Big Lines of Credit for Canadian Merchants?
November 15, 2023
Business loan brokers in Canada typically do not fit the same mold as brokers in the United States. Most business loan brokers in Canada are actually mortgage brokers working with mortgage clients that happen to own a business. Such has been the case for Kingsmen Capital Investments, a Canadian small business lender that gets roughly half of its deal flow from mortgage brokers. It’s a nice relationship, but Kingsmen Capital believed that something was missing between a bank loan and merchant cash advances/small unsecured loans.
“We’ve started to come out of the MCA space,” said Kingsmen Managing Partner Roger Dusanj.
The company’s idea was lines of credit that start as low as $250,000 and go up to $2 million (or even higher). Although it can be a little more expensive than a bank, the true LOC can also be easier to obtain. Dusanj, for example, said that they’ll evaluate a business’s ebitda versus looking at their total net income. Covid, he added, has also made businesses across Canada more receptive to non-bank products and so it’s taking off.
“In 18 months, we paid out $100 million,” Dusanj said of the loans they’ve made already. The progress so far has made them confident that they’re on to something big. The company will also do term loans and equipment financing.
Although the Canadian mortage broker community works well, Kingsmen says that they would work with US-residing business loan brokers. The company was founded in 2015.
Back to Business Lending in Canada
November 2, 2023
“There’s a need for products and services like ours across all cycles,” said Cato Pastoll, CEO of Loop, on the small business lending panel held at the Lenders Summit this week in Toronto.
It’s unclear what cycle the industry is in exactly. The Lenders Summit, put on every year by the Canadian Lenders Association, was not only sold out but packed wall to wall with more than 500 attendees. The tone was relatively upbeat despite Canada’s key interest rate holding steady at 5% and economic headwinds blowing in the background.
OnDeck Canada COO Harley Greenspoon said that his company just had their best October in four years and that they’ve returned back to pre-pandemic growth. “Demand is actually not the issue at all,” Greenspoon said.
Not only is the demand for business loans there but OnDeck Canada has not had to pass on the rising costs of capital thanks to greater efficiencies unlocked by reducing headcount and increasing automation.
Lauren Thompson, VP of Specialty Finance for Peoples Group, whose organization partners with fintechs and lenders, said that from a bird’s-eye view banks would probably continue to restrict capital being loaned to small businesses for the foreseeable future. “I don’t think that small businesses are best served through the traditional banking system,” said Thompson.
Pastoll of Loop pointed out an irony with this, that banks tend to under serve the underserved when they actually need it most. “90% of the private sector workforce is employed by small businesses so if you want to stimulate the economy, we as fintechs can do it faster…” Pastoll said.
Thompson explained that the traditional financial system can be hamstrung by reviewing data that is already stale such as financial reports that reflect a moment in time six months ago while a fintech lender has more of a live pulse on what’s going on.
Greenspoon of OnDeck Canada, for example, could rattle off the top of his head industries that are experiencing challenges, the most notable being transportation.
Finally, Pastoll was asked if Loop had contemplated ever having to deal with a high interest rate environment back when he founded the company almost nine years ago. Pastoll explained that his whole inspiration for founding Loop in the first place was to help small business owners precisely during difficult times. Both of his parents were small business owners and he had watched firsthand how hard it was to find financing.
“Again, I just think about what my parents had to go through,” he said.
Maxim Commercial Capital Doubled Fundings in Q3 2023
October 19, 2023LOS ANGELES, CALIF. (Oct. 17, 2023) – Maxim Commercial Capital (“Maxim”) announced robust demand across its diverse financing programs for the third quarter of 2023. The hard asset secured lender reported a 100% year-over-year increase in truck financings for the period. Furthermore, it experienced a surge in demand for second-lien mortgages to refinance Merchant Cash Advance (MCA) loans and to support working capital. Maxim is a national provider of loans and leases from $10,000 to $3 million collateralized by class 6 and 8 trucks, trailers, heavy equipment, and real estate.
“The current climate of healthy residential real estate valuations, coupled with low-cost first mortgages and conservative banking practices, makes our Real Estate and Structured Finance programs highly appealing,” noted Michael Kianmahd, Maxim’s Executive Vice President. “Many homeowners don’t realize they have liquidity in their homes that can be tapped to grow their businesses, often at significantly less expense than MCA loans.”
