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A significant development in the long-running Par Funding case. According to reports, investors in the Philadelphia-based loan company are set to receive an initial distribution. This proposed plan, submitted by court-appointed receiver Ryan Stumphauzer to U.S. District Judge Rodolfo Ruiz on August 23, 2024, outlines a distribution plan. Read the full story in our Exclusive Content category in our Forum. You must be logged in to view.

The Consumer Financial Protection Bureau's (CFPB) small business lending data collection rule has cleared another significant legal obstacle, according to reports on August 26th. U.S. District Judge Randy Crane in McAllen, Texas, rejected a challenge backed by the banking industry that argued the rule's data collection method was flawed. The judge ruled that the challenge was essentially a disagreement with the CFPB's determinations rather than a dispute over the regulator's statutory authority to adopt the rule. This ruling is particularly noteworthy as it comes in the wake of previous legal challenges to the rule. The CFPB had already extended compliance dates for the rule earlier this year due to a prior court stay pending a Supreme Court decision on the CFPB's funding mechanism. The rule, initially released in March 2023, requires lenders who issue more than 100 small business loans annually to collect demographic, geographic, and other data about borrowers. This requirement effectively covers over 95% of small business loans issued in the United States. In the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress directed the Bureau to adopt regulations governing the collection of small business lending data. Section 1071 of the Dodd-Frank Act amended the Equal Credit Opportunity Act (ECOA) to require financial institutions to compile, maintain, and submit to the Bureau certain data on applications for credit for women-owned, minority-owned, and small businesses. The CFPB has already launched a beta platform for the small business lending data collection rule, inviting financial institutions and their technology partners to test the platform and provide feedback. Industry stakeholders should note that this rule aims to create a comprehensive public database on small business financing practices. The CFPB intends to use this data to ensure fair lending practices and identify business and community development needs for small businesses, including those owned by women and minorities. The rule's impact on lending practices, data collection processes, and technology infrastructure could be significant, making it a crucial area of focus for industry players in the coming months.

Joseph Carpenter, a 76-year-old military veteran from Tampa Bay, Florida, recently received an alarming letter from the Small Business Administration (SBA). The agency claimed he owed $20,000 for a loan taken out in 2021 - a loan he never applied for or received. "There are all those loans out there," Carpenter told WFLA News Channel 8. "They're going to make you do the work. They're not going to do the work. They put the burden of proof on the person they're accusing of having the loan." Even more troubling, the SBA is threatening to garnish up to 15% of Carpenter's Social Security benefits if he can't prove he didn't take the loan. For retirees like Carpenter, losing this income could mean the difference between making ends meet and struggling to cover basic necessities. Carpenter has filed a complaint with the inspector general. This isn't just a clerical error - it's a stark example of the widespread fraud that has plagued SBA loan programs since the start of the pandemic. The Staggering Scale of SBA Loan Fraud Carpenter's case is just the tip of the iceberg. Let's dive into some eye-opening statistics: Over $200 billion in potentially fraudulent loans disbursed by the SBA 4.3 million loans flagged with fraud concerns 78 out of 94 federal districts have filed fraud-related charges These numbers paint a sobering picture of the extent of abuse within the SBA's pandemic relief programs, particularly the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL). How Did This Happen? Several factors contributed to this perfect storm of fraud: 1. Rushed Implementation: The urgent need for economic relief led to hastily designed programs with inadequate safeguards. 2. Lax Verification: Many lenders relied heavily on self-reported information without thorough checks. 3. Profit Motives: Some fintech companies prioritized loan volume over due diligence, driven by processing fees. 4. Lack of Oversight: The SBA Inspector General reported that the agency didn't have a clear organizational structure to manage potentially fraudulent loans until nearly two years after the PPP launch. Common Fraud Schemes Fraudsters employed various tactics to exploit the system: Ghost Companies: Creating fictitious businesses solely to apply for loans Identity Theft: Using stolen personal information to secure loans in others' names Inflated Employee Counts: Exaggerating workforce numbers to qualify for larger loan amounts Misuse of Funds: Using loan money for personal luxuries rather than approved business expenses The Ripple Effects The consequences of this fraud extend far beyond financial losses: Taxpayer Burden: Billions in fraudulent loans may ultimately be shouldered by taxpayers Legitimate Businesses Suffer: Funds diverted to fraudsters meant less support for genuinely struggling small businesses Increased Scrutiny: Even honest loan recipients now face potential audits and investigations Erosion of Trust: Public confidence in government assistance programs has been severely damaged What Can You Do If You're a Victim? If you find yourself in a situation like Joseph Carpenter's: 1. Contact the SBA's Office of Disaster Assistance for support 2. Submit a FOIA request for the loan application and related documents 3. Check your credit report for unfamiliar accounts or unusual activity 4. File a report with the Consumer Financial Protection Bureau (CFPB) 5. Consider seeking legal representation if the situation escalates Moving Forward: Lessons Learned To prevent future large-scale fraud, several key improvements are needed: 1. Robust Verification Systems: Implement advanced identity verification and cross-checking of applicant data 2. Real-Time Fraud Detection: Develop systems to flag suspicious patterns across lenders instantaneously 3. Stronger Oversight: Increase resources for fraud prevention teams and auditors 4. Clear Accountability: Establish clearer lines of responsibility for fraud prevention within agencies The pandemic loan fraud saga is a stark reminder of the vulnerabilities in our financial systems during times of crisis. As we move forward, striking a balance between rapid assistance and robust fraud prevention will be essential for maintaining public trust and ensuring help reaches those who truly need it.

