Large Fintech Companies Helping to Normalize Revenue Based Financing
With business increasing for wide-reaching financial technology companies like Square, Paypal, and Shopify, this has brought more attention to revenue-based financing products like the ones they offer. Henry Abenaim, Founder and CEO of Fundingo, said that it brings more businesses to the table.
“…you sometimes think it’s a small world or small group of merchants, and you really come to realize that it’s huge,” he told deBanked. “And the more they’re serviced, the more they need, the more they grow. So it just feels like there’s just more awareness of the product, and then more merchants that are going to come in demand and ask for it, as well as these bigger players are always going to service only a subset of the businesses.”
At the same time, a greater public awareness of options could tighten margins for certain funding providers. “I think it’s going to make the merchants that are way more bankable… get lower price deals, so it’s going to hurt the margins, it’s going to hurt the profits,” Abenaim commented.
John Bulnes, Vice President of Business Development at Fenix Capital Funding, expressed how it is not yet determined what kind of effect the larger mainstream companies will have on the industry. “I do think it’s something that the larger first position MCA companies may feel the effects of first, because they’re going to be competing more or so with taking away clients from those companies first, as opposed to the companies that are smaller that are doing shorter term deals.”
As these big companies operate with larger capital bases, it may indeed become more difficult for smaller companies to compete.
“… it’s going to be something that’s going to constantly adapt and fluctuate as time goes, but I do see it as an expanding industry… it’s kind of a sign that when you see more commercials and we see these bigger companies jumping into the space, that it is something that’s going to continue to grow,” said Bulnes.
And commercials and ads are definitely increasing. One of the largest online small business lenders in the country was asked about their TV and radio campaigns during their recent quarterly earnings call.
“We’ve definitely been ramping [commercials up] hopefully with a little bit more diligence than OnDeck was running ads three or four years ago,” said David Fisher, CEO of Enova. “But we’ve definitely jump back into kind of broader base advertising in that business and it’s been working really well.”Last modified: May 6, 2022
Larissa Brulato writes for deBanked. Connect with me on LinkedIn.