Online Lending
Tips From the Source: Small Businesses Told deBanked How They Wanted Loans to be Marketed to Them
July 31, 2017
Small business owner Jim Moseley is inundated with calls from online funders—and he hates it. They frequently use unscrupulous tactics to try and get his attention. More than one has claimed to be a close friend so his assistant transfers their call. Then they try to reel him in with stories they’ve concocted about past personal connections. The unprofessional-sounding calls also irk him—where a salesman insists he’s local, but his voice sounds muffled and distant. In these instances, Moseley usually hangs up within a few seconds.
“The layer of sleaze is as thick as lard in the calls that I get,” he says.
Like many small business owners, Moseley, the chief executive of TransGuardian Inc., a shipping solutions company based in Petersham, Massachusetts, finds these types of calls extremely off-putting. In fact, it’s what made him hesitant to do online funding to begin with—until it became absolutely necessary since he couldn’t get a bank loan.
He’s not alone. As online financing proliferates, several small business owners say they are increasingly being bombarded with stacks of snail mail, multiple cold calls a day and numerous unsolicited emails offers—many of which they don’t understand and therefore won’t accept. Rather, small business owners say they prefer to work with companies that are forthcoming, provide sound advice and have taken steps to prove their credibility. They offer several tips on how funders can win more of their business.
Tip No. 1: Can the cold-calls
Several small business owners say they don’t mind when lenders follow up with them after a legitimate interaction. But they could do without the boiler-room tactics.
“It feels like a loan shark situation,” says Sean Riley, co-founder of DUDE Wipes, a Chicago-based company that makes flushable wipes for men. Riley, who has several good experience obtaining loans through Kabbage, finds the constant phone calls from firms he doesn’t know particularly vexing. He suggests lenders drop the high-pressure routines and find more effective ways to promote their services to small businesses. “These companies could be very credible. I don’t know. But I don’t perceive them as credible—and perception is reality,” he says.
Tip No. 2: Step up legitimate marketing efforts
Donna Cravotta chief executive and founder of Social Pivot PR, a Bedford, New York social media and marketing communications firm, says online funders should seek out simple, cost-effective ways to get their name in front of small businesses. For relatively little money they can sponsor local small business events. She also suggests that online lenders volunteer to speak at small business events and teach small businesses how to leverage online lending opportunities. They could also appear as guests on financial podcasts or broadcast Webinars to the small business community, says Cravotta, who has taken a few loans to fund her business, two of which were with Lending Club.
R.T. Custer, co-founder and chief executive of Vortic Watch Company in Fort Collins, Colorado, offers some additional advice: Customers don’t believe when you self-publish your testimonials. When he sees a review on a website, he wants to know how much a company has paid for that review. Instead, he relies on third party confirmations of a company’s worth. “When it’s clearly something that is not paid for, that is the best kind of advertising,” says Custer, an OnDeck customer whose business turns antique pocket watchers into wrist watches.
Tip No. 3: Deliver personal attention
As much as they hate aggressive salespeople, small businesses love personal attention from their lenders. Dana Donofree, founder and chief executive of AnaOno Intimates, a Philadelphia-based company that designs and sells apparel for breast cancer survivors, appreciates the stellar customer service she gets with OnDeck. The sales rep follows up appropriately to make sure everything is going well, but doesn’t bombard her constantly. She gets an occasional email asking if she needs more funds—but the communications aren’t overly aggressive. “Some institutions can really be sales pushy and call you several times a day. I’ve blocked more numbers than I would like to admit,” she says.
Tip No. 4: Be a resource for small business owners
Online lenders can also gain traction by helping customers better understand the financing process; many small business owners often don’t know much about financing and would appreciate getting sound advice from lenders, according to Sandy Lieberman, who co-owns Artemis Defense Institute in Lake Forest, California.
She and her husband started the business a few years ago to offer reality-based training to law enforcement, military personnel and civilians. When the business needed cash, Lieberman began searching online for a bank loan, but wound up taking a merchant cash advance instead. After a few rounds, she started getting bombarded with solicitations. “I think the stacks of mailings from companies must have been four-inches thick,” she recalls.
