Small Business Lending Marketplaces

Part
01
of four
Part
01

Lendio Competitors - Part 1

The requested details for the lending companies Funding Circle, Lendio, and Boefly have been outlined below. Funding Circle was founded in August 2010 and is headquartered in San Francisco. Lendio was founded in February 2011 and is based in Utah. Boefly is based in New York and was acquired by ConnectOne Bank in April 2019.

COMPANY INFORMATION

(1) FUNDING CIRCLE

Value Proposition

  • The company offers its borrowers speed and simplicity in accessing loans, with decisions rarely exceeding 24 hours in the UK, and a maximum of 3 days in the US, Germany and the Netherlands. Their online application form only takes 10 minutes to complete.
  • They assure their customers have an amazing experience and a very easy and efficient application process.

Target Market

  • Funding Circle currently manages investment portfolios in 4 countries globally, with the UK as its main market. Other countries the company operates in are the US, Germany, and the Netherlands.
  • Although the company targets businesses operating in several sectors, they have a keen interest in businesses operating in the following sectors: property and construction, professional and business support, manufacturing and engineering, retail, IT & telecommunications. Other sectors are healthcare, leisure & hospitality, wholesale, transport & logistics, and automotive.

(2) LENDIO

  • Since its establishment, Lendio has received $53.5 million in funding.

Value Proposition

  • This company offers small business owners an easy application and document uploading process that only takes 15 minutes to complete.
  • They also offer borrowers access to over 75 leading lending organizations, including companies like PayPal, American Express, Bank of America, and Mulligan Funding. The company states that approved loans and dispersed within 24 hours.
  • Lendio also ensures that dedicated funding managers are assigned to each small business owner to discuss their needs and the best loan options for them. The support continues throughout the journey of the small business owner until retirement.

Target Market

  • Lendio focuses its investments on main street businesses such as restaurants, manufacturing organizations, dry cleaners, landscapers, as well as any other businesses that would be classified within the mainstreet business category.
  • The company only operates in the US.

(3) BOEFLY

  • The company was founded in 2010.

Value Proposition

  • They help borrowers save time on their loan applications by matching them directly with the most suitable lenders.
  • They expose borrowers to a large pool of 5,000+ investors, including banks and individual lenders.
  • As an added perk, the company helps borrowers put together an attractive loan package, and provides relevant resources for creditworthiness documentation.

Target Market

  • BoeFly mainly targets businesses in six sectors, which are hotel, manufacturing, retail, restaurant, commercial real estate, and services.
  • The company only operates in the US.

RESEARCH STRATEGY

We commenced our research for the required information on the website of each of the listed companies. There we were able to retrieve information on each company's value proposition. Regarding the target markets of the companies, we made use of information found on each company's website where available, or in other sources such as press releases. For other details such as founding date, company headquarters, and funding amount, we made use of the LinkedIn and Crunchbase pages of each company.

Part
02
of four
Part
02

Lendio Competitors - Part 2

National Business Capital and Services, founded in 2007, assures their customers of integrity, empathy, and respect in their business dealings. The lending organization has raised a total funding amount of over $1 billion, while Become and SmartBiz Loans have raised $165 million and $1.2 billion, respectively. Complete details about each of these Lendio competitors are presented below.

NATIONAL BUSINESS CAPITAL AND SERVICES

  • Headquarters Location: Bohemia, New York
  • Founding Date: 2007
  • Value Proposition: National Business Capital and Services assures its customers of integrity, empathy, and respect in business dealings.
  • The company promises to "provide an easy and fast path to business financing."
  • Through technology, National Business Capital and Services assures customers of a simple, transparent, and fast process to support their businesses and reduce the processing loan time down to hours.
  • Target Market: National Business Capital and Services targets small businesses in local communities where they operate with the hope of strengthening their businesses.
  • They also target doctors and dental practitioners for funding their practices. Additionally, they fund small businesses looking to purchase equipment through equipment financing.
  • Funding Amount: $1+ billion

BECOME

  • Headquarters Location: San Mateo, California
  • Founding Date: 2016
  • Value Proposition: Become customers are assured of a better funding world through algorithms and advanced technology.
  • They offer improved funding opportunities and provide business borrowers and lenders with the best possible match at no cost.
  • They promise customers an increased chance of securing a loan through its automated application review, transparent lending score, and partner performance programs.
  • Target Market: Become's target market includes small businesses looking to purchase equipment, hire new employees, expand their workspace, increase working capital, or strengthen an existing loan.
  • Funding Amount: $165 million

