Drift Capital Partners Credit Facility Shows Confidence in Fintech
January 20, 2018Drift Capital Partners, LLC, an alternative asset management company, announced a new $50 million credit facility earlier this month. The funds will be used to “expand its portfolio of structured credit solutions to FinTech enabled Non-Bank Financial Services companies and allow them the opportunity to increase lending to ‘main street’ businesses,” a company release said.
Drift previously provided $25 million in financing to McClean-based Breakout Capital.
“Since its inception, Drift has been focused on developing solutions to bridge the chasm between institutional investors and main street businesses and we believe this facility is an important step toward solidifying that connection,” said McLean Wilson, Managing Partner of Drift in a company release.
Holiday Bubble Helped Cause (Routine) Crypto Stumble
January 18, 2018
Those cherished-yet awkward-family moments you navigated this holiday may be responsible for Bitcoin’s recent rollercoaster ride.
While that may be painting with a bit of a broad brush, it does appear that that the post New Year’s dip that befell the cryptocurrency world was tied to a festive hype-bubble.
Between Thanksgiving and the December holidays cryptocurrency was a hot topic around the dinner table while people spent extended time with their families, John Omar, head of the Chain Operator blog and cryptocurrency trading course, told AltFinanceDaily.
Omar explained that not only were those that were already schooled in the ways of crypto-trading discussing their financial gains over apple cider and stuffing, but family and friends who were previously unaware or unfamiliar with the likes of Bitcoin were having their interests piqued.
This spurred a rapid uptick in pricing on the way to to unprecedented gains in Bitcoin and other crypto counterparts.
“No, this is not the end of crypto,” Omar told AltFinanceDaily. “This is far from the end. What we’re seeing is a price correction after 2 months of unprecedented growth. It’s not even a historic price correction. There have been more dramatic movements. There are a few reasons why the price is correcting at this time: potential regulation from Korea, China and France, and people who bought into cryptocurrencies after the holidays selling off to realize profits.”
Emerson Taymor, founding partner of the strategies firm Philosophie, agrees with Omar’s stance.
“Bitcoin and the market has seen much more significant drops in its past and always rebounded with a vengeance. It is a healthy correction, but far from the end,” he said.
Like Omar, Taymor also attributes the recent drop to “regulatory headwind” overseas.
While he believes that cryptocurrencies best days are not necessarily behind them, there will be losers on the path to determining a clear winner.
“Remember, cryptocurrency is much more than the “stock price,” Taymor said. “We are seeing a fundamental shift in how technology is going to be created. I believe we will have another big run up for the next 6-12 months and then we will have the real bubble bursting. Much like the Dot Com bubble, we will see people lose a lot of money and companies implode like Pets.com and Webvan, but we’ll also discover the next Amazon!”
Defendants in Forged COJ Case Failed to Respond to The Complaint
January 16, 2018The lawsuit brought by FundKite against defendants alleged to have forged a Confession of Judgment (COJ) is not going so well for the defendants. Last week, FundKite filed a proposed order for a default judgment since none of the defendants ever appeared to defend themselves.
Meanwhile, circumstances surrounding the suspicious notary stamp on the COJ in the case have become a lot more clear. Originally, the merchant asked how a New York notary stamp ended up on the documents he claims are forged when the merchant himself resides in Florida.
According to an affidavit by Jennifer Gately, the notary, she was asked by someone employed by the ISO to sign off on a document for a merchant without the merchant present. She refused. Soon after, her notary stamp was stolen. She not only reported this theft to the National Notary Association, but she also filed a police report.
The relationship between the person working for the ISO and her, is that they both lived at the same address, explaining how the theft would’ve been relatively easy to carry out.
“I have never worked with any of the listed defendants on any matters, including concerning financial transactions,” she declared.
The case is filed under Index Number: 656692/2017 in the New York Supreme Court. You can download the original complaint here.
Stacking Lawsuit Trial Date Set
January 16, 2018The lawsuit between RapidAdvance and Pearl Capital has a trial date, June 25, 2018. RapidAdvance, who filed the complaint in 2015 in the Circuit Court for Montgomery County in Maryland, has sought to recover damages for tortious interference.
