Enova Killed Its Bank Deal — And Small Businesses Are Better Off for It

By Richard McKellar, Founder of My Commercial Funding

I've been in the business funding industry since 2011. I've watched fintech lenders come and go, I've watched banks tighten and loosen credit, and I've watched small business owners get caught in the middle of every shift. This week, something happened that most people outside our industry missed — but it's one of the most important developments for small business borrowers in years.

Enova International — the company that owns OnDeck, Headway Capital, CashNetUSA, and NetCredit — officially killed its $369 million deal to acquire Grasshopper Bank. The deal would have made Enova a bank holding company. It's dead now.

And honestly? That's good news for small business owners.

What Actually Happened

Enova announced Monday evening that it was pulling its applications with the Office of the Comptroller of the Currency and the Federal Reserve. Those applications were tied to the acquisition of Grasshopper Bancorp, the parent of digital-first Grasshopper Bank, announced last December for $369 million.

CEO Steve Cunningham put out a statement arguing that bank regulatory guidelines haven't kept up with how consumers and small businesses access credit, and that the process had become "susceptible to political pressure and outside advocacy." He closed by saying Enova's future growth doesn't depend on becoming a bank.

The market disagreed. Enova's stock dropped 25% in the first trading session after the announcement — wiping out over a billion dollars in market value in a single day. Shares fell from $226.72 to $173.61, erasing roughly $1.2 billion. That's what Wall Street thinks a bank charter is worth.

Why This Deal Would Have Hurt Small Businesses

Here's what the press releases and CEO statements don't spell out: if Enova had become a bank, small business borrowers would have been worse off. Here's why.

1. Bypassing State Interest Rate Caps

This is the big one. Currently, Enova charges up to 99.99% APR through NetCredit and up to 299% APR through CashNetUSA. Those rates are prohibited in many states. Twenty state attorneys general wrote to the Fed, the OCC, and the FDIC in July to say exactly this: they view certain bank-partnership structures as rate-cap circumvention, and they wanted Enova's application denied.

If Enova had gotten a national bank charter, federal preemption would have let it charge those rates in every state — including the ones that currently protect borrowers. The Center for Responsible Lending, the NAACP Legal Defense Fund, and the National Consumer Law Center all opposed the deal for the same reason: a national bank charter would have legally greenlighted triple-digit APR lending nationwide.

Now think about what that means for a small business owner. If your lender can charge 100%+ APR and there's no state regulator who can stop it, your negotiating position collapses. Right now, state interest rate caps force lenders to compete on terms, not just on speed and accessibility. Remove that constraint and the playing field tilts hard against borrowers.

2. Cheap Deposits Would Have Created an Unfair Advantage

Banks fund themselves with customer deposits — the cheapest form of capital in financial services. Non-bank lenders like Enova fund through wholesale markets, securitizations, and institutional investors. That's more expensive, and it naturally keeps pricing in check because the lender has to earn a spread over higher funding costs.

If Enova had become a bank, it would have had access to Grasshopper's deposit base. Suddenly, a company that charges some of the highest rates in the industry would also have one of the cheapest funding costs. That's a dangerous combination. It would have let Enova undercut community banks and credit unions on small business lending while still charging borrowers sky-high rates.

Community banks and credit unions — the institutions that actually serve small businesses in local markets — would have been competing against a well-funded fintech with a regulatory moat and triple-digit rate permission. That's not competition. That's a predator with a badge.

3. Their Track Record Speaks for Itself

The Consumer Financial Protection Bureau labeled Enova a "repeat offender" in 2023. The finding: Enova had continued illegal behavior after a prior enforcement order, including withdrawing funds from borrowers' accounts without consent and deceiving borrowers with false statements and omissions.

Enova said at the time those issues "arose from unintentional technical systems and processing errors."

I've been doing this long enough to know that "technical errors" that repeatedly take money from borrowers' accounts without permission aren't technical errors. They're business practices. And the CFPB agreed.

Would you want a company with that track record having the full regulatory protections of a bank charter? I wouldn't.

4. 50%+ Chargeoff Rates Tell You Everything

Consumer groups pointed out that Enova's chargeoff rates exceed 50%. That means more than half of the loans in certain portfolios go bad. That's not just a problem for Enova's investors — it's a signal that the lending model is extracting money from borrowers who can't afford the terms.

