I recently participated in the recently concluded Governor’s Utah Economic Summit in Utah and the summit used to hold every year, bringing top leaders and decision-makers in the business, government and academic sectors of the state together. The summit aims to discuss the global economic impacts of our business communities and the economy in Utah. During this summit, I had the opportunity of moderating a different panel dedicated to discussing the issue small business face when funding. There are many experts from various sectors at this meet up, and some of them are Martha Dreiling of OnDeck who is an online lender offering term loan products between $5,000 and $500,000; Roger Shumway of Celtic Bank, an active SBA lender with working capital loans averaging $100,000; and Ana Sirbu of BlueVine, an online lender specializing in invoice factoring and line of credit products. I was able to discuss alternative funding for small businesses, and as a moderator, I was able to match small business owners to the financing from more than 75 lenders. 

The Evolution of Unconventional Funding

The much small business owner is not following the right part when they are finding capital to fuel their business. About ten years ago when the business needs a loan the first place they go to is the bank but in 2007 – 08 after the market crash banks stated to focus only on loans that are over a million dollars because underwriting loans like cost are the same cost as smaller ones. This as given birth to host of opportunities in alternative funding and nowadays many non-bank lenders has moved onto the scene. According to a survey carried out by Lendio Survey it shows that about 74% of small business would switch to a bank willing to give them a loan. 

How Is the Lending Industry Serving the Underserved?

Dreiling: According to a 2016 Federal Reserve study it shows that that small business owners spend about 33 hours looking for financing. 

Sirbu: The goal is to make access to capital simple, fast and flexible and also making the customer jump through a few hoops as possible.

How Are Banks Responding?

Shumway: Banks are forced to do better due to online lenders’ that now focus on serving the underserved forces. Banks have traditionally done a bad job loaning small amounts of money to small businesses, and this has made many banks to work on technology that can help them speed up the borrowing process. 

Dreiling: OnDeck was the first fintech company to partner with a top-10 bank, and we can partner together to deliver the right experience to small businesses without any conflict. 

What Does Lending Look Like in 5 to 10 Years?

Sirbu: We have to face the fact that technology and the use of data is here to stay, as many big players will increase their use of data in decision making. We’re unlocking this new market segment that didn’t have this as an option. 

Dreiling: It might be hard for new online lenders to emerge but Fintech companies and banks will continue to partner together

Shumway: The fintech industry has banks’ attention and over the next 2–5 years the business that will survive are those that can generate assets. The “fin” part will become more important than the “tech” part but whatever changes technology component is here to stay. 

 

I am an advocate for the small business owner, and I must say I love hearing customer success stories been shared y industry experts and how they share their efficient and individualized access to capital for small business owners.