Considering that RapidAdvance’s loan to the merchant at hand was only for $31,000, this litigation, which is now more than 2 years-old and scheduled for trial, is likely more about the parties attempting to set a precedent.
The case is Small Business Financial Solutions, LLC v. Pearl Beta Funding, LLC Case No. 411478-V.
What’s Lending Got to do With Cryptocurrency?
January 10, 2018
Facebook and Snapchat might be the last things that employees are being distracted by these days. Instead it’s Coinbase and Blockfolio, two cryptocurrency apps, that are quickly stealing the attention of young finance professionals. And the interest in Bitcoin, Ethereum and alt coins is causing some in the industry to wonder if the phenomenon can somehow be connected to online lending and merchant cash advance.
A meetup hosted by partners of Central Diligence Group (CDG) on Tuesday night in NYC, for example, was geared towards cryptocurrency enthusiasts. CDG is a merchant cash advance and business lending consulting firm. Those that attended, talked candidly about Ripple, Bitcoin, Ethereum, and the hot topic of Initial Coin Offerings (ICOs). And it did seem all connected. Companies successfully raised more than $3 billion through ICOs in 2017, for example, some of them online lending companies.
ETHLend and SALT, blockchain-based p2p lenders, each raised $16.2 million and $48.5 million respectively through ICOs. What’s more, their crypto market caps currently stand at $325 million and $754 million respectively. The latter is nearly twice as valuable as online lender OnDeck. The founder of Ripple, meanwhile, briefly became one of the richest men in the entire world.
Whether these valuations are overdone is besides the point. A smart phone is all that’s required to get in on the action and trade thousands of cryptocurrencies online, many of which move up and down by astronomical percentages over the course of a day. Becoming a millionaire overnight by hitting on the right one is a dream sought after by many. And young people, especially millennials, are become unconsciously comfortable transacting in non-government-backed currencies through technology that completely shuts out banks.
And that may be the shift in all of this to pay attention to. It isn’t that a local restaurant is going to collateralize their Bitcoin to get a loan and outcompete an MCA company, but that a portion of the monetary system eventually starts to sidestep banks.
Trying to collect on that judgment? Good luck tracing the money in cryptos.
Need to freeze funds? You can’t freeze someone’s Bitcoins if they’ve got them stored on their own hardware.
Evaluating a business’s bank statements? The transactions can only be verified on a blockchain.
You might not believe me, but it’s incredibly likely that you’ve encountered a client that has defaulted on an MCA or loan whose stash of money has been obscured in cryptos all the while their bank statements appear to show insolvency.
It’s also likely that you’ve encountered a client that has used the proceeds of their MCA or loan to buy a crypto. Maybe not the whole amount, but with some of it. One study, for example, revealed that 18% of people have purchased Bitcoin using credit. Bloomberg reported that the phrase “buy bitcoin with credit card,” just recently spiked to an all-time high.
People are even taking out mortgages to buy Bitcoin, according to CNBC.
If you think cryptocurrency is an industry completely independent of your business, consider that the market cap of cryptocurrencies is currently valued at more than $700 billion. That’s nearly twice the market cap of Goldman Sachs and JPMorgan, COMBINED. The #3 cryptocurrency by market cap, Ripple, is being pitched almost entirely to traditional financial institutions.
Bet all you want on the prediction that this bubble will burst. Maybe it will. But the underlying technology, transacting without banks in non-government backed currencies that may be difficult to trace and recover, is a genie that’s not returning to its bottle anytime soon.
In the meantime, now might be a good time to poll your employees or colleagues about their knowledge or use of cryptocurrency. You may be surprised by what you find, especially among the younger crowd.
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Disclaimer: I currently hold a material amount of Ether, the currency of the Ethereum blockchain.
Finn & Co, Inc. To Manage Two New Equity/Debt Funds
December 14, 2017Below is a letter that was circulated by Finn & Co, Inc.
