Fora Financial & Expansion Capital Group Partner with Ocrolus to Automate Underwriting Legwork
October 8, 2018
New York, NY — Ocrolus, the emerging leader in analyzing loan documents, today announced integrations with Fora Financial and Expansion Capital Group, two of the fastest-growing online small business lenders. Enabling quicker and more precise loan decisions, Ocrolus has seen rapid adoption since its debut in the small business lending world with flagship customer Strategic Funding Source in May 2017. Following its Series A round highlighted by QED Investors, Ocrolus is quickly growing its customer base and team with laser-focus on the lending space.
Ocrolus employs crowdsourcing and artificial intelligence to drive efficiencies in the origination process, from document collection to calculating credit model inputs. The Company’s simple API ingests and analyzes bank statements and other loan files, returning actionable data and risk analytics, with 99+% accuracy.
Fora Financial, one of the most prominent New York City-based online lenders, has partnered with Ocrolus to automate bank statement reviews, resulting in a faster, more accurate end-to-end underwriting workflow. The benefits of automation have become increasingly important as Fora Financial accelerated growth after its June 2018 acquisition of US Business Funding. Leveraging Ocrolus to parallelize underwriting tasks, Fora Financial is poised to eclipse $400 million in annual originations over the next year.
“We are excited to automate an additional step in our underwriting process that has historically been very laborious, requiring additional staffing as we grew originations,” said Dan Smith, Co-founder and President of Fora Financial. “As a tech-enabled SMB lender, we rely on our technology to achieve scale while delivering a frictionless process for small businesses to access capital.”
Expansion Capital Group (ECG), recently honored on the 2018 Inc. 5000 as one of the fastest-growing private companies in America, has also partnered with Ocrolus to enhance its underwriting process. ECG sought a loan automation partner to facilitate ambitious growth objectives while improving risk management capabilities. With Ocrolus now handling its document analysis work, ECG, who has grown 627% over the past three years, looks forward to scaling its operation to new heights, thanks to its leaner, technology-enabled infrastructure.
Herk Christie, Head of Operations at ECG says, “Using Ocrolus solutions, we have been able to create a lean, smart and tech-enabled underwriting infrastructure that focuses on quality without sacrificing speed. The level of data Ocrolus provides will continue to feed the growth of our statistical models, further benefiting our clients and partners alike.”
Growing beyond online small business lending, into online personal lending and traditional banking, Ocrolus has added a couple of prominent lending executives to its team. Matt Burton, former CEO of Orchard Platform has joined Ocrolus as a Board Advisor. Kevin Bailey, former Senior Advisor at the US Department of Treasury, has joined Ocrolus as Head of Growth.
As CEO of Orchard Platform (acquired by Kabbage), Matt Burton became a cornerstone of the online lending community. Orchard’s Online Lending Meetup events regularly brought together industry thought leaders from all over the world, helping to shape the next generation of financial services. As an Advisor to Ocrolus, Mr. Burton is continuing his mission to grow online lending into an efficient, transparent, and global financial market.
A former White House and Treasury official, Kevin Bailey brings more than fifteen years of experience as a financial services and public policy professional. Prior to joining Ocrolus, Kevin was the Director of Business Development & Capital Markets at CommonBond, a leading marketplace student lender. Mr. Bailey is a graduate of Rice University and the University of Chicago Booth School of Business. At Ocrolus, Mr. Bailey is leading growth efforts as the Company expands beyond its core online small business lending market, into online personal lending and traditional banking.
Visit www.ocrolus.com for more information.
About Ocrolus
Ocrolus is a RegTech company that automates data verification and analysis for bank statements and other loan documents. The Company analyzes e-statements, scans, and cell phone images of documents from any financial institution with over 99% accuracy, and rigorous process documentation. By replacing tedious, imperfect human audits with sharp, AI-driven analyses, Ocrolus modernizes financial review processes in lending with unprecedented speed and accuracy.
Media Inquiries:
media@ocrolus.com
Fintech Was Back on Capitol Hill
February 1, 2018A House financial services subcommittee hearing this past Tuesday put fintech and online lending back in the spotlight. The most notable witness that testified was Nat Hoopes, Executive Director of the Marketplace Lending Association (MLA). The MLA represents companies like Lending Club, Prosper, Funding Circle, Avant, Marlette Funding, Affirm, CommonBond, Upstart, PeerStreet, and StreetShares.