Notable fundings during the period include a $400,000, 5-year second-lien mortgage at a 60% combined loan-to-value (LTV) for an experienced optometrist with four business locations in Los Angeles. The funds were used to pay off MCA loans, reducing monthly debt service by $15,000, and for working capital. Maxim also funded aa $125,000 second-lien mortgage to an experienced construction project manager in Las Vegas at 58% combined LTV to fuel business growth and pay off an expensive MCA loan.
Maxim’s credit matrix featuring lower down payments for truck owner-operators, ranging from better credit to subprime borrowers, continued to prove popular among loan brokers and truck vendors in Q3 2023. Truck financings during the period included 75% purchase financing for an experienced owner-operator with a 607 FICO to buy a 2018 Peterbilt 579 with 399K miles for $58,695; 68% purchase financing for an owner-operator with a 593 FICO to buy a 2019 Peterbilt 579 with 547k miles for $62,250; and 71% financing for a start-up owner-operator with a 618 FICO to buy a 2020 Freightliner Cascadia with 465K miles for $51,275.
“Fortunately, the used truck market has softened in light of the current economic volatility “We are committed to helping hard-working truck drivers stay on the road, earning a living,” noted said Behzad Kianmahd, Maxim’s Chairman and CEO. “The current economic volatility has improved truck pricing while also causing some lenders to retract, creating an opportunity for Maxim to fill a void.”
About Maxim Commercial Capital
Maxim Commercial Capital helps small and mid-sized business owners nationwide by providing loans and leases (“financing”) from $10,000 to $3 million secured by trucks, trailers, heavy equipment, and real estate. It funds equipment purchase financings and leases, working capital, and debt consolidations. Maxim’s more creative financing structures leverage equity in real estate and owned heavy equipment to facilitate growth and preserve customers’ cash. As a leading provider of transportation equipment financing, Maxim supports startup and experienced owner-operators and non-CDL small fleet owners by funding loans and leases for class 8 and class 6 trucks, trailers, and reefers. Learn more at www.maximcc.com or by calling 877-776-2946.
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Contact:
Michael Kianmahd
Executive Vice President
Maxim Commercial Capital
michael@maximcc.com
(213) 984-2727
With Fraud on the Rise, AI Can Fill in the Gaps
October 19, 2023
In today’s dynamic world of fraud detection, technology, and artificial intelligence (AI) are allies. The insights of industry experts, Yinglian Xie, a technology veteran with a background at Microsoft Research and CEO at DataVisor, Sandip Nayak, President at Fundation, and Andrew Davies, Global Head of Regulatory Affairs at ComplyAdvantage, discuss the transformative role of AI in fraud prevention.
When DataVisor started, it primarily offered advanced machine learning solutions, through an unsupervised approach. In other words, their programs can spot fraud without needing a loss or training labels; they can automatically identify suspicious activities. Xie explains that AI’s ability to make rapid decisions during real-time transactions depends on the amount of data available for this process. To achieve a proactive response, it must be synchronized with real-time data, as opposed to a manual or “supervised machine learning” approach.
“We need to kind of switch the traditional approach looking at fraud being very much kind of an isolated case, like a manual approach, and into something we need technology for, said Xie. “And we need to essentially be able to make decisions instantaneously as well.”
In addition to unsupervised learning algorithms, Xie explains that generative AI falls into another category of fraud detection. This method describes the data and communicates information back in human-like responses. Xie gives an example that as customers, some may not understand why a transaction was rejected and that’s where generative AI comes to rationalize the reason behind the rejection.
Echoing Xie, Nayak described solutions where traditional techniques fail, one of them being unsupervised learning algorithms. These algorithms can use techniques like anomaly detection to actually hone in on “the needle in a haystack problem.”
“Number two, the automated and advanced nature of AI can really solve the shortcomings of rules based and human based approaches in detecting fraud and can also self-calibrate itself as the nature of fraud evolves with time,” said Nayak.
Meanwhile, Andrew Davies pointed out that one of the biggest challenges faced by banks and financial institutions is “they are constantly playing catch-up.” With the accelerated pace of money movement and real-time settlement, he emphasized that fraudsters capitalize on this by being swift and innovative, continuously seeking out new vulnerabilities to exploit.
“Banks must update their legacy technology which leaves too many weak points in the control environment,” said Davies. “Additionally, as money moves more quickly and is subject to finality, fraud detection must be done in real time.”
