LendingTree: SMB Lending Business Softened in Q2, Merchant Sentiment Shifted

“Performance in July gives us confidence that Q2 was our trough and we have entered the recovery period,” said LendingTree CEO Scott Peyree during the Q2 earnings call.

LendingTree’s SMB business underperformed in the quarter, driven by “both merchant sentiment and lender pullback.” It attributed this to tension in the Middle East, energy price spikes, and more, but concluded that the merchant sentiment issues, which have been slower to recover, were macro-driven and temporary.

“I will say the lenders have largely come back and are writing and offering loans at similar levels to early Q1. Merchant sentiment does remain soft,” said Peyree. “The long-term macro outlook for the SMB industry remains very strong, in our opinion. We’re seeing some encouraging signs already; Improving closing rates, larger loan requests, favorable underwriting shifts. July will be our best sales month since Q1.”

LendingTree does not make loans itself, it connects prospective borrowers with the proper partners that can do that. This business has been very lucrative and had been growing 40% year-over-year on average until now.

“This was our growth engine,” said LendingTree CFO Jason Bengel. “Like I said, it was growing 40% a year on average. Now for this year it’s looking like we might be flat to down. The good news is that should really be temporary. There’s nothing structurally wrong with that business. We operate very well in that business, and the market opportunity is really strong. That will recover. Once merchant sentiment returns, that will return to being a very strong growth driver for us. We’re very optimistic with small business.”