Benny Ganatra is watching closely how the pandemic-fueled recession is affecting the ability of Americans to pay their credit card debt.
It’s not a pretty picture as the government’s initial aid to the unemployed may end in the coming months.
“2021 will be even more people needing help—that will increase tenfold,” said Ganatra, chief executive and founder of Americor Funding Inc.
“Right now, creditors are deferring payment. What will happen at the end of the year and 2021 is that people cannot defer their payments forever.”
It likely means even more business for Irvine-based Americor, which helps consumers resolve their debt problems.
Business is already brisk for Americor, which has exploded in sales in the past two years.
The company’s revenue increased 492% to $87.5 million from the same period two years ago. It’s the highest sales growth on the Business Journal’s annual list of companies with sales in the $10 million to $99.9 million range (see list, page 30).
It’s also one of the fastest growers nationwide. Inc. magazine ranked it No. 24 on its list of the 5,000 fastest-growing firms, based on a three-year growth rate.
The company said it has helped relieve its customers of $1 billion in debt.
Ganatra is prepping for even more growth at Americor, which currently has 550 employees. Ganatra’s original goal this year was to boost his employee count to 800, a number’s he’s trimmed to 600 to 700. In 2021, he wants to add another 300 people.
Some will join his customer service operation in Idaho, where the company broke ground on a new building last year. Most will be based in his Irvine office in areas such as sales, technology and underwriting.
“Right now, everything is based on the stimulus,” Ganatra said. “Once that stops, there will be a need to help people.”
Ganatra, who was born in Orange County to parents from Kenya, grew up in Laguna Hills and graduated in 2001 from San Diego State University with a degree in finance and a minor in psychology.
His first jobs were as a loan officer in mortgage companies.
“At that time, I was 23 or 24 and I loved doing it,” Ganatra said during an interview at his sixth-floor office at the Irvine Towers office complex, near John Wayne Airport.
“I was making like $10,000 a month and still (lived) at my parents’ house.”
When his paychecks started bouncing, he knew the company was in trouble. He decided to start his own mortgage company, which he opened across the street from his old firm.
“This was a blessing in disguise because it made me start sooner than later,” he recalled. “I only had 12 months experience in the industry. Everyone else’s checks were bouncing, so it was great recruiting for me.”
He built the Equity Financial Group to about 50 employees and in July 2007, it recorded its best month ever.
Then the 2008 financial crisis hit, wiping out many in the mortgage industry. He shut down his own firm and laid off the employees.
“I never really scaled the company. We were conservative in the loans we did. When we went out of business, we didn’t lose money. We just closed the doors. The business shut down because there were no more loans to be made. The company wasn’t insolvent.”
He had two options: take a year off or start another business. Since he’s accustomed to waking at 5 a.m. daily and being in his office by 6 a.m., he started looking around.
“I had laid everyone off, so I was in the office by myself. The printer guy came in and I asked him what companies were busy. He told me about a company in the debt consolidation business.”
Looking back on it, Ganatra said the mortgage industry is “very volatile” with many factors out of management’s control such as interest rates, making the debt consolidation industry more intriguing.
However, a partner decided to pull out and Ganatra put the debt consolidation business on hold while starting another company, BrandRep LLC, a provider of digital marketing services for 18,000 small and medium size businesses. He built it to 150 employees before selling it in 2018 to Millpond Equity Partners of Boca Raton, Fla.
“Benny has built an amazingly talented team of professionals, a solid position in the SMB market and a high-performance proprietary customer relationship management (CRM) technology that will play a key role in BrandRep’s continued success,” Cary Burch, who took over as executive chairman, said in a statement at the time of the sale. “We are pleased to announce the sale, which demonstrates BrandRep’s value to the market.”
Ganatra used the capital to invest $30 million into Americor so as to scale the business through an organic technology platform that his webpage calls “the next generation debt relief.”
“We’ve built all of our technology from the ground up,” he said. “It allows our staff to be more efficient at their jobs and operate a larger volume of clients.”
Debt consolidation is an industry that hasn’t had a great reputation because some companies would charge upfront fees and higher interest rates that would make it more difficult for consumers to get out of debt.
Ganatra said a big change came in 2010 when federal law forbade companies from charging upfront fees before resolving their consumers’ debt.
It’s still an industry where problems still may not always get resolved for the client. For example, if someone owes $30,000, a competitor like Lendingclub.com might give $32,000, Ganatra said.
“We say that’s putting a client in a worse position,” Ganatra said. “That client will go into bankruptcy. We figure out a better path for that client to keep them from borrowing more and more.”
The clients that seek Americor don’t want to go into bankruptcy and don’t want to borrow more money to get out of their situation, he said.
“Our product is a lot different. We put the client in a better position by ultimately reducing his debt.”
One of its biggest competitors is San Mateo-based Freedom Financial Network LLC, which began in 2002.
Americor generates revenue in two ways.
First, a typical client has about $30,000 in debt. Americor talks to the clients’ creditors to reduce that amount to typically half, or $15,000. Americor makes money by negotiating with the creditors and charging a fee on top of that.
Why do credit card companies accept the haircut?
“If a client hasn’t paid for 90 days, the creditors know the chances of collecting that debt are rare,” he said. By accepting a reduced amount, “it’s a win-win situation for the creditors and the clients.”
Then Americor takes the remaining $15,000 owed and introduces an installment loan to the client rather than a more expensive revolving loan.
Ganatra said the key is lending to the right clients, pointing out its overall default rate is 3%. Americor isn’t focused on the person’s credit score but rather his or her payment history.
“After six to 12 months, we know the client’s habits and we feel comfortable giving this client a loan,” he said. “Our purpose is to get the client out of debt and into a better position.”
For now, the profit margins are relatively low because of the need to scale and develop technology, he said.
He’s considering an initial public offering in a few years. Ganatra, who has no outside investors, said he’s been approached by plenty of private equity funds that want to get involved.
“I’m not interested in selling a piece,” he said. “I love what I’m doing and I’ve just gotten started.”