Business Lending

Upstart Funded $9M in Small Business Loans in Q3

They’re known as a consumer fintech lender but last quarter Upstart also originated $9M in small business loans. It’s a new market it entered into this past June that coincided with revelations that the company is struggling in its core lending divisions due to adverse market conditions that led to a 90% drop in its stock price. Nevertheless, despite just laying off 7% of its workforce, Upstart sees small business lending as a growth opportunity.

“Well now we’re close to $10 million in loans originated and the team is rapidly shipping improvements as we look to refine that product,” said Upstart CEO David Girouard during the quarterly earnings call. “While the financial impact of these upgrades to our products is muted in the current environment, we’re confident that they’ll set us up for a giant leap forward once the economy and credit markets normalize.”

Upstart considers small business lending to be a $644B/year market, according to the quarterly earnings presentation. When questioned if it made sense to be investing in this business versus just trying to manage expenses in the near term, Girouard said “the way we think about that is we would like to, to the extent possible, continue to invest or even increase investment in the future products because that’s obviously what our franchise is built on and what will lead to significant growth in the future.”

Upstart set a record in Q3, claiming that 75% of all the loans made on its platform during the quarter required no human intervention.

National Funding is Venturing into Automated Lending

National Funding did more than just survive the pandemic. Already in 2022 the company upsized its credit facility, invested in Finova Capital, closed on a $125M ABS, and now more recently is going full force into automated lending.

The new initiative that aims to build off of National Funding’s 20 years of experience will be led by Rob Rosenblatt, a seasoned fintech veteran that previously worked for American Express, Chase, Citi, Kabbage, and Behalf.

National Funding will still do business as it has previously but Rosenblatt said that his separate division, formally organized as Business Loan Center, LLC, will differ in that it will be fully digital to the point that borrowers won’t have to engage with a human being if they don’t want to when accessing capital. The self-serve automated experience that takes a customer from application to approval in a matter of minutes is admittedly not a new concept in that of itself, Rosenblatt concedes, but he believes National Funding is equipped to do it better than the rest.

“…what we hope to do that’s unique is, first of all, leverage all of the learnings that National Funding has because they’ve been in business for over 20 years,” Rosenblatt said. “Number two is create a superior technological experience which will help with speed and user experience because we’re brand new, so we won’t in any way be beholden to systems of the past. Third is really be aggressive in our use of alternative data.”

Rosenblatt also emphasized that they will create a “world class user experience” and he expressed his belief that there is more than ample room for a new player to enter this market.

“Dave Gilbert, the founder of National Funding, and Joe Gaudio, who’s the president and COO, they became in the course of our conversations very firmly convinced that there’s a huge opportunity to better serve large swaths of the small business universe that maybe today aren’t quite being served fully by the suite of products that are out there,” Rosenblatt said.

In The Wake of Hurricane Ian

The last week of September was pretty ugly for Floridians with Hurricane Ian hitting numerous cities like Fort Myers, Naples, and Tampa, to name a few. With 2.8 million small businesses making up the Sunshine state, many experienced power outages, flooding, and other physical damages. For the small business finance industry, natural disasters are always a possible challenge that they’ll have to contend with.

Jordan Fein, CEO at Greenbox Capital, knows firsthand how to deal with natural disasters during hurricane season. The Miami-based funding provider has been in business since 2012 and has experience with funding businesses in tropical areas like Puerto Rico and the Virgin Islands.

“We’re now at a point where we feel that we do it among the best on how to handle these kinds of situations in terms of being able to meet our customers’ needs, especially during times of duress,” said Fein.

Flooding, wind damage, and trees fallen over on buildings and properties is what Tarneisha Peters, Regional Director of West Florida at Black Business Investment Fund (BBIF), has seen in her area of South Tampa. Many people have lost power for up to 4 days, affecting not only small businesses but staff members as well. And while the extent of the storm’s effects on some merchants are still unknown, Peters hopes the variety of program mentorship and training will help their clients remain resilient in the wake of the hurricane.

“Over 500,000 people experienced outages in the Tampa Bay area, as well as our staff in the Orlando area, including some of our clients,” said Peters. “Our goal is to support BIPOC business owner’s resiliency, so that they are prepared and able to navigate challenging circumstances that may come their way.”

Mark Kane, CEO at Sunwise Capital in Boca Raton, has seen a fair number of hurricanes since he started his business in 2010. His company has even had to relocate to Orlando before just to have internet in order to work. Businesses that are a true “brick and mortar,” as Kane described, may not have the luxury of moving elsewhere. But before immediately knowing which angle to help clients, Kane tries to look at it from a couple different angles. What was the impact of the damages? What exactly do they need? And how can they accommodate those needs?

“I think it has to be looked at from a number of different levels,” said Kane. “So, what was the total impact? Is it ‘hey, I’m done, I’m out of business?’ or ‘hey, I need a break, because our business is slow, or we haven’t reopened, and I’m not able to make the payments.’”

Meanwhile, impacted businesses may be eligible for Business Physical Disaster Loans as well as Home Disaster and Economic Injury Disaster Loans. For physical damage, the deadline to apply for a loan ends November 28th and economic injuries the deadline ends June 29, 2023.

“BBIF is an SBA lender,” said Tarneisha Peters, who added that the SBA was a great partner of theirs. “[The SBA provides] disaster related support, guidance and business assistance to help provide relief when it is needed most.”