tiny office of two people in Delaware.
CAN Capital to Grow Team and Business with New Facility
September 5, 2018
CAN Capital CEO Parris Sanz at Broker Fair May 2018CAN Capital announced today that it agreed to a financing transaction of up to $287 million, provided by Varadero Capital. This is CAN Capital’s second facility with Varadero Capital. The first one came in July 2017. This financing will be used to fund more small business loans and to invest in talent and technology to enhance customer experience. The company plans to grow the size of its team with this new facility.
“We look forward to utilizing this funding to expand our ability to provide access to capital for small businesses, enhance our technology stack, and continue to build a dedicated, customer-driven team,” said Parris Sanz, CEO of CAN Capital.
CAN Capital also announced today that it has now provided small businesses with access to over $7 billion of working capital through more than 190,000 funding transactions with over 81,000 small business owners.
“Reaching $7 billion in working capital is a significant milestone for us,” Sanz said. “We are excited to use our deep experience and data to enable even more small business owners to grow with streamlined access to capital.”
CAN Capital makes business loans from $2,500 to $250,000 that last between 6 and 18 months. And they provide merchant cash advance financing, also from $2,500 to $250,000. They also work with broker partners to fund deals.
Founded in 1998, CAN Capital is among the oldest alternative lending companies. After an issue plagued them in 2016, the continued growth and confidence in the company from Varadero Capital is noteworthy. The company is now growing when it was making layoffs less than two years ago. Currently, CAN Capital’s headcount is 142.
“Since our initial facility, we’ve been impressed by the work ethic and dedication of CAN Capital’s staff, which have driven consecutive quarters of business growth and boosted confidence in the company’s fundamentals,” said Fernando Guerrero, Managing Partner and Chief Investment Officer at Varadero Capital.
1 Global Capital Charged With Fraud by SEC
August 29, 2018
The Securities & Exchange Commission unsealed a 10-count complaint against 1 Global Capital LLC (“1st Global Capital”), its owner Carl Ruderman, and related parties on Wednesday.
The South Florida firm “fraudulently raised more than $287 million from more than 3,400 investors to fund its business offering short-term financing to small and medium-size businesses,” the complaint begins.
Investors were offered low-risk, high-return investments that 1st Global would use to fund merchant cash advance deals. Ruderman, who owned the company through a trust, misappropriated $35 million of the funds, paying a lot of it to himself and companies he controlled that had nothing to do with MCA, the SEC alleges. Beyond that, millions more went towards other pet projects like a $50 million purchase of distressed credit card debt.
But the deception went deep, the complaint lays out. 1st Global touted a default rate of only 4% despite the fact that 15-18% of their deals over the last 2 years had resulted in collections lawsuits.
By October 2017, the statements investors received showing their monthly performance were faked with the value and performance significantly inflated. By June 2018, one line item on monthly statements (labeled “cash not deployed”) reported that investors collectively had $70 million in idle cash ready to be put into deals. Meanwhile, the company itself only had about $20 million in all of its bank accounts combined, money that was being used for everything including operating expenses, salaries, and commissions.
1st Global’s alleged auditor, Daszkal Bolton, LLP, says they never audited 1st Global’s statements and haven’t had anything to do with the company since 2016. Nonetheless, 1st Global placed Daszkal Bolton’s name on statements given to investors and stated on their website that investor balances were validated by an accounting firm quarterly.
United Capital Source Selected to Service BizBloom’s Portfolio
August 19, 2018
Great Neck, NY, August 20, 2018 – United Capital Source has been selected to service the BizBloom portfolio. BizBloom, a NY-based small business financing brokerage that launched in 2015, recently underwent a management change. The company’s president, Thomas Costa, has stepped down.
Costa is also no longer involved with a related business, Accredited Business Solutions, LLC (ABS), which does merchant processing.
“We are happy to use our resources to manage BizBloom’s book,” United Capital Source CEO Jared Weitz said. “It’s something our team is really good at. Our in-house CRM and technology enables us to take on the additional work seamlessly, Our employees are all industry veterans and best of breed.”
Weitz was also recently selected to co-chair the Broker Council of the Small Business Finance Association.