After additional research, she reached out to Lendio to broker an $85,000 term loan; she later took another loan for $204,000 through Lendio. While these funds have brought her business to a better place—and she has learned a lot in the process—she feels online lenders are missing out on a prime teaching opportunity.
“Some lenders think business owners know more than they already do. Some really don’t know a lot and could use more hand-holding,” she says.
In hindsight, Lieberman—who nearly destroyed her personal credit while trying to run her business—wishes a funding company had offered her a short class on financing; she would have attended, even for a small cost. Access to a finance coach—someone at the lending company who could help business owners plan proactively without ruining their personal credit—would also be a boon, she says.
“Small business owners are wearing many hats—customer service, payroll, financing, strategic planning. In the midst of all that they don’t know necessarily know how to make wise funding decisions,” she says.
Tip No. 5: Advertise
There are plenty of small businesses that need funds, but many simply don’t know where to turn. Consider a TD Bank survey of 553 small business owners in late March that found 21 percent have or will seek a loan or line of credit in the next 12 months. While the majority of these businesses plan to try their bank first, a sizeable number—11 percent—don’t know how to seek credit when they are ready. While many small businesses have found lending partners by Googling for information, others simply feel stymied by the process.
Take the case of Scott Deuty, who is having trouble obtains funds for Coolbular Inc. in Cheyenne, Wyoming, which serves as an umbrella for his kiddie ride business and his writing and publishing services. He wants to raise funds but has bad credit and doesn’t meet the revenue requirements for certain lenders. There are so many lenders; he doesn’t know how to find the right one—or one that might be willing to take a chance on him. “It’s very difficult,” he says.
Deuty’s case is an example of the paralysis that can happen when small businesses don’t know where to turn. It’s an opportunity for alternative funders to gain a leg up by marketing more appropriately to small businesses that may not know they exist—or how to find them.
Custer, of Vortic Watch, reached out to OnDeck for a bridge loan after seeing a television ad that ran during an episode of Shark Tank. He also suggests funders use online advertising to gain broader exposure. “If a business owner is trying to find a loan, they are going to Google, ‘I need a loan,’” he says.
Tip No. 6: Ramp up business referrals
Another way small businesses hear about lending opportunities is through business referrals. Azhar Mirza, founder of SomaStream Interactive, an e-learning solutions provider in Berkeley, California, says funders should actively seek out more referral partnerships. In 2015, his company couldn’t afford its online marketing costs. Then a lifeline came its way. Mirza received an offer from Google telling him his company was eligible for a loan to help finance the online advertising it was doing through the Google AdWords program. The offer was part of a new pilot program between Google and Lending Club to extend credit to smaller companies that use Google’s business services. SomaStream got access to the funds it needed, but in lieu of cash, the company received advertising credits with Google.
The pilot program between Google and Lending Club ended in the first quarter of 2016, but Mirza believes similar partnerships would be a great tool for online lenders. Certainly for Mirza, the timing was precipitous, he says.
Push notifications from trusted business partners can also be an effective marketing tool, when used in moderation. When Yvonne Denman-Johnson, co-founder of HootBooth Photo Booth, a Lago Vista, Texas, manufacturer of photo booth kiosks, needed money, she happened to receive a notice from Shopify, the company’s e-commerce software and hosting provider, talking about its merchant cash advance services. She has one outstanding advance through Shopify, which she is working to pay off.
Tip No. 7: Be transparent
Denman-Johnson got the funds she needed, but she feels MCA providers need to be more transparent about the effective interest rate—at the advertising stage, not at the approval stage—so small businesses can make more informed decisions without having to do all the calculations themselves. Otherwise, some small businesses might decide not to pursue this form of funding because of the unknowns. Her company almost walked away, but decided to go through the full application process. At this point, Shopify provided the effective interest rate, which was in the 12 percent range. Other funders she researched were in the 30 percent range—which she describes as “outrageously” expensive.
