FlexShopper - Chapter 11 Case Summary

Business Description

Headquartered in Boca Raton, FL, FlexShopper, Inc., along with its Debtor and non-Debtor affiliates (collectively, "FlexShopper" or the "Company"), is a financial technology company providing lease-to-own ("LTO") solutions and lending products to consumers. The Company primarily serves near-prime or subprime customers who may face challenges obtaining traditional credit for durable goods.

• The Company’s platform enables consumers to shop for brand-name electronics, home furnishings, and appliances on an LTO basis without long-term obligations or impact on their credit scores.
• Product offerings include well-known brands such as Apple, Samsung, Sony, LG, Whirlpool, and Ashley Furniture.

FlexShopper offers flexible ownership paths, allowing customers to obtain ownership by making all payments over a standard 52-week lease term or by exercising early payment options to save money. Customers may also terminate agreements at any time by returning the merchandise.

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Corporate History

FlexShopper, Inc. was incorporated in Delaware in 2006 and operates as a holding company. It conducts its core LTO business through its wholly owned subsidiary, FlexShopper, LLC (formed in 2013), and its lending business through FlexLending, LLC (formed in 2019) and Flex Revolution, LLC (formed in 2022).

Expansion and Acquisitions

• Since 2018, FlexShopper has been granted various patents related to systems that integrate LTO transactions into e-commerce and retailer websites.
• In late 2022, the Company acquired the assets of Revolution Financial, Inc., which facilitated the creation of a direct origination model operated by Debtor Flex Revolution, LLC.
  • This acquisition included a loan portfolio, leases for 22 brick-and-mortar locations, and program agreements with 78 additional locations.

Corporate Structure

The Company utilizes bankruptcy-remote special purpose vehicles for its financing operations. FlexShopper, LLC wholly owns non-Debtor FlexShopper 1, LLC, which in turn owns non-Debtor FlexShopper 2, LLC (the "SPV Borrower").

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Operations Overview

FlexShopper operates through a proprietary "LTO Engine," a technology platform that automates underwriting and transaction processing within minutes. The Company utilizes a risk analytics-powered underwriting model to approve consumers for spending limits.

Sales Channels

The LTO Engine supports three primary strategic sales channels:

• Direct-to-Consumer: Sales via the FlexShopper.com LTO Marketplace, which features thousands of durable goods.
• E-Commerce Partnerships: Integration of the LTO payment method at checkout on merchant partners' websites.
• Retail Partnerships: Facilitation of LTO transactions at physical retail locations through in-store terminals and mobile applications.

Transaction Lifecycle

Upon approval and execution of a lease, FlexShopper purchases the selected merchandise—sourced from retailers, distributors, or manufacturers—and leases it to the customer. Payments are typically collected on a weekly or bi-weekly basis via automatic deduction. In the direct origination model, loans are underwritten and funded directly by the Company.

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Prepetition Obligations

As of the Petition Date, the Company’s funded debt obligations primarily consist of a warehouse credit facility and subordinated insider notes. A separate facility related to Flex Revolution, LLC was satisfied prior to the filing.

Secured Warehouse Facility

• 2024 Warehouse Facility: Non-Debtor SPV Borrower is the borrower under a credit agreement with Powerscourt Investments 50, LP (as Administrative Agent and Lender).
  • Following amendments in April 2025, the maximum commitment amount was increased to $200 million.
  • The facility is secured by first-priority liens on substantially all assets of the SPV Borrower and Debtor FlexShopper, LLC’s equity interests in FlexShopper 1, LLC.
  • Guarantees: FlexShopper, LLC provided a limited unsecured guaranty and a "Validity Guaranty." The Validity Guaranty renders FlexShopper, LLC liable for losses resulting from "Liability Events," including fraud or material misrepresentations regarding the borrowing base.

Subordinated Insider Debt

• NRNS Note: FlexShopper, LLC issued subordinated promissory notes totaling approximately $9 million to NRNS Capital Holdings LLC, an entity managed by the Chairman of the Company’s Board.
  • The notes bear a maturity date of July 1, 2025.
  • While purportedly secured by substantially all of FlexShopper, LLC’s assets, the security interest remains unperfected.
  • Obligations under the NRNS Note are subordinated to the 2024 Warehouse Facility.

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Events Leading to Bankruptcy

Accounting Irregularities and Management Fraud

The Company’s descent into bankruptcy was precipitated by the discovery of significant fraudulent activity involving senior management. In May 2025, a finance employee reported concerns to the Audit Committee regarding manufactured loan documents and overstated borrowing bases.

• An independent investigation by Alvarez & Marsal confirmed that the Company’s then-CEO and CFO, Russell Heiser, participated in providing forged documents to the Company's auditor and misrepresenting collateral eligibility to lenders.
• The investigation revealed that the SPV Borrower had overborrowed in excess of $140 million under the 2024 Warehouse Facility due to these fraudulent misrepresentations.
• Following these findings, the Board terminated Mr. Heiser for cause in August 2025 and determined that previously issued financial statements could no longer be relied upon.

Liquidity Crisis and Operational Winddowns

The revelation of fraud triggered a "Liability Event" under the Validity Guaranty, rendering FlexShopper, LLC fully liable for the SPV Borrower’s obligations. While the Company entered into forbearance agreements to allow continued borrowing for new leases, liquidity remained insufficient to fund non-operating expenses, including mounting legal and investigative costs.

• Concurrently, the Company addressed the unprofitability of its subsidiary, Flex Revolution, LLC. In September 2025, the Company agreed to a strict foreclosure of Flex Revolution’s assets by its lender, BP Fundco, LLC. A UCC foreclosure sale was completed in October 2025, followed by the termination of remaining Flex Revolution employees.

Sale Process and Chapter 11 Filing

Facing a liquidity shortfall and the inability to restructure the warehouse debt out of court, the Company explored sale alternatives. After negotiations with a potential acquirer ("Party B") collapsed in late October 2025, the Company pivoted to a transaction with Snap U.S. Holdings, LLC.

• On November 14, 2025, the parties executed a term sheet designating an affiliate of Snap U.S. Holdings as the Stalking Horse Purchaser.
• The Debtors filed for Chapter 11 protection to consummate this sale, which includes an $8 million payment to the Debtors and a $7.5 million cash payment to the Warehouse Agent, subject to adjustments.
• To fund the cases, the Debtors secured DIP financing commitments from the Stalking Horse Purchaser and continued access to the Warehouse Facility to maintain leasing operations during the restructuring.