DoorDash Now Offers Merchant Cash Advances
January 19, 2022
DoorDash has made its way into the small business financing game. DoorDash Capital, as the financing arm is so named, claims to provide merchant cash advances to DoorDash partners against future sales orders placed through the DoorDash app.
The DoorDash website explains the product in detail.
“There is no interest rate because a merchant cash advance is not a loan,” the website says. “There is a fixed fee stated up front which will be collected together with the capital advance. Your fee will never change after you have accepted the offer.”
All of these deals are processed through Parafin, a Silicon Valley-based funder who was started by former Robinhood data scientists and engineers. They spoke to the Wall Street Journal in September about their launch and the onboarding of their first customer, Mindbody.
As a software provider with a financing arm of their business, Mindbody reportedly uses Parafin’s funds to provide financing through Mindbody Capital. When speaking to the Journal, Parafin’s Chief Executive Sahill Poddar said that Mindbody customers would pay fees between 6%-15%.
“We are categorically distinct from online lenders,” Poddar told the Journal.“We only get paid back when the [small business] makes sales.”
It’s still unclear the amount of DoorDash merchants getting financing from DoorDash Capital. From the looks of it, the program is still in its infancy.
When AltFinanceDaily reached out to DoorDash for a progress report on the program, the company declined to speak. “No comment at this time,” said a DoorDash representative when asked about the progress, usage, and ideas behind DoorDash Capital.
“Our goal is to provide our partners with fair, fast and convenient financing,” the DoorDash website says. “To help partners gain access to additional capital, we partnered with Parafin, a business financing provider, to offer cash advances that you pay back automatically with your DoorDash sales. You can use the capital for inventory, payroll, rent, marketing or for your cash flow needs.”
Wing Lake Capital Announces New Capstone Fund
November 12, 2021
After acquiring Franklin Capital in October of last year, Wing Lake Capital CEO Shaya Baum spoke to AltFinanceDaily about a new fund the company is unveiling, the Capstone Fund.
A mix of debt and equity has put $50 million into the Capstone Fund, all from investors of the Franklin Fund. According to Baum, the Franklin Fund still has about $100 million in it.
“Wing Lake Capital has two funds now,” said Baum. “There’s the Franklin Fund and the Capstone Fund. The Franklin Fund was launched as a bridge for companies that are stuck in the cash advance merry-go-round. Companies are stacking cash advances until they are using Peter to pay Paul, and then there are no more Peters.”
Comparing the Franklin Fund to the Capstone Fund, Baum described it as a “graduate fund” that will enable companies with too many advances to move beyond them and that it would serve as a stepping stone between the Franklin Fund and traditional SBA or bank financing.
Additionally, the Capstone Fund is also a place where companies who have extenuating reasons why they’re denied credit, but aren’t in distressed business situations, can get access to capital.
Baum’s business model is sometimes at odds with the advance providers his companies try to draw customers away from, with Baum going so far as to say that some of these providers “hate” him. Despite this, he says that some quietly work with him.
“These companies say one thing publicly and privately do another,” said Baum. “These companies that come to us for help are companies that can no longer pay their cash advance debt.”
As part of his company’s program, the advance provider can recover some of its money, he asserted.
“We’re getting 800 deals a week from cash advance companies saying ‘hey, can you help us get out of these?’”
Regardless of the tension with competitors, Baum believes the new fund will ultimately benefit the merchants.
“The Capstone Fund is really focused on growth capital as opposed to restructuring distressed assets. Okay, we’ve restructured your business, you don’t have to pay that cost of capital, you have to focus only on growth. You have opportunities to grow, room for success, now let’s scale the business.”
Shopify Capital Originated $393.6M in MCAs and Business Loans in Q3
October 28, 2021Shopify Capital, the funding arm of e-commerce giant Shopify, originated $393.6M in merchant cash advances and business loans in Q3, the company reported. That’s up from the $363M in the previous quarter.
Covid was a boon to Shopify Capital given its dependence on e-commerce businesses. Its 2020 funding volume was almost double that of 2019.
“Shopify Capital has grown to approximately $2.7 billion in cumulative capital funded since its launch in April 2016,” the company announced. The large volume and continued success has landed the Shopify Capital division in the company’s “core” bucket of “near-term initiatives” that will build the company for the long term, according to a presentation accompanying Q3 earnings.
MJ Capital Funding Had More Than 5,000 Investors
October 8, 2021Investigations carried out by the Receiver for Pompano-based MJ Capital Funding, have revealed that the number of investors in the alleged ponzi is more than double than originally believed.
In August, the SEC successfully persuaded a judge to place MJ Capital in Receivership after providing a convincing argument that the company was engaged in an active securities fraud and that the assets should be preserved. At the time, the SEC estimated that there were as many as 2,150 investors and that the amount raised ranged somewhere between $70M and $129M.
