This week the Lighter Capital team has the great opportunity to be in New York, sponsoring the LendIt conference. LendIt is the largest conference series dedicated to the global online lending community and brings together online lending platforms, financial innovators, and investors all around the world. Our CEO BJ Lackland was on the Small Business Lending Innovators panel yesterday. Along with four other CEOs in the SMB lending space, BJ discussed trends and challenges in online lending.
So what did these five CEOs think are the most important trends in small business lending today?
Panelists:
BJ LackLand, CEO of Lighter Capital Lighter Capital provides up to $1M growth capital to early stage, growing technology companies.
Denise Thomas, CEO of ApplePie Capital ApplePie Capital is a marketplace lender focuses on financing franchises.
David Haber, CEO & Founder of Bond Street. Bond Street offers up to $500K, 1-3 year term loans to small businesses.
Jeffrey Rogers, President & CEO of LiftForward LiftForward provides working capital, purchase order and asset backed loans to small businesses.
Mark Rockefeller, CEO & Co-Founder of Street Shares Street Shares is a lending marketplace for veteran entrepreneurs.
Trend #1: Striving for sustainability in an uncertain market
Today’s small business owners looking for capital face a major challenge. Strict lending guidelines, disappearing community banks, and the consolidation of big banks have made funding scarce, and unfortunately, predatory online lenders that lend fast at sky-high interest rates have stepped in to fill the gap. The companies represented on the panel have created innovative lending products to fill this gap for specific industries or customers. Expect more online lenders carving out niches and lending to them sustainably.
Trend #2: Leveraging technology and data in the application and underwriting process
Gathering and analyzing quality data is essential for small business lending, from both the credit and process perspectives. Everyone on the panel shared how they’ve used technology to be more efficient in running their operations. ApplePie Capital relies on historical brand data to estimate the performance of their franchise borrowers. Lighter Capital and Bond Street talked about using financial and customer data to assess the business’s risk instead of relying on borrowers’ credit scores.
While everyone on the panel recognized the importance of tech and data, they also acknowledge the importance of interactions with their customers. Many aspects of small business lending can’t be replicated by automation and machines. Machine learning is great, but nothing is more valuable than actually getting to know your borrowers.
Trend #3: Fighting for mindshare
The issue most commonly shared among companies on the panel was awareness. Many small business owners don’t realize there are options outside of traditional banking and predatory online lenders. If they are aware, they often don’t realize these options are priced competitively. Gaining mindshare in a market saturated with bad options was a common concern.
Trend #4: New competition and consolidation
In the next 3–5 years, some panelists predict there will be more new players entering the space: tech-enabled startups as well as new, more specialized and nimble loan products from traditional banks. Many also predict there will be consolidation, where smaller players will get acquired.
Where do you see small business lending going? Let us know on Twitter. @LighterCapital.