Business Lending
Bill Introduced to Try and Block SBA’s Plans to Become a Direct Lender
March 21, 2024In case you missed it, the White House has called for the SBA to get into the direct lending business to “address gaps in access to small dollar lending.” The SBA has previously defined “small dollar lending” as loans under $150,000. Now the Biden administration wants it to compete in this segment against the private sector.
But a new bill introduced by two republican senators, called the Protecting Access to Credit for Small Businesses Act, says not so fast.
It literally says that its purpose is to “To prohibit the Administrator of the Small Business Administration from directly making loans under the 7(a) loan program, and for other purposes.”
“Fraud and inefficiency characterize the Small Business Administration’s history in direct lending,” said Senator John Kennedy in a statement. “The government shouldn’t crowd out private lenders that are already doing a good job getting funds to the small businesses that need them. I’m proud to partner with Sen. [Tim] Scott to stop the SBA from replacing private lenders and those in our communities with Washington bureaucrats.”
“When acting as a direct lender, the SBA has a consistent history of failure and inefficiency when compared to the private sector,” said Senator Scott. “The administration’s proposal is just a vehicle for a big government overreach into nearly all aspects of American life and private institutions. There’s simply no reason to use the federal government to funnel tax dollars that will later be loaned back to small businesses.”
Government agencies at all levels seem to be creeping into the small business lending game. Not only has the SBA recently upgraded its Lender Match online loan marketplace but the City of New York also recently launched its own business loan marketplace.
NYC Promotes its Own Online Business Loan Marketplace
March 17, 2024There was so much demand for NYC’s experimental Small Business Opportunity Fund last year that it had to stop accepting applications after just 3 weeks. The program, however, ultimately enabled 1,046 businesses to collectively borrow $85 million at a low interest rate of only 4%. While the Mayor’s office has declared it a major success it is now encouraging anyone else seeking funds to use its relatively new online business loan marketplace called NYC Funds Finder.
Facilitated by Next Street, a b2b platform whose co-CEO Michael Roth is a former interim chief of the SBA, NYC Funds Finder promises to connect business owners with capital products that are “non-predatory and have been screened to ensure fair and transparent pricing and terms.”
An example of some of the lenders on the platform include Lendistry, Accompany Capital, and SmartBiz. APRs tend to range roughly from 7% to 19%.
“NYC Funds Finder serves New York City’s small businesses by aggregating funding options from many of [the NYC Department of] Small Business Services (SBS) and Next Street’s trusted partners,” said an official announcement that went out in September. “Additionally, the platform makes it easy for the business owner to connect with a free advisor if they need help navigating or applying for capital. This partnership with trusted SBS advisors is key for small businesses to access the best financing options for their business.”
Coincidentally, the SBA has also been pushing its own online business loan marketplace as of late. The SBA’s Lender Match tool has 1,000 SBA lenders and 257 community based lenders on its platform already.
Nerdwallet Generated $101M in Revenue from SMB Products in 2023
March 10, 2024Nerdwallet, a financial service shopping site, generated $101.2M in revenue across 2023 from SMB loans, business credit cards, and other financial products & services, according to the company’s latest earnings report. That was an increase of 11% over the previous year.
Nerdwallet said that it has been seeing “positive momentum” for SMB products.
“As we look to the rest of the year, we expect to return to double-digit revenue growth during the second half, given recent recovery in SMB products and insurance,” said Nerdwallet CEO Tim Chen.
Nerdwallet had 14 million registered users as of December 31, 2023, which creates a strong base to generate revenue.
“Critical to our aspiration of delivering consumers and SMBs with a trusted financial ecosystem is our ability to register and engage users – in turn allowing us to drive repeat visits, collect data and provide users with unique insights via nudges,” the company said. “We are focused on growing the traffic and engagement on our platform, as well as increasing our number of registered users, who have a lifetime revenue value five times greater than our non-registered users and more than twice the transactions and sessions, on average.”
Amazon Discontinues Its In-House Business Loans
March 9, 2024After deBanked reported that Amazon’s on-balance-sheet business loan receivables had remained steady throughout 2023, the company has abruptly decided to terminate its in-house lending program altogether.