And as the digital landscape continues to evolve, Nayak envisions the adoption of these technologies will be beneficial to the lending industry. Embracing different strategies not only reduces fraud losses but also enhances capital efficiency, paving the way for increased profitability and security in lending, according to Nayak.
“I do expect the lending industry, especially the ones who adopt the latest technologies of fraud detection, will have a competitive advantage compared to those who don’t,” said Nayak. “And what that will do is it will help them preserve more of their capital in the current tough macro environment by helping the overall unit economics…”
Unsupervised machine learning and generative AI are strategies reshaping fraud prevention. The ability to make rapid, data-driven decisions, adapt to evolving fraud tactics, and provide human explanations behind alerts has become a cornerstone in modern fraud detection.
Former MBE Capital Partners, LLC CEO Sentenced to 4.5 Years in Prison
July 31, 2023
Rafael Martinez, the former CEO of MBE Capital Partners, LLC, is going to prison. The company was a PPP lender during covid but it was alleged it should not have been!
In March 2022, the DOJ said that “Martinez used false representations and documents to fraudulently obtain the approval of the SBA for his company, MBE Capital Partners, LLC, to be a non-bank lender through the PPP. Martinez then used that approval to obtain approximately $932 million in capital to issue PPP loans and earn over approximately $71 million in lender fees.”
Martinez then spent those funds on himself, purchasing a villa in the Dominican Republic, a Ferrari, and private jets.
He pled guilty to conspiracy to commit wire fraud exactly a year later. Last week he was sentenced to four and a half years in prison.
Can’t Watch Videos In the Office? AltFinanceDaily is On Spotify
June 30, 2023Can’t watch videos on company time? Catch up with what’s going on in the industry by listening to AltFinanceDaily’s podcast on your commute. With more than 500 AltFinanceDaily TV segments altogether since 2020, we’ve been adding some of the most memorable and informative ones to Spotify.
Recent interview guests include:
- Justin Thompson – National Funding
- Andrew Carman – PerCina Report
- Steve Geller – Leasing Solutions LLC
- George A. Parker – VenSource Capital
- Nancy Robles – Eastern Funding
- Alyssa Guglielmi – JRG Funding
- Porsha Brooks – Lenpick
eCapital Expands With Two Senior Hires
May 11, 2023MIAMI – May 11, 2023 – eCapital Corp. (“eCapital” or “the Company”), a leading finance provider across North America and the U.K., has reinforced its commitment to delivering specialized finance solutions to small to medium-sized businesses by recently appointing two accomplished Business Development Officers (BDOs) to its team. These new hires bring a wealth of experience to eCapital, as they serve clients across a variety of industries. With a focus on delivering customized financing options, eCapital has been able to distinguish itself in the current market conditions, leading to significant momentum for the company.
The two new hires, Matthew DeBernardo, SVP, Business Development Officer, and Bret Aaron Meuschke, SVP, Business Development Officer, will be involved in managing Factoring and Asset-based Lending transactions as part of the company’s Commercial Finance division. Bringing more than 25 years of industry knowledge, the two seasoned BDOs will prioritize meeting clients’ business and financial requirements while providing exceptional customer service.
“eCapital’s sustained expansion is drawing exceptional talent, such as Matthew and Bret, to our company because of our distinct business model and advanced technology capabilities,” stated James Poston, Chief Sales Officer at eCapital Corp. “Their specialized expertise, combined with eCapital’s extensive resources, will enable us to further elevate our capacity to deliver the quick, adaptable financing options that we are renowned for. Matthew and Bret have already demonstrated impressive results in their new positions, and we are excited to see them continue to thrive as integral members of our team.”
eCapital has been a champion of SMBs for almost two decades, harnessing its profound understanding of finance solutions and its remarkable capacity to cultivate and maintain strong business relationships. By adopting a personalized approach and promoting valuable connections with clients, eCapital offers rapid and hassle-free access to working capital, empowering SMBs to thrive and succeed.
“eCapital’s reputation in the industry along with today’s economic climate made it ideal timing to join the company and support clients in getting the financing they need,” said Meuschke. “eCapital’s business model plus the strength of the team was very attractive and something special I knew I wanted to be a part of as they continue to help solve a major pain point in the market.