Hoopes testified that “this industry is effectively serving the broad American ‘middle class’ that remains our engine for economic growth and prosperity.” He also cited data from dv01. “More than one million unsecured marketplace personal loans were issued last year – with an average loan balance of approximately $14,000 and a term of greater than 4 years – far from being a small dollar, short term loan,” he said. “[Marketplace Lending Platforms] offering consumer loans do so at an average of 14.7% APR and 100% of the loans are below the 36% APR threshold.”
Prof. Adam J. Levitin, a Georgetown University Law Professor, played the role of fintech skeptic and called for state and federal regulation to address what he believed were lingering issues.
“What is new about fintechs is that they are nonbank financial companies with ready ability to acquire consumers because of the Internet,” Levitin testified. “This means that despite the regular use of buzzwords like ‘transformative’ and ‘disruptive’ in discussions about fintechs, there really isn’t anything particularly transformative or disruptive about them.
You can watch a recording of the full hearing below:
Click the links to view the testimonies of the following witnesses
- Mr. Nathaniel Hoopes, Executive Director, Marketplace Lending Association (TTF)
- Mr. Brian Knight, Director, Program on Financial Regulation and Senior Research Fellow, Mercatus Center, George Mason University (TTF)
- Mr. Brian Peters, Executive Director, Financial Innovation Now (TTF)
- Mr. Andrew Smith, Partner, Covington and Burling, LLP (TTF)
- Prof. Adam J. Levitin, Professor of Law, Georgetown University Law Center (TTF)
Catching Up With Marketplace Lending – A Timeline
June 13, 20174/11 Regions Bank recruited Kabbage’s chief technology officer, Amala Duggirala, to become its chief information officer
4/12 Federal Reserve Published their 2016 Small Business Credit Survey
4/13
- Marathon Partners, a minority shareholder of OnDeck, publicly called on the company to make changes
- Fifth Third Bank partnered with Accion to support lending to underserved small businesses
4/17 Affirm surpassed the mark of making more than 1 million loans since inception
4/20 YieldStreet surpassed $100M in loans funded since inception
4/21 Glenn Goldman stepped down as Credibly’s CEO
4/25
- SmartBiz Loans announced partnership with Sacramento-based Five Star Bank
- CommonBond begins offering loans to undergrads directly
4/26 State regulators sued OCC over fintech charter proposal
4/28
- IOU Financial announced that they loaned $107.6M to small businesses in Q1
- China Rapid Finance announced their IPO
5/2
- Funding Circle closed their online forum
- Elevate’s Debt facility with Victory Park Capital increased from $150M to $250M
5/3
- Prosper Marketplace disclosed that it miscalculated returns shown to retail investors
- Square announced that they loaned $251M to small businesses in Q1
- Nav raised $13M from investors that include Goldman Sachs and Steve Cohen’s Point72 Ventures
5/4
- Vermont governor signed into law new licensing requirements for anyone soliciting loans to Vermont borrowers.
- Lending Club announced that they loaned $1.96B in Q1
5/5 Thomas Curry steps down as OCC head, replaced by Acting Head Keith Noreika
5/8
- OnDeck announced it was substantially reducing its workforce as part of its plan to achieve profitability. The stock price proceeded to hit record lows.
- Dv01 announced reporting partnership with SoFi
- With no IPO on the horizon, SoFi revealed that they began letting their employees sell some of their stock
5/9
- In the United States District Court, The Southern District of New York ruled that a purchase of future receivables was not a loan largely because it was not absolutely payable. Colonial Funding Network, Inc. as servicing provider for TVT Capital, LLC v. Epazz, Inc. CynergyCorporation, and Shaun Passley a/k/a Shaun A. Passley
- The value of 1 Bitcoin surpassed $1,700.
5/10
- CFPB announces that it will begin work on small business loan data collection pursuant to Section 1071 of Dodd-Frank.