When a lender has chargeoff rates that high, the business model depends on volume, not on the borrower's success. The lender makes money on the origination fees and early payments, and writes off the rest. The borrower is left with damaged credit, depleted bank accounts, and fewer options next time they need capital.

Small businesses that get caught in that cycle don't just lose money — they lose access to better funding options in the future. One bad experience with a predatory lender can close doors with community banks, credit unions, and legitimate alternative funders for years.

5. It Sets a Dangerous Precedent

Enova isn't the only fintech that tried this play. OppFi is currently trying to buy BNCCORP and BNC National Bank — the other deal named in the state AGs' July letter. If Enova's deal had gone through, it would have opened the floodgates. Every fintech lender with high-rate products and a balance sheet would have started shopping for bank charters.

The twenty state attorneys general understood this. That's why they intervened at the federal level. They weren't just trying to stop one deal — they were trying to stop a template.

What This Means for Business Owners Looking for Funding

If you're a small business owner reading this, here's what matters:

The funding landscape didn't change this week. Enova/OnDeck still operates, still lends, and still competes for your business. What changed is that one path to predatory dominance just got blocked.

State consumer protections still apply. As long as Enova doesn't own a bank, state interest rate caps still matter. That's a check on how much any lender can charge you.

Community banks and credit unions remain your best option for traditional products. If you have time, good credit, and can put up collateral, a community bank will almost always beat a fintech on rate. The reason most small businesses don't use them is speed and accessibility — not price.

Alternative funders like MCA providers fill the gap differently. We don't charge interest rates. We advance capital against your revenue and you pay it back through a fixed percentage of daily sales. There's no APR to manipulate, no rate cap to circumvent, and no bank charter needed. It's a different model — and for the right business, it's the right model.

If you need capital this week, call us. We work with 15+ funding programs across 27+ industries in all 50 states. We don't charge application fees, origination fees, or hidden costs. We qualify you based on your revenue, not your credit score. Same-day approval, funded in under 4 hours.

That's not because we have a bank charter. It's because we've been doing this since 2011 and we know how to get deals closed.

The Bottom Line

Enova's Grasshopper Bank deal died because twenty state attorneys general and multiple consumer protection organizations said it would harm borrowers. They were right. A bank charter would have given a repeat CFPB offender the ability to charge triple-digit APRs nationwide, fund itself with cheap deposits, and outcompete the community institutions that actually serve small businesses.

The stock market took a billion dollars off Enova's value because it lost the strategic option. But strategic options for lenders aren't automatically good for borrowers. Sometimes the best thing for small business owners is when a deal that would have concentrated more predatory power doesn't close.

Enova's future doesn't depend on becoming a bank. And small business owners' future doesn't depend on Enova becoming one either.

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Richard McKellar is the founder of My Commercial Funding, a nationwide business funding brokerage serving 27+ industries since 2011. Need capital? Talk to us — same-day approval, funded in under 4 hours.

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Frequently Asked Questions

Why is a bank charter dangerous for a fintech lender?

A national bank charter gives a lender federal preemption over state interest rate laws. That means a fintech that charges triple-digit APRs in states where it's allowed could legally charge those same rates in states that currently prohibit them. It also gives the lender access to cheap customer deposits as a funding source, creating a cost advantage that community banks and credit unions can't match.

How does a bank charter affect small business lending specifically?

If a fintech becomes a bank, its small business lending arm operates under the same charter. That means the same cheap deposit funding, the same federal preemption, and the same ability to bypass state regulations — but applied to business loans. Community banks and credit unions that currently serve small businesses would face a competitor with lower funding costs and fewer regulatory constraints.

What did the state attorneys general actually argue?

Twenty state AGs wrote to the Federal Reserve, OCC, and FDIC in July 2026, asking them to deny banking privileges to Enova and OppFi. Their core argument: these companies use bank partnerships to circumvent state interest rate caps, and granting them full bank charters would legalize predatory lending nationwide.

Is Enova still lending to small businesses?

Yes. Enova still owns OnDeck and Headway Capital, both of which lend to small businesses. The only thing that changed is the bank charter acquisition was withdrawn. Enova still operates under its existing lending model, which is funded through wholesale markets and securitizations rather than customer deposits.

What should I do if I'm looking for small business funding?

Start with community banks and credit unions if you have time and good credit. If you need capital faster or don't qualify for traditional bank products, work with a broker like My Commercial Funding that has access to multiple funding programs and can match you with the right option for your situation. We work with 15+ programs across 27+ industries nationwide.