Finn & Co, Inc. is pleased to report the formation of two new equity/debt private equity funds to be managed by our firm. The first of these two funds is a US$100M equity fund which will seek investments in the MLM Industry (multi-level-marketing). This fund will be seeking and entertaining opportunities in North and South America as well as Europe. It is the intention of the fund to have heavy concentrations of ownership in relatively few investments and in addition to the contribution of the invest cash, it is the intention of the fund to offer geographical business partnerships with Asian ‘like-type’ MLM entities. The second fund is a US$200M debt/equity fund engaged in lending to the MCA Industry (merchant cash advance). This fund will offer senior debt, sub-debt and equity investments to the MCA industry here in America and in specific areas of Asia. The management of these funds will embrace additional industry experienced individuals and hopes to ‘fill a void’ of available capital for these traditionally difficult ‘to bank’ business endeavors.
Finn & Co. Merchant Banking Activities at this time.
Please review the following activities of our firm in the areas of consulting, merger and acquisition assignments and current capital fundraising activities. Finn & Co. has recently completed valuations for operating companies engaged within the Direct Sales/MLM industries and that of aerospace and defense. In addition, we are currently engaged with multiple capital raising assignments for companies within the following industries: Nutrition Products, Merchant Credit Advance (MCA), Medical services, Tobacco, Fish Farming, Oil Refinery, Lodging, Technology, Consumer Water Bottlers and the financing of Credit Card Receivables. Finn & Co., Inc. has active M&A assignments detailed later in this communication. We welcome your inquiries for valuation assignments, merger and acquisition advisory services, and capital fundraising needs.
Merger and Acquisition Assignments:
(1) Binocular Manufacturers: The Purchaser is a manufacturer of ‘high end’ binoculars, ground, airborne and maritime Electro-Optic/Infrared cameras sold primarily to the military and law enforcement communities. This acquirer is engaged in the design, development and sale of advanced optical devices to expand its domestic and international sales and is seeking manufacturers of related devices targeting the commercial, law enforcement and military markets. Asian and European-based manufacturers of binoculars and vehicle cameras are of a particular interest to this acquirer. In addition, the buyer is interested in the purchase of optics companies with strong R&D personnel — specializing in the development of binoculars, rifle scopes, and any and all related advanced EO/IR technology. This acquirer will entertain joint-ventures in place or in lieu of outright purchase or merger.
(2) Fish Processing Companies: The acquirer is an international integrated fishing enterprise engaged in catching, processing, and value-added functions in the worldwide fishing industry. This company desires to acquire a value-added fish processing company located in the USA. The desired company will be profitable at the time of purchase, selling into the retail market, restaurants, and the cruise ship sector of the marketplace.
(3) Health Care:
- (A) Seeking Acquisition Targets operating in business process outsourcing, employment, staffing, billing, surgery centers, and ancillary services to health care industry. The target platform company should have an EBITDA of between US$5M and US$20M.
- (B) Home Health & Hospice: Seeking a home health and hospice platform acquisition in any Geographical area, if the acquisition target enjoys US$3.0M in EBITDA or more AND Management team is willing to remain with the company post the acquisition is completed.
- (C) Large, publicly traded NYSE ‘for profit’ hospital ownership and management company seeking additional ‘hospital’ acquisitions and/or management contracts. While any ‘locale’ will be entertained, the States west of the Mississippi River are preferred.
(4) Multi-Level-Marketing Industry/Direct Sales: We continue to seek North American, Latin American and Asian-based operating MLM/direct selling companies for various buyers and investors. We have multiple buyers of nutritional products, cosmetics, personal and health care companies, lingerie sellers, fashion jewelry and other consumable products. The targeted acquisition or investment opportunity can range in annual sales size from US$25M to as large as multi-hundred million dollar sales companies located in the USA. We have interest in direct sales/MLM companies with annual revenues of US$10M or greater located outside the continental boundaries of the USA. These American and non-American buyers are either currently operating MLM entities or are the investment arm of non-USA based MLM operating companies, all of which have a long and “in-depth” operating knowledge of the industry and are anxious to expand their businesses into the USA, Canada, Latin America and/or Asia. The buyers or investors are prepared to purchase 100% of any entity or are prepared to partner with a seller that wishes to maintain some equity ownership and a management role. Our buyers will require at least 51% equity ownership.
