Shares of Gap Inc. jumped after hours on Thursday after the clothing retailer reported fourth-quarter profit and sales that beat expectations, helped by yet another same-store sales gain at Old Navy and steady sales trends at its namesake stores.
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With banks facing higher interest rates that bite into economic activity, not to mention their need to stockpile money for bad debts or unpaid credit-card bills, it has been harder to get a loan in the past year or so.
At least one startup sees an opportunity.
The founders of financial-technology company Nectar told MarketWatch this year’s market conditions are fueling its growth at a time when banks remain more selective with their loans.
“It’s a good time to be in this business because access to capital has dried up,” said Derrick Barker, 36, who co-founded Nectar with his wife, Brittany Mosely, 35.
Also read: New York Community Bancorp led increase in loan-loss reserves by big regional banks as lenders brace for potential downturn
With 92 loan deals and counting since its launch in 2021, Nectar now employs 12 people as a lender to real-estate investors and owners who often build housing for Black Americans and other people of color.
It’s worked on more than $500 million in transactions including apartments, multi-family buildings, single-family rentals, hospitality properties, assisted living facilities and commercial real estate.
Nectar’s success thus far illustrates the alternative ways capital is being provided to individuals and businesses even as banks grow more conservative.
The growth of private credit has pivoted to meet some of this demand, but fintechs such as Nectar are also ramping up.
To be sure, others offer quicker routes to capital than many banks. Capchase Inc., for example, specializes in loans based on annual recurring revenue for software-as-a-service companies in the business-to-business space.
Pipe Technologies Inc. operates a trading platform to connect institutional investors and companies with recurring revenue streams to get financing for growth.
For its part, Nectar saw revenue growth of 750% between 2022 and 2023 by focusing on an underserved part of the market, namely people with $50 million to $500 million in assets, typically in real estate.
“The supply chain for capital is … old, outdated and broken, specifically for people who aren’t large institutions,” Barker told MarketWatch. “We want to fix that. We can provide to those people who are medium-size and smaller who are making an impact with the capital they need, so they can build the housing that needs to be built.”
Nectar’s mezzanine debt deals focus on transactions of less than $5 million, much smaller than the $20 million cutoff from many major banks. The company uses existing assets and cash flow generated by rent and other payments as collateral for the loan. This structure allows real-estate owners to retain more of the equity in their own property than other types of financing.
“We can come in and look at their stabilized cash flow and their properties so they can keep doing the important work that they’re doing, which is creating affordable housing … across the country,” Barker said.
Barker and Mosely met while studying at Harvard University, got married in 2015 and went into different careers. She headed for the retail sector, while Barker worked as a bond trader for Goldman Sachs Group Inc.
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During and after his time at Goldman Sachs, Barker built up his own $450 million real-estate portfolio by buying abandoned apartments and rehabilitating them.
Barker started working to solve the challenge of coming up with working capital and liquidity for real-estate properties with low leverage and positive cash flow, which is the core business of Nectar.
For her part, Mosely had seen property owners giving up equity to investors — the limited partners, or LPs, in a real-estate private-equity fund — to get capital.
“For me, it was about really being on the front lines and doing all the work that it took to acquire the property and actually manage the construction or the rehab and when it came time to sell, the LPs would take most of the profit,” Mosely said. “I felt there had to be a better way to grow without property owners having to give up equity — that was my drive to co-found Nectar.”
Many of Nectar’s lending deals are sub-institutional, and many of them are for housing.
These so-called Class C properties — defined as 30 years old, in fair to poor condition, and in less-desirable locations compared with Class A or Class B buildings — often house a greater proportion of Black Americans and people of color.
“They’re still the places where Black people live. If you look at the Class C apartments, they’re the apartments that more people of color are more likely to live in,” Barker said. “They’re also more likely to be owned
by smaller institutions with less access to [loans]. By providing access to capital, it helps … people who are creating housing for this part of the population.”
Nectar remains well capitalized after lining up venture-capital backing from RareBreed Ventures, J4 Ventures and Asymmetry Ventures. Nectar is also raising a private-equity real-estate fund to generate capital for deals called Nectar Fund 2, which has a $100 million target.
Nectar is able to approve financing in as little as seven days, once all underwriting due diligence has been handed in.
Nowadays, Nectar’s portfolio has a combined leverage below 60%. The company maintains more than 2x coverage for every $1 that’s borrowed.
“We do some detailed and deep underwriting. We get to focus on the cream of the crop,” Barker said. “Just because the loans are smaller doesn’t mean they’re not good.”
Also read: Why small-business loans are a win-win for women-run startups and smaller banks
My immigrant Latino parents never spoke to me about money. Their emphasis was always on education. I had to go to college, end of discussion. But when I got to college, I knew nothing about savings accounts or high-interest-rate credit cards or how debt can ruin your life.
I’m in my early 50s and have only recently paid off my decades of accumulated debt and started saving for retirement.
