Kabbage’s Petralia Talks Big Tech, Fintech and Lending
October 2, 2017
Kabbage co-founder and head of operations Kathryn Petralia was in New York last week for The Economist’s Finance Disrupted 2017 conference where she was a panelist on in an Oxford-style debate about whether tech giants Alibaba, Amazon, Apple, Facebook and Google pose a greater challenge to traditional banks than the fintech startup community. Her position is that no, they do not, and there appears to be room for both.
“Fintech can be anywhere. Alternative lenders, whatever you want to call them, I think they’re disrupting the space but not by trying to put people out of business. In our case we make loans to small businesses, but these are folks that are having a hard time borrowing from banks. So, we’re not taking business from banks. We’re drawing the circle a little bit bigger around access to capital.”
It’s only been a few weeks since the blockbuster announcement that SoftBank is investing $250 million into Kabbage, which thrust the small business lender into the spotlight for a few reasons, not the least of which was the more than $1 billion valuation that has been speculated for Kabbage.
This valuation, of course, is in stark contrast to that of OnDeck, which also lends to small businesses. As Petralia points out, however, OnDeck is a very different company than Kabbage and in fact not a very good comparable at all. For instance, Kabbage has never turned to brokers to find customers, and their application process has been fully automated since day one. She highlighted other differences too.
“All of our bank partnerships are technology integrations where our technology sits in their systems. They use our technology to deliver the customer experience. And I think what SoftBank saw in us was that potential. Whatever the valuation was I can assure you it was a result of a lot of due diligence on the part of SoftBank,” she said.
SoftBank may now be sitting on Kabbage’s technology but they’re also sitting on a vast treasure trove of customer data that Kabbage may gain access to in the future.
“Certainly, that’s something we’re interested in and that’s something they talked with us about. They have a lot of access to a lot of businesses in global markets certainly in Asia including Japan and India, so I think we’ll see more relationships forming from that alliance over time,” said Petralia.
And the SoftBank deal seems to support Kabbage’s ambitious expansion plans. “We always thought we would be in almost all of the global markets five years from now. SoftBank is a continuation of our strategy for growth.”
As Kabbage pursues its aggressive growth strategy, it’s hard to ignore some of the headwinds other industry players have experienced.
“I don’t think anyone’s immune to macroeconomic changes and changes to access to the debt markets. Our focus is on technology automation from the beginning, and I think that gives us an advantage in the way we manage our customer base. Debt investors can see it, the ratings agencies can see it. One problem with a lot of the lenders is that they’re not able to access the debt markets because there’s not enough history or their portfolios haven’t performed the way they need,” said Petralia, adding that Kabbage has had the benefit of time on its side.
Kabbage’s vision is to “dynamically deliver products that small businesses need to run their businesses and to stay connected to the data that drives the underwriting process for lines of credit,” Petralia says, adding: “This could be growth capital and it could be other products and services that work around small businesses, whether it’s data processing or insurance or payments, any of those things. We want to deliver big business tools to the little guys.”
In terms of customer interest rates, everybody would rather have a lower rate Petralia says, but customers in their ROI equation know they will be able to generate more revenue to offset that. And Kabbage doesn’t require small businesses put up any collateral, which is what a bank would require them to do.
Kabbage’s Culture
Meanwhile in addition to industry headwinds some funders have experienced company-specific issues that had more to do with internal culture than any macroeconomic influence.
“From our perspective, culture is incredibly important. We were No. 16 for Glassdoor reviews for mid-sized businesses and that’s because employees really enjoy working here. If I had to characterize our culture with one term I’d say connected – our employees are connected to one another and to our customers. There is transparency and trust and a culture of caring deeply about one another. That’s really important to us,” said Petralia.
As for future growth avenues for Kabbage, there’s a lot of stuff in the works none of which she was at liberty to discuss.
LendingPoint: CAN Capital’s Close Neighbor in Kennesaw
August 14, 2017
LendingPoint, a consumer lender staffed largely by former CAN Capital employees, may have something to teach the alternative small-business finance industry about creditworthiness. Three-year-old LendingPoint claims to go beyond FICO scores to bring each applicant’s sense of fiscal responsibility into sharper focus.
But first, let’s examine the CAN Capital connection. Four or five members of LendingPoint’s top management team came to the company after lengthy tenures at CAN Capital, a LendingPoint official says. That includes Tom Burnside, LendingPoint’s CEO and founder, and Franck Fatras, the company’s president and chief operating officer. Both worked 13 years for CAN Capital, with Burnside leaving as chief operating officer and Fatras departing as chief technology officer, according to biographies posted online.
All told, about 30 of LendingPoint’s 100 or so employees – a total that includes outsourced positions – formerly labored at CAN Capital, according to Fatras. Many put in considerable time at CAN Capital, holding jobs there in management, corporate governance, legal affairs, risk, sales, operations, IT, marketing, analytics, design, customer service, partner success and success delivery, online reports say.
Geography no doubt encourages CAN Capital employees to consider LendingPoint when it’s time to move on to another job. Both companies maintain headquarters in office parks in the Atlanta suburb of Kennesaw. In fact, the two companies operate half a mile apart, both of them just off of Cobb Place Boulevard Northwest, according to Google Maps and Directions.
Great news! Our new logo has OFFICIALLY made it's mark on our new building. What do you think?#Finance #LendingPoint #Logo pic.twitter.com/cpUIQvLy2w
— LPLoans (@LPLoans) March 13, 2017
The way Fatras tells it, LendingPoint hasn’t raided CAN Capital’s workforce. “We post the job, and they end up responding,” he says. “When they’re known quantities and people we have a lot of respect for, we just end up making it work.”
Moreover, LendingPoint’s connections with other companies don’t begin or end with CAN Capital. Some of the people in top management met when they worked at First Data Corp. and Western Union, Fatras recalls. Juan E. Tavares, co-founder and chief strategy officer, and Victor J. Pacheco, chief product officer, came from those relationships, he says.
Regardless of where they became acquainted, Lendingpoint’s leadership team has come together to form a direct balance-sheet consumer lender specializing in what they call a “near prime” clientele. The company defines the phrase “near prime” to include personal-loan applicants with FICO scores from 600 to 700, Fatras says, adding that the segment’s not sub-prime and not prime. The company has even trademarked “NEARPRIME” as a single word in capital letters, and it appears that way on the company website. It regards those consumers as “deserving yet underserved,” Fatras notes.