(5) Nutritional Products
- (A) Manufacturers (third party): We are seeking third party nutritional products manufacturers of tablets, capsules, powders, gels, and liquids. There is a particular interest to acquire a liquids manufacturer at this time. The targeted companies should possess the appropriate industry certifications and conform to recent government-imposed manufacturing processing requirements. The targeted companies will have annual sales of US$15M or larger.
- (B) Branded Nutritional Products: Sold via retail chains, direct through mail order or online. The more ‘direct’ the sale method of delivery, the stronger the interest from our buyer.
(6) Food
- (A) Hispanic Food Suppliers: Our client is an acquirer of North American-based manufacturing and distribution companies offering Hispanic foods and related items to the wholesale or retail marketplace. The candidate will have a known brand name and an obvious presence in the Hispanic community and a recognized name or product to the Hispanic food buyer.
- (B) Restaurant Chains: A currently operating restaurant team is seeking restaurant chains with annual sales of US$50M or more and EBITDA of US$5M or more. The target chain could be an independent restaurant concept, a franchisor, or a franchisee. Minority Recaps/and or Growth Equity will also be considered.
- (C) Branded Food companies: We represent a financial buyer of ‘branded’ food companies. The targeted candidate will have annual sales sufficient to generate an EBIT of US$10M or greater. The food offering can be across a wide spectrum of food offerings and will be considered a national brand.
(7) Aerospace/Defense:
- (A) We have multiple buyers seeking aerospace and defense operating companies that will range in annual sales size from US$20M to US$250M. The ideal candidate will currently be a supplier of materials and/or parts to the aerospace after-market, manufacturer of such parts and supplies, a provider to the aerospace/defense industry and/or engaged in a business relationship within the industry that allows it to participate in any of the ongoing support and/or replacement vendor positions in this after-market sector.
- (B) In addition to our above targets, we represent a US$200M sales company, privately-owned, seeking an aerospace manufacturer. Tight tolerance machining and/ or the manufacturing of aerospace/defense parts are the two areas of interest. Turnarounds and under-performing companies will be considered. The preferred size target is an entity generating revenue of US$25M to US$250M.
- (C) We represent a buyer of “Type Certificates” of established aircraft. These airplane types are currently in operation but not in production and range from piston propeller, turbo propeller and/or jet engine type aircraft.
- (D) Security Companies: We are seeking businesses that offer services to the military or law enforcement markets associated with intelligence gathering, manufacturers of security equipment, service companies that are engaged in the guarding and maintaining of premises, sea-going security in the area of anti-piracy and other related services.
- (E) Hand Gun, Rifle and Shotgun Manufacturers: We are seeking USA and/or Western European hand-held weapons manufacturers. There is a particular interest on the part of the buyer in a manufacturer that is currently supplying its weapons to the military and/or law enforcement communities.
The financing of ‘gun’ or related companies in today’s banking marketplace is most challenging. Finn & Co. is in a position to offer short and long term credits as well as growth capital to gun industry-related operating, profitable companies. If you or your clients are in need of working capital or acquisition capital, we would be most pleased to work with you.
- (F) A&D, Medical Products or Photonics Industries: Our Client is seeking a USA-based manufacturing operation in the highly regulated aforementioned industries. Acquisition opportunities with annual sales/revenues of up to US$100M and EBIT of US$10M are the size range of our client’s investment interest.
(8) Oil and Gas
- (A) Service and Support Companies: We are seeking North American-based oil and gas industry service and support companies. The targeted prospect might offer a service for ‘on-shore’ or ‘off-shore’ drillers, maintenance of wells, work-over and stimulation of wells, transportation and security management. The targeted company could be solely domestic or international in its operations. Our clients have a decided interest in targeted acquisitions that represent what would be defined as the larger participants in the industry, in short ‘the bigger the better’.
- (B) Large Oil and Gas proven properties seeking a sale or requiring large capital investment. These properties will be domestic locales with proven oil and/or gas reserves that can be currently producing or not. The buyer/investor will entertain the outright purchase of the property or a joint venture with the current owners.
(9) Trailer Manufacturers and Distributors: We are seeking manufacturers and/or distributors of ‘open and closed’ commercial trailers that would traditionally be pulled by a pickup or SUV and used in a wide variety of activities, both for commercial and private family purposes. Our client has a present interest in acquiring additional closed box trailer manufacturers or large distributors.