ABOUT UNITED CAPITAL SOURCE:
United Capital Source is a leading small business funding organization headquartered in New York. Thousands of small businesses throughout America rely on the small business loans, business lines of credit, merchant cash advances, working capital loans, credit card factoring, accounts receivable loans, SBA loans, and Equipment financing placed by United Capital Source. Companies with credit challenges unsuitable for traditional bank lending work with United Capital Source for faster funding approvals, reducing financing costs and increasing business funding choices. Our delighted customers are across industries from aviation, construction, dentistry, franchises, healthcare, manufacturing, communications, real estate, retail, and wholesalers. For more information, visitUnitedCapitalSource.com or call 855.933.8638. Visit the United Capital blog on our website and follow United Capital Source on Twitter, LinkedIn and Facebook.
Shopify’s Merchant Cash Advance Business Grows
July 31, 2018Today Shopify released its Q2 2018 earnings report, revealing that Shopify Capital issued $68.5 million in merchant cash advances in the second quarter of 2018, an increase of 84% compared to the $37.2 million issued in the second quarter of last year. Shopify Capital has advanced nearly $300 million to merchants since they launched in April 2016, $80 million of which was outstanding on June 30, 2018.
Founded in 2004 and headquartered in Ottawa, Canada, Shopify currently powers over 600,000 businesses in approximately 175 countries. The stock trades on the New York Stock Exchange and the Toronto Stock Exchange as SHOP.
Syndication at Heart of SEC and Criminal Investigation into 1st Global Capital
July 31, 2018
New light was shed into the bankruptcy filing of 1st Global Capital this morning. The investigations by the SEC and the US Attorney’s office are related to possible securities law violations, “including the alleged offer and sale of unregistered securities, the alleged sale of securities by unregistered brokers, and the alleged commission of fraud in connection with the offer, purchase, and sale of securities.”
The company is also being investigated by several states attorneys general where individuals were solicited to invest into merchant cash advance deals.
No charges have been filed in these investigations to-date, but they have prevented the company from being in a position to raise new capital.
There are more than $283 million in unsecured lender claims. Of the 20 largest creditors, all of them are individuals or their retirement accounts.
The company’s two main executives, Carl Ruderman and Steven A. Schwartz, relinquished their powers and resigned on Friday. Darice Lang, the company’s operations director, will stay on and report to the newly appointed Chief Restructuring Officer.
The company’s 1,000+ individual unsecured creditors (syndicates) loaned money to be invested in merchant cash advances and would receive a monthly statement to see how their money had been allocated. They also had access to a portal to track their accounts.
Of the $283 million owed to the individuals, the company’s unaudited financials reflect $238 million in A/R (primarily MCAs outstanding), $21 million of intercompany accounts, and $17.3 million in unrestricted cash.
1st Global generated $22.6 million in revenue in 2017 and $29.3 million in revenue in the first 6 months of 2018.
1 Global Capital Files Chapter 11
July 30, 2018
UPDATE: A joint motion filed this morning explained that the companies were forced to file bankruptcy “in order to address a sudden and acute liquidity crisis and to preserve their assets and business operations for the benefit of the individual lenders and all other constituencies. As a result of the investigations commenced by the US Attorney’s Office and Securities and Exchange Commission, with which the Debtors have been and will continue cooperating, the Debtors have ceased their pre-petition effort to raise capital.”
1 Global Capital LLC filed for Chapter 11 on Friday, according to a voluntary petition filed in the Southern District of Florida. The company’s estimated assets and liabilities exceed $100 million while the number of estimated creditors was listed as between 1,000 and 5,000.
A related company, 1 West Capital LLC, also filed for Chapter 11.
Greenberg Traurig, LLP has been retained to assist on the companies’ behalves.
In a joint motion filed this morning, both entities described themselves as “providing direct merchant cash advances to small businesses across the United States.”
90% of PayPal Merchant Advances and Business Loans Are Performing On Pace
July 28, 2018
As of June 30, 90.6% of PayPal’s merchant advances and business loans were performing within the original expected repayment period, the company disclosed this week. That equated to $1.27 billion worth of deals. Only 4.2% of their merchants were more than 90 days behind their expected pace.
PayPal had $1.4 billion in outstanding merchant loans, advances, interest and fees receivables.
Swift business loans are charged off when they are more than 180 days past due. The Working Capital products (which can be loans or advances) are charged off when the merchant is 180 days past the company’s original expectations and no payment has been made in the last 60 days OR when the merchant is 360 days beyond the company’s original expectation.
Swift Business loans are generally repayable over 3-12 months. Working Capital advances are generally expected to be satisfied within 9-12 months.
After PayPal acquired Swift Financial, the company began marketing itself to small businesses as LoanBuilder. A flyer obtained by AltFinanceDaily showed that it was being marketed with loan amounts of $5,000 to $500,000 that could be funded in as quick as 1 business day.