To qualify those applicants for credit, LendingPoint considers “behavior,” such as work history, education, and timeliness with paying rent, utility bills and cell phone bills, Fatras says. “A lot of what we do is identify patterns,” he says. “It’s all about asking the right questions.” The process requires tapping into multiple sources to collect the data, he observes.
In a blog published online soon after LendingPoint was launched, executives Burnside and Tavares claim that most credit models search for ways to say no to applicants, while their company uses big data to find ways of saying yes. LendingPoint algorithms predict risk with great precision, they say.
In a newspaper opinion piece that ran about the same time, Burnside and Tavares maintain that their model examines cycles in an applicant’s life to pinpoint upward and downward trends. A consumer on the way up deserves a loan, according to the theory.
The company’s willingness to study information that resides outside credit scores did not originate with the CAN Capital connection, Fatras says. “The model is unique and the data structure we are using is unique,” he says. “It’s all about understanding the credit story of the person.”
Latin American lending practices had some influence on LendingPoint, Burnside and Tavares write in one of their editorial pieces. Lenders there review factors other than credit scores because the scores aren’t readily available in some countries, they write.
To analyze that type of non-FICO information, LendingPoint has developed its own internal scoring model and then automated the process, spending a lot of time to develop the technology, Fatras continues. Once again, asking the right questions determines the meaning that the company can extract from the data, he emphasizes. Otherwise, the information’s just not that beneficial, he says.
When consumers come to the LendingPoint website and answer five or six questions, they can receive a firm offer of credit in an average of seven seconds and sometimes as quickly as four seconds, Fatras maintains. The offers are contingent upon the company underwriting department’s validation of income and other figures, ne notes, adding that “we’re pretty happy with the infrastructure we’ve built.”
LendingPoint collects on the loans with automatic payments from customers’ savings or checking accounts twice a month, according to the company website. Deducting the payments twice a month helps customers with budgeting, the site says. Consumers can borrow up to $20,000 and pay it back in 24 to 48 months.
The system was devised by top management with combined experience of more than a century in credit and risk, Fatras says. When those executives with so much commercial lending experience gather around the conference table to talk about the business, the possibility of lending to small businesses occasionally comes up in the conversation.
But Fatras doubts the company will make that move to the commercial side anytime soon because companies in the alternative small-business finance industry are competing for 5 million to 6 million potential customers while the country has 50 million near-prime consumers. “The space is so big where we are,” he says. “The demand could be over a billion dollars a month. We have a lot of room in front of us for growth.”
With that seemingly infinite market, LendingPoint has been growing at a healthy pace, Fatras says. The company, which was self-funded for the first year, made its initial loan in January 2015. In 2016, it did $150 million in business, he notes. By the middle of this year, the company had made a total of $250 million in loans to 25,000 consumers, he says.
It’s a business model that members of the alternative small-business finance community might do well to emulate, Fatras suggests. “There could be a lot of cross-pollination,” between consumer and commercial loans when it comes to going beyond FICO, he says.
LendingPoint executives that were formerly at CAN Capital
Tom Burnside, CEO
formerly a COO and president at CAN
Franck Fatras, President and COO
formerly a CTO at CAN
Mark Lorimer, Chief Marketing Officer
formerly a CMO at CAN
Dave Switzer, Chief Analytics Officer
formerly a VP at CAN
Joe Valeo, EVP of Strategic Development
formerly an EVP at CAN
On The Line With BlueVine After a Big Year
March 13, 2017
Helping businesses get paid on their invoices faster is a big market. So big, in fact, that when I met up with BlueVine CEO Eyal Lifshitz at LendIt last week, his company had just recently secured a $75 million warehouse credit line with Fortress. BlueVine had also just come off of a big year in which they provided more than $200 million to small businesses, earning them a spot in our rankings.
BlueVine’s success comes at a time when some in the online lending space have lost their luster. Lifshitz feels his company, however, is positioned well. “The time of exuberance has disappeared,” Lifshitz says. “Investors are looking to create value.”
Part of what makes them different is that they not only factor invoices, but they also provide lines of credit to prime and near-prime customers. Factoring is still a bigger percentage of their overall business, Lifshitz says, but he asserts that their credit line segment is growing at a faster clip. And he insists that they are working on other products too, not just loans. It sounds like the beginnings of a bank, I tell him, while making references to SoFi and their ability to live on the threshold of banking without actually currently being one.
“People have been saying that PayPal would become a bank forever but they haven’t become one,” he points out.
Still, running a company as big as his does require prudent decisions. “We are very mindful of how we manage capital,” he says. I ask if he thinks his business model protects them from an economic downturn. “It doesn’t protect it,” he asserts. Instead, he explains, his model gives him the ability to make adjustments rapidly. Since BlueVine’s capital is typically repaid in a matter of months, they can react to economic changes quickly.
Big name backers aren’t afraid to show that they believe in this either since they have been funded by Lightspeed Venture Partners, 83NORTH, Correlation Ventures, Menlo Ventures, Rakuten Fintech Fund and other private investors. A recent announcement by BlueVine says that they are on track to fund approximately $500 million to small businesses in 2017.
What Shakeout? Breakout Capital Secures $25 Million Credit Facility
February 8, 2017
Put a tally up on the board for small business lenders in 2017. McClean, VA-based Breakout Capital, which just announced a move into a larger office last week, has also secured a $25 million credit facility with Drift Capital Partners. Drift is an alternative asset management company.
Breakout is young by today’s industry standards, founded only two years ago by former investment banker Carl Fairbank, who is the company’s CEO. And don’t count them out just because they’re not in New York or San Francisco. Washington DC’s Virginia suburbs have become somewhat of a hotspot for fintech lenders. OnDeck, Fundation, StreetShares and QuarterSpot all have offices there, Fairbank points out. “And Capital One is right up the street,” he adds while explaining that the community has a strong talent pool that is familiar with creative lending. Breakout has already grown to about 20 employees and they’re still growing, he says.
Fairbank considers Breakout to be a more upmarket lender, whose repertoire includes serving the near-prime, mid-prime customer. CAN Capital and Dealstruck had focused on this area and both companies stopped funding new business in 2016. As I point this out, I ask if that suggests that segment is perhaps too difficult to make work.
