Most banking commercial lenders are stillbeing very wary about increasing the level of lending activity tosmall businesses. At Money2020 last week, Jim Bruene of Netbankerhappened upon a panel discussion featuring three innovators insmall business commercial lending. Glen Goldman, CEO of CapitalAccess Network; Kathryn Petralia, Co-founder & COO, Kabbage;and Noah Breslow, CEO of On Deck Capital all agreed theirbusinesses are booming.
According to Bruene:
“Like most disrupters, the three are gainingtraction in a narrow niche that legacy players have largelyavoided, sub-$250k non-asset-backed commercial lending. In total,the three are on track to do roughly $2 billion in total lendingnext year. While impressive, that’s not the big story. Thedisruptive piece is the technology the three use to underwrite theloans.”
Each is using one or more streams of daily data, which might begenerated by a merchant-accepting application or an online bankingapplication, to monitor borrower cash flows daily, and thus adjustlending levels (and take partial loan repayments) more frequentlythan the usual monthly schedule. In some instances, theirdata-driven view of a business enables them to provide support toonline businesses and e-commerce ventures which have little in theway of physical assets, but are successfully leveraging digitalassets.
Let’s face it: monthly loan repayment schedules are a vestigialtrait of the pre-automation commercial loan products that featuredmanual monthly calculation of interest due and manual posting ofinterest and payments. Bankers take heed: these firms (and otherslike them) are making money from credits which have, in most cases,already been declined by commercial banks. They will change thegame in small business lending.
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