Fundomate Announces $50 Million Line of Credit to Bring Embedded Automated Funding and Real-Time Banking to Payments and SMB Marketplaces
September 30, 2021
Los Angeles, September 30, 2021 — Fundomate, a leading embedded finance provider of automated business funding solutions and real-time banking tools for merchant-facing platforms, announced the closing of a $50 million line of credit with Revere Capital today. The new line of credit is Fundomate’s largest to date.
Fundomate will leverage the credit facility to scale up its partnerships with merchant-facing businesses and grow the company’s new white-label banking platform. The platform enables merchant-facing platforms and marketplaces to rapidly expand their product suite and enhance engagement by offering automated financing and embedded banking tools under their own brand.
“With the closing of the $50 million credit line, Fundomate can scale its proven automated funding platform via its one-touch funding tool already embedded within 100+ payment processing partners and marketplaces”, says Sam Schapiro, CEO and Founder of Fundomate. “We’re excited to also focus on our new embedded real-time banking platform, which uses AI and advanced forecasting to provide our partners the ability to offer their customers free short-term working capital that’s available for immediate use.”
Revere Capital Managing Director Christopher Gilker said, “We’re incredibly excited to grow with Fundomate. As I tell all my colleagues, Fundomate is a company at the right place at the right time. The team is ambitious, and I have no doubt the company will disrupt the fintech, payments, and banking space in a big way.”
Revere Capital Managing Director Suman Mallick commented further, saying, “I’m very excited about Fundomate’s potential to change how businesses manage their banking and credit needs. I believe the company will benefit from strong secular tailwinds and has vast opportunities for growth with merchant-facing businesses throughout the US.”
Waterford Capital structured and arranged the line of credit on behalf of Fundomate. Dave Piotrowski, Managing Director at Waterford Capital, said, “Fundomate has an advantage over others in the merchant finance space through the products offered through their payment processor partners. This financing relationship with Revere Capital will help take the company to the next level and further broaden their competitive advantage.”
About Fundomate
Fundomate is an innovative fintech company that operates in the alternative lending space and provides both direct-to-business and white-labeled turnkey solutions, enabling merchant-facing platforms to offer alternative funding products to their customers as a value-added proposition.
The company has deployed over $100M to more than 2000 merchants across various industries in
the United States.
About Revere Capital
Revere Capital is a private credit manager with expertise in lower middle-market real estate bridge lending & specialty finance. The firm’s disciplined underwriting utilizes fundamental real estate analysis and research, emphasizing intrinsic value to create a diversified portfolio for investors. Revere also specializes in financing other commercial interests, consumer interests and insurance-backed interests. With a national footprint, Revere Capital offers speed, certainty of execution, and creativity to structure loans to fit borrowers’ needs and provide contractual income for investors.
About Waterford Capital
Waterford Capital is a leading arranger of structured finance and asset securitization transactions. The firm advises specialty finance companies and asset managers in connection with warehouse credit facilities, private placements of asset-backed securities, whole loan sale programs, and mezzanine and equity capital raises.
MCA “Funder” Was a $100M Ponzi Scheme, SEC Alleges
August 18, 2021
It was all a ponzi scheme, the SEC alleged about MJ Capital Funding, LLC in a recently unsealed complaint. A purported MCA funding company in South Florida run by a woman named Johanna M. Garcia, is said to have raised between $70M and $129M from over 2,150 investors in roughly one years time.
According to the SEC, MJ Capital promised annual returns of 120% to 180% to syndicate in merchant cash advances and guaranteed the return of principal if the merchants defaulted.
Literally thousands of investors lined up to give their money, despite a similar scheme having just ripped through the community.
MJ Capital only funded between $588,561 and $2.9M worth of deals with the money, the SEC claims, while $27.4M was paid out to various entities including to sales agents for promoting the investment opportunity.
When someone tried to blow the whistle, MJ Capital responded by suing the whistleblower, “a cover-up effort” the SEC said was actually successful.
That is until an undercover FBI agent went to the company’s office in June and pretended to be an investor. The FBI successfully invested $10,000 into purported deals, and MJ Capital unknowingly made payments to the FBI as promised.
“Once the supply of new investors was exhausted, the MJ Companies would be unable to pay the promised returns to existing investors,” the SEC says.
Two companies are charged: MJ Capital Funding, LLC and MJ Taxes and More, Inc. in addition to Johanna M. Garcia personally. The SEC has already obtained emergency relief by securing a temporary restraining order and an asset freeze.