“Candidly, that’s the part of the market that I feel the best about,” he says matter of factly. The company tries to product-fit deals based on the borrower, and will even make monthly-payment based loans. “I think the subprime side with the stacking and the debt settlement companies is a very very difficult place to play right now,” he says, adding that they have worked with subprime borrowers using their original bridge program but that they’ve kind of pulled back from doing those. As with all programs regardless, their goal is to graduate merchants into better or less costly products later on. We have helped merchants move on to get SBA loans, he maintains.
That all sounds very hands on, and part of it is, Fairbank confirms while asserting that technology does indeed do a lot of the legwork. “There’s absolutely a human element to underwriting these deals,” he says. He also agrees with much of what RapidAdvance chairman Jeremy Brown wrote in a AltFinanceDaily op-ed titled, The New Normal. Both Breakout and RapidAdvance refer to themselves as technology-enabled lenders, an acknowledgement that tech is a component of the company, not the entire company itself.
“I think we will see the beginning of the demise of fully automated, no manual touch funding,” Brown wrote in his article.
Brown also predicted that the legal system will ultimately impose order on some industry practices like stacking or that a state like New York could take a public policy interest in products he believes have legal flaws. As he was writing that, Governor Cuomo’s office published a budget proposal that redefined what it means to make a loan in the state. And it leaves much to be desired, some sources contend. Two attorneys at Hudson Cook, LLP, for example, published an analysis that demonstrates how its wording is ambiguous and far-reaching.
“What they really need to do is take the time to think through the implications and basically do a full study of the market to ensure that what they’re pushing forward is going to have the desired consequences,” Breakout’s Fairbank offers on the matter.
This doesn’t mean he’s anti-regulation. The company already holds itself to high standards and customer suitability and is a founding member of the Coalition for Responsible Business Finance.
“I personally do believe that there’s bad forms of lending or cash advances in the market and I’m sure that’s what Cuomo thinks as well but at the same time, it’s getting pushed very quickly and they really really ought to step back and do the research to understand the broader implications and to understand what exactly they’re trying to accomplish,” he maintains.
His pragmatism extends to the OCC’s proposed limited fintech charter, which he finds intriguing, assuming it gets buttoned up. “I believe it’s a concept worth pursuing,” he says, explaining that regulators will need to get comfortable with unsecured lending.
In the meantime, he’s optimistic about Breakout’s prospects. “In a time when institutional appetite for alternative finance companies has dried up, we believe our ability to raise a credit facility in this market speaks volumes about what we have already accomplished, our position as a leading player in the space, and our prospects for strong, but measured, growth,” Fairbank is quoted as saying in a company announcement. The company was also invited and joined the Task Force for the PLUM Initiative, a collaboration between the U.S. Small Business Administration (SBA) and the Milken Institute to more effectively provide capital to minority-owned businesses throughout the United States. The Task Force consists of a very select group of industry leaders, who are in positions to improve access to capital in underserved markets, according to the announcement.
While other companies are making adjustments or in his opinion, continuing to make questionable underwriting decisions, Fairbank thinks his formula for success works. “I think that we do look at deals differently than most folks because I intentionally built the core of my underwriting team with folks who are not from this space so they take a more traditional approach and mix it with some of the greatest aspects of alternative finance.”
The CAN Capital Shakeup Is A Sign of the Times
November 30, 2016Update 11/30 7:30 pm: CAN says they are still open for business and still providing access to capital for current customers and renewal business. They are not actively seeking new business at this time, but will evaluate it as it comes in.
Part II of the industry’s season finale has begun. On Tuesday afternoon, CAN Capital confirmed that CEO Dan DeMeo had been put on a leave of absence. The chief risk officer and chief financial officer have also reportedly stepped down. Parris Sanz, the company’s chief legal officer, is now running the company, a CAN spokesperson said. His new title, acting head (which is how their statement referred to him), is perhaps a subtle clue that the company did not plan these moves far in advance. And it’s the phrasing that’s used to describe the departure of these executives that’s worth raising an eyebrow. A leave of absence? A curious fate indeed.
In an exclusive interview AltFinanceDaily conducted with DeMeo last year, he said of CAN at the time, “it’s a self-sustaining business. We’re not forced to approach the capital market to cover our burn rate. We’re cash-flow positive.”
But more recently, there’s a different tone. A spokesperson for CAN said that the company had “self-identified that some assets were not performing as expected and that there was a need for process improvements in collections.” The sudden decapitation of the company’s top officers seems a harsh consequence for this apparent underperformance, especially given that CAN has long been on the short-list as a potential IPO candidate. DeMeo himself had been with the company since 2010, having started originally as the CFO and rising to the CEO position in 2013.
While CAN Capital is a private company, they are notable in that they have originated more than $6 billion in funding to small businesses since 1998 and secured a $650 million credit facility led by Wells Fargo just last year.
Some of CAN’s ISOs report being told that originations have been put on hold until January. A source with close knowledge of the company however, said that’s not correct. The Financial Times reported though that CAN had paused new business until the end of the year and would only be servicing current customers. And they might indeed need time to upgrade their systems since American Banker cited an unnamed source that said “problems arose when CAN Capital used old systems, which were not designed to require daily repayments, to collect money owed by term loan borrowers.”
Some outsiders are not surprised by what’s going. Alex Gemici, the chief revenue officer of World Business Lenders (WBL), said that it’s an indicator that uncollateralized lending is not the panacea everyone thought it was. “What we’ve been saying all along is right there on AltFinanceDaily,” Gemici said, while directing me to the prediction they made a year ago that appears right on this website. At a December 2015 event at the Waldorf Astoria, WBL CEO Doug Naidus told a crowd comprised mostly of his company’s employees that he believed the bubble was about to burst. He doubled down on that prophecy in an interview four months ago in which he chided companies for having forsaken sound underwriting.
Is he right? In the last six months, the CEOs of Lending Club, Prosper and CAN Capital have all stepped down. Avant shed a lot of its staff. Dealstruck, Circleback Lending and Windset Capital have stopped funding. Confidence in the business side of alternative finance has also started to slip on a measurable basis before the election even happened.
“I believe companies are experiencing higher than normal losses due to a serious lack of proper underwriting practices, policies, and procedures,” said Andrew Hernandez, a managing partner at Central Diligence Group, a company that specializes in risk analysis who wasn’t commenting about any lender specifically. “As I say to people not familiar with the space, ‘putting the money out is the easy side of the business; getting it back is what proves to be the most difficult.'”
But CAN has not specifically fingered underwriting practices as the reason for their management shakeup, instead leaning towards it being a lapse in their process as the company grew. “It became clear that our business has grown and evolved faster than some of our internal processes,” they said in their statement.