(10) Water Treatment Companies: Manufacturers of water treatment equipment, new technologies for the purification of water, and companies offering deliveries of commercial water supplies. All water related opportunities entertained.
(11) Consumer Products, Consumer Durables, Retail or Retail Services: We have a buyer of companies in the aforementioned sectors (logistics, e-commerce, etc.). The minimum required EBITDA is US$3M.
(12) Risk-based Consulting Services: Our client is a platform entity engaged as a provider of risk-based consulting services including – Internal Audit, IT Audit, Information Security, Corporate Governance and Regulatory Compliance. Our client would like to grow their business with the acquisition of similar type functioning companies both domestic and international.
Family Related Operating Companies:
Tethys Corporation: a holding company that has as its investment criteria the acquisition and/or investment in the aerospace/defense/medical or medical service industries. Tethys will also entertain ‘control’ investments in security companies and/or service companies servicing the military, diplomatic or international work-place.
Blue Steel Ventures, www.bluesteelventures.com. This ‘alternative’ wholesale funder of the Merchant Cash Advance (MCA) industry is a provider of senior debt, sub-debt and equity investments to established operators of merchant cash advance providers. Blue Steel Ventures will entertain loans and investments of US$2M to US$30M or more subject to the specifics of the MCA applicant.
Board Assignments:
Members of the Finn & Co organization currently sit on Boards of Directors or finance committees of various commercial and non-profit companies and/or organizations. We particularly wish to expand our assignments of Directors and Members of the Board of commercial companies here in the USA. We are prepared to entertain appointments to private or public corporations, located anywhere in the USA. Any inquiries or suggestions that you might wish to offer would be warmly received.
We would be most pleased to hear from you concerning your interest and needs for any of our consulting services, capital raising or M&A activities listed in this communication. We look forward to hearing from you.
Sincerely yours,
Kenneth R. Finn
Chairman
Finn & Company, Inc.
Kenneth R. Finn
Finn & Co., Inc.
Merchant Bankers
5776-D Lindero Canyon Road, #382
Westlake Village, CA 91362
(818) 219-3097(818) 219-3097
krfinn2001@yahoo.com
Wyoming Location
4350 Fallen Leaf Lane
Jackson, WY 83001
(307) 203-2556(307) 203-2556
krfinn2001@yahoo.com
Kabbage Crosses $4 Billion in Loans, Taps C-Suite Exec for Intl Expansion
December 6, 2017
Alternative lender Kabbage is exiting 2017 with a bang, having just crossed the $4 billion threshold for loans deployed across more than 130,000 small businesses so far. The latest milestone represents a 30% spike in both total funding and the number of merchants on its platform since April 2017, which is when they celebrated their previous new threshold. Victoria Treyger, chief revenue officer for Kabbage, took some time to talk with AltFinanceDaily about the latest milestone, international expansion and mobile strategy.
“Our lines of credit and amounts taken continue to increase as we begin serving more and larger small businesses. We see great momentum across all industries in all 50 U.S. states,” Treyger said, adding that the momentum is particularly evident among the restaurant, construction, professional services and automotive industries for funding strategic investments such as new locations, specialty equipment, business expansion, etc. The $4 billion milestone is the result of the company’s direct business in America only.
According to recently released data by Kabbage cited in CrowdFund Insider, nearly three-quarters of 400 small business owners polled are forecasting higher revenues by year-end. More than 50% of those merchants are targeting a jump of at least 10%. Kabbage certainly appears to be benefiting from this optimism and an economy that is functioning on all cylinders. Treyger points to the lender’s “fully automated lending process and unique, live data connections with our customers.”
Fintechs & Banks
The relationship between alternative lenders and banks has been at the forefront, and Kabbage has been involved in some of the most high-profile pairings, evidenced by SoftBank’s famous investment. And while there’s no crystal ball, fintech and bank partnerships are one of the trends that will likely persist in 2018.
