CAN Capital, a subprime business lender that recently laid off scores of employees after recording higher-than-expected losses, has received a much-needed infusion of cash.
The New York-based company, which had stopped funding new loans, said in a press release Thursday that it has been recapitalized by Varadero Capital, an asset management firm that focuses on specialized credit. Financial terms of the deal were not disclosed.
CAN Capital, which was founded in 1998, made its name as a pioneer of the merchant cash advance, an expensive form of business financing that critics often compare to payday lending. Companies that use the product make daily payments based on a percentage of their daily revenue.
Following the recapitalization, CAN Capital said that it will immediately begin funding existing customers that are eligible for a renewal, and will also start originating new loans.
“We’re thrilled to leverage Varadero Capital’s specialty financing expertise and capital,” CAN Capital CEO Parris Sanz said in a press release.
CAN Capital’s problems began surfacing late last year, when the privately held firm’s longtime CEO was replaced, and new business was halted.
The New York-based company attributed its woes to
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Lenders frequently get exposed to losses when brokers, in a practice known as loan stacking, return to existing borrowers and offer them new loans from different creditors that are secured by the same assets.
CAN Capital did not say Thursday whether it has cut off certain brokers. But the company said that it will work with a “select” number of “sales partners,” a category that includes brokers.
“We have developed strategic relationships with sales partners over the past 19 years that have proven traction in serving the small-business community,” Sanz said in the press release. “We’re committed to continuing and growing those relationships as we move forward with the next phase of the company and re-engage with our customers.”