The only alternative business lender funding more annually is OnDeck, a company that has garnered its fair share of criticism over its lackluster financial performance. Their stock is currently down a whopping 77% from the IPO price, but they have put on a good face for the industry they lead. The familiarity of their famous CEO and the decade in business under their belt arguably even has a calming effect on the tumultuous world of financial technology startups.
OnDeck too though, has been referenced in the context of bursting bubbles. Less than two years ago, RapidAdvance chairman Jeremy Brown voiced concern that the industry was heading into unsustainable territory, even going so far as to call out OnDeck by name. “When I see some of the business practices, offers, terms and other aspects of our business today, I am worried,” he wrote. “I am worried because I believe that 2008 has been too quickly forgotten, and very few, other than those of us that were on the front lines on the funding side at that time, appreciate what happened to outstanding portfolios at that time when average duration was 6 months and no deals were written over 8 months.”
For risk experts like Hernandez of Central Diligence Group, he thinks the newness of everything has been part of the problem. “I believe [funding companies] have faced a big hurdle in acquiring talent,” he said while adding that funding companies can be forced to hire underwriters with no prior knowledge of the product just to keep up with the growth.
While still very little is known about what exactly happened at CAN Capital, most people that AltFinanceDaily spoke with were shocked that anything could happen there at all. “It’s insane,” said the chief executive of another competitor who wished to remain anonymous. “This is CAN we’re talking about.”
A sign of the times?
Some Alternative Funders See Pot As Next Big Market Opportunity
October 17, 2016
For some funders, marijuana is not just about sewing their wild oats. Rather, they see the business potential of being early to what’s expected to be a highly profitable and long-lasting party.
Indeed, for the right type of funder, doling out money to marijuana-related businesses is a promising market—certainly in the short term because these companies are so capital-starved. Because marijuana is still classified by the feds as an illegal drug, many related businesses can’t even get a bank account much less access to bank loans or more traditional funding. Many alternative funders are also unwilling to lend to marijuana-related businesses, which has left a significant void that’s beginning to be filled by opportunistic private equity investors, venture capitalists and others.
Meanwhile, rapidly shifting public opinion and state-centered initiatives bode well for what many estimate is a multi-billion dollar market. Indeed, industry watchers say marijuana funding will eventually be an even stronger niche than lending to alcohol producers, tobacco companies or pharmaceuticals because of all the ancillary business opportunities related to medical marijuana use.
“I think it’s probably the biggest opportunity we’ve seen since the Internet,” says Steve Gormley, managing partner and chief executive at Seventh Point LLC, a Norwalk, Connecticut-based private equity firm that invests in the cannabis industry. “Consumption continues to grow and demand is there,” he notes.
Despite shifting public opinion, legalized marijuana use is still quite controversial. So, all things considered, it takes a particularly thick-skinned funding company—one that has no moral objectives to marijuana and is also willing to accept a significant amount of legal, business and reputational risk—to throw its hat in the ring.
One of the biggest challenges keeping banks and many mainstream funders at bay is that cannabis remains illegal under law. Despite numerous attempts by proponents to scrap marijuana’s outlaw status, the DEA recently dealt out a significant blow by opting to maintain the status quo. This means that for the foreseeable future marijuana remains a Schedule I drug, on par with LSD and heroin, and as a result many lenders will choose to remain on the sidelines for now.
It remains promising, however, that over the past several years, the federal government has taken a more laissez-faire approach, giving individual states the authority to decide how they will deal with legalizing marijuana use. Forty-two states, the District of Columbia, and the U.S. territories of Puerto Rico and Guam have adopted laws recognizing marijuana’s medical value, according to the Marijuana Policy Project, an advocacy group. Four states—Alaska, Washington, Oregon, and Colorado—as well as the District of Columbia have gone even further. They allow the recreational use of marijuana for adults, with certain restrictions. Meanwhile, marijuana initiatives are on the November ballot in numerous states.
As these changes have percolated, forward-thinking alternative funders have been dipping their toes in the market—getting an early start on a market that’s hungrily looking for growth capital. “The last couple years there have been fewer investors than capital needed, but we believe that tide is changing,” says Morgan Paxhia, managing director and chief investor of Poseidon Asset Management LLC in San Francisco, an investment management company founded in 2013 to invest exclusively in the cannabis industry.
Paxhia says he’s starting to see more venture capitalists, lease-finance companies and private equity investors willing to provide liquidity to marijuana-based companies that are seeking to grow. The short-term cash advance marketplace, however, is not there yet. The challenge is finding funders willing to do the business with them.
“The people that are building these businesses have to always be worried about their cash. It’s not a given that they’ll get new additional investment,” Paxhia says. “Most people are quick to brush it aside. They won’t give it a minute to take a serious look at it and understand that it is already a multi-billion dollar market growing at 30 percent annualized for the next several years,”
A QUIETLY GROWING INDUSTRY
There are a number of private investors and venture capitalists who have spent the last several years researching and ramping up to invest in what they see as a goldmine of business opportunities. Many of these companies aren’t shy about publicly expressing their support for change.
“We see this as an opportunity of a lifetime to witness a societal change and we want to be a part of it,” says Paxhia who together with his sister runs a $10 million investment fund.
At the same time, there are also some alternative funders who dabble in this space and won’t discuss it publicly—partly because of the perceived stigma and partly out of concern that their financial backers won’t approve. To cover themselves, some are only willing to deal with companies that have hard assets. Often times the rates they offer are much higher than businesses in other industries with comparable financials would pay.
Andrew Vanam, founder of Rx Capital Funding LLC, an ISO in Norwalk, Connecticut, who focuses on the healthcare and medical industry, has helped a handful of few marijuana-related businesses get funding in the past few years and would love to help facilitate more deals. But he says it’s extremely difficult to find lenders that are willing to fund cannabis-related businesses as well as offer reasonable rates. Many of the files he generates in the cannabis space have incredible financials, positive cash flow, and month-on-month growth. However, lenders still treat these businesses as high-risk and offer rates so high it’s not even worth bringing back to a client. Instead, “they are taking hard money loans from private investors that put these cash advance offers to shame,” he says.
ASSESSING THE RISKS
Certainly there are risks to funding marijuana businesses. In Colorado—one of the first states to legalize the recreational use of marijuana—values are getting lofty, and people are overpaying for properties that house marijuana-related businesses, notes Glen Weinberg, a partner in Fairview Commercial Lending, a hard-money lender with offices in Atlanta and Evergreen, Colorado.
