StreetShares Stops Lending Directly to Small Businesses, Records $10.7M Annual Loss

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tanksStreetShares, the online lender known for its focus on veteran-owned businesses, is no longer lending directly to small businesses, the company disclosed last week. This became effective as of October 26.

“We still offer lending products to small business customers via our LaaS clients,” the company said however.

“As of June 30, 2020, 47 banks, credit unions, and alternative lenders have contracted to use our Lending-as-a-Service (LaaS) small business financing technology.”

It defined LaaS as:

“Since the launch of LaaS, the Company has offered several LaaS packages, which include various products and services depending on the package, such as: online product presence for small business lending, web design collaboration, client-branded landing page, intelligent online loan application for small business borrowers (client-branded or StreetShares-branded), decisioning platform, loan analytics platform, and small business loan marketing services. Depending on the LaaS package, either the Company or the LaaS client will originate, underwrite, and service the small business loans. Our LaaS products and services are available in all 50 states and the District of Columbia.”

Financially, StreetShares’ June 30 fiscal year-end report revealed a massive $10.7M loss on only $4.5M in revenue. Despite the impact of covid, these figures are actually in line with (and perhaps even better than) historical performance. The company had a $12.3M loss on only $4.4M in revenue for the fiscal year prior, for example.

“Beginning in March 2020, we experienced an increase in late payments and requests from our borrowers for payment deferments. As a result, there has been an increase in predicted losses on our loan portfolio and we expect to observe an increase in our charge-off ratio in the near-term; however, we are unable to predict a long-term trend in our charge-off ratio. Beginning in March 2020, we instituted a deferment program that permitted our small business borrowers to defer loan payments as necessary due to the COVID-19 pandemic. We worked closely with our borrowers and have exited all of them from the deferment program as of this filing. We also provided, and continue to provide, certain borrowers with payment plans with reduced payments as necessary. The payment deferments or modifications made as a result of the COVID-19 pandemic consisted of short-term payment deferrals or reduced weekly payments.”

Earlier in the month of October, StreetShares announced they had secured a $10 million round of funding from Motley Fool Ventures, Ally Ventures (the strategic investment arm of Ally Financial), and individual fintech angel investors.

Read the full report here.

Last modified: November 1, 2020
Sean Murray

Category: Business Lending

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