Indeed, small business owners want to work with funders that outline the terms clearly and offer comparisons. Lisa Ayotte, founder of Soul’y Raw, a specialty pet food provider in San Marcos, California, has had good experiences with Kabbage, On Deck and Fundbox.
She wishes, however, that all online lenders offer more detailed information about the loan programs they offer on their website—so small businesses can weigh their options before they go through the actual application process. Small businesses want to know, for instance, whether a lender offers debt consolidation. They also want funds to spell out clearly on their websites the various types of loans offered and the underwriting criteria. Ayotte also suggests lenders provide links to online loan calculators so small businesses can understand what the terms mean to them.
Small business owners want to be told like it is. That’s one major appeal of online lending—if you’re going to be turned down, you typically know right away says Ricardo Picon, the co-owner of The Sandwich Shop, a restaurant and catering business in Williamsburg, New York.
He took an $88,000 loan in February issued by Excelsior Growth Fund, a U.S. Treasury-certified Community Development Financial Institution, but in the future, he says he would consider using a different type of online lender. It would depend on the rates, the economic times, monthly payments and closing fees, among other things. “I want transparency. I want to know if they are going to give me the money or not so I can move on. This way there are no false hopes,” he says.
Tip No. 8: Make the process as easy as possible
Small business owners also prefer to work with online lenders that make the process seamless. AJ Saleem, founder of Suprex Learning, a Houston-based private tutoring and test prep company, was proactive about searching for online lending options. He chose a loan with Lending Club in part because the process was so easy. Some applications he started, but never finished because the process was too onerous. With Lending Club, the process was quick, there were fewer questions asked and the funder asked for less documentation than some competitors, Saleem says.
To be sure, rates are really important to small businesses, but they also want to work with funders they feel are on the up-and-up. “We want a square deal,” says Moseley, the chief executive of TransGuardian. “Tell us what the deal is in an honest and professional way and if we like it we’ll do business.”
PayPal & LendUp Bridge Financial Inclusion Gap
July 25, 2017
PayPal put its stamp of approval on fintech startup LendUp, evidenced by a strategic investment by the eBay spinoff in recent weeks. In doing so PayPal demonstrated its commitment to non-prime borrowers, which is the demographic that San Francisco-based LendUp targets.
The pairing brings together the chief executives of two companies – Sasha Orloff and Dan Schulman of LendUp and PayPal, respectively — who have been at the forefront of fintech and who together will likely play an expanded role together.
“People care about the ability to build credit and about having a safe product and a really great user experience. We are aligned with PayPal there. Dan is a pioneer in financial inclusion. He is a ringleader in the industry. There is an exciting momentum from an executive leader with a voice for financial inclusion from one of the largest and most successful fintech companies,” Orloff told deBanked.
PayPal’s mission is similar.
“LendUp and PayPal share a vision of reimagining financial services and offering innovative solutions to people typically underserved by the traditional financial system. PayPal has made a strategic investment in LendUp to help this fintech innovator continue to grow and broaden its positive impact on improving financial health,” according to a PayPal spokesman.
LendUp focuses on the emerging middle class, including those who were left behind in the wake of the financial crisis. Orloff pointed to a macroeconomic shift beginning in 2008 with the creation of Dodd Frank, which is contributing to a deep well of financial exclusion. “More than half of the country has a credit score below 680 and are excluded from many bank products,” Orloff added.
Meanwhile as online lending has taken root banks have demonstrated a stubborn inability to become tech focused
Second Time Around
Orloff and Schulman are no strangers to one another. Previously the LendUp chief was senior vice president at Citi Ventures, Silicon Valley’s maiden venture capital firm for early stage fintech, while the PayPal president and CEO served as group president of enterprise growth at American Express.
“Through the process I met Dan Schulman [then] at American Express. He was a big champion of financial inclusion. He had been tooting the horn at AMEX for a long time and had been leading their financial inclusion revamp,” said Orloff.