Channel, a prominent equipment financing and working capital solutions provider, has successfully closed its sixth securitization and fourth Working Capital securitization, raising $125 million in asset-backed notes. Backed by a diverse portfolio of small business loans and advances, the transaction garnered strong investor interest, attracting seven new investors while solidifying relationships with existing ones. This year's transaction marks Channel’s fourth consecutive successful year in the ABS market, emphasizing its ongoing commitment and stability in the sector. Key points Strong investor confidence:  The successful closing of the securitization, even amidst challenging market conditions, underscores investor trust in Channel's business model and asset quality. Market leadership:  Channel’s consistent success in the ABS market solidifies its position as a leader in small business lending. Expanded investor base:  The addition of seven new investors to Channel’s investor base indicates a growing appetite for small business loan assets. 100% advance rate:  Channel's achievement of a 100% advance rate through Class D notes is a significant accomplishment, setting it apart from other working capital ABS transactions this year. Resilience in challenging market:  Channel's ability to successfully complete the securitization despite market headwinds demonstrates its financial strength and adaptability. Mike McConnell, Vice President of Treasury & Capital Markets at Channel, highlighted the transaction's reception in the market, saying, “The market acceptance and efficient pricing reflect the strong support and confidence our investors have in us.” This transaction highlights Channel's commitment to providing innovative financing solutions to small businesses and its ability to attract capital to support its growth.

The recent alleged data breach involving National Public Data, a background check company, has potentially compromised the personal information of approximately 2.9 billion people. This breach, if confirmed, could be one of the largest in history, affecting individuals across the U.S., Canada, and the UK. The compromised data reportedly includes sensitive information such as full names, addresses, Social Security numbers, and familial details, raising significant concerns about identity theft and data security. The breach allegedly occurred in April 2024, when a third-party actor accessed and scraped data from National Public Data. The data was later put up for sale on a cybercriminal marketplace. Despite the severity of the breach, the company has not confirmed the full extent of the data compromised, nor has it provided a detailed response to the allegations. For fintech industry stakeholders, business loan lenders, and brokers, this incident underscores the critical importance of robust data security measures. It highlights the vulnerabilities inherent in handling large volumes of sensitive personal information and the potential reputational and financial risks associated with data breaches. The breach serves as a wake-up call for companies to reassess their data protection strategies, emphasizing the need for encryption and other security protocols to safeguard consumer data. Moreover, it points to the broader implications for regulatory compliance and the necessity for transparency and accountability in data management practices. As the situation unfolds, businesses and consumers alike must stay informed and take proactive steps to protect their personal information, such as monitoring credit reports and implementing credit freezes where necessary.