Now with better access to the internal workings of the business, the Receiver says that there are actually more than 5,000 investors and that they expect this number to increase, according to recent court filings.
Also revealed is that more than 400 individuals were tasked with recruiting investors.
“While MJ Capital claimed to use investor funds to provide small business loans called Merchant Cash Advances, the Receiver’s investigation to date has revealed virtually no evidence of legitimate business activity involving the funding and collection of Merchant Cash Advances which proceeds could have funded the payments to investors,” the Receiver said in official papers.
The case is ongoing.
More than 3,200 people have come out in support of MJ Capital Funding’s CEO, believing that she is also a victim in what has befallen the company.
MJ Capital Funding CEO Consents to Asset Freeze
September 9, 2021The primary defendant in the MJ Capital Funding case agreed to an extended asset freeze, court records show. Her consent is not an admission of guilt to the civil charges. The SEC has already sufficiently demonstrated its strength of prevailing in the case, which is why the judge ordered the companies be placed into receivership from the outset.
The consent order, entered on the 8th, covers 9 bank accounts held at both Wells Fargo and JPMorgan Chase, in addition to ten credit cards. MJ Capital’s CEO agreed to live off of income derived from two unrelated businesses known as MJ Remodeling and MJ Realty to the tune of $72,800 a year combined. That could change, however, if the SEC determines those businesses are also connected with the alleged scheme. $100,000 that was paid to her lawyer in advance will stand and can be used for her legal defense.
The only unusual bank record disclosed in the papers is a purported account at a small cryptocurrency hedge fund.
Nearly 2,900 people have signed an online petition voicing support for MJ Capital accused’s CEO.
The Receiver is providing regular court filing updates at: https://kttlaw.com/mjcapital/
Knight Capital Technology to Play Continuing SBA Loan Role at Ready Capital Corporation
September 7, 2021
Ever since Ready Capital’s name arrived on the big stage for its leading role in the nation’s PPP lending, the company has continued to be very active in small business lending. They completed round 2 of the PPP program with $2.2B in loans to more than 72,000 small businesses. For comparison’s sake, that’s twice what PayPal contributed, who provided $1B to 43,000 businesses.
Ready Capital is the #1 non-bank in the nation in 7(a) SBA loan originations this year so far, according to John Moser, President of the company’s SBA lending division, and is #7 in the entire SBA lending industry nationwide.
Some of the technology behind their success can be attributed to Knight Capital, the company Ready acquired back in 2019. Knight has enabled the company to roll out offerings of SBA loans under $350,000, which it is using to grow its already impressive marketshare.
Speaking about Knight, Ready Capital CEO Thomas Capasse said in the Q2 earnings call, the “[Knight] investment will be levered into more technology affinity-based expansion of the SBA business.”
Overall, the company is optimistic. “Ready Capital is off to a strong start in 2021,” Capasse said during the call. “We have accomplished much in the first quarter of the year with our small balance commercial or SBC, CRE lending operations and Small Business Administration or SBA 7(a) lending businesses, posting record originations, including high volume in round two of the Paycheck Protection Program or PPP.”
Knight’s merchant cash advance business is combined with its small business lending division for quarterly reporting purposes so its individual stats are not easily ascertainable. The company still touts “same day business funding” on its website.
Shopify Capital Originated $363M in MCAs and Business Loans in Q2
August 4, 2021
Shopify Capital originated $363M between merchant cash advance and business loans in Q2, bringing the first half total to $671.6M.
“Not only does Shopify Capital help fuel our merchants’ growth,” said Shopify President Harley Finkelstein in the quarterly earnings call, “our data tells us that merchants that accept Capital stay with Shopify longer as they succeed on the platform and take more of Shopify’s other solutions, namely Shopify shipping, apps, themes and domains and maybe most importantly, extending capital when their business needs it, reinforces the trusted relationship that we have with our merchants, one that goes beyond what they have with their bank or any other vendor. When we talk about Shopify’s flywheel, this is exactly what we mean.”
Shopify Capital is in the same league as rivals Square and Enova in terms of small business financing volume. Square Loans originated $1B for the first half, for example, while Enova has originated $722M.
Square Capital is Now Just a Bank Loan Product
July 20, 2021
Square Capital has been reduced to just one of several banking products under the Square Financial Services umbrella. That’s one result of Square successfully becoming a bank earlier this year.
Loans will be one product offered alongside checking accounts, savings accounts, and debit cards.
Just as before, Square’s loans will be repaid by diverting a percentage of a business’s card sales. The methodology is derived from its merchant cash advance roots, but what’s different is that a Square loan has a fixed repayment term.
“Pay it back automatically,” Square says of its loan product. “You won’t have to schedule any payments. We just ask that you meet your minimum every 60 days.”
Square has originated more than $9 billion in small business loans since inception and is one of the largest small business lenders in the country.