Through an email confirmed to Fortune, Amazon ended its in-house term loan business on March 6. That same story says that they will continue to work with third party lenders and funders as they have been doing for a while. Some of their partners include Lendistry, SellersFi, and Parafin.
The in-house program had been running since 2011 and was first discovered by deBanked in 2013.
While the company was shy about disclosing origination figures, it carried approximately $1.3B in loan receivables on its books throughout last year.
The Amazon news coincides with the announcement that business loan rival Funding Circle has decided to exit the US market. Funding Circle US is currently up for sale.
Wow we sort of called this @amazon sellers pic.twitter.com/MOWsPWxcb1
— Amazon Sellers ASGTG (@AmazonASGTG) March 7, 2024
FOR SALE: Funding Circle US?
March 8, 2024Funding Circle has decided to focus just on its UK business. The company is open to selling off its US business, it revealed.
“Whilst the US business offers attractive long term growth, it also requires a significant amount of cash and capital to grow the SBA proposition and we don’t believe that this is the best course of action for the Group,” said Funding Circle CEO Lisa Jacobs. “We have received indications of interest for the US business and will update further in due course.”
The US segment originated $491M in 2023 while generating $40.4M in revenue and a $29M net loss. That loss was steeper than the $11.6M recorded in 2022.
Funding Circle had just recently secured an SBLC license after years of lobbying for the SBA to end the 40-year pause. When that happened, it was anticipated to be a big boon for them.
Compared to the competition in 2023, Funding Circle’s American origination volume was only 1/6th that of Enova’s.
Small Business Administration Upgrades its Business Loan Marketplace
March 5, 2024Add the SBA to the list of organizations capitalizing on the popularity of business loan marketplaces. The Administration recently announced the next generation of its Lender Match tool.
“The enhanced Lender Match will provide Americans seeking funding to start and grow their businesses with a simple, online tool that will more effectively match them with the SBA’s competitive lending products and additional offerings from a trusted network of banks and private lenders,” the SBA said.
The updated homepage says that the tool will match applicants with competitive rates and fees while offering unique benefits like lower down payments, flexible overhead requirements, and no collateral needed for some loans.
“Borrowers will now be able to easily view all of their matched lenders in one place, allowing the borrower to find and compare lenders to help them decide where to apply for a loan. The enhanced tool will also verify borrowers and screen for fraud to streamline the process for both lenders and borrowers. Importantly, with Lender Match, small businesses that are not matched to lenders will be connected to the SBA’s local network of free advisors to help them get capital-ready.”
The SBA says that it gets 50,000 requests for capital every month through Lender Match, a platform which now has nearly 1,000 SBA lenders and 257 community-based lenders.
Matching borrowers with lenders is big business right now. In January, for example, SoFi launched its own small business loan marketplace.
Intuit Experiences Big Business Loan Surge
February 26, 2024Intuit experienced a significant surge in small business lending activity, according to the company’s most recent earnings report, originating $469M in FY Q2 2024 (which ended Jan 31, 2024) which was up from $279M in FY Q1 2024. That’s a jump of nearly 70%! Intuit makes these loans via Quickbooks Capital through a partnership with WebBank. The increase warranted no mention during the earnings call.
The positive sentiment echoes that of its rivals, including Square Loans and Enova who both just reported their biggest quarters ever for originations.
Square Generated $4.78B in Business Loans in 2023
February 22, 2024Block’s business loan division, Square Loans, had a massive year in 2023, generating $4.78 billion in loans. That was $1.5 billion more than its closest competitor Enova and up from $4.06 billion in 2022.
Data of this sort is becoming harder to come by industry wide. Several publicly traded firms that once highlighted their origination volumes have since sought to minimize disclosure of it. (This is an approximate list of the largest online small business lenders and merchant cash advance providers in the US.) While Square still makes their origination figures available, it warrants no mention on the Block quarterly earnings calls because its impact on the overall business is small. Block generated $21.92 billion in net revenue in 2023 for example, $9.5 billion of which stemmed from its bitcoin business.