The recent Federal Register Notification regarding the Small Business Lending Company (SBLC) Application Process is poised to impact the fintech industry, business loan lenders, and brokers. Beginning September 2, 2024 , the Small Business Administration (SBA) will accept applications for licenses for both regular and Community Advantage (CA) SBLCs. This initiative is designed to expand the availability of capital to small businesses, particularly those in underserved markets. Key points of interest include: Application Periods: Applications for regular SBLC licenses will be accepted until October 15, 2024, with the SBA planning to issue up to three new licenses by the end of the year. For CA SBLC licenses, the application window extends to December 20, 2024, with no cap on the number of licenses that may be approved. Focus on Underserved Markets : The SBA will require CA SBLCs to allocate at least 60% of their loans to small businesses in underserved areas, aligning with the agency's commitment to addressing lending gaps. Evaluation Criteria : Applications will be assessed based on the applicant's ability to address lending gaps, including small-dollar loans, loans to underserved populations, and support for small businesses' climate change initiatives. This aligns with the SBA's "Green Lender Initiative" aimed at promoting clean energy investments. Decision-Making Process : Final decisions on license applications will involve multiple SBA offices, ensuring a comprehensive review process. This initiative presents opportunities for fintech companies and lenders to expand their services and support small businesses, particularly in underserved markets, thereby fostering economic growth and innovation. Small Business Lending Company Application Process

According to data from Open Secrets, PayPal, Block, and Early Warning Services are leading a surge in fintech lobbying expenditures in the first half of 2024. As the industry faces increasing regulatory scrutiny, these financial technology giants are investing heavily to influence policymaking. PayPal has emerged as a major player in the lobbying arena. The company's spending on lobbying efforts has skyrocketed in 2024, with over $800,000 allocated in the first six months alone. While Open Secrets reports that PayPal's lobbyists are primarily focused on broad issue areas rather than specific legislation, the sheer magnitude of their spending indicates a robust commitment to shaping the regulatory landscape. Block , the parent company of Cash App, is also demonstrating a significant financial commitment to lobbying. The company has invested more than Paypal at nearly $1 million in lobbying efforts during the first half of 2024. Like PayPal, Block's lobbying activities appear to be concentrated on general issue areas rather than specific legislative proposals. Early Warning Services, owner of Zelle and a key player in the payments industry, has adopted a more targeted approach to its lobbying efforts. Open Secrets data reveals that the company's lobbyists are actively engaged in advocating for the Earned Wage Access Consumer Protection Act. This focused strategy suggests a clear intention to influence specific legislation that could impact the company's business. Chime , a leading player, has deployed a significant portion of its 23 lobbyists to advocate for the Earned Wage Access Consumer Protection Act, while also engaging in broader issue lobbying similar to that of Early Warning Services. In contrast, Varo Bank, another prominent neobank, reports a more modest expenditure of $20,000 per quarter since early 2023, focusing its efforts solely on matters related to digital banking. The reasons behind this surge in fintech lobbying are complex and multifaceted. However, it is clear that these companies are anticipating a more stringent regulatory environment and are proactively working to shape the policies that will govern their operations. As the fintech industry continues to evolve, the interplay between technology and policy will undoubtedly become increasingly important.

NewtekOne reported a significant increase in business lending activity for the second quarter of 2024. SBA 7(a) loan closings, a popular loan product for small businesses, jumped 18% year-over-year to $229.8 million. The company also forecasts total SBA 7(a) loan fundings for 2024 to reach $935 million, reflecting a 14.7% increase from 2023. Newtek Bank also saw a modest increase in SBA 504 loan closings, up 3.94% to $16.4 million for the quarter. Overall, Newtek and its subsidiaries closed $316.5 million in loans across all loan products, a 26.3% increase compared to the same period in 2023. Analysis Newtek's business lending performance is positive. The strong growth in SBA 7(a) loans suggests a healthy demand for financing among small businesses. The company's forecast for full-year SBA 7(a) loan funding further strengthens this positive outlook. While the growth in SBA 504 loans is modest, the overall loan volume increase across all loan products indicates that Newtek is effectively catering to the borrowing needs of various businesses. It's important to note that this press release only provides a snapshot of Newtek's lending activity. A more comprehensive analysis would involve looking at factors such as loan delinquency rates, approval rates, and the average loan size. Overall, Newtek's business lending results are a positive sign for the company's growth prospects. The continued rise in loan volumes suggests that Newtek is well-positioned to capitalize on the increasing demand for small business financing. Full Earnings Press Release NewtekOne®, Your Business Solutions Company®, is a financial holding company, which along with Newtek Bank and NewtekOne's non-bank consolidated subsidiaries, provides a wide range of business and financial solutions under the Newtek® brand to independent business owners. Since 1999, NewtekOne has provided state-of-the-art, cost-efficient products and services and efficient business strategies to our independent business owner relationships across all 50 states to help them grow their sales, control their expenses and reduce their risk. NewtekOne’s and its subsidiaries’ business and financial solutions include: banking (Newtek Bank, N.A.), Business Lending, SBA Lending Solutions, Electronic Payment Processing, Technology Solutions (Cloud Computing, Data Backup, Storage and Retrieval, IT Consulting), eCommerce, Accounts Receivable Financing & Inventory Financing, Insurance Solutions, Web Services, and Payroll and Benefits Solutions.

