Business Lending

Economic Hurricane? Timeless Advice For Your Small Business Finance Company

“You know, I said there’s storm clouds but I’m going to change it … it’s a hurricane,” said JPMorgan CEO Jamie Dimon about the current economic situation. “JPMorgan is bracing ourselves and we’re going to be very conservative with our balance sheet.”

At the very least, Dimon is predicting that a recession may be just around the corner. And if that’s the case, we dug up some timeless advice about how a small business finance company can brace itself for such a scenario. These quotes are from 2016 when economic experts were already beginning to wonder if the economy had already overheated, if you can imagine that.

“If the market moves sideways and you rely only on a single source of funding, you are at risk. It’s an incredibly obvious statement, but it becomes more acute when the economic environment comes under pressure.” – Glenn Goldman

“Liquidity is king. The more that participants in this market are able to diversify their capital structure, diversify their funding sources and work with multiple providers, the better off they will be.” – David Snitkof

“[Funders will have to decide] to tighten and pivot while the rest of the players in the space are going full steam ahead. That’s where you have to have some conviction and trust your data and do the right thing.” – Stephen Sheinbaum.

“Just because someone paid you back yesterday doesn’t mean he’s going to pay you back tomorrow. You have to be right more often in a recessionary environment.” – Andrew Reiser

“A small recession could lead to big failures if you don’t take the right steps.” – Yoel Wagschal

In April 2016, when recession predictions were making the rounds, the S&P 500 was ~2,000, Bitcoin was $450, Ethereum was $8, gas was ~$2.20/gallon, and few, if any people, believed that Donald Trump would ever become President.

IOU Financial Was Profitable in Q1

IOU Financial may have originated $59.6M in small business loans in Q1, but the company also managed to do it profitably. Specifically, IOU recorded net earnings of $1.1M in Q1 2022 compared to a $100,000 net loss over the same period the year prior.

“IOU Financial continues to deliver on its promise to stakeholders by growing loan originations and increasing profitability while continuing to invest the scalability of its operations and technology,” said Robert Gloer, President and CEO in a public statement.

IOU’s Q1 revenue totaled $3.9M, earned mostly from servicing and fee revenue that is generated by its marketplace model. $500,000 of it was attributed to referral fee revenue earned by IOU’s direct-to-merchant retail operation called ZING Funding.

Ready Capital Small Loan Closings Reach New Growth with LenderAI

Last week, Ready Capital Corporation announced another company record for small 7(a) loan closings in the $10,000 to $350,000 range. Originating 55 such loans in April, the company attributed its success to the use of LenderAI by iBusiness Funding LLC, a subsidiary of Ready Capital.

LenderAI is a technology platform comprised with an easy-to-use suite of tools, according to the company. iBusiness Funding says their “approach to funding is based on automation, backed up by hyper-current and relevant data.” The LenderAI self service lending origination software includes no implementation fees, free instant setup, digital borrower application, digital documentation, all while being E-Train automated and SOC II compliant.

“Our core mission when expanding the SBA small loan program was to help the smallest businesses, making affordable lending available to support economic development and underserved communities,” said Justin Levy, President of Ready Capital Small Balance Lending. “LenderAI has enabled our 7(a) small loan products. The technology platform allows us to process loans for smaller businesses, who have fewer capital options, by digitizing their documents and inputs, giving them access to capital while allowing them to stay focused on their businesses.”

With iBusiness Funding’s LenderAI system, Ready Capital’s Small Loan Lending program funding has increased from 84 loans in 2021 to over 150 loans in the first four months of this year. iBusiness focuses on specific criteria for its borrowers including likelihood of success, engagement, and background/credit.

“We believe our LenderAI technology has drastically improved document collection and processing, streamlining both the borrower and lender experience,” stated Katy Forte Seybold, iBusiness Funding Chief of Staff and Head of Strategy, in a press release. “There’s little risk to trying it out, with bank level security, flexible core platform integrations and, for a limited time, it’s free to try with no implementation fees.”