Overview of US SMB lenders (alternative lenders)

In Featured, Marketplace Lending by MonJa TeamLeave a Comment

“Of the 28 million small businesses in the United States, over half faced financial challenges in the last year [2016]

Janet Zablock;

Former Head of Global Small Business at Visa and currently, an Independent Board member at Nav Inc.

As we have all heard multiple times, Small and Medium Businesses (SMB) are the backbone of the US economy; still, they struggle the most when it comes to raising funds. In the wake of 2008 financial crisis, the situation worsened for SMBs and they are finding it harder than ever before to raise funds from traditional banks and lenders. Wall Street vacated the segment en masse after the financial crisis, as the cost of executing a SMB loan for brick and mortar banks became “prohibitive” because of the new regulations. As per Karen Gordon Mills, Harvard Business School, and Brayden McCarthy, Fundera, Inc, over 70% of small businesses want a loan under $250,000 and more than 60% want a loan under $100,000. Data from FDIC-insured institutions shows that the proportion of commercial and industrial loans under $1 million (used to measure small business lending) has fallen to 21% of all commercial loans from a peak of 34% before the credit crunch. Small Business Loans is a trillion dollar industry and the weakness of existing lenders in serving such a massive customer base has allowed alternative marketplace lenders (MPL) to establish themselves as the go-to lenders among the SMBs.

Source: https://briangottlob.com/category/banks-2/

Online lenders have raced ahead because they close the loan quickly, are more agile and nimble and their cutting edge technology allows them to be flexible to the needs of their customers. They are not burdened by the high fixed costs of banks and have instead invested in their technology to provide convenience and a hassle-free experience to the prospective borrower. Even though MPLs charge a comparatively higher APR but the mass migration of SMBs goes to show how underfunded the SMB sector has been in the last decade.

Future Trend

http://www.businessinsider.com/small-business-alternative-lending-alternative-roads-to-capital-will-add-billions-to-the-small-business-lending-market-2016-4

As per a Business Insider report in 2015, alternative SMB lenders originated $5.4 billion and 4.3% share of the entire SMB market. By 2020, alternative SMB lenders are expected to originate loans worth $52 billion and gain a 20.7% share of the total market. This will be achieved on the back of continued growth of new as well as existing players, increase in borrower awareness and strategic partnerships with the banks.

Though the alternative US SMB lending market is now mainstream and developed with dozens of credible options, there are a few players who have created their own niche and stand tall above the rest. We are profiling a few of them here.

OnDeck (ondeck.com) – OnDeck is a NASDAQ–listed technology-enabled financial platform that provides loan financing to small and medium-sized businesses. Total loan originated has crossed the $7 billion mark. It was founded in 2007 and offers short and long-term loans as well as a line of credit. Term loans range from $5,000 to $50,000 and up to $100,000 for line of credit. APR: 9% to 99% for term loans; 14% to 40% for line of credit. Term loans are repaid daily or weekly for 3 to 36 months; lines of credit are repaid weekly.

Funding Circle (fundingcircle.com– Funding Circle is a lending platform focused exclusively on small businesses operating in the U.S., the U.K. and Continental Europe. It was established in 2010 and has originated loans worth $4 billion globally. It offers small business loans ranging from $25,000 to $ 500,000 for 6-60 months, with APR starting from as low as 4.99%

Kabbage (kabbage.com– Kabbage, Inc. is a financial technology and data company that pioneered a new, automated way to lend money to small businesses and consumers. It was founded in 2009. It offers loans up to $150,000 for 6 to 12 months and interest rates range from 1.5% to 10%. Total loans originated so far: over $3 billion.

Credibility Capital (credibilitycapital.com– Credibility Capital is a technology-enabled platform serving the financing needs of small businesses. It was founded in 2013 and is headquartered in New York. It offers loans ranging from $5,000 to $350,000. APR ranges from 7.99% to 20% and loan term is usually 1 to 3 years.

IOU Financial (ioufinancial.com) – has been lending to small businesses since 2008 and funded over almost $400 million in loans. Its headquarters are in Montreal, Canada, and its North American operations center is in Atlanta, Georgia. Its working capital loans allow 6 to 18months terms and a fixed daily or weekly payment to accommodate client’s specific needs. Loans size starts at $5,000 and is up to $300,000.

QuarterSpot(quarterspot.com) – QuarterSpot is an online lending platform that offers credit-starved small businesses working capital on attractive rates and terms. It was founded in 2011. It offers loans ranging from $5,000 to $200,000, with APR ranging from 30% to 70% and term of loan varying from 9 -18 months. The company has raised almost $2.75 million from investors for expansion.

