SoFi: We Think We Can Take Significant SMB Lending Marketshare

“We’ve expanded our offering to include our new SMB loan product and have agreed to terms on a three-year, $3 billion agreement with BasePoint Capital,” said Chris Lapointe, CFO of SoFi during the company’s Q2 earnings call, who later added that there was also another undisclosed party working with them on this for several hundred million dollars. SoFi’s foray into direct business loan origination was announced a month ago after spending years referring customers to other parties using a platform it built.

“The SMB business is one that we think we can be incredibly competitive on, similar to personal loans and credit cards,” said Anthony Noto, CEO of SoFi during the Q&A session. “Most SMB lenders are charging exorbitant rates of over 30%. We think we can operate meaningfully below that and take significant market share.”

Small business lending was a recurring theme and question during the call so Noto explained the genesis for how they even first started thinking about it.

“SMB really was born out of the fact that a large percentage of our members actually are small business operators,” Noto said. “Back during COVID, when the government provided PPP loans, we got a significant amount of demand for applications on PPP loans, even though we were not in the SMB business. We actually stood up an application process that met the government’s application criteria and helped pass on that demand to lenders. Then on the back of that, we built a marketplace so that we actually get paid for that referral process that we’re doing. The SMB business is very much synergistic to the rest of our business. I would think of it as just another use case for an individual to satisfy the needs they have from a borrowing standpoint. We’ll obviously follow this up with checking and savings in SMB, and other products that are ancillary to that. It will add to the flywheel.”