GOING NATIONAL: How David Gilbert Built One of the Largest Small Business Lenders in the Country
October 17, 2018
When Ty Austin, who owns a florist shop in West Palm Beach, secured a $5,000 loan from National Funding last year, he was happy to have working capital and could build inventory for mini-gardens and landscaping,
The experience, moreover, was surprisingly pleasant. “The guy I worked with was really cool,” Austin says, referring to the sales representative at the San Diego-based financial technology firm. “It turned out that he was getting married and I ended up giving him and his fiancé advice on floral arrangements.”
The borrowing worked out so well that the Floridian, who is 46 and the sole proprietor of Austintatious Designs, re-upped for a second loan of $12,000 to help purchase a commercial van. The van will be used to transport flowers, plants and tools while doubling as a billboard-on-wheels. “It gives me more ‘street cred,’” he jokes.
To register his approval with National Funding, Austin went online to TrustPilot and posted a rave review of the sales rep: “James Johnson Rocks!”
Pam, a Texas wellness coach who provides clients with an array of holistic health therapies, needed extra money to buy an infrared sauna to add to her portfolio of services. But her credit rating was “poor,” she told AltFinanceDaily in an e-mail interview, “from when I changed careers and lost my health and struggled to make my credit card and student loan payments on time.”
Like Austin, Pam — who asks to be identified by her first name —found National Funding through an online search. And she too secured $5,000, although her transaction was structured as a merchant cash advance, rather than a loan. The terms of the MCA require a daily debit from her bank account. She reckons that the total cost of the MCA to be roughly $1,500.
Pam pronounces herself satisfied with the deal and mightily impressed with the way National Funding treated her. The process took about three days — and would have gone even quicker if she’d located her professional licenses sooner. Best of all, she says, the agent at the company tailored the financing to suit her circumstances. “They were great as far as getting my questions answered, even listening to my past situation, which others may not have cared about,” she says.
“They really wanted to get me an option that they knew I’d be able to repay,” Pam adds. “They said they were in the business of helping small businesses grow rather than putting them in a hard financial situation.”
The positive experiences that Austin and Pam had with National Funding are not isolated instances. Rather, they are representative of clients’ dealings with the company. Witness its online reviews from business borrowers at TrustPilot which go back three years, run for 36 pages, and merit National Funding a 9.4 rating on a scale of 10. That’s a straight-A grade on any report card. Although there’s the occasional naysayer — four percent assert that their experience was “poor” or “bad” (and some negative comments can be blistering) — the weight of the reviews is almost embarrassingly positive.
Typical postings find that National Funding and its agents win kudos for, among other things, being “prompt and professional,” providing service that is “hassle free and about as friendly as you can be,” and even being “accommodating and gracious.” A man named Al McCullough spoke for many when he declared: “My experience was great. Professional and on time. Couldn’t ask for more.”
All of which helps account for why National Funding — its 230 employees working out of a sleek suburban office building guarded by a tall stand of palm trees in San Diego — is a rising star in the world of alternative business lending and financial technology. In 2017, the company raked in $94.5 million in revenues, a 24.8 percent bounce over the $75.7 million recorded a year earlier and nearly fourfold the $26.7 million posted in 2013.
In recognition of the company’s three-year growth rate of 142%, Inc. magazine included National Funding in its current list of the country’s 5,000 fastest-growing companies, the lender’s sixth straight appearance on the coveted roster. Since its inception in 1999, National Funding reports that it has originated more than $2 billion in loans to some 35,000 borrowers.
The company’s impressive performance has similarly merited accolades for David Gilbert, the 43-year-old chief executive who started the company on little more than a shoestring and whom employees regularly describe as “visionary.” Among Gilbert’s trophies: Accounting firm Ernst & Young recently presented him with its “Entrepreneur of the Year 2017 Award” for San Diego finance.
At first glance, the San Diego financier doesn’t look too much different from its cohorts. The company proffers unsecured loans of $5,000 to $500,000 to a mélange of small businesses in all 50 states and across multiple industries, including retail stores, auto repair shops, truckers, construction companies, heating-and plumbing contractors, spas and beauty salons, cafes and restaurants, waste management, medical and dental clinics, and insurance agencies.
To qualify for financing, a prospective borrower should have been in business for a year, have at least $100,000 in revenues, and boast a personal credit score of at least 500. While there’s no collateral required for loans, National Funding insists on a personal guarantee. The website reviewer NerdWallet cautions borrowers that this “puts your personal assets and credit at risk if you fail to repay the loan.”