“Data will be at the heart of everything, how it’s shared, accessed, applied, protected and given back. Expect to hear more about the personalization of lending and to see stronger partnerships between fintechs and banks,” said Treyger. Consumer data, of course, is the Holy Grail for lenders, with banks having a tendency to keep that information close to the vest. And with the Equifax breach so recent in the rearview mirror, the importance of data security is certainly paramount.
“The CFPB recently published data-sharing guidelines between banks, their customers and financial services they choose to permission their data. Kabbage applauds the CFPB guidelines, small business owners should control how, where and with whom their data is shared to best serve their needs. Security is the primary concern, as it should when handling customers’ data. All entities, from fintechs to data aggregators should be held accountable to the same security standards as banks,” Treyger said.
She also pointed to a mobile push in yet another sign that the industry has turned a corner. “Anticipate greater adoption in mobile lending. Today, approximately 20% of Kabbage’s originations come from mobile. We’re the only provider that allows its customers to apply, qualify and draw funding from a mobile app; we have seen growth and expect to see more in 2018,” she said.
Kabbage’s Global Ambitions
Meanwhile, as Kabbage sets its sights on global expansion, they’ve tapped a C-Suite executive from the consumer goods industry who has held leadership roles across North America, Europe and Asia. Robert Sharpe was tapped for the newly created position of COO at Kabbage. Most recently, Sharpe served as president and COO at National DCP, LLC, a supply chain management company. He has also led CSM Bakery Solutions and Spain’s Campofrio Food Group, serving as chief executive at both companies.
According to the press release: “Sharpe will be responsible for Kabbage’s continued growth and operational oversight as the company expands internationally and scales its services to serve more and larger small businesses.”
As Kabbage readies its 2018 roadmap, notwithstanding its $200 million revolving credit facility with Credit Suisse in November, don’t be surprised to see them revisit the capital markets.
“Continuing to diversify our funding options for small business lending is certainly of interest,” noted Treyger.
SBA Loans Go Online: A Q&A With SmartBiz
November 28, 2017
A while back, a merchant AltFinanceDaily interviewed told us they had obtained what sounded like impossibly good terms from an online lender not known for low rates. When I requested a fact check of it, we learned that the online lender had actually referred the borrower to SmartBiz and that SmartBiz had secured an SBA loan for them. It was so seamless that the borrower had hardly noticed.
Curious, I caught up with Sean O’Malley, president and co-founder of SmartBiz last month at Money2020. Below is a modified excerpt of our conversation:
AltFinanceDaily: [tells the above story about the merchant who got an SBA loan] – So you actually have other alternative lenders and online lenders going through you too. What is really the biggest channel that you tap into to get small business owners to you? Is it other online lenders or do you go direct to merchants?
O’Malley: Well, there are three different areas where customers come to us. The first is through our marketing efforts. We have our own online presence and marketing initiatives that go on, where small business owners are interested in the SBA loan product. The second area lies in our strategic relationships. These are partnerships with companies like Sam’s Club where we’re actually on their lending center; we have been doing that for a number of years. Another channel would be partnerships with companies like Fundera who bring customers to us through their online channels.
AltFinanceDaily: How about like Lendio?
O’Malley: Yes. We’ve built a relationship with them over the years. Lastly, the third area is the independent financial consultant channel, like our partnerships with accountants.
AltFinanceDaily: Okay. Didn’t SmartBiz recently celebrate a major milestone?
O’Malley: Yes! We recently passed the $500 million threshold of originated capital on the platform.
AltFinanceDaily: All SBA loans?
O’Malley: Correct, all the originated capital is a result from SBA 7(a) loans. Today, we have six bank partners on our platform who are doing SBA loan origination. It’s all been facilitated through our platform. There are really four major components to what we do. The first part is we provide an online presence and origination solution for small businesses. They come through our technology solution and then they go through an application process where we’re able to pre-qualify them. So, that’s the first piece. The second piece is really the technology platform around packaging of the loan.
AltFinanceDaily: What do you mean by packaging?
O’Malley: After a business pre-qualifies, there are still documents that need to be captured and some of the specific analysis also needs to be done. A large piece of that is automated through our platform. Some of it does require sort of a white glove experience for small business. We provide that as well. Then the third piece is the bank’s underwriting platform, where we digitize the bank’s underwriting and provide them with an underwriting platform that they license from us. Leaving us with the fourth part, the marketplace.