When: September 10th, 6:30 PM - 8:30 PM Where: Moxies, Fort Lauderdale Dress Code: Business Casual Reserve Your Spot: Register Now Why Moxies? Why This Mixer? Step into Moxies, where sophistication meets modern flair in the heart of Fort Lauderdale. This September, it becomes the stage for a high-caliber networking event hosted by Funder Intel. Known for its contemporary décor and vibrant atmosphere, Moxies sets the stage for an evening where every detail is curated to enhance your networking experience Your Evening Includes: Dining: Share delicious plates and great stories. Artisan Cocktails: Toast to new friendships and future collaborations. An Elite Crowd: Connect with professionals from a variety of positions Proudly Sponsored By: Everest Business Funding Revenue Based Finance Coalition We Fund CFG Merchant Solutions Liquidibee Triton Recovery Group Why You Can't Afford to Miss Out Unmatched Networking Opportunities: Meet and mingle with key players, including our proud sponsors. This is where connections are made and opportunities are uncovered. A Setting Worth Experiencing: Known for its vibrant vibe and exquisite decor, Moxies provides the perfect backdrop for a memorable evening. Additional Details: Find information about parking and hotel options on our Registration page Join us at Moxies where opportunities happen and the evening promises more than just business cards—it offers connections that could shape your future. Don’t miss out; RSVP today to be part of this exclusive event! See below for past event pictures.

In its earnings report on Thursday, Block reported that Square Capital did 142,000 loans totaling 1.45 billion in Q2 of 2024. That number is an increase of 32% year over year, an impressive figure. This is because more merchants are subscribing to their services as Block reported a gross profit increase of 27% this quarter at $1.5 billion. Square for Restaurants and Square for Retail were up 21%. This is important because it indicates why square loans have increased. The more merchants subscribe to these services the more opportunities for loans. I said this recently in a post referencing embedding lending, but it should be emphasized again, that a small business owner needs to integrate embedded lending options into their operations. That means if they can process with Square, Paypal or Stripe then do it. If they can bank with Bluevine or Novo, use Quickbooks for accounting, or Shopify for their website builder platform (among others), it's worth it for the lending options. They all offer some form of lending options that could be advantageous on short notice or simply provide the best lending option, all things considered. This is one of the reasons why Square is doing so well in that business segment.

PayPal Holdings Inc (NASDAQ:PYPL) announced an 8% increase in revenue for the fiscal second quarter, reaching $7.89 billion, which surpassed the analyst consensus estimate of $7.81 billion. Additionally, total payment volumes rose by 11% year-over-year, totaling $416.8 billion for the quarter. In reference to their lending products, they have decreased in the amount of loans and advances they have purchased. Paypal “offers access to merchant finance products for certain small and medium-sized businesses through our PayPal Working Capital (“PPWC”) and PayPal Business Loan (“PPBL”) products, which we collectively refer to as our merchant finance offerings.” From their 10-Q filing, "During the six months ended June 30, 2024 and 2023, we purchased approximately $774 million and $975 million in merchant receivables, respectively. As of June 30, 2024 and December 31, 2023, the total outstanding balance in our pool of merchant loans, advances, and interest and fees receivable was $1.2 billion, net of the participation interest sold to the partner institution of $43 million and $44 million, respectively." That's a staggering $200 million decrease in receivables from the same period last year! Other interesting notes: A key performance indicator of how its portfolio is doing would be looking at its Charge-off rate. The report says, "The decrease in charge-offs for the six months ended June 30, 2024 compared to the same period of the prior year was due to the decrease in originations in the second half of 2023 and improvement in credit quality of the PPBL portfolio. "Qualitative adjustments were made due to uncertainty around the financial health of our borrowers, including the effectiveness of loan modification programs made available to merchants."