- CFPB publishes a white paper on small business lending
- SoFi revealed that they will apply for an industrial bank charter
5/12 NY’s banking regulator sued the OCC over its proposed fintech charters
5/15
Prosper announced that they lent $585M in Q1 and had a net loss of $23.9M
5/16
- Media outlets reported that SoFi is expanding into wealth management
- Lending Club named PayPal’s former head of Global Credit Steve Allocca as President
- OnDeck’s share price hit a new all-time low
See previous timelines:
2/17/17 – 4/5/17
12/16/16 – 2/16/17
9/27/16 – 12/16/16
Marketplace Lending Association Announces 11 New Members
January 12, 2017
WASHINGTON, Jan. 12, 2017 /PRNewswire/ — The Marketplace Lending Association (MLA) today announced the addition of eleven new companies to the Association. The new members join as the MLA works to expand its presence in Washington. The MLA was formed in 2016 by founding members Funding Circle, Lending Club, and Prosper Marketplace with the goal of promoting a transparent, efficient and customer-friendly financial system.
New Members include: Affirm, Upstart, CommonBond, Avant, PeerStreet, Marlette Funding, Sharestates, Able, and StreetShares. New Associate Members of the MLA include dv01 and LendIt.
This expansion represents a new chapter for the MLA, as it extends the group beyond consumer and small business lending to include platforms focused on student loan refinancing and real estate, as well as greater diversity of funding models, including lending platforms that hold loans on balance sheet.
“On behalf of the founding members, I welcome these new members to the Association and I look forward to working with them to advance our mutual public goals both in Washington and in state capitols around the country,” said Nathaniel Hoopes, executive director of the MLA. “As MLA member companies continue to innovate and create new opportunities for borrowers and investors, the MLA will play an important role in sharing data and insights that help educate policy makers on the benefits that these companies bring to consumers, businesses, and our financial system.”
To provide policymakers with a general overview of its 2017 agenda, the Association also today sent letters to the incoming Trump Administration and to the leaders of the 115th Congress.
ABOUT MLA
MLA, a professional trade association, was formed in 2016. The goals of the Association are to promote a transparent, efficient, and customer-friendly financial system by supporting the responsible growth of marketplace lending, fostering innovation in financial technology, and encouraging sound public policy at the state and federal level. To be eligible to join the association MLA companies must abide by the highest standards of business conduct in providing credit and services to consumers and businesses.
For more information about MLA, its members and its membership standards, visit the MLA website at www.marketplacelendingassociation.org.
Media Contacts:
Nathaniel Hoopes – Executive Director
Phone: (202) 660 1825
nat.hoopes@marketplacelendingassociation.org
A Q4 To Remember – A Timeline
December 18, 2016In case you haven’t noticed, it’s been an interesting few months for alternative finance. The below timeline is an expanded version of what appears in the print version of our Nov/Dec magazine issue.
9/27 Able Lending secured $100 million in debt financing
9/30 The FTC won a judgement of $1.3 billion against payday loan kingpin Scott Tucker, its largest ever award through litigation
10/11 The United States Court of Appeals for The District of Columbia ruled the CFPB’s organizational structure unconstitutional. To remedy, the agency will either have to convert its one-person directorship to a multi-member commission or the director will have to report to the President of the United States. The CFPB is appealing the decision.
10/13 Affirm secured $100 million in debt financing
10/14
- CircleBack Lending was reported to have ceased lending operations
- Goldman Sachs unveiled its new online consumer lending division, Marcus
10/20 CommonBond secured a $168 million securitization deal
10/24 Bizfi announced that John Donovan had joined the company as CEO. Donovan was the COO of Lending Club from 2007 to 2012.