Weinberg has financed between 75 and 100 commercial real estate loans where marijuana businesses were involved, but says recently he’s shied away. “I’m not comfortable with the valuations at a lot of these marijuana properties,” he says.
Even investors who are bullish on the space urge caution. “If you’re in a [nationwide] market that is growing at about 64 percent per year, that rising tide floats all boats, but there’s a lot of risk, so you have to be careful,” says Chet Billingsley, chief executive of Mentor Capital Inc., a public operating company in Ramona, California, which acquires and provides liquidity for medical and social use cannabis companies.
Billingsley says he has learned some hard lessons through his dealings with about nine marijuana-related companies. For example, he recently won a court judgment against a company that Mentor had supplied with millions of dollars in cash and stock. The company later balked at the terms of the deal and tried to renege, but Mentor ultimately prevailed in court. Still, Billingsley says Mentor went through many unnecessary hassles and racked up $300k in legal costs over the course of its two-and-a-half-year legal battle.
Many business owners in the marijuana space started out during a period when it w as completely illegal. Often these companies march to the beat of their own drum; to protect themselves, lenders need to do more than offer a standard funding contract and hope for the best, Billingsley says.
“The contract has to be solid and it has to be explained in detail to the marijuana operator who is often not sophisticated with regard to contracts.” If you leave things open to interpretation, you’re likely to end up in court, where anything can happen, he cautions.
Companies that fund cannabis businesses say they have very extensive vetting processes—so much so that they turn away a good portion of requests. Jeffrey Howard, managing partner of Salveo Capital in Chicago, says about two-thirds of the companies that come across his desk don’t make it past the company’s initial criteria. “We see a ton of companies and business plans from companies seeking capital to raise money,” he says. “We are going to be very selective about who we invest in and how much.”
Gormley, of Seventh Point, leverages all the same resources he would if he were buying any retail or production manufacturing outfit. He does extremely invasive vetting of the individuals involved and uses private detectives to help.
It many cases it comes down to the business’s management team, according to Paxhia of Poseidon Asset Management. “All the businesses are very early-stage and most companies have a very short track record, so you have to place a greater emphasis on the people,” he says.
OPPORTUNITIES ABOUND
Despite the risks, funders that work in the marijuana space say they are filling an important need by providing capital to marijuana-related businesses. For Gormley of Seventh Point, it’s a calculated risk in an area he’s been following for quite some time. “How often do you get to be part of history, and how often do you get to participate in a burgeoning market?” he says.
Industry participants stress the many funding opportunities aside from companies that cultivate and distribute the plant. Indeed, there are many ancillary businesses that provide products and services geared towards patients and cannabis users without having anything to do with the actual plant.
Howard of Salveo Capital, says his company is gearing up to provide private equity and venture capital to several marijuana-related businesses through its Salveo Fund I and will only make select investments into companies that “touch the plant.” The goal is to eventually have $25 million of committed capital to invest in multiple early-stage companies that offer ancillary products and services to the marijuana industry. “We think there’s more exciting opportunities than ‘touch the plant’ investments,” he says.
Crowdfunding platforms are another avenue for companies in the marijuana space. This type of funding hasn’t yet been utilized to its full potential, industry watchers say.
Eaze Solutions, a San Francisco-based provider of technology that optimizes medical marijuana delivery, is one example of a company that turned to crowdfunding. It raised part of a $1.5 million infusion to fund its expansion via the crowdfunding site AngelList in 2014. Loto Labs, in Redwood City, California, is another example. It raised more than $220k via Indiegogo to fund production of its Evoke vaporizer. There’s also CannaFundr, an online investment marketplace for companies in the cannabis industry to gain access to capital.
Seth Yakatan, co-founder of Katan Associates in Hermosa Beach, California, suggests that crowdfunding will become more of an option for certain types of cannabis based companies, specifically those that aren’t as closely tied to the actual production of the plant. “Until federal regulations change, it’s going to be hard to raise money for an entity where you are actively engaged in the cultivation, distribution or sales of a product that’s federally illegal,” says Yakatan, whose company invests in and advises cannabis-related companies that have a biotech or pharmaceutical orientation.
Because laws on legalized marijuana are still in limbo, industry watchers say the market is still many years away from being mainstream. “Public perception will be similar to alcohol in 10 years from now,” predicts Weinberg of Fairview Commercial Lending, adding that he expects banks to enter the funding arena in five to 10 years.
In the meantime, alternative funders who can stomach risk continue to pave the path for others. Howard of Salveo Capital expects private equity investors, venture capitalists and other alternative players to continue playing a big role in getting the nascent industry off the ground.
“I strongly believe that in the interim there’s a significant advantage for players like us to be funding and to be in on the ground floor of this industry before it changes,” Howard says.
Indeed, many alternative funders believe the potential upside significantly outweighs possible negative consequences. “The perceived risk at this point is far greater than the actual risk,” says Paxhia of Poseidon Asset Management.
Got a Ferrari or Fine Art? If So, You May Have More Leverage Than You Think
December 23, 2015If you own a Ferrari, fine art or expensive wine, getting access to capital may be easier than you think.
Although it’s still a niche market, luxury asset-backed lending has been gaining traction lately, particularly with small and mid-size business owners. These executives are enticed by the ability to use certain high-priced valuables as a means of getting large amounts of cash quickly and often at a lower cost than other funding sources.
“People are increasingly learning that this is another option. It’s not for everybody, but it’s another option,” says Tom McDermott, chief commercial officer at Borro, a New York-based asset-backed lender that deals exclusively with luxury asset-based loans.
It’s notable that luxury asset-based lending by alternative funders is gaining ground at a time when unsecured money is so easy to come by. There are several reasons business owners are attracted to the idea of leveraging their valuables to attain cash. First off, they don’t need stellar credit or a proven track record in business to qualify. Secondly, they can typically get larger sums of money and at better rates than they might through other financing channels. A third reason is that many of them have already tapped out other funding options and leveraging their assets allows them to obtain additional funds quickly.
“A lot of small business owners have assets, so it’s something else for them to utilize in getting access to attractive small business financing,” says Steven Mandis, chairman of Kalamata Capital LLC, an alternative finance company in Bethesda, Maryland.