SmartBiz (SmartBizLoans.com-SmartBiz Loans is a unique combination of an online SBA loan marketplace and a bank enabling technology platform. It was founded in 2009. It offers loan ranging from $30,000 to $5 million with APR ranging from 5.75% to 8.00% and loan term from 10 to 25 years. It recently surpassed $500 million in SBA loans.

BondStreet (bondstreet.com) – BondStreet is a startup focused on transforming small business lending through technology, data, and design. It was founded in 2013. It offers loan ranging from $50,000 to $1 million, with APR ranging from 10%-20% and loan term ranging from 1 to 3 years. Bond Street has raised more than $400 million in debt from Jefferies that has been deployed for expanding originations.

SnapCap (snapcap.com) – SnapCap is rapidly transforming traditional lending by providing businesses with access to working capital quickly and without paperwork. It has originated loans worth $250 million and it was founded in 2012. It offers loans and advances up to $600,000 with APR ranging from 20 to 50% and tenure stretching from 3 months to 36 months.

Fundation (fundation.comFundation is an online direct lender offering simple interest small business loans to companies through a technology-driven process. It was founded in 2011. It offers term loans ranging from $20,000 to $500,000 and line of credit up to $100,000 with APR ranging from 7.99% to 29.99% and terms of loan varying from 1 to 4 years. It raised $100 million from Goldman Sachs in debt for loan origination.

Rapid Advance (rapidadvance.com– Rapid Advance is a leader in providing capital to small business owners in the United States and Canada. Rapid Advance offers a variety of products, including loans, lines of credit, and merchant cash advance programs, and the expertise to determine the best option based on the unique needs of each customer. It has originated loans worth over $1 billion and was founded in 2005. It offers SBA, merchant cash advance, line of credit and SBA bridge loan. Loan amount ranging from $5,000 to $500,000 and APR ranging from 50%- 80% and term of loan ranges from 4-12 months.

Accion (accion.org) – Accion is the largest nationwide nonprofit lending network in the United States. They provide fair and flexible loans, connections to business experts, and access to resources and opportunities specifically tailored to each business owner’s unique needs and goals. It has originated loans worth over $500 million and has been in the business for over 25 years. It offers loans ranging from $500 to $50,000 with interest rates ranging from 8.99% to 15.99%, and terms from 6 to 60 months.

CAN Capital (cancapital.com)CAN Capital provides capital to small and medium-sized businesses, using its own real-time platform and risk-scoring models. It was founded in 1998 and so far has originated loans worth $6.5 billion. It offers small business funding; term loans and merchant cash advance (MCA). Short-term loan ranges from $2500 to $250,000 with loan term ranging from 3- 24 months whereas term loan ranges from $50,000 to $150,000 with APR ranging from 12.9%-29.9% and term of loan ranging from 2 to 4 years.

Biz2Credit (biz2credit.com) – Biz2Credit is a hub connecting small business owners with lenders and service providers, and seek solutions based on their online profiles. It was founded in 2007 and has funded over $1.6 billion in small business funding. It offers SBA loans, traditional bank loans, business lines of credit, equipment financing, business acquisition loans, commercial real estate loans, refinancing and merchant cash advances. The loan amount ranges from $5,000 to $5 million. Interest rates and terms depend in large part on credit history and how quickly a borrower needs money.

Credibly (credibly.com)Credibly is an emerging Fintech platform, leveraging Data Science and technology with a focus on customer experience. It was founded in 2010 and has funded over $500 million till date. It offers working capital loans ranging from $5,000- $250,000 for 6-17 months and Business expansion loans ranging from $10,000- $250,000 for a term of 18-24 months and with APR ranging from 9.99%-36%.

StreetShares (streetshares.com) – StreetShares brings like-minded investors together with small business owners looking for funding to grow. It was founded in 2014 and offers Term Loans, Patriot Express Line of Credit, Contract Financing, Veteran Business Bonds, StreetShares Pro Investing, Veteran Small Business Loans. Loan ranges from $2,000 to $100,000 with APR ranging from 9%-40% and loan term 3-36 months. In 2015, raised $200 million and In July of this year again raised undisclosed amount of debt financing, which will help in expanding their loan origination.

Small Business lending has undergone a metamorphosis with multiple tech lenders competing with each other and traditional lenders to fund the next American dream. The companies who can create a defensible niche or partner with larger banks should win the maximum market share.

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