The Biggest Expansion Period of Our Lifetime? The Non-Bank Finance Industry Says Full Steam Ahead
July 8, 2021
Erez Stamler, Managing Director of Fresh Funding, said that the events of the past year has been an up and down ride, from the initial shutdown shock to rushes in demand. Now that the world is back, those that survived are here to stay and need capital to grow.
“At first the system was in shock, then a phase where we saw a strong spike in submissions [where] the owners were probably looking for some sort of PPP-type solution, and that was not available by us,” Stamler said. “Going into 2022 we believe there’s a lot of demand out there. A lot of businesses have demonstrated growth during Covid and hopefully will continue that into 2022. As far as we can see right now, we’re going strong this year for sure.”
Alex Vasilakos, who tracks online interest in alt finance as the director of marketing for Finance Marketing Group, said there had been an increase in online searches for non-bank financing solutions in the past year because banks weren’t sure how the pandemic would pan out.
“We are back in the office, and we are seeing a large uptick in digital advertising since Covid, and it is continuing to increase,” Vasilakos said in an email. “I am seeing and predicting that people will be leveraging more online sources for financing than they have in the past.”
Amotz Segal, a startup co-founder of Edge Funder, said that if the Covid spikes and black swan events are over, there is no limit to demand, and the hybrid model is here to stay. Edge Funder uses lead generation and AI underwriting to make SMB deal-making easier, Segal said.
“I think nobody’s really bullish enough, I think we’re facing the beginning of the biggest expansion period of our lifetime,” Segal said. “Our team based in New York City will hopefully gradually go back to the office this fall. That being said, I don’t think that we will ever see a one-hundred percent office-space environment. I think what the pandemic did is accelerated a trend that already began of people working from home, working remotely, and not having to attend the office daily.”
Segal has grounds to be bullish: Edge was just acquired by Yes Lender after only a year of development.
James Lee, CEO and co-founder of Julius Technologies, said that people had definitely gotten a feel for remote work, but virtual does not replace in-person communication. Julius is a startup that creates cost-effective back-end infrastructure for fintechs, building efficient data analytics for credit underwriting.
“We will see some shift. People got a taste of what it’s like to work from home; the hybrid model is a possibility in the short term,” Lee said. “In the long term we’ll see if Covid comes back in the fall with people working closely together. Hybrid works, but face-to-face time is irreplaceable and very difficult to replace in a virtual sense.”
Lee said that in-person interaction is vital for networking, mentorship, and even random, spur-of-the-moment conversations that bring a team together. Lee recently completed the Techstars incubator program fully virtually. Everything but launch day was virtual in a process that is usually hands-on.
Some firms are back in the office full time. Samuel Yakubov, director of ISO Relations at Maverick Funding, said he was already working in the office in June and had high hopes for 2022.
Tyler Deters, president and CEO of Paradigm Equipment Finance in Utah, said his business was back indoors and on track.
“We are optimistic for the future,” Deters said. “Our staff has all returned to the office, and we are full steam ahead.”
Joe Lustberg from Upwise Capital couldn’t agree more and said his team had been working in the office through the shutdown. Lustberg is confident that the post-pandemic world will be great for business, and Upwise has been doing well servicing PPP, equipment and trucking financing, and niche cannabis industry funding. Upwise also took advantage of the dip in real estate to snag an office in Manhattan and “never looked back.”
“We made sure that everybody was vaccinated, and before the vaccination was available we were still in the office. We were getting tested monthly and my guys had the option to work from home,” Lustberg said. “To be honest, most of them want to be around the company culture, the show floor. It’s much easier for them to walk in my office and ask me a question than FaceTime. It’s good New York is coming back.”
Six or seven months ago, it might have been a market full of PPP loans, but MCA is coming back strong, Lustberg said. With government funds exhausted, he said even firms that had never taken an advance before are looking for funding.
Steven Hunter would agree the industry is back. As a consultant that works best coaching underwriting teams in person, however, the work from the home model has been a drag. He said hybrid may work for relaxed work environments, but to get ahead, in-person is the way it has always been and always will be.
“I think the fact that we have proven we can, in most situations, work remotely has made [funding shops] think: ‘well you know airfare, hotel, meals and Ubers.. you know it adds up.’ So, I think I think a lot of people are going to be cost-sensitive to travel in a way they weren’t before,” Hunter said. “But if you want to make it in this industry as a startup funder, and you want ISOs to give you deals, you cannot do that by the phone and you cannot do that via Zoom call. You have got to show respect for the good shops.”