Here’s how the process typically works at most luxury asset-based lenders. Say a business owner wants to borrow against a high-priced item such as a top-of-the-line car, fine art or wine, jewelry or a luxury watch. First the luxury-based lender hires a third-party to appraise the item. Generally, depending on the asset and its marketability, lenders will lend 50 percent to 70 percent of the asset’s value. If the owner moves forward, the item or items are held and insured in a lender’s secure storage area until the loan is paid back. Default rates on these types of loans are relatively low, lenders say.
“People don’t want to put their house at risk when they need capital,” says McDermott of Borro. “They’d rather lose the Maserati or a lovely piece of art than the house,” he says. And even then, it doesn’t happen very often, he says. Borro clients only default on their loans about 8 percent of the time, McDermott says.
Barriers to Entry
To be certain, luxury-based lending is not a business that every funder wants to be in. For starters, there are a lot of regulatory hoops a funder has to jump through in order to do it. You need a pawnbroker’s license and a second-hand dealer license. You also need a secure facility or facilities to house the collateral, have secure ways of transporting the valuables, and you need to carry large amounts of insurance for the transfer of the items as well as during the holding period.
Indeed, keeping the items secure is critical. PledgeCap, a Lynbrook, New York-based funder, says on its website that it uses “cutting edge technology, top of the line bank vaults and armed guards” to keep a customer’s items safe. What’s more, all items are insured during transit and storage. All items are shipped through secured and insured FedEx shipping vendors for pickups and drop-offs.
“There aren’t a lot of players in the market because there are a lot of operational and legal requirements to adhere to. There are a lot of barriers to entry,” says Gene Ayzenberg, the company’s chief operating officer.
Putting Things in Perspective
Luxury asset-based lending is only a small subset of the overall asset-based lending market, which as a whole has been gaining ground in the past few years. After getting badly burned in the most recent recession, many lenders have come to appreciate the security blanket that collateral offers. According to the Commercial Finance Association’s quarterly Asset Based Lending Index, U.S. ABL loan commitments rose 7.2 percent in the second quarter, compared with the year-earlier period. In addition, new ABL credit commitments were 6.3% higher than the same period a year ago.
“Asset-based lending at one time used to be the lending of last resort. Now it’s the type of lending that it is accepted globally,” says Donald Clarke, president of Asset Based Lending Consultants Inc., a Hollywood, Florida-based company that provides due diligence services for lenders. “Today, everybody wants an asset.”
There’s not a lot of public data to gauge the size of the luxury market within the broader asset-based lending market. But a 2014 report that focuses on art lending gives more perspective to at least one facet of luxury asset-based lending.
Thirty six percent of the private banks polled said they offer art lending and art financing services using art and collectibles as collateral. That’s up from 27 percent in 2012 and 22 percent in 2011, according to the report by consulting firm Deloitte and ArtBanc, a company that provides art sales alternatives, valuations and collections management services.
Meanwhile, 40 percent of private banks said this would be a strategic focus in the coming 12 months, up considerably from the 13 percent who named this as a priority in 2012.
These market changes are likely driven by client demand. The Deloitte/ArtBanc survey found that 48 percent of establishes art collectors polled said they would be interested in using their art collection as collateral for a loan, up from 41 percent in 2012.
Many big banks won’t touch asset-based lending deals unless they are worth north of $5 million. Some community banks will do smaller deals, but many don’t have the necessary infrastructure or skill sets, explains Clarke, of Asset Based Lending Consultants. This, of course, leaves an opening for alternative funders to capture market share.
Luxury asset-based lending expected to experience growth
Some lenders say they expect demand for luxury asset-based loans to continue to increase over time as more people accumulate big-ticket items and they become more aware that they can satisfy their capital needs by leveraging those assets. “A lot of times they don’t even know they have this option available to them,” says Ayzenberg of PledgeCap.
He says most of his company’s customers are small and mid-size business owners. Often they have temporary cash flow issues, but bank loans aren’t necessarily an option for them for any number of reasons. For instance, some may have bad credit. Others may have excellent credit but not enough of a business track record to qualify for a bank loan. Others may not have the cash flow to secure the amount of money they need, or they may need the money very quickly. Asset-based lenders can generally make the money available within a day, whereas bank loans require a lot of paperwork and can take months to obtain.
Mandis, of Kalamata Capital, says his company has seen an increased willingness by business owners to put up their luxury assets as collateral in order to get larger amounts of money at more favorable terms. Many times business owners have a high-priced asset that they don’t want to sell and pay a tax or can’t easily unload within a short-time frame. By borrowing against the luxury asset, they will get the capital to take advantage of a short-term opportunity and make an attractive return quickly without having to worry about finding a buyer or paying taxes on the sale of the asset, he explains.
Certainly luxury asset-based lending is not for every customer. Not only do you have to have a valuable asset to be used as collateral, but you also have to be willing to part with the item while the loan is outstanding. The risk of default and not getting the item back may also be a barrier for some people.
“I would be very hesitant to put up my wife’s diamond ring for my business. I don’t think it’s typically someone’s first choice,” says Ami Kassar, chief executive and founder of Multifunding LLC, a company in Ambler, Pennsylvania that helps small businesses find the best loan for their business. He remembers considering this option for a client only once in the past several years and the client ultimately chose another funding source.
But companies that focus on luxury asset-based lending say there is a viable market for their services that will continue to grow as more people hear about it and use it successfully to fulfill their funding needs. People have been taking their small items to pawn shops for many years. Working with a licensed lender to leverage their larger and often more expensive items gives them an option they may not have had previously. “You can’t just drive a tractor into a local pawnshop and say, ‘Here just put this in your safe,’” says Ayzenberg of PledgeCap.
Also, unlike pawn shops, luxury asset-based lenders say they aren’t looking to sell the items to make a quick buck and will only sell the item as a last resort if a customer defaults and they can’t reach agreeable terms. “We want them to keep their items,” says Ayzenberg whose company has been in business since 2013. For every 100 loans, there are only a small percentage of customers that default and lose the items, he says.
Every lender runs their business slightly different. At Borro, for example, loans typically range between $20,000 and $10 million and span in time frame from three months to three years. Rates start in the mid-teens and are based on the size of the loan, the time frame and how easy the asset would be to sell. In order to work with Borro, the asset typically has to be worth more than around $40,000, McDermott says.