10/25
- Expansion Capital Group announced new management team. Vincent Ney, the company’s majority shareholder became the CEO
- Lendio raised $20 million through a new equity round led by Comcast Ventures and Stereo Capital
- Lending Club announced its foray into the $1 trillion auto refinancing market
11/1
- Cross River Bank raised $28 million in equity led by Boston-based investment firm Battery Ventures along with Silicon Valley venture capital firms Andreessen Horowitz and Ribbit Capital
- Square beat earnings estimates and extended $208 million through 35,000 loans in Q3
11/3
- OnDeck announced earnings, continued use of balance sheet to fund loans and extended $613 million in Q3
- Independent merchant cash advance training course goes live, allowing brokers and underwriters to earn a certificate
11/4 SEC concluded its investigation into Lending Club
11/7 Lending Club announced earnings and a deal to sell $1.3 billion worth of loans to a National Bank of Canada subsidiary
11/8 CFG Merchant Solutions secured a $4 million revolving line of credit
11/9 Donald Trump became the President-Elect
11/11
- Fintech leader Peter Thiel joins the executive committee of Trump’s transition team
- Kabbage appointed Amala Duggirala as Chief Technology Officer and Rama Rao as Chief Data Officer
11/14 Prosper’s CEO Aaron Vermut, stepped down
11/16
- UK-based p2p lender Zopa applied for a banking license
- Small business lender Dealstruck reportedly ceases lending operations
- Former Lending Club CEO revealed to be launching a new rival, Credify
11/17
- LiftForward secured a $100 million credit facility
- Prosper filed their Q3 10-Q, revealing that they only originated $311.8 million in loans for the quarter compared to $445 million in Q2
- The IRS sent a broad request to Coinbase, the nation’s largest bitcoin exchange, as part of a hunt for tax evaders
- PeerStreet raised a $15 million Series A funding round led by Andreessen Horowitz
11/18 P2Bi raised $7.7 million in venture financing
11/22 LendIt announced the first ever industry awards event
11/29 Three C-level executives at CAN Capital are placed on a leave of absence after the company identified assets that were not performing as expected
12/2
- Total Merchant Resources secures $20 million in private equity, launches wholesale funding division
- Bitcoin-based P2P lending platform BitLendingClub shuts down
- OCC announces they are moving forward with a special purpose national charter for fintech companies
12/8 Former CEO and co-founder of World Wrestling Entertainment tapped to run Small Business Administration
12/9 OnDeck announced new $200 million revolving credit facility with Credit Suisse
12/12 Knight Capital Funding announced new Chief Data Scientist
12/13 Fifth Third Bank is reported to buy a stake in franchise marketplace lender ApplePie Capital
12/14 BlueVine raised $49 million in Series D funding
12/15
- Swift Capital named Tim Naughton as Chief Legal Officer
- John MacIlwaine, Lending Club’s Chief Technology officer, submitted his resignation to the company to pursue another opportunity
12/16 CAN Capital is reported to have laid off more than 100 employees
Do Marketplace Lenders Need to Take Balance Sheet Risk?
September 20, 2016At the recent altfi conference in NYC, Rhydian Lewis from RateSetter and Rob Young from OnDeck debated the need for marketplace lenders to take balance sheet risk. (see the video below)
According to Georgia Quinn of Crowdfund Insider, “noteworthy absentees [at this conference] from former years were SoFi, Dealstruck, OurCrowd, Symbid, LendKey, Biz2Credit, OneVest, Realty Mogul, Assetz Capital, CommonBond, Seedrs, Crowdcube, P2BInvestor, and Zopa.” She speculated that it might have something to do with the Lending Club scandal from earlier this year.
Altfi is a UK-based company, competing against many other industry conferences in the US. Competition among conferences probably had more to do with a low turnout than anything else. For a list of upcoming conferences that should have a good turnout, see the upcoming schedule HERE.
Caution! Politics Ahead: Amazon Breaks Student Loan Ties With Wells Fargo
September 7, 2016Was it easy come and easy go for the Amazon-Wells Fargo partnership?
Not long after the two companies signed a multiyear contract to market private student loans to Amazon Prime Student subscribers, the ecommerce giant retreated after finding itself in a political soup.
Caught in the crossfire between the two bastions of private and federal student loans, the partnership ended rather abruptly after The Institute for College Access & Success, or Ticas, a nonprofit focused on higher education and student-loan issues called the partnership an attempt to dupe students.
“This is the kind of misleading private loan marketing that was rampant before the financial crisis. It is a cynical attempt to dupe current students who are eligible for federal students loans with a record low 3.76% fixed interest rate into taking out costly private loans with interest rates currently as high as 13.74%,” said TICAS in a statement issued last week, “Amazon and Wells Fargo are trumpeting a 0.5% discount while burying the sky-high rates on these private loans and without noting that they lack the consumer protections and flexible repayment options that come with federal student loans.”
This was exacerbated by the CFPB’s allegations that the bank engaged in illegal student loan practices — by misleading borrowers on partial payments, charging certain consumers late fees for payments made on the last day of the grace period and failing to correct inaccurate information on credit reports of borrowers. Wells Fargo, the second-largest private student lender neither denied nor admitted to the charges but however, settled the matter for $4.1 million.