We need to learn about money and what to do with it, but the purveyors of such wisdom are a rare commodity in Black, indigenous and people of color communities. Information about saving, investing and retirement needs to be passed down from generation to generation, according to Mark Willis, a retired Morgan Stanley financial executive.
“If you don’t have that resource of historical knowledge within the financial markets, you’re prone to operate on whatever information you hear on the media outlets you use,” he says.
One-third of Black investors said they invested in something based on information they saw on social media, compared with 20% of white investors. According to the FTC, financial scams, including cryptocurrency schemes, cost consumers $3.8 billion last year just in the U.S., twice as much as in 2021.
Dr. Troy Callahan, a Black plastic surgeon and experienced investor, says that a lack of knowledge about financial matters contributes to the mushrooming growth in financial fraud.
“If you don’t know what you don’t know, then you don’t even know what to ask,” says Callahan, who is Chief of Plastic Surgery at Englewood Health, a teaching hospital in Englewood, New Jersey, and owner of Northern Jersey Plastic Surgery Center.
A lack of information may help explain the investment gap between Black and white investors. In 2022, 58% of Black Americans owned stocks, compared with 63% of white Americans, according to the 2022 Ariel-Schwab Black Investor Survey. Two decades earlier, a much larger percentage of Black Americans — 74% — owned stock. The peak for white investors was 86%, in 2002.
The question becomes, can people of color keep up their standard of living when they retire?
The U.S. Federal Reserve’s latest Survey on Consumer Finances showed that 57% of white families had savings in retirement accounts, compared with only 35% of Black families and 26% of Latino families.
Read: ‘We’ve really lost a decade to lip service about inequality’: World’s richest 1% captured almost two-thirds of all new wealth created in two years, report says
The problem is magnified when you factor in who has access to retirement plans. In July 2022, the AARP Public Policy Institute found that 64% of Latino workers, 53% of Black workers, and 45% of Asian-American workers lack access to an employer-provided retirement plan. That compares with just 42% of white workers.
“Growing up in the projects, there wasn’t anyone really saving or investing for retirement,” says Joanne Garce-Rodriguez, director of diversity initiatives at New York University. “It was really just surviving the month with the income you would receive either through low-wage work or public assistance. If you did have a job with a pension, that was retirement for those few. Everyone else just expected Social Security.”
The reliance on Social Security and other government programs for retirement income can differ among races and ethnicities. Historically marginalized communities may depend more on these programs due to limited employer-sponsored retirement plans and/or personal savings access.
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According to the National Academy for Social Insurance, Social Security is the sole source of income for 40% of Latinos aged 65 and over, 33% of Black Americans in that age group and 26% of Asian and Pacific Islanders; it is the sole income source for only 18% of whites.
Understanding the impact these programs have on retirement security is essential in addressing disparities.
Callahan says that having parents who were not financially savvy affected him.
“Race and ethnicity impact everything, just how you’re raised and treated in society,” he says. “Because even as a physician with higher education, we’re not taught investment or business anything. We’re taught how to care for patients, but we’re really poor businesspeople.”
The bottom line is that access to financial resources and wealth disparities are critical factors contributing to inequalities in retirement savings across races and ethnicities. Historical and systemic factors — such as limited access to high-paying jobs, educational opportunities and homeownership — have led to wealth gaps.
Plus: Unions must reckon with racial inequality and speak to ‘a more marginalized workforce,’ former U.S. labor board chair says
Studies and experts concur that financial literacy can bridge this gap, empowering individuals from all backgrounds to make informed decisions about retirement savings. Becoming financially confident and lifelong savers and investors helps create good habits that will follow people into retirement. It also helps investors discern between reliable online sources of information to make wise investment decisions.
“Many new and younger investors have never experienced market volatility as we’ve seen in the last couple years,” says Mellody Hobson, the co-CEO and president of Ariel Investments. “We have a responsibility to educate these new investors about the value of long-term investing to build wealth and achieve financial security.”
Judi Rosenthal, a financial adviser at Bernstein Private Wealth Management, also advocates the importance of being transparent with clients, “telling them how it all works…what they own, what they’re buying and selling.”
Related: Telling low-income families to budget better won’t close the racial wealth gap, Boston Fed researcher says
Trust also plays a major factor. Black Americans are less trusting of the stock market (30% vs. 23%) and financial institutions (28% vs. 18%) than white Americans, according to the Ariel-Schwab survey. This has led many Black investors to pull out of the market. Since 2020, the two main reasons Black Americans have given for not investing were lack of trust and bad investing experience.
A Black attorney, Kevonne Small, the acting chief of staff of the Office of Justice Programs in the U.S. Department of Justice, finds that her life experiences have made her heedful.
“I am super cautious and risk averse because I don’t have a ‘trust fund’ or ‘generational wealth’ to fall back on,” she says. “My investing decisions are based on my need to be financially safe. Notably, my investing decisions are tied to my career choice, which was to select a very stable, risk-averse job with the federal government.”
This is also true among Latinos. Garce’s mother and my mother each bought and rented a single-family home. They saw real estate as a more trustworthy investment than the stock market.