Borro, which has been in business since 2009, deals with customers directly. But it also gets a good number of referrals from other lenders. Let’s say a customer needs $500,000 and a particular lender can only offer a maximum of $350,000. That lender might refer the client to Borro, which kicks in $150,000 based on the value of a leveraged asset. The referring company gets a commission based on the loan value and doesn’t lose the whole deal. “It’s a way to keep your customers tied in with you,” McDermott says, adding that Borro has no intention of getting into other types of lending. “We complement each other. We don’t compete.”
PledgeCap also focuses exclusively on asset-based lending. The company typically funds loans between $1,000 and $5 million. The length of each loan is four months. Customers don’t have to pay every month, though most do. For every month the loan is outstanding customers pay a rate of 3 percent on average. Other fees, payable at the end of the loan, are assessed based on costs PledgeCap incurs and depend on factors such as the cost of insurance, the appraisal fee and the cost of transporting the item to the secure facility.
By contrast, Kalamata Capital, which has been in business since 2013, offers asset-backed loans in connection with several other small business financing options—such as working capital loans, SBA loans, lines of credit, merchant cash advance and invoice factoring—to give customers more flexibility in terms of rates.
In Kalamata’s case, it will evaluate the cash flow and other assets of a small business for financing options. Kalamata then combines both the amount it would lend against an asset and the amount it would lend to the small business, possibly giving the business a lower rate—and more options—in the process.
While it’s not a type of funding that works for everyone, Mandis, the chairman of Kalamata, expects to see continued growth in this area. “I don’t think the loan market for luxury assets is as large as many of the traditional small business finance areas, but it is something that can be helpful to small business owners,” he says.
CAN Capital: Beyond Hyperbole
December 11, 2015
It’s usually risky to say “first,” “largest” or “best,” but CAN Capital invites those superlatives and more.
Asked whether the company’s the biggest in the alternative funding business, CEO Dan DeMeo hedges only a little with qualifiers like “might” or “probably” before proudly announcing that the company has provided access to more than $5.5 billion in working capital through 163,000 fundings to merchants operating in over 540 different kinds of businesses.
Glenn Goldman, the company’s CEO from 2001 to 2013 and now Credibly’s chief executive, doesn’t mince words about his former employer when he calls CAN Capital the biggest and most profitable small business alternative finance company in the U.S.
Cofounder and Chairman Gary Johnson proclaims without hesitation that CAN Capital was the first alternative small business finance company. His wife and cofounder, Barbara Johnson, came up with the idea of the Merchant Cash Advance in 1998 when she had trouble raising funds to promote her business, he said.
CAN Capital developed the first platform to split card receipts between the merchant and funder, and it gave birth to the idea of daily remittances, Johnson continued. Within a few years of its founding the company was turning a profit, another first in alternative finance, he claimed.
The innovation continued from there, according to Andrea L. Petro, executive vice president and division manager of Lender Finance, a division of Wells Fargo Capital Finance. She cited a couple of possible firsts she’s witnessed in her dealings with CAN Capital.
When CAN Capital received a loan from Wells Fargo in 2003, it may have been the first sizeable placement in the alternative finance industry by a major traditional financial institution, Petro said. In 2010, CAN Capital was among the first alternative funders to offer direct loans, she noted.
Petro stopped short of characterizing CAN Capital as the best in the alternative finance business, but she praised the company’s management and lauded its systems for underwriting and monitoring funding. “They continually upgrade their systems, upgrade their software, upgrade their people,” she said.
Calling CAN Capital one of the best comes naturally to Kevin Efrusy, a partner at Accel Partners and a CAN Capital board member. Accel saw opportunity in alternative finance because banks were reluctant to lend at the same time that an explosion of data on small businesses was informing the underwriting process. When Accel sought a position in the industry, it contacted CAN Capital, he said.
“Frankly, CAN Capital didn’t need or want our money,” Efrusy said. “We approached them.” Five years ago, Accel convinced CAN Capital that additional resources could help the company grow, and it bought a stake in the company.
With so many extolling the virtues of CAN Capital, AltFinanceDaily asked DeMeo for a look at the thinking that underlies the success.
PLOTTING STRATEGY
CAN Capital pursues a strategy that DeMeo visualizes as a honeycomb. In the center cell, he places the objective of “helping small businesses succeed.” The compartmental element above that provides a place for the goal of serving as “the preferred provider of financial solutions to small business,” he said. The company’s cultural values, summarized as “Care, Dare and Deliver,” reside in the compartment below the center cell as table stake underpinnings, he added.
DeMeo also describes the company as driven by four strategic planks: “1) Expand the market, 2) broaden the product set, 3) deepen relationships with customers, and 4) achieve operating excellence,” he said.
What does success look like to the company? To DeMeo, it’s dramatic growth in the number of customers, resulting in increased revenue, a more valuable company and better career opportunities. “Digital automation and customer experience are at the center of those efforts,” he said.
CAN Capital operates with a “huge appetite for ‘test and learn,’” according to DeMeo. “That’s how we keep innovation alive,” he said.
And the result of all that? The company has increased fundings by 29 percent (CAGR) and revenue by 24 percent (CAGR), with corresponding growth in earnings, DeMeo said. It has also grown its digital business by 600 percent since 2014, he noted.
AT THE WHEEL
DeMeo, the man at the top of CAN Capital, joined the company in 2010 as chief financial officer and became CEO early in 2013. He was previously CFO at 1st Financial Bank, and also served as CFO for JP Morgan Chase’s consumer and small business unit. DeMeo also was chief marketing officer and ran business development head for GE Capital’s consumer card unit. His career began at Citibank, where he held senior roles in marketing and customer analytics.
“I was very fortunate to work for some pedigree companies earlier in my career,” DeMeo said. “Those companies emphasized market based training and development, and I worked with very smart and hardworking people. I also had great experience in unsecured lending.” His formative years left him with great appreciation for “behavioral analytics and the quantitative, information-based approach to business finance.”
Experience convinced him, as a CEO, the importance of attention to the balance sheet and income statement. It’s vital to combine that with innovation and growth orientation, DeMeo said. He seeks to lead, inspire and motivate employees, he emphasized.
DeMeo grew up in Atlantic City, NJ, with parents who valued hard work, education and maximizing opportunity. His wife and three children have supported him in his career despite the long hours and dedication necessary for success.
At CAN Capital DeMeo has faced the challenge of managing the business through internal and external cycles. Running the company often comes down to balancing what customers want with what makes economic sense, he said. “Pigs eat, and hogs get slaughtered,” he maintained. “You can’t get too greedy.”
