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That survey Sean linked to about institutional investors being more interested in small business lending than consumer lending was surprising in part because the consumer loan market is a lot bigger. It appears investment in the b2b side of things is probably only just beginning...
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Consumer is a bigger market but comes with a lot of heavy regulation, interest caps and high risk. B2B side of things is more appetizing. I am curious though on institutional money, what are the competitors for b2b? I know at one point insurance was showing great promise... not your typical car insurance/life insurance but for other markets... as well as automotive finance but that is also seeing some regulations from CFPB... Just curious where our industry stacks up on tasty menu of returns. -
B2B is a more difficult category for institutional investors to understand because each and every business looks different from the others. Scale is also an issue because diversification of $50K-$250K loans requires more capital by definition than consumer loans in the $5K-$25K range. But, counterbalancing this is the trend that there are pockets of high single digit and low double digit unlevered returns to invest in within the SMB lending ecosystem and in the consumer space these types of returns are becoming more difficult to find.
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