Along with unsecured loans, National Funding offers equipment leasing – usually for heavy trucks and construction equipment – as well as merchant cash advances. The equipment lease is secured by the machinery. As in the case of Pam, the wellness coach cited above, MCAs are debited daily, the money automatically withdrawn from bank accounts.
There are a number of businesses that National Funding disdains, no matter how stellar their credit. “We won’t finance casinos, strip bars, tobacco, or firearms,” Gilbert says. “We’re not going to support industries like that.”
For CEO Gilbert, doing business ethically is a signature feature of the company. Among other things, National Funding presses its salespeople to steer clear of putting people into dodgy loans that are likely to default. “We’re lending capital,” Gilbert says, “and one of our core values is the way we support our customers. Are we placing people with the right product to meet their needs or are we being selfish? The best way to be customer oriented is to get a better understanding of what capital will do for them.”
That corporate ethos, coupled with the company’s remarkable performance, has raised its profile while earning it a measure of esteem among industry peers. “What I do know about National Funding,” says Douglas Rovello, senior managing partner at Fund Simple, a lender and broker in the Tampa area, “is that they have five or six different programs and set their rates high but competitively. They’re known for fitting their products to a client’s needs,” he adds. “And in a business that has its share of bad actors, they have a reputation as a company with a conscience.”
A company with a conscience. Customers come first. And yet National Funding turns heads with its sales production of roughly 1,000 financings a month and triple-digit growth rate. So how do they it? A good place to start is with Gilbert, whose leadership skills, business acumen, and second-to-none work ethic “set the tone,” says Kevin Bryla, the company’s 52-year-old chief marketing officer.
For his part, Gilbert credits his family background and an upbringing in which education and academic achievement were strongly encouraged. The fifth of six children, he’s the only one who opted for a business career. “There are three doctors, two lawyers – and me,” Gilbert says.
The son of a prominent physician, his mother a homemaker and volunteer docent at the nearby Nixon Library for the past 25 years, Gilbert grew up in Yorba Linda. He attributes his keen interest in business to observing how his father, a pathologist, operated his own laboratory, which employed 60 people. “It was the business side of medicine that fascinated me,” he asserts.
Even so, his two closest friends at the University of Southern California — fraternity brothers Marc Newburger and Sean Swerdlow– tell a somewhat different story. They remember Gilbert as someone who found his true calling, his métier, during his college years. Enrolled initially in pre-med courses, he was a diligent student but, his friends assert, manifestly unsuited for a career in medicine.
“Formative,” says Swerdlow, the older of the two fraternity brothers and now a management consultant based in Southern California, “would be a very good word” to characterize that period during which Gilbert abandoned medicine in favor of the world of commerce. In 1997, he earned a bachelor’s degree in business administration “with an emphasis in entrepreneurship.”
But it was fraternity life just as much as the classroom, his friends agree, that shaped him and foreshadowed his future. “It wasn’t ‘Animal House,’” Swerdlow says of Alpha Epsilon Pi. “We boasted the highest GPA (grade point average) on fraternity row.”
Nonetheless, Gilbert took to the social life and camaraderie that the fraternity offered with gusto, and his friendship with the colorful Newburger was especially fateful. A freewheeling entrepreneur today, Newburger takes a measure of credit — Gilbert’s disapproving parents might have preferred the word “blame” — for contributing to his fraternity brother’s metamorphosis. “Dave hated all of his pre-med classes,” Newburger insists. “He had zero stomach for it. He was so much like I was: a natural people person and a born entrepreneur.”
Newburger is the quintessential soldier of fortune. After college, he tried his hand as an actor, supporting himself by playing poker and getting paid to be a contestant on TV game shows including “The Dating Game,” “Card Sharks,” and “3’s A Crowd.” He’s now the co-president and co-inventor of Drop Stop, a patented device that “minds the gap” between a car’s front seat and the console and prevents coins, keys, glasses, and mobile phones from disappearing down that rabbit hole. (Drop Stop really took off after Newburger and his business partner appeared on the television show “Shark Tank” and scored a $300,000 capital injection from celebrity-investor Lori Greiner who took a 30% stake in the company and slapped her name on the brand.)
Back at the frat house, Newburger and Gilbert collaborated on business ventures. The pair once sold T-shirts sporting an off-color message about USC’s archrival, the University of California at Los Angeles. “The (anti-UCLA) message was pure hatred,” Newburger recalls. “But it was just for the day of the football game and it was all in fun.”