While at Amex Schulman was LendUp’s executive sponsor before taking the helm at PayPal. Soon after the teams reconnected and recognized even more possibilities beyond the PayPal ecosystem, such as providing access to credit and helping borrowers to build a credit score. There is also the massive PayPal database to consider.
“PayPal has a bigger reach and a more relevant audience,” said Orloff, declining to tilt his hand to the specific ways in which LendUp and PayPal will partner. “We have a lot of conversations in the works. That is absolutely part of the investment and we are excited,” noted Orloff.
LendUp earlier this year surpassed the $1 billion threshold for loan originations since the company was founded half a decade ago.
“We are a balance sheet lender,” said Orloff. “But we just continue to grow so quickly that we’re going to need to diversify our funding sources over time. We set up structures to do that now, and [investor] Victory Park is an amazing supporter,” said Orloff, pointing out that LendUp just doubled its access to capital with a $100 million credit facility to fund loan growth. “Eventually we will outgrow them as a single funding source. And that will come up soon.”
LendUp’s trifecta of offerings include credit cards, loans and financial education. The education is delivered via online videos and courses that highlight how much bad credit can cost borrowers, evidenced by $250,000 in fees paid by an average consumer with bad credit over their lifetime, according to LendUp stats. LendUp provides tools to help people to improve their credit score, ultimately making it easier and cheaper to borrow money. LendUp has saved its customers nearly $150 million in fees and interest.
Meanwhile LendUp and Beneficial State Bank recently announced an expansion of their credit card, the L Card, which should quadruple the availability of the Visa product.
“We launched the card recently and already by just having a simple and transparent credit card we’ve gotten a top rating in the credit card space,” said Orloff, adding that there is more to come. “We are going to completely revolutionize what credit cards mean for the emerging middle class. We are going to bring innovation that has not happened before. We are almost ready to launch and share that.”
Orloff expects that LendUp will grow in “overwhelming influence” over the course of the next year.
Grameen Bank Effect
For his part, Orloff has always had a penchant for helping the poor, evidenced by his efforts with the Grameen Foundation supporting financial services in rural and under-served areas. His work with the foundation was inspired after reading Nobel Peace Prize winner Dr. Muhammad Yunus’ book Banker to the Poor.
From there he moved on to Citi, where he did credit underwriting before joininig Silicon Valley’s maiden venture capital firm for fintech, Citi Ventures. In 2012 LendUp was born and Orloff has been determined to provide good structured products with embedded education that can help to make people more successful ever since.
Easy as Pie? Square Reaches For a Slice of the Consumer Lending Market
June 30, 2017Tod Wilson, founder of Mr. Tod’s Pie Factory in Englewood, N.J., is a Square Capital chief evangelist. Mr. Tod not only uses Square instead of what he describes as a “clunky cash register” but he also gained access to capital from Square via a small business loan that allowed him to expand his pie company.
Now Mr. Tod has the two criteria that qualify him as a candidate for Square Capital’s latest product, Square Installments, which is purchase financing offered to consumers of small businesses on the Square Invoices platform. First, he is one of about 225,000 businesses that use Square Invoice products nationwide; and second his business is based in New Jersey, which is one of half a dozen states that are participating in Square Capital’s pilot program for purchase financing.
“We do invoice via Square, and this sounds like another great product they’ve developed to help entrepreneurs run their business,” Mr. Tod told deBanked, adding that “I don’t believe our invoice transaction amount would make us a great candidate to comment – at least not until we begin selling them in gold pie tins!”
Square is extending purchase financing to consumers for invoices between $250 and $10,000.
Speed, Flexibility & Transparency
Square Capital has been serving the small business owner for the past three years, and so it’s only natural to now target consumers. Meanwhile Square Installments has a striking resemblance to the core features of Square’s small business lending, mainly speed, flexibility and transparency.
For instance, Square Installments is integrated directly into Square Invoices. Sellers send an invoice to customers. Eligible invoices include the option for customers to pay either with a credit card or to pay over time with Square Installments. The loan amount matches the purchase price on the invoice.