Hunter said in the actual MCA business, you don’t win deals by calling them 100 times. You get deals from the best of the best by selling face to face.
“You get deals from [top brokers] by putting your ass on a plane and flying into LaGuardia, taking a cab to their office and camping out there for three days, and talking to them looking them in the eye and saying this is what I’m going to do for you,” Hunter said. “Sales is always going to be boots on the ground. You got to put people out there.”
Real Estate Investing For Beginners and More
July 6, 2021deBanked met with Kurtavious Ball, a physician assistant and savvy real estate estate investor in Philadelphia. Ball started small, risking about $30,000 he had set aside for a startup venture. If it didn’t work out, Ball said he was still young enough and capitalized enough to weather the loss. After doing a lot of reading and listening to gurus, Ball said the best course of action was to just plow forward and give it a try. He’s happy he did.
AltFinanceDaily’s interview with Ball is part of a nationwide docuseries with business finance and real estate professionals.
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Snapchat Acquired Mobile Shopping App Founded By Former MCA Execs
July 2, 2021
A brother and sister team formerly known throughout the merchant cash advance industry have achieved major success in another market altogether, mobile shopping.
Recently, their app was acquired by Snapchat, according to various news outlets, and the tech has since been integrated into the Snapchat app.
Molly and Meir Hurwitz, both original stalwarts of the old Pearl Capital in New York, co-founded Screenshop in 2017, an app that integrated shopping with fashion and social media. Its initial launch received added buzz thanks to Kim Kardashian’s early involvement as an advisor. Notably, Screenshop CEO Mark Fishman was previously a Risk Manager at Pearl Capital, rounding out the former MCA crew.
“We’re No. 5 on the app store category of fashion,” Meir Hurwitz told AltFinanceDaily in November 2017. “We’re just getting started.”
The success continued.
“Screenshop gives shopping recommendations from hundreds of brands when you Scan a friend’s outfit,” Snapchat wrote in a published announcement this past May.
More than 170 million Snapchatters use scan features every month, the company revealed.
“Screenshop is now a part of ‘Scan’ said Snapchat CTO Bobby Murphy during the company’s annual Partner Summit broadcast on May 20. The above screenshot is of Murphy demonstrating the Screenshop technology.
CC Splits Still Make Profits, Payments Knowledgeable Funders Benefit
June 15, 2021
Back in its heyday, the MCA industry began as credit card factoring. The original product was simple- purchase future credit card receivables, and collect a percentage of them every day: easy peasy. Then, the industry broadened into ACH, funding businesses that did not have credit card purchases and credit card receivables became less common.
But some funders still work with credit card payments through long-standing payment processor relationships. Cash Buoy is a Chicago-based MCA firm that uses a network of twelve major credit card processors and thousands of representatives from payments ISOs to fund old-fashioned MCAs. Co-Founder and president Sean Feighan would tell you that having connections in payments pays off for both merchants and ISOs.
“The whole point is to add value to their business. By doing split funding remittance,” Feighan said. “It’s a much more comfortable way for the merchant to pay back the advance, it gives them some breathing room on the ebbs and flows of their volume, as opposed to having that hard fixed daily ACH that doesn’t care if they were closed on Monday, are slow on Tuesday, or we’re in a global pandemic.”
Feighan attests that the CC model still works great. He said alongside co-founder Brian Batt, they started Cash Buoy to give ISOs a better option. He boasts a renewal rate of 90% on his CC products, and his default rates for standard MCAs are a “night and day difference” with CC splits.
But operating heavily within the payments realm requires some expertise, something that long-time veterans of the MCA space are fortunate to have accumulated from the era of the product’s origin.
Steven Hunter, a multi-decade industry vet explained where the MCA concept came from. Hunter worked at CAN Capital back in 2000 when it was still was called AdvanceMe when he and the data team developed one of the first credit card factoring products.
“The idea came across to build a credit card-based product, because a lot of the original development team other than myself, were the First Data guys,” Hunter said. “And they said ‘okay well what if we could factor future sales, instead of three invoices or accounts receivable or inventory’, which we all know how to factor those things, that’s been in place since biblical times.”
So they built a model, aiming to fund merchants and take out a small amount of money from their credit card splits. Merchants would never see the money hit their bank, and the product just felt like free investing money paid for off of the increase in future sales.
When restaurants and other merchants shut down during the pandemic or rolled back to 25% capacity, many ACH funders found out their customers could not keep up with the pre-set debits. While defaults were on the rise, Cash Buoy was getting paid back, Feighan said, at an admittedly slower rate but still seeing returns.