At first, sales at the stadium were lackluster. USC students kept trying to bid down the price or importune them to throw in an extra tee. As for the game itself, USC’s chances for victory looked equally unpromising. As time ran out, however, the Trojan quarterback completed a Hail Mary pass and USC won. The two fraternity brothers grabbed the bundle of shirts and sprang into action. “We got to the exit just in time and sold out in a matter of seconds,” Newburger recalls.
Newburger takes credit too for introducing his friend to Las Vegas’ gaming tables. Gilbert, his friend says, immediately demonstrated a knack for counting cards, handling money, and taking risks. “It was typically blackjack,” recalls Swerdlow, who sometimes accompanied them. “We didn’t have much money then. But there were moments when Dave would bet a big pile of chips. He’s willing to make a bet and live with the consequences.”
Sports are another of Gilbert’s enthusiasms. His friends say that, whether he’s returning serve at ping pong or standing over a putt — he plays to an 11 handicap at golf – he wants to win. Remarks Newburger: “He’s competitive to the point that — when he beats you — he wants the Goodyear blimp flying overhead to announce his victory.”
Gilbert, who is married with two children, is legendarily loyal to friends and family. While most members of a college fraternity might keep up with old companions after graduation by exchanging greeting cards and attending college reunions, Gilbert goes the extra mile.
He once footed the bill for Swerdlow to travel with the USC football team to an away game, arranging it so that his fraternity brother could view the action from field-level. After Newburger had a recent health scare (no worries, he’s O.K.), Gilbert rounded up a couple of dozen fraternity brothers and their wives (or companions), and put together a four-day bash in his buddy’s honor. The event was held at Cabo, the Mexican beach resort in Baja California, and Gilbert underwrote a fair amount of the cost. “He shares his success with his friends,” Newburger says, adding: “I don’t know anybody who works harder on friendships.”
Many of the personality traits described by friends and colleagues — tenacity and competitiveness, self confidence and leadership — played a key role in the development and success of National Funding, which Gilbert founded just two years out of college with $10,000 borrowed from his uncle, Howard Kaiman, of Omaha.
He’d worked a couple of quick jobs right after college, including a stint at small-business lender Balboa Capital, but he was always destined to be his own boss. Gilbert’s start-up was called Five Point Capital and, at first, it was located in the affluent Chatsworth section of Los Angeles and concentrated on equipment leasing.
“The first two years we were a cold-calling company and then we got into direct mail and saw some success and then we moved to San Diego and started to scale up the company,” Gilbert says. The decampment, he explains, was “for the quality of life, but we also felt we could hire from a better talent pool than L.A. We wanted to set ourselves apart.”
By 2007, Five Point was cranking up operations, revenues shot to $28 million and its headcount totaled 210 employees. “Then the Great Recession hit” in 2008-2009, Gilbert says. The company was forced to furlough 140 employees, two-thirds of its workforce. Yet even as it retrenched, the company managed to branch out. It began making merchant cash advances, Gilbert says, and, also in 2007, it linked up with CAN Capital to do broker financings. “We were pretty well known and they were looking for partners for factoring and leasing,” Gilbert explains.
It took time to recover after the financial crisis. But by 2013 – the year that Gilbert re-branded his company “National Funding” – the company was able to hire back as many as 15% of its laid-off employees (most had found other jobs, in many cases relocating to Silicon Valley, Gilbert reports). By then, the company had secured a $25 million credit facility from Wells Fargo Bank, which allowed it to move up the food chain to “become a balance-sheet lender,” Gilbert says, and offer a wider selection of financing options.
Key to driving the company’s phenomenal growth has been its flood-the-zone marketing and sales strategies. The company spends $16 million annually on marketing using a full panoply of channels and media, both online and offline. These include direct mail and targeted marketing, paid advertising, search-engine optimization or SEO, and sports sponsorships. “We try to build a whole range of marketing mechanisms,” explains marketing chief Bryla, “and when you get the mix right, they all help each other.”
Gilbert is a big believer in the benefits of sports marketing, the company’s website featuring the logos of the San Diego Padres (baseball), and Anaheim Ducks and Los Angeles Kings (hockey). Ever the faithful alumnus, Gilbert and his company back USC football as well. During the 2015 2016 college football season, the company paid for naming rights for what became, for one night, the “National Funding Holiday Bowl” at Qualcomm Stadium.