A square spokesman said Square Invoices is for merchants ranging from retail to professional services.
“The use case we see from businesses is diverse. We imagine larger ticket purchases, like furniture, appliances or something along the lines of professional services, such as home improvement projects or repairs, installing a fence or solar panels on a house. Imagine going to the veterinarian and having unexpected costs,” he said, adding that the list goes on.
Customers can then choose to repay the loan over three, six or 12 month installments. All three offers have an attached APR of 9.99 percent.
“With the offers customer see the rate and exactly what the monthly payment would be at that rate over the course of the loan. It’s a really simple transaction and upfront in terms of what the total costs would be with those monthly installments,” said a Square spokesperson.
Square uses their own models to determine credit eligibility based on a host of data inputs and some external credit factors. “We take a holistic view of customers’ credit worthiness to decide whether or not they are eligible for the loan,” the spokesperson said. “Many of those applications will be approved instantly.”
Once the customer is approved the small business is paid instantly, shifting the risk of the unpaid balance over to Square Capital.
“We’re really in the early stages at this point. We’re just starting the pilot. There are no default projections,” the spokesperson said.
In addition to New Jersey, the Square Installments pilot is actively being rolled out across California, Colorado, Florida, New York and Virginia.
SoFi Bank Puts ILC Charter in Spotlight
June 28, 2017
Online lender SoFi’s decision to apply for a bank charter has snagged the attention of alternative lenders, big and small banks and regulators alike. Market participants appear split between cheering the move and drawing a line in the sand. One thing they agree on is that the signs were there all along.
Christopher Cole, executive vice president and senior regulatory counsel at the Independent Community Bankers of America (ICBA) said it was only a matter of time.
“We were expecting the application from a fintech company to come eventually and it came pretty rapidly,” Cole told deBanked. “What was surprising to me was that they took the ILC route as opposed to the OCC special purpose national bank charter.”
As a Utah-chartered industrial bank SoFi would be subject to the regulation of the FDIC. There have not been any ILC applications for deposit insurance in years in part due to a temporary moratorium that Dodd Frank placed on the ILC loophole following the financial crisis, a roadblock that has since been removed.
Richard Hunt, president and CEO of the Consumer Bankers Association (CBA), said that SoFi’s application was certainly not a shock.
“The whole world is evolving, fintech is evolving. This was inevitable one way or another,” Hunt told deBanked, adding that there will probably be more applications coming down the pike, which he welcomes. “We’re glad more people are getting into banking. SoFi at one time railed against banks and now it wants to get into banking. Welcome to the world of banks and overregulation.”
The CBA is comprised of the country’s largest financial institutions as well as regional banks.
“This is the first true test of the FDIC in a new fintech world,” said Hunt, adding that it’s the duty of the FDIC to ensure that SoFi Bank is well capitalized. “That is part of the application process.”
The ICBA is comprised of approximately 6,000 small banks across $5 trillion in assets.
“This would actually create a risk to the deposit insurance system. An ILC would have deposit insurance from the FDIC. If SoFi Bank fails because parent SoFi can’t maintain it, the rest of the banking system must pay for it. They’re putting the banking industry at risk here,” said Cole.
And while the rise of fintech startups has created more competition for banks, neither trade organization has a problem with this.
“We’re not trying to keep fintech from competing, that’s not the case,” said Cole.
Meanwhile Hunt told of his trip to Silicon Valley in which he visited SoFi as well as many other fintech startups.
“I’ve always been a big fan of SoFi, especially after visiting. I’m head over heels they chose banking as their industry. We’re gloating that they want to join the banking industry. This is good for consumers, to have choices. We are not going to be afraid of SoFi joining the banking world. We welcome them to the banking world,” said Hunt, adding that banks are ready to compete as long as it’s fair.
Fair is precisely what the ICBA is seeking.
Level Playing Field
There are about 30 existing ILCs in existence now and thousands of insured banks. And SoFi’s use of the ILC charter is the ICBA’s main objection.