“eCapital takes an innovative approach to problem-solving and supporting its customers, which is even more critical now as businesses look for options outside of traditional lending,” said DeBernardo. “I’m excited to put my background in alternative lending and expertise in government contracts to work for eCapital as we continue to support and service customers across North America, quickly getting them the funding they need, when they need it.”
About eCapital Corp.
eCapital is committed to accelerating access to capital for companies in the United States, Canada, and the U.K. By leveraging a team of over 700 experts and proprietary, industry-leading technology, eCapital is creating the future of business funding. With a full suite of products such as freight factoring, invoice factoring, lines of credit, asset-based lending, payroll funding, and equipment refinancing, eCapital ensures businesses have the funds they need to do more. Through its Transportation, Staffing, Wellness, Healthcare, Factoring and ABL divisions, eCapital delivers customized funding solutions for over 80 industries. To learn more about eCapital, visit eCapital.com.
New California Disclosure Rules Reduce Capital Available to Small Businesses
March 21, 2023In a poll conducted by a leading trade association, since new CA disclosure rules were implemented in December 2022, 40% of respondents were found to be “no longer lending” to prospective borrowers who fall within the regulations’ threshold of less than $500,000. The poll was conducted by The Secured Finance Network (SFNet), an 80-year-old nonprofit with members representing the $4T U.S. secured finance industry. The new law, requiring sweeping financial disclosures, introduced by CA State Senator Steven M. Glazer in 2018, faced four years of strong opposition before being rolled out in December of 2022.
According to the poll, commercial finance companies would rather not lend to small businesses than comply with what they believe are “misguided and un-compliable” requirements. Mark Hafner, president and CEO of Celtic Capital Corporation, based in Calabasas, CA, said, “Unfortunately, we must now shy away from smaller deals (under the $500k threshold) as the disclosure requirements are extremely complicated to figure out and would require getting our attorneys and CPAs involved to ensure compliance. It’s just not worth the costs involved to fund a small deal anymore. The statute is not user friendly and, frankly, not representative of the true costs as there are numerous assumptions that have to be made to calculate the APR based on the state’s requirements. I honestly don’t think it was designed to meet the stated goal of the statute.”
Robert Meyers, president of Republic Business Credit, which does business with many California-based businesses, explained, “While the fines and penalties are clear under the regulations, the state has been unwilling to confirm our compliance or anyone else’s compliance. That fear is what has stopped 40% of our non-banks from doing business in the state, thus reducing access to capital for small- and medium-sized businesses. I expect this number to increase as time goes on. If the goal of this law was to better inform, it is actually doing the opposite as APR just doesn’t apply to our products.”
SFNet reports that its member companies provide “tens of billions” of capital annually in California to small businesses for essential working capital that funds everything from inventory, to work in process to payroll.
“Forty percent of billions is a large number,” said SFNet CEO, Richard D. Gumbrecht. “In attempting to find a one-size-fits-all solution to financial transparency, the State has created a complex set of requirements that misrepresent the actual cost of borrowing. Lenders are saying it’s not worth the cost and risk of complying. If this sample of 50 lenders is indicative of what we can expect, clearly that was not the intent of the legislation. And considering the demise of Silicon Valley Bank, it’s more important than ever that capital is not restricted in California.” The trade association is working with State legislatures to revise the statute. “Other states have found a simpler and more accurate way to protect small borrowers, and given the unintended consequences we are seeing, we are hopeful California will be receptive to these alternative approaches.”
To demonstrate how vital small businesses are to the U.S. economy, and the importance of not curtailing funding, consider these statistics: According to the U.S. Small Business Association (SBA), small businesses of 500 employees or fewer make up 99.9% of all U.S. businesses and 99.7% of firms with paid employees. Of the new jobs created between 1995 and 2020, small businesses accounted for 62%—12.7 million compared to 7.9 million by large enterprises. A 2019 SBA report found that small businesses accounted for 44% of U.S. economic activity.
About Secured Finance Network
Founded in 1944, the Secured Finance Network (formerly Commercial Finance Association) is an international trade association connecting the interests of companies and professionals who deliver and enable secured financing to businesses. With more than 1,000 member organizations throughout the U.S., Europe, Canada and around the world, SFNet brings together the people, data, knowledge, tools and insights that put capital to work. For more information, please visit SFNet.com.
Media Contact:
Michele Ocejo, Director of Communications
Secured Finance Network
mocejo@sfnet.com, 551-999-5283