Janet Fink, department chair at the McCormack School of Sports Management located at the University of Massachusetts-Amherst, told AltFinanceDaily that sponsorship programs can easily cost a million dollars or more. “It’s not cheap,” she says. “When a company sponsors a team, they get a number of benefits. One is that they get to put the team’s logo on their website. The idea is that fans are passionate or have an affinity for the team and that it will rub off on a sponsor.
“Sports enthusiasts,” Fink adds, “often make good customers. When you have enough disposable income to go to these sporting events, you’re probably a good prospect for a loan.”
The sponsorships — which include civic involvement such as offering Holiday Bowl tickets to members of San Diego’s large military contingent as well as to company employees — also build good will in the community and team spirit among the workforce. (National Funding also makes an effort to hire veterans, says Bryla.)
Gilbert believes in the old adage that you have to spend money to make money. The company spends $14 million rewarding its network of outside brokers. Inside the company, high-performing salespeople are compensated with commissions, bonuses and an assortment of rewards, including resort trips.
But sales representatives’ must conform to company guidelines. Justin Thompson, National Funding’s sales chief, explains that the “customer comes first” philosophy is not just a slogan but a core value. “We’re not a factory spitting out widgets,” Thompson says. “We’re here to build relationships and sell a repeatable product. We want that customer to come back to us. Every loan is customized. Six of ten customers who pay off their loans come back for a second financing. Whether your business is dog grooming or you’re an asphalt company,” he adds, “people will do business with people they like and trust.”
Using the software program “customer relationship management” (CRM), National Funding expends a lot of effort gathering data on its business customers and extrapolating the information for use in credit evaluations. But the use of technology only goes so far.
Gilbert reckons that the art of the deal involves about “70 percent algorithm and 30 percent people.” He adds, “You still need the people component to look at credit profiles. The algorithm spits out a recommendation but we still need the human element.”
If there’s a fly in the National Funding ointment, it’s that the company’s fees can be more expensive than a bank loan.
But borrowers who have been denied loans at a bank or other lender are likely to overlook those costs. Austin, the florist in West Palm Beach, for example, came to National Funding when his bank, North Carolina-based BB&T Bank, gave him the cold shoulder despite the $15,000 in deposits that he averages each month. “I’ve been with them for six years,” he fretted, “and they treated me shabbily.”
Even more grateful was Jimmy Frisco, of Annapolis, who is co-owner with his wife of Lisa’s Luncheonette, a business that includes a food trailer and several cafeterias located in the city’s office buildings. They employ about a dozen people.
Frisco had taken a nasty spill and was laid up for seven months. Health insurance covered the $18,000 in medical costs but he and Lisa fell behind in their bills and needed working capital to pay for food purchases and other business expenses. By the time a flyer from National Funding popped up in his mailbox, he and his wife “had been turned down by several other lenders, including banks,” he says, adding: “Things happen in life and we don’t have the best of credit.”
Getting that loan for $25,000 from National Funding took just three days. Frisco’s health is much improved and business is back to normal. He won’t discuss the terms of the financing, other than to say “it was reasonable.”
He adds: “There were no problems with National Funding, no hassle with the paperwork. They’re great people to work with.”
Square Expands into Consumer Lending, Keeps Banking Hopes Alive
October 16, 2018
Square is no stranger to payments and is looking more and more like a bank every day. Square Capital already facilitates loans to small businesses, and now they’re expanding into consumer loans. Meanwhile, it’s been several months since Jack Dorsey’s fintech startup withdrew its application to become an Industrial Loan Company (ILC), but Square’s banking pursuits appear far from over.
“With regard to charters, Square Capital is uniquely positioned to build a bridge between the financial system and the underserved, and we continue to work closely with the FDIC and Utah DFI on our ILC applications,” a Square spokesperson told AltFinanceDaily.
In the interim, Square is making a push into consumer lending, giving small businesses the opportunity to capture big-ticket sales that might otherwise slip away. After testing the feature for about a year, Square Installments has now been rolled out across 22 states with plans for a nationwide expansion.
“Historically, offering financing options for customers has only been available to larger businesses. For many Square sellers, providing a payment option like this to customers has either not been possible, or has been too complicated or time/labor intensive to set up. We are focused on expanding access to financial services for both businesses and individuals, and Square Installments sits at the intersection of both,” the spokesperson said.
Square Installments will further diversify the company’s revenue stream and build on the momentum that they have been experiencing with business loans. The new product offers customers more flexibility for purchases between $250 and $10,000, giving them the option to pay over three, six or 12-month installments at an APR of up to 24%.