“It’s the fact that they’re using this loophole so that SoFi, the parent company of SoFi Bank the subsidiary, will not be subject to the same kind of restrictions that the owner of a commercial bank would. And therefore, you don’t have a level playing field,” said Cole.
The ICBA is also concerned that a successful SoFi ILC charter would set a precedent for other fintech firms.
“Who’s next? I could see Amazon trying to do this and waiting for SoFi to do it first. Who knows? I could see maybe Google and PayPal pursuing this. I could see some big commercial companies exploiting this loophole, and that is why we think it should be closed,” said Cole.
Meanwhile CBA’s Hunt sees things somewhat differently. He said SoFi’s application represents an opportunity for bank regulators to review the ILC in a new world environment and possibly make changes.
“No one envisioned when they wrote the ILC charter that we would have fintech companies that finance mortgages and student loans from private equity capital and not deposits. It’s a new world. Like with all rules and regulations, federal regulators should periodically review longstanding policy,” Hunt said.
Either way the influence of the banking sector should not be overlooked.
“We have been fighting the ILC charter for over a decade. When Walmart tried to apply for an ILC charter in 2006 we objected at that point. And that resistance was part of the reason why they never got a charter,” said Cole.
SoFi Bank
The ICBA is preparing commentary for the FDIC, which is due by July 18. “Our comments will be focused mostly on the use of the ILC charter,” said Cole.
Once the comments are in, the ball is in the FDIC’s court. “We’re anticipating that a decision will be made in the next two to three months. We should know by the end of this year whether or not SoFi Bank gets its charter and deposit insurance,” said Cole.
If SoFi does become a bank, Hunt says he’s pleased that the fintech company has expanded its lending beyond only the elite universities though he’s still not sure they’ve gone far enough. “If they are granted the ILC charter, every student should have fair access to SoFi’s products just as they do with every other bank in this country,” said Hunt.
SoFi declined to comment for this story.
SEC Reported To Be Looking Into CAN Capital and Prosper
May 27, 2017Bloomberg reporter Matt Scully reiterated on Friday that the SEC is looking into CAN Capital “after that firm failed to report to bondholders that some customers’ loans were in default.” That was referencing a previous December inquiry reported back in February. CAN’s $200 Million securitization suffered a rapid amortization event in the second half of 2016, compounding other problems including a reported breach with their Wells Fargo credit facility. The company never quite recovered despite CAN’s Acting CEO, Parris Sanz, telling the WSJ back in January that the problems were akin to changing a flat tire. The previous CEO along with the company’s chief risk officer, chief financial officer, and chief marketing officer have all left.
Bloomberg also reported that online consumer lender Prosper is being probed by the SEC after they disclosed that they had overstated investor returns. The inquiry was said to only be in a preliminary stage.
Update: The inquiry with CAN originated in December but it was not widely reported. The above has been edited to reflect the timing.
Two Small Biz Owners Talk Online Borrowing
May 5, 2017
Katie Basson, President of Birch Tree PromotionsDuring National Small Business Week, we wanted to see what we can glean from a couple of small business owners who have taken to the Internet for their capital needs. Entrepreneurs Katie Basson of Birch Tree Promotions and Asha Waterstreet of Tasteful Additions document their experience as first-time online borrowers, and here’s a hint: Both of them would do it again.
And while their stories are unique, there are some parallels in Basson’s and Waterstreet’s online borrowing experience starting with the fact that both women got their capital needs met through SmartBiz Loans. Both raved about customer service. And for both, marketing and the media played a key role in their decision process.
Where their stories diverge, however, is in their response to the amount of financial products targeting women-owned small businesses. While Waterstreet does not give much thought to demo-tailored loans, Basson’s experience is that the number of programs geared toward women small business owners is lacking. This despite the fact that the United States is home to more than 11 million women-owned small businesses who employ millions and produce $1.6 trillion-plus in combined revenue.