AltFinanceDaily: Can you explain the fourth piece, marketplace?
O’Malley: The core of what we do is we connect small business owners with banks. And the interesting part of that is that because we’re the marketplace, we’re able to say yes more to the small business than any single bank because they all have their own different credit boxes. In effect, we’re able to get more customers approved because we’re able to fit more use cases for that small business owner. If you combine all these, the ultimate value prop is that we’ve reduced the time to originate a loan. It traditionally takes about 120 days for a bank to originate an SBA loan. We’ve reduced that to as little as seven days. And on the bank side, we’ve reduced their costs up to 90%. As a result, we’ve made these loans more profitable for banks. And they’re then more willing to originate as part of their standard business. Whereas you know, in the small business space, banks have not been super eager to be making smaller sized loans because it costs as much for them to originate that type of loan as it does for them to originate a $5 million loan. So, we’ve made it super efficient.
AltFinanceDaily: So you’re kind of filtering out applicants on your own that they would normally have to deal with.
O’Malley: That’s right. Our platform allows us to filter out all the applications and only feed a bank the deals that they can do. When we provide a deal to a bank, they’re funding it anywhere between 90-95 percent of the time. They’re funding the deals that come from us because we have the knowledge of how the bank looks at their deals.
AltFinanceDaily: Is there a world in which you move outside of SBA loans and potentially offer other types of bank loans or maybe even non-bank loans or facilitate them? Not necessarily make them, but facilitate them?
O’Malley: We recently just launched a conventional bank loan. So, yes, we are expanding on our product line, and we did this as a result of really looking at that type of product and filling a gap in the marketplace as well. We’re trying to help the customers out and support their needs.
AltFinanceDaily: Are you noticing a trend with maybe borrowers applying for loans on like a mobile phone? I mean, any loan is a pretty big commitment, right? They go online and apply for $5,000, you know what I mean, for a personal expense or whatever and that’s not such a huge deal because it’s a small loan. I think an SBA loan is a much bigger commitment, you know, it’s long term. Are you seeing borrowers apply for the loans you offer from a mobile device?
O’Malley: About a quarter of our small businesses start the applications over a mobile device. And they are able to get pre-qualified through a mobile device. That said, the majority of borrowers still want to talk to someone. There are still a lot of traditional relation-based elements to a small business lender. When somebody is taking out a couple hundred thousand dollars, like you said, there needs to be some white glove experience for that. And it can’t just be 100% automated. In fact, small businesses a lot of times don’t want 100% automation.
AltFinanceDaily: Because it’s such a big commitment.
O’Malley: That’s right. And that’s where the market is today. In the future, we look to certainly automate as much as possible, but we hyper-target where we interact with the customer so that we provide the most unique customer-centric solution so that they feel comfortable about the process. If you look at our TrustPilot customer reviews that we use on our site, you will note that people really speak very highly about their experience. We’re super proud of that because we’ve been able to match up technology with people in the right way so that we can hyper-target where human interaction is needed to make sure that the customer feels at ease with the process. We’ve been able to become the trusted source for them getting the loan that they’re looking for.
AltFinanceDaily: Do you think in the future borrowers will apply for SBA loans entirely online? Will there be an age where they’re not necessarily going to the bank to meet somebody to talk about an SBA loan? Do you think it’s all going to kind of become like an online digitized process or will it always be a layer of I wanna go and sit and talk with somebody in the bank office?
O’Malley: Well, we’re proving small businesses want to do it primarily online. In fact, you know, the point too is that if you just consider the small dollar amount category, we are now the largest provider of SBA loans in the country for loans under $350,000.
AltFinanceDaily: Anything else I should know about SmartBiz?
O’Malley: We really seek to be an advocate for small businesses. We have gone beyond SBA in supporting our customers with the more conventional product, but we’re always trying to get businesses into SBA loans because it’s the best product out there. And so, our focus is always first and foremost trying to get our businesses SBA loans if at all possible. And it appears to be working. Recently, we were named as one of the fastest growing companies in the Bay area. We’re looking at certainly scaling this solution with as many small businesses as possible.