“We noticed there were a lot of very high-ticket purchases on Square and sellers were saying that they might lose a sale because a national chain might offer financing,” according to the spokesperson. Over the past year, Square facilitated tens of millions of transactions for purchases of more than $250.
And it isn’t just merchant demand. Small business customers similarly are hunting greater flexibility and more financing options for budgeting purposes, according to a survey of American consumers done by Square over the summer.
Square Installments works at both the point-of-sale for brick-and-mortar businesses as well as with Square Invoices for e-commerce companies. Other fintechs that offer similar consumer lending solutions include Affirm, GreenSky and Klarna, as Reuters pointed out.
For sellers, Square Installments can be integrated into their existing Square offerings. The seller is not engaged in the credit decision process and is paid for the sale up front.
By giving customers the ability to pay in installments, small businesses can increase their sales, bolstering growth in the process. Square gives the example of Fly1 Motorsports, whose sales increased between 20%-30% while order values increased by more than 50% as a result of Square Installments.
Square has a history with the sellers on its platform, which delivers greater transparency to the credit decision process. The loans, however, will be added to Square’s balance sheet, a risk that was reflected in declines in Square’s stock price on the heels of the announcement. Square (SQ) shares are down 22% so far in October. The declines also coincided with the departure of Square’s CFO, Sarah Friar.
“From a risk perspective, we look at two types of risk — fraud and credit. At Square, we start with an advantage since we know the sellers we are bringing on to the Square Installments program given they are already processing with Square. We have visibility into what they sell, their average ticket size, and any chargebacks,” the Square spokesperson explained.
On the consumer credit risk side, Square uses machine learning and other tools to provide what it describes as a “holistic view of our borrowers.”
Sean Murray to Moderate Best Practices Panel at New York Institute of Credit Event
October 15, 2018AltFinanceDaily President and Chief Editor Sean Murray will be moderating a best practices panel at the New York Institute of Credit Event on October 16th. The event is also supported by the IFA Northeast, the Alternative Finance Bar Association, and AltFinanceDaily.
The subject of the panel is to discuss best practices when dealing with different financial firms, namely ABL, factoring, and merchant cash advance. The panelists are:
- Bill Gallagher, President, CFG Merchant Solutions
- Bill Elliott, President, First Business Growth Funding
- Raffi Azadian, CEO, Change Capital
- Dean Landis, President, Entrepreneur Growth Capital
Yoel Wagschal Becomes Last Chance Funding’s CFO
October 10, 2018
Yoel Wagschal, an accountant who specializes in servicing MCA funding companies, told AltFinanceDaily today that he will now be the CFO for Last Chance Funding (LCF), which has been one of his clients for about five years. Wagschal said he will maintain his private accounting practice, spending half the week working for LCF and the other half running his own business, serving other clients, mostly in the MCA space.
“I always treated my clients like I was a part time CFO,” Wagschal said. “Yes, it’s a little different to be the officer of one particular company, and that’s why I feel it’s important to make this announcement so my clients or prospective clients know that I am an officer, officially, of Last Chance. You can either embrace it, or not.”
For those who might see this arrangement as a conflict of interest, he argued that this has essentially always been the case since he has two dozen MCA clients.
“If the accountant is honest and doesn’t exchange information from one client to another, his knowledge will only be better, and [the client] will gain from having an accountant with other clients in the same space.”
Wagschal said he believes that every company needs a CFO. And being a part-time, per diem CFO, largely in the MCA space, has been his niche for the past 15 to 20 years.
Already, Wagschal has eliminated some jobs in LCF’s accounting department by creating a more efficient system, he said. (No one was fired; a few employees were just moved elsewhere). Wagschal believes that many accounting departments are often too big and that great leadership actually frees up time for a company.
“If you have proper accounting procedures in your company, then the compliance and the reporting comes so easy, it’s a piece of cake,” Wagschal said.
LCF’s owner and CEO Andy Parker is very excited about Wagschal’s new role at the company.
“I have never come across a more talented accountant in the MCA space,” Parker said of Wagschal.
Parker said that since he co-founded the Long Island-based company in 2011, they have seen triple digit growth year after year.
“As we continue to grow, we really needed a serious level accountant and we’re glad Yoel accepted the position,” Parker said.