Meanwhile SmartBiz Loans seems to buck the banking trend when it comes to extending capital to entrepreneurs like Basson and Waterstreet. “One third of loans [we process] are to women-owned businesses, which is higher than the average for traditional bank loans to small businesses,” Evan Singer, CEO of SmartBiz Loans, told deBanked.
Katie’s Story
Birch Tree Promotions, whose name was inspired by a trip to Basson’s grandparents New England cottage where the moon-lit birch trees shined, was founded in 2006. The Newburyport, Mass.-based business, whose annual revenue hovers at about $1 million, specializes in selling premium promotional items. Similar to the birch tree at that vacation cottage, Basson seeks to make her brand stand out from the rest.
“It’s amazing to do this kind of volume for such a small place. I attribute that to technology, which is why I completely appreciate a company like SmartBiz that leverages that technology to be efficient,” said Basson, who counts among her clients Bain Capital, Philips and Amazon Robotics.
Her need for capital arose with a growth spurt during which time she hired a number of part-time employees.
“Up until [using SmartBiz Loans] we were sort of going along using lines of credit from local banks. I expressed my desire to have a long-term solution help with cash flow so it’s not boom and bust all the time. Instead there would be a significant amount of capital to use for managing the cash flow of the business where making payments each month made sense. None of them were interested. Somehow I didn’t fit their traditional model,” she explained.
The roots of Birch Tree Promotions reside in Basson’s quest to achieve a work/life balance, throughout which she observed financing needs for women-owned home-based business being overlooked.
“There was nothing I could see out there that was targeted to me. I didn’t have a storefront; I’m working out of my home office. That made it seem suspect to them. I wasn’t serious if I didn’t own office space,” she noted.
But Basson, whose business is run 100 percent online, would not take no for an answer. “If I could pay a $20,000 line of credit, why wouldn’t they view me as a viable credit risk?” she quipped. So Basson set out on a journey to find a lender that was more open minded. She read about SmartBiz loans in an article published by a major financial publication, and then it was off to the races.
“I was amazed at how easy it was and how quickly everybody responded to me,” said Basson, adding that she even received a call on a Friday night from a SmartBiz representative to let her know where her loan stood and so that she wouldn’t have to worry over the weekend.
SmartBiz Loans matched her up with First Home Bank in Florida for an SBA-backed loan. Basson borrowed $200,000 over a 10-year term and her monthly payment is $2,274. The loan process took four weeks.
“Managing cash flow was the biggest, most important piece in addition to having funds available should I need them for big orders. We need some resources if we’ve just landed a huge order. We pay for the goods and then wait to get paid by the big company, and we needed more financial flexibility for that,” said Basson.
Perhaps the greatest testament to her online borrowing experience resides in whether or not she would return to the online lender for her capital needs in the future. The answer? “Indeed” she would.
Asha’s Story
Waterstreet launched Tasteful Additions about six years ago in Rochester, New York. The inspiration for her business came from a family vacation to North Carolina where she and her daughter visited a tasting store featuring flavored olive oils and balsamic vinegars. Ten bottles later coupled with frequent requests from her 12-year old for salads at dinner, Waterstreet knew there was something there.
So she opened up her own tasting store featuring flavored olive oils, balsamic vinegars and gourmet salts. And while in recent weeks she brought her small business entirely online doing away with the brick-and-mortar location, Waterstreet came across a need for capital about three years ago.
“I wanted to expand some of my products, and that was primarily the reason I decided to apply for a loan to get more capital. Credit cards were too high interest and I didn’t want to do that,” she said, adding that she initially went to her local banks only to be met with a process that she described as “tedious.”
In fact, after inquiring with a traditional bank for a loan, she was later greeted by her local banker with a pile of paperwork that she immediately rebuffed. “Being a small business and with me running things I didn’t have time, honestly. I’m trying to open the store, run the business and meet with customers, and I was like, ‘forget it,’” she said.
Instead she opted opting to complete an online application, a process she described as “simple.”
“They took care of everything. And when they had questions, they called me. It was so easy. Whenever you think something’s too easy you wonder, ‘What’s the catch?’ I was shocked there really wasn’t a catch,” said Waterstreet reflecting back.