The partnership was an one up for private student lending especially against growing private entrants like SoFi and CommonBond. With it being undone, what’s next?
Hold The Loans Or “Marketplace”? It Depends
August 1, 2016
At the risk of stating the obvious, the motivation to keep loans on balance sheet or sell them off through a marketplace is related to the type of lending one does. But even then, opinions on the best strategy varies. Is there a winning formula?
Not all online lenders are marketplaces. Some consumer lenders like Affirm, for example, hold all the loans they issue on their balance sheet. Avant, another consumer lender, has either held all or some of the loans on its balance sheet, making it a kind of hybrid.
But for companies like Lending Club, long considered to be the definition of marketplace, their May debacle showed the weakness that model can have, at least with those lending to consumers.
Interest rates, terms and risk profiles associated with businesses are different from those for retail consumers. According to Fora Financial co-founder Dan Smith, this changes the economics of the game since consumer loans are typically longer (3-5 years) compared to business loans where the weighted average term could be as short as under 12 months. This, not only makes consumer lending a lot more capital-intensive it also begs for diversification of sources.
“When I started the business, I had one lender in 2007 and they said they couldn’t work with us. Today, my credit facility has eight different lenders,” said Stephen Sheinbaum, founder of Bizfi which buys future receivables with its balance sheet in addition to running a loan marketplace. “We are undoubtedly seeing a shift from the B2C side. Any model that has sources of funds concentrated in one area is risky.”
Relying on your own balance sheet can lead to handsome returns, sources say. Sheinbaum, said that his company can make twice as much by holding than gains on sale. For companies engaged in consumer lending, that margin can be anywhere between 5 percent to 20 percent depending on borrower profiles and the type of loans, said student lender CommonBond CEO David Klein.
The unit economics of assuming risk can be higher if risk is assessed well. “If you do it well, balance sheet lending provides better unit economics,” said Fora Financial’s Smith. “You have to have the right capital structure, a low cost of capital and need to be able to underwrite effectively so it can scale.”
Smith however warned that this is not prescriptive and consumer lending companies like Lending Club might be forced to take a multi-pronged approach given the barriers to entry and the regulation around balance sheet lending for consumer loans. “There is clearly a more significant regulatory environment to get into on balance sheet consumer lending and that might be a barrier to entry.”
Often referred to as ‘having skin in the game,’ balance sheet lending potentially forces companies to assess risk better and be scrupulous about underwriting. But marketplaces whose prerogative may be seen as trying to make as many loans as possible, will inevitably be scrutinized over perceived conflicts of interest in their underwriting.
There are arguments to be made for each of the models but a better case is made for hybrid models which aims to take the best of both. Klein of CommonBond, said that his company leans heavily on balance sheet at times and the marketplace at other times. “Unless your investors are broad in profile and deep by type, then it is possible for a loan sale purchaser to walk away.” Klein said. “It all comes down to control. If you have more of it, there’s less risk.”
While more consumer lenders gravitate towards hybrid models, Lending Club at the end of Q2 held only 2 percent of the loan volume on balance sheet and CEO Scott Sanborn is very clear about the company operating purely as a marketplace.
“Some of our investors have observed the funding environment and asked: Are you going to become a balance sheet lender, just like a regular bank? Has Lending Club’s business model changed?”
“Let me be very clear: Lending Club is committed to the marketplace model and we do not plan to become a balance sheet or ‘hybrid’ lender. Our mission of connecting borrowers and investors has not changed,” wrote Scott Sanborn in a letter to investors.
The letter reiterated that the limited use of balance sheet does not affect Lending Club’s Notes. And while the company soldiers on, Lending Club’s story has taught many lessons to other lenders.
“In the wake of Lending Club’s news, you realize that if you have a hiccup on the way, it’s good to control some of your capital and assets because if you are truly marketplace, a hiccup in investor confidence can meaningfully change their trajectory,” said Klein who believes that for a pure marketplace player to survive, it needs to have more retail investors than institutional investors.
And there seem to be more people who agree than disagree. “The B2C model of selling 100% to a secondary market will cease and fault,” said Sheinbaum. “If buyers go away, your entire model is jeopardized. In a perfect world you want options. You see whichever way the wind is going and you try to go with it.”
The challenge then is in telling which way the wind will blow and be prepared for a storm.