Feighan has intentionally shied away from ACH. Cash Buoy is modeled on his and Batts’ connections in the payments space. They founded Cash Buoy after five or six years of experience in on-boarding merchant accounts. Feighan said he tried brokering but became disappointed with the process of working with an outside funder.
“[Other firms] may not have the relationships to get split funding at national processors,” Feighan said. “Maybe they didn’t have enough business or money in the bank when they went through the application process with different processors to get true split funding accommodations.”
Hunter agreed that without payment connections it is hard to factor CCs these days. Shortly after AdvanceMe began CC splits, other firms caught up and began developing similar products, with slightly changed terms like automatic set ACH draws. Eventually, he said this made MCAs more loan-like as opposed to a real variable product.
In 2021, there are many reasons that firms adopt ACH right off the bat, he said.
“Well, several reasons one, not every company takes credit cards,” Hunter said. “The thing is that some credit card processors, I’m not going to name any names, are very hostile to the product and they will not actually help people. They won’t help you manage the remittance, they won’t split for you, because they consider you to be a competitor, afraid you will take a portion away.”
The final reason Hunter said is a lot less elegant. He said in order to make this work, as a direct funder, you have to exchange files with every credit card processor you work with every night on every deal you have.
“So you got to send them something out and say, populate this for us. ‘Joe’s Bait Shop, What did they do today? Today they did this much money, your split is 11%, here’s what’s coming to you,'” Hunter said. “Then you import that back into your system and Joe’s Bait Shop’s balance drops by this amount. Right, that’s hard. I mean it’s a pain in the ass to manage, and I have people who do nothing but exchange, you’ve got to have processors who work with you and you’ve got to have the expertise.”
Hunter now works as a consultant, known in the industry as a go-to for MCA funding help. As for Cash Buoy, after the pandemic year, things are only on the up and up. Covid could not have happened at a worse time right after a three-year bull run, Feighan said, but now that things are back, there are “high water funding amounts each month.”
“The biggest thing here in Cash Buoy are our partners, our ISO partners, and processors,” Feighan said. “And if anybody were to say, ‘tell me, what’s the most important thing to you, Cash Buoy,’ it is 100% Our agent partner program. That is number one. The whole point of the company was to be able to provide a ton of value to national processors and ISOs.”
Forward Financing Gets $250M to Grow
June 4, 2021
Forward Financing announced a $250 million credit facility from one of their current capital providers.
“This is a big win for our business and a testament to our strong financial performance throughout this difficult past year,” said Eugene Wong, Vice President of Strategy and Finance. “The increased facility gives us the flexible capital we need to grow and expand so that we can support the small business economy as it recovers on the other side of the COVID pandemic.”
Forward said it reported growing 60% in the past six months and expected to double the employee headcount in the coming year. The numbers back this up: the firm originated a total of $165,826,203 across 6,142 advances in 2020, a representative said. Forward reached a total of $1B in funding as of March 2021 since the firm was founded in 2012.
Irish E-commerce Revenue-Based Funder Raises $76 Million Series A After First Year
May 27, 2021
An Irish revenue-based e-commerce financing platform called Wayflyer raised $76 million in a funding Series A round this past week. It has been a roaring first year for the small fintech, so far funding $150 million to online merchants. The firm just launched its cash advance product 14 months ago and raised $10.2M in a seed round only six months ago.
Wayflyer offers e-commerce sales-based funding, without the need for collateral, from $10k up to $20M. They partner with firms across the UK, including a recent deal with the international athleisure brand Gym+Coffee.
Left Lane Capital led the round with investments from DST Global, QED Investors, Speedinvest, and Zinal Growth. The successful funding comes after the firm widened its credit facility by $100M to keep up with the demand for capital and a partnership announcement with Adobe Commerce.
The cofounders, Aidan Corbett and Jack Pierse came together in 2019. Back then, Corbett led an online marketing analytics firm called Conjura when Pierse, a former venture capitalist, proposed using analytic tech to underwrite what amounts to digital MCAs.
“Jack came to me and said, ‘You should stop using our marketing analytics engine to do these big enterprise SaaS solutions, and instead use them to underwrite e-commerce businesses for short-term finance,'” Corbett told Tech Crunch. “We just had our heads down and started repurposing the platform for it to be an underwriting platform.”
Launching in April 2020, Wayflyer funded $600,000 in the first month. In March of 2021 alone, the firm did about $36 million in advances.
“So, it’s been a pretty aggressive kind of growth,” Corbett said.