Wagschal’s introduction to the MCA industry was a dramatic one. As a forensic accountant, he had contacts with tax attorneys, one of whom introduced him to the owner of an MCA firm whose partner had made a really costly mistake. Instead of sending an agreed-upon $9,600 to a merchant, he accidentally added an extra zero to the end and $96,000 was sent to that merchant. In what Wagschal described as a “very intense” experience, Wagschal drove to the town where the merchant operated from and said he rescued the money within 48 hours of being contacted.
But beyond this initial Indiana Jones-esque introduction to the MCA industry, Wagschal said that he began to see a void.
“It was a very new industry. People were confused, and I saw an opening,” Wagschal said.
National Funding Promotes Justin Thompson
October 3, 2018
National Funding announced today that Justin Thompson, formerly Executive Vice President of Sales, has been promoted to Chief Revenue Officer of National Funding. The new position is an expanded role that will include Thompson’s previous management of a 100-person sales division that includes Direct Sales, Renewal Sales, Broker Sales, Equipment Financing and the responsibilities of developing the company’s new Strategic Partnership vertical.
“On the heels of our acquisition of QuickBridge, and the explosive profitable growth of National Funding, this is a great time to expand our offerings to clients with new products and solutions,” said Dave Gilbert, National Funding founder and CEO. “Justin has led sales through the biggest growth period in our 20-year history and I am thrilled for him to continue building on this strong record.”
Thompson started working as Director of Sales for National Funding in 2002, according to his LinkedIn profile, and he has remained with the company until now, with the exception of a two year stint at Reliant Services Group working as Director of Sales & Operations.
“I have never been more excited about the future of National Funding as I am now,” said Thompson. “With the acquisition of QuickBridge, expansion of our strategic partnership channel, and the ever-improving performance of National Funding, we have a lot to offer our customers and brokers – making us an important resource for small and medium-sized businesses nationwide.”
National Funding has also made two additions to support the growth of Strategic Partnerships. Jason Osiecki, previously Head of Sales for QuickBridge, has been named Vice President, Strategic Partnership for National Funding. He will be tasked with driving growth opportunities in the merchant processing, leasing, B2C, Lender Decline and other markets. And Kevin Kane has been appointed as Director of Business Alliances. He will manage day-to-day relationships with brokers across the country.
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.
IOU Financial Profitable, Again
August 23, 2018
IOU Financial originated $29.2 million during Q2 2018, according to the company’s quarterly financial statement released today. This is an increase of 11.6% compared to the same period last year, and an increase of 19.1% over originations of $24.5 million from last quarter. This is also IOU’s third consecutive quarter with positive earnings.
“It’s the contribution from our team, our account executives, broker partners [and] product expansion,” IOU CEO Phil Marleau told AltFinanceDaily as an explanation for the company’s growth.
Marleau said that over the past year IOU has been originating loans for larger amounts and for longer terms, like longer than 12 months. He also said IOU has been expanding into new industries.
Benjamin Yi, who leads IOU’s Capital Markets & Corporate Development efforts, characterized the company’s results as a “mini version of OnDeck,” alluding to OnDeck’s profitable 2018 Q2 earnings report.
Additionally, provision for loan losses (net of recoveries) decreased by 61.2% to $900,000 for the three month period ending June 30, 2018. Marleau said this is largely because the company has been using a more aggressive litigation strategy against businesses that default on their loan obligations.
And the principal balance of IOU’s servicing portfolio (loans being serviced on behalf of third-parties) amounted to approximately $44.1 million compared to $24.1 million in 2017. Marleau said that servicing loans is part of IOU’s business model and that this near doubling of its servicing portfolio in a single year is simply a reflection of the overall growth of the company.
Most of IOU’s revenue comes from making loans, of up to $300,000, to American small businesses. According to the company website, almost half of IOU’s merchants use the business loans to purchase equipment. Other loans are used for business expansion and temporary cash flow. To date, IOU has originated $563 million in loans.
Despite the focus on the American market, the company’s headquarters is in Montreal and its stock is listed on the Toronto Stock Exchange. While IOU’s footprint in the Canadian market is still very small, Marleau expects that to change and is looking forward to expanding in Canada.
“We’re part Canadian,” Yi said.
Marleau, who is Canadian, met cofounder and IOU President Robert Gloer at a fintech conference in San Francisco, and the company’s first loan was made in 2009. Gloer had ties to Atlanta, which is why IOU’s U.S. office is located there. While the company’s headquarters is in Montreal, the Atlanta office is larger and is where the company’s sales operations take place. The company has about 40 employees, but only about ten work at the Montreal headquarters.