So, how do you get past the fear of the market and investing?
Also see: Stock buybacks spur wealth inequality and stifle innovation. Should they be banned?
It can start with open and honest conversations at home, being transparent with your loved ones about what you know — and don’t know.
Emily Kuvin, a lawyer and journalist turned jewelry designer, told her children to max out contributions in their 401(k) plans, starting with their first jobs. Garce and her husband, Danilo, split their preteen children’s allowance into spending, saving and donating. As parents, it’s important to lead by example. Explaining how you must plan for retirement is a lesson few people learn early in life.
I’m hopeful. My teenage daughter thrift shops on the day of the week students get a discount, and my husband and I got her a Greenlight Debit Card so she can learn how to spend, save and invest consciously. You can do the same.
Olga Lucia Torres is a former public defender who teaches narrative medicine at Columbia University. She also works as a patient advocate and has volunteer leadership roles within various foundations that seek to help and empower patients. Olga has been published in the New York Times, PopSugar, the New York Daily News, and various other publications on disability rights, healthcare and Latino issues.
This article is reprinted by permission from NextAvenue.org, ©2023 Twin Cities Public Television, Inc. All rights reserved.
More from Next Avenue:
A new report reveals women are vastly underrepresented in leadership positions across the cryptocurrency and blockchain industries.
The study analyzed 50 leading crypto and blockchain companies. It found only 6% of CEOs were women, while men held 94% of top executive positions.
Looking at broader leadership roles beyond CEO, men occupied 77.6% and just 22.4% by women. This highlights an imbalance despite more women reaching senior levels below CEO.
Chainalysis led in female inclusion, with women holding 46% of leadership roles. BitOasis and Coinbase followed with around 42% and 33% female leadership representation, respectively.
The report also examined crypto’s top 50 influencers on Twitter. Only 7 were women, meaning just 14% of prominent voices were female.
Layah Heilpern ranked highest for reach and engagement among women, while Ripple CEO Brad Garlinghouse was deemed the most engaging crypto influencer overall.
Developing nations saw the most equal engagement between genders in general crypto ownership. Vietnam had the smallest gap at 6 percentage points between male and female ownership. Kenya, Colombia, Indonesia, and others all saw strong involvement from women.
Over 24% of women own crypto in Vietnam – the highest proportion globally. India and the Philippines also ranked highly for overall female participation in crypto ownership.
The data indicates that while crypto is traditionally male-dominated, women increasingly adopt digital currencies, especially in emerging markets. However, work is still required to improve female inclusion across crypto’s upper echelons.
The post Women hold just 6% of crypto CEO roles highlighting gap in leadership – report appeared first on CryptoSlate.
Gap Inc’s new CEO Richard Dickson took over after the company reported an 8 percent drop in sales in Q2 to $3.55 billion, compared with $3.86 billion a year earlier.
Gap Inc (NYSE: GPS) shares closed Thursday trading at $9.53, down 1.24 percent from the day’s opening price. The losses were however recovered during the after-hours session with a rise of about 1.47 percent to trade around $9.67. The billion-dollar lifestyle brands company released its second quarter fiscal year 2023 financial results on August 24, which sparked mixed sentiments from the shareholders. In Q2 which ended on July 29, 2023, Gap reported adjusted earnings per share of about 34 cents compared with 9 cents expected by analysts surveyed by Refinitiv.
Notably, the company reported a revenue of about $3.55 billion during the second quarter, whereas analysts believed that Gap would release total sales of around $3.57 billion. Perhaps the most disappointing thing most shareholders resonated with was the projection of a double-digit decline in sales during the fiscal third quarter. Moreover, analysts surveyed by Refinitiv forecasted that the company would report third-quarter sales to drop by about 6.8 percent.
During the second quarter, Gap announced its net sales declined by about 8 percent to $3.55 billion on a YoY basis. Specifically, the store sales declined by about 7 percent YoY. Gap announced that it closed the second quarter with about 3,456 store locations in over 40 countries, out of which 2,592 were company-operated. Meanwhile, the company announced that its online sales decreased by about 11 percent compared to last year, but represented about 33 percent of the total net sales during the second quarter.
The company announced an operating income of about $106 million and an adjusted net income of approximately $127 million during the second quarter. Nonetheless, the company urged investors to remain cautious with the mixed economic outlook.
“We are pleased to deliver meaningful operating margin expansion and strong free cash flow during the second quarter driven by modest market share gains, our significantly improved inventory position, and our actions to transform the company’s operating model and structure,” said Katrina O’Connell, Executive Vice President and Chief Financial Officer, Gap Inc. “While we are encouraged by our near- term progress, we remain mindful of the mixed economic and consumer environment in which we are operating and continue to plan the business prudently.”
Forward, Gap sets images that the third quarter net sales will decline in the low double-digit range compared to last year’s net sales of about $4.04 billion. Additionally, the company anticipates that fiscal 2023 net sales could decrease in the mid-single digit range compared to last year’s net sales of $15.6 billion.
Read other business news on Coinspeaker.
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