Analysis

Amex enters competition with business alt lenders in aggregators

According to the Alternative Finance Benchmarking Report, Marketplace Business Lending model was responsible for generating $2.62 billion of loans in 2015, equating to a growth rate of 160% from the 2014 volume of $1.01 billion. Between the period of 2013–2015, this model grew by an average annual rate of 173%.

Balance Sheet Business lenders originated more than $2.27 billion in loans in 2015 and are growing at an average rate of 115% for the last 2 years.  Major online lenders to SMEs have raised massive rounds from VCs.

SME lending aggregator

From a paucity of choice during the recession, an entrepreneur is now confused about which is the best funding option for him and his business.

This pain point led to the launch of Lendio, a free marketplace for small business loans. Essentially Lendio acts as an aggregator for business owners looking to raise debt and as a customer generator for the small business lenders. It was cofounded by Levi King, Trent Miskin, and Brock Blake and launched in 2011. At present, more than 130 employees work in Lendio with its headquarters located in South Jordan, Utah.

Company history

Lendio has raised more then $9 million between 2011 and 2012 (from Highway 12 ventures and Tribeca Venture Partners), $4.5 million (Runa Capital as lead) in 2013 and $20.5 million (Napier Park Global Capital as Lead) in 2015. Lendio acquired Business Bounce, a small business financing platform in April 2015 for an undisclosed amount. New York located Business Bounce gave the company an east coast presence and helped the management acqui-hire a great team. Lendio helped to generate loans worth $14 million in 2014 and $128 million in 2015. The number of borrowers facilitated have increased from 500 to 5242 in 2015; Owler.com estimates the company’s 2015 revenues (approx.) to $6.2 million. On the other hand, it also faces tough competition from Fundera, Bizfi, Biz2credit, the Business Backer and the like. Lendio holds the database of more than 100 active lenders across U.S. (75 affiliated lending institutes were used to finance borrowers) and has been recognized as Utah’s fastest growing companies in 2011 by the Mountain West Capital Network ( MWCN).

How does Lendio work?

Once the borrower/business house registers itself, Lendio quickly views, compare and explores the best product options for its users. Clients then choose the one as per his/her convenience by reviewing the rates and terms of each loan product by making a single application for the same. After completing the application process and meeting the required criteria (on the basis of credit score, time in business, annual revenue, amount of financing, collateral available and other customer filters),  the client will receive multiple offers from the lenders (lenders can include banks, fin-techs, credit unions and other institutional investors) for providing loans (in the form of Term Loan, Line of Credit, SBA Loan, Equipment Loan, Franchise Loan, Business Acquisition Loan, Commercial Real Estate Loan, Accounts Receivable Financing, Merchant Cash Advance and Peer-to-Peer & Crowd sourcing) and the best rate is chosen among them. At the end, the client gets his loan and is assisted in the whole funding process with no extra charge from Lendio. It only charges a fee from the lender for helping them acquire a customer.

Key numbers

On an average, it took 8.9 days to close a loan but the startup’s fastest closure took a mere 57 minutes. The average loan size is of $29,500 and 57% of the businesses returned to Lendio for additional financing in 2015. On the basis of risk assessment, borrowers were classified among various credit bands/scores; 11% of the borrowers had the credit score of more than 720, 16% comes in the range of 680-719, 18% in 650-679, 29% in 600-649, 23% in 500-599 and 3% less than 499. Lendio had served in various segments of industries such as Construction (10%), retail (6%), Restaurant and food services (5%), business services (5%), transportation (4%), arts/entertainment/recreation (3%), automotive repair & maintenance (3%), real estate (3%), etc.

Speed and growth

Lendio helps in reducing the average processing time of Financial Institutions (which is in months) to just 8.9 days on an average. Its CEO, Brock Blake’s view is that the alternative lending industry will grow into a $200 billion industry in less than 10 years. Since the SMEs are in their initial growth stage, they have high-risk profiles and are less eligible to get a conventional SMB loan. On the other hand, the more established the online lenders become, the cheaper their capital gets. This process will help in the convergence of pricing of loan products so that it’s a win-win for both business houses as well as for lenders.

New lenders

Previously, Lendio partnered with Experian and Staples for its outreach across states and recently it tied up with American express (Amex) to provide more flexibility for SMEs by powering them with American Express’s merchant financing offering. It is a win-win for Amex as well, as the issuance of loans will help in expanding and strengthening the client database of Amex. The loan amounts will range from $5,000 to $2 million for the term period of 1-2 years.

Future of SME lending

Burgeoning growth of lender agnostic marketplaces like Lendio will help to reduce search costs both for lenders as well as for borrowers. Lendio is able to charge a small fee from the lender by acting as a cost effective sales funnel for the lender. Tech innovation by players like Lendio is bringing the much-needed change to make the financial system more flexible, effective and accessible to SME borrowers.   Massive funding from VCs to Lendio and its competitors indicate that loan aggregators will soon become the de rigueur for SMEs across the spectrum looking to raise debt from alternative or traditional lenders.

Author: Heena Dhir and George Popescu

George Popescu

About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( www.currencymountain.com ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

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