For business lenders, the cannabis industry presents a unique opportunity. It's a rapidly growing market, projected to reach a staggering $41.5 billion by 2026. Yet, this market faces a significant hurdle: traditional bank financing. Due to federal classification as a Schedule I drug, cannabis businesses are largely shut out of conventional lending options. The Justice Department made an announcement earlier this year to move Cannabis to a Schedule III drug, a less harmful drug, but it will still take time to formalize that rule. It would not legalize marijuana outright for recreational use and we don't yet know how this will affect financing to these companies. So in the meantime, there is still a gap that alternative lenders can bridge. But before diving in, it's crucial to understand the intricacies of lending to cannabis companies. The Roadblock: Federal Prohibition vs. State Legality The core challenge lies in the federal illegality of cannabis. Despite legalization for medical or recreational use in 39 states and D.C., the federal stance creates a conflict for banks. The Federal Deposit Insurance Corporation (FDIC) prohibits banks from knowingly dealing with proceeds from illegal activities. Fear of federal repercussions keeps most banks out of the cannabis space. Alternative Solutions Emerge This gap has fostered a vibrant niche market for alternative lenders. These lenders typically fall into three categories: Specialized Cannabis Lenders:  These firms cater exclusively to the cannabis industry. They understand the unique risks and regulations and offer loan products tailored to cannabis businesses' needs. Fintech Lenders:  Technology-driven lenders leverage data analytics to assess cannabis businesses and offer financing solutions like equipment financing, revenue based advances, or invoice factoring. Private Equity and Venture Capital:  For established cannabis businesses seeking larger capital inflows, private equity and venture capital firms can be a viable option. Understanding the Risks and Rewards Lending to cannabis companies comes with inherent risks. Here are some key considerations for business lenders: Regulatory Uncertainty:  The ever-evolving legal landscape presents a challenge. New regulations can disrupt business operations and impact a company's ability to repay loans. Cash-Intensive Industry:  Cannabis businesses often operate on a cash basis due to limited access to banking services. This can make traditional loan evaluations based on credit scores less reliable. High Rates:  Due to the perceived risk, interest or factor rates on cannabis business loans tend to be higher than conventional loans. However, the potential rewards are significant. The cannabis industry is experiencing explosive growth, and well-managed cannabis businesses can be highly profitable. Lenders can become crucial partners in this burgeoning market by providing much-needed access to capital. Conducting Due Diligence: Key Considerations For lenders venturing into cannabis lending, thorough due diligence is paramount. Here are some key areas to focus on: Compliance:  Ensure the cannabis business has the necessary licenses and permits to operate legally in its jurisdiction. Verify they follow stringent anti-money laundering (AML) protocols. Business Plan:  Assess the strength of the business plan, including market analysis, financial projections, and management experience. Look for a clear path to profitability. Security Measures:  Evaluate the company's security measures for its product and cash holdings. This is crucial given the cash-intensive nature of the industry. Market Research: Understand the local cannabis market, competition, and growth potential. Collateral Assessment: For secured loans, carefully evaluate the value and liquidity of the collateral. Building a Strong Partnership Beyond financial evaluation, building trust and a strong partnership is essential. Lenders who understand the complexities of the cannabis industry and can offer guidance beyond just capital will be more attractive partners. Consider offering additional services like business consulting or connections to industry resources. The Future of Cannabis Lending The cannabis industry is poised for continued growth and is expected to expand at a compound annual growth rate (CAGR) of 14.3% to 2028. The need for alternative financing solutions will only increase. Business lenders who can navigate the regulatory landscape and conduct thorough due diligence will be well-positioned to capitalize on this burgeoning opportunity. By providing responsible access to capital and fostering strong partnerships, lenders can play a vital role in the success of this exciting industry.