It was while reading a food trade magazine that Waterstreet came across and ad for SmartBiz Loans. The rest is history. “I read about what they do. I called and the process was so easy and quick. And I got a very good interest rate as well. I was not getting raked over the coals or anything like that,” she said.
Waterstreet would not discuss the details surrounding her SBA loan but suffice to say that if she were to find the need to access more capital in the future, she would likely go to SmartBiz first.
Neither Basson nor Waterstreet considered any other online-lenders.
Elevate Readies Rise for Growth
April 28, 2017
Alternative lender Elevate has hired Tony Leopold for the newly created role of general manager of Rise, the company’s flagship product that is 100 percent online. The addition places Rise in the spotlight ahead of Elevate’s maiden earnings report as a publicly traded company, which is being unveiled in May. Leopold had ambitious plans for Rise, which bodes well for the company’s balance sheet.
Before Leopold came on board Jason Harvison, Elevate’s COO, oversaw all of Elevate’s products.
“As Rise has grown and become more complex it starts to become difficult for one person to manage all the moving pieces. It made sense to have a general manager come in and oversee the different parts of the puzzle for Rise,” Leopold told deBanked.
Leopold’s move to Elevate from United Rentals represents his foray into the world of fintech. Prior to that he also had a stint with Bain & Company, experiences from which he fully intends to pull as he steer’s Rise into its next chapter.
“I see a lot of parallels in the way we raise capital and make decisions about how to allocate that capital. The fintech side feels very familiar to me as United Rentals was very capital intensive. My experience at United Rentals will be very useful with Rise in moving it from where it is today to a higher level in the future. It is a playbook that I know very well.”
In his new role, Leopold, who officially came on board in March, oversees decisions that touch Rise and its customers on issues ranging from where he wants interest rates to progress, to value creation for the customer and the company, to customer acquisition. He also leads the charge on the states in which Rise is available and the product strategy in each of those states, which at the moment stands at 15.
And while expansion is on the horizon, Leopold’s near-term focus is on the states in which the product is already offered. “My main priority is making sure we increase share in states that we are already in through customer acquisition and more importantly customer retention. Over time we will add additional states to extend our reach as it makes sense.”
Leopold kept his cards close to his vest on the details, though he pointed to Elevate’s deep bench of talent to increase customer loyalty. “That’s our secret sauce. We have a world class risk analytics team that identifies customers that are a good fit for our product. This gives the customer access to credit that they didn’t have before.”
Rising Up
Elevate in 2015 grew its revenue nearly 60 percent to $434 million, while gross profit in that year came in at $125 million. Shares have climbed 27 percent (as of April 28) since the carefully timed IPO.
“I have responsibility for the P&L results for the Rise product, the flagship product for Elevate. Rise is critical to the overall performance of the company,” said Leopold. “Growth is something that is a priority, and historically this company has not had a problem achieving that. Growth for the sake of growth doesn’t create shareholder value. But as we continue to grow we will do so profitably and responsibly from a credit perspective.”
While Rise is by no means a payday product, its target customer possesses subprime credit. As a result, the interest rates attached to Rise product loans range from 36 percent on the low end to 299 percent. Rates improve to the lower end of that range as customers prove their credit worthiness.
“There are 170 million subprime Americans, customers that often times do not have access to traditional sources of credit such as banks and credit cards. The credit they do have access to in some states can be predatory. While we charge interest rates that are higher than credit-card companies for new customers, we take losses at a higher rate as well. To provide credit and take on higher risk you have to have a higher interest rate. Otherwise we wouldn’t be able to provide credit to customers who need it,” said Leopold.
When Leopold joined United Rentals in 2010, the company had revenue of $2.2 billion and an adjusted EBITDA margin of 31%. When he left, the previous fiscal year United Rentals had $5.8 billion in revenue with adjusted EBITDA margins of 48%.
Elevate reports its first-quarter results on May 8.