DeMeo runs the company without the help of a President or Chief Operating Officer. While DeMeo serves as the public face of the company, he also devotes himself to every aspect of operations, he said.
WHAT’S IN A NAME?
Although CAN Capital’s drive for technological innovation and its measured approach to fundings have remained constant, the company has renamed itself several times to fit changing times.
In November 2013, it rebranded itself publicly as CAN Capital, and the company now provides access to business loans through CAN Capital Asset Servicing Inc, and Merchant Cash Advances through CAN Capital Merchant Services.
With the CAN Capital rebranding, it dropped the umbrella name of Capital Access Network. At the same time, it retired the AdvanceMe, New Logic Business Loans and CapTap names.
Most of the company’s old names applied to products or distribution channels, DeMeo said. The company had added them when it presented a new product, such as loans, or introduced a way of going to market, like end-to-end digital technology.
Consolidating the names reflected the company’s decision to put its direct marketing efforts on equal footing with business generated by partner companies, DeMeo said. Having just one name would result in a more efficient approach to building a stronger brand, he noted.
“The opportunity is to create one brand, multiple products and omni channel distribution under one company,” he said. “For a company our size, it would be hard to create brand awareness if you had to put significant promotional support behind every one of those sub brands.”
CAN Connect is a sub-brand that has survived. “That’s not a product name or distribution channel name,” DeMeo said. “It’s the technology suite we use to connect with partners so that we can exchange information in real time.”
CAN Connect is a way to speed up the process and eliminate friction for customers and partners. For example, a partner is able to link their CRM directly into CAN Capital’s decision engine, eliminating manual steps in submitting and generating offers. For partners with a customer-facing portal, CAN Connect enables an offer to be made available in real time to a small business owner, taking advantage of data sharing APIs to tailor the marketing message to fit the prospective customer’s needs.
Attention to detail pays off in repeat business for CAN Capital, in DeMeo’s view. “Almost 70% of our merchants return for another contract,” he said
THE GENESIS
By all accounts, CAN Capital is a company born of necessity. Barbara Johnson, who had the brainstorm that became CAN Capital, was running four Gymboree playgroup franchises in Connecticut and needed funds to finance summertime direct marketing efforts for fall enrollment.
But her company didn’t have much in the way of assets to pledge, so banks weren’t interested in providing funds. Why, she reasoned, couldn’t she just borrow or receive an advance against the credit card receipts she knew would flow in when the kids came back in the autumn? Thus, she gave birth to an industry.
Barbara Johnson and her husband, direct marketing executive Gary Johnson, cofounded the company as Countrywide Business Alliance and put up their own money to build a computerized platform to split card revenue, Gary Johnson said.
Then they persuaded a card processor to partner with them. Once they were operating and had signed their first customer, venture capital began flowing their way to grow the business. These days, the Johnsons remain major shareholders.
“What made it an interesting concept was how huge the market potential was,” Gary Johnson said. “That’s what the attraction still is today.” Although Merchant Cash Advances may now seem commonplace, they were startling at first, he said. “When we first went out in the marketplace, everybody thought it was a crazy idea,” he noted.
The company earned patents on processing related to Merchant Cash Advances and daily remittances, Gary Johnson said. At first, the patents deterred potential competitors from entering the business, but the company was unable to defend the patents successfully in court. Rivals then entered the fray.
Just the same, the company became profitable early on through “deliberate decision-making, having the right people in place and being bigger than everybody else,” he said.
Much of the company’s early business came through firms that provide merchants with transaction services, and that remains the case today, DeMeo said. Many were placing point of sale terminals in stores and restaurants to accept credit cards, and working capital became an upsell or cross-sell, he noted.
The large base of business CAN Capital built with merchant services companies means it will always be an important channel for the company. Recently, new merchant sign-ups have come from more diverse channels, including cobranded and referral partners, and the fast-growing direct marketing channels.
From the beginning, the merchants receiving capital used it to grow their businesses, DeMeo said. “That feeds the whole economic system and creates jobs,” he said.
TODAY’S NUTS AND BOLTS
Daily remittances give CAN Capital nearly constant insight into how well customers are performing, which enables the company to discover potential issues quickly and take action. Such close monitoring also provides the company with enough information to enable funding opportunities that competitors might pass up, DeMeo said.
“The basis for our decisions is how the business performs and business-specific indicators, such as capacity and consistency, versus looking at the personal credit history of the business owner,” DeMeo noted.
Having that data also helps the company create models it can use to serve other businesses in the same classification, DeMeo said. “It’s poured into machine learning for future decisioning,” he maintained. “It’s a cool concept, right?”
The company’s 450 or so employees work in several locations. Three hundred of the total are attached to the office in Kennesaw, GA, the region where the company first set up operations. To this day, that’s where the company conducts most of its business, DeMeo said.
About 25 employees work in technology and operating support in offices in Salt Lake City because the area offers a strong talent pool and provides the company with additional time zone coverage, DeMeo said.
Some of the company’s former executives came from Western Union, which had a presence in Costa Rica. About a hundred employees are now stationed there, working on technology, maintenance and development. That location also houses back-office redundancy for the company, too.
On Manhattan’s 14th Street, the company has 30 or so employees, who include digital engineers, marketing and business development teams, the human resources lead, the chief financial officer, the chief legal officer, and the chief executive officer. The company moved its executive office there from Scarsdale, NY to take advantage of the digital boom, he said, adding that, “Google’s right around the corner.”
Compared with most companies in alternative finance, CAN Capital has little venture capital as part of its ownership structure, DeMeo said. “It’s a self-sustaining business. We’re not forced to approach the capital market to cover our burn rate. We’re cash-flow positive.” Competitors have to borrow to fund their growth, he noted.
The company has taken on infusions of debt financing, not equity financing. In the latter, a company is selling part of itself, DeMeo said. “We raised $650 million from a syndicate with five new banks and 10 banks in total.” The company completed a securitization of $200 million the year before, he said.
CAN Capital recently introduced the new TrakLoan product that has no fixed maturity date, with daily payments that are based on a fixed percentage of card receipts. This way, payments ebb and flow with the merchant’s card sales. CAN Capital is also testing “bank-like” installment loans of as much as $500,000 with a payback period of up to four years.
And there’s nowhere to go but up, in the view of CAN Capital executives. With a market of 28 million small American merchants and penetration of between 5 and 10 percent, they see plenty of potential to keep earning superlatives.