SMARTBIZ LOANS

  • Headquarters Location: San Francisco, California
  • Founding Date: 2008
  • Value Proposition: SmartBiz Loans promises their customers of a "fast, easy and secure lending process for the best deals at rates as low as 6.75%-9.00%," for loans up to $5 million and a long repayment term of 10-25 years.
  • They assure customers of matching them with a lender who is most likely to fund their loans.
  • Target Market: SmartBiz Loans targets small businesses looking to purchase equipment, purchase a new property, hire new employees, expand their workspace, increase working capital, or strengthen an existing loan.
  • Funding Amount: $1.2 billion

Part
03
of four
Part
03

Small Business Lending Market - Market Size

After an extensive search, the size of the U.S. small business lending market specific to only non-commercial lending banks was largely unavailable. However, the Office of Advocacy for the U.S. Small Business Administration reported that the total small business lending by all reporting lending institutions in the U.S. amounted to $614 billion in 2016. Also, between 2015 to 2018, online small business lenders lent nearly $10 billion to small businesses in the U.S.

SMALL BUSINESS LENDING IN THE U.S.

  • In 2018, the Office of Advocacy for the U.S. Small Business Administration published an analysis of the 2016 state of the U.S. small business lending sector (which is the most recently available report).
  • According to the report, all reporting lending institutions (banks and depository lending institutions) in the U.S. lent $614 billion in 2016, with 26.07 million loans processed.
  • The total small business lending in 2016 increased by 2.5% from $599 billion in 2015.
  • A report by PRNewswire hints that online small business lending platforms such as OnDeck, Kabbage, and Lendio have lent nearly $10 billion to small businesses in the U.S. from 2015 to 2018.
  • Furthermore, the report opines that these platforms have generated $37.7 billion in gross output, created 358,911 jobs, and $12.6 billion in wages between this period.
  • 42% of small business loans processed by online small business lenders were between $10,000 and $50,000.
  • The average amount of small business loans was $55,498.

RESEARCH STRATEGY

To provide the size of the U.S. small business lending market, your research team's first approach was to search on credible government financial and statistical databases for precompiled data. We found a report by the Office of Advocacy for the U.S. Small Business Administration which provides a general analysis of the U.S. small business lending market without specific segmentation of the report to exclude lending by commercial banks.

Our next approach was to search threough credible market report sources for an analysis of the U.S. small business lending market. While we found a report by PRNewswire, the report was specific to only online small business loan platforms. This report is related to the specific market of interest, but it does not provide the size of the market per annum, rather it provides data for 2015 to 2018.

Furthermore, we attempted to triangulate relevant data points. We tried to find any market share data of the identified players in the sector such as Lendio, Boefly, and Funding Circle. We hoped to use the U.S. market share data to determine the size of the U.S. market. While the revenue data for these competitors was found, we could only find the UK market share of Funding Circle which is not related to the U.S. market, hence, we could not proceed with the triangulation. However, we have provided the related information we found in the course of this research.
Part
04
of four
Part
04

Small Business Lending Market - Industry Trends

Three current, key trends in the US small business lending industry include: The increased involvement of technology companies resulting in faster and easier access to loans for small businesses; partnerships between traditional lenders and new fintech disruptors resulting in an improved funding environment; and an increase in small business lending scams causing worry and distrust among small businesses.

1. INVOLVEMENT OF TECHNOLOGY COMPANIES

2. INCREASED CONVERGENCE BETWEEN TRADITIONAL LENDERS AND NEW FINTECH DISRUPTORS

  • Traditional lenders such as banks and other mainstream lenders are "forming an unlikely pact" with new fintech disruptors, as the two benefit from each other's strengths and disrupt the small business lending industry in the process.
  • While traditional lenders have large databases of custom loan products and user data, fintech firms use the latest technologies such as AI-powered decision-making to improve the lending process and overhaul the conservative, slow and inefficient methods used by traditional lenders to review and approve loans.
  • The combination of these strengths is leading to the emergence of a new era of small business lending, and small businesses stand to gain benefits from a better funding environment, quicker loan approvals and more access.
  • An example of companies involved in this trend is SoFi, an online lender which joined forces with Fannie Mae, "one of the biggest mortgage lenders in the U.S." Their union provided benefits for both of them as improved Fannie Mae's debt refinancing process was improved and SoFi's customer base increased significantly.

3. AN INCREASE IN SCAMS DUE TO ONLINE LENDING

  • While the growth in online lending makes it easier for small business owners to receive funding, it has also led to more scams arising on the internet and other channels.
  • According to a survey by the BBB and the Fair Trade Commission, 67% of small businesses have said that lending scams have increased in the past three years. In 2016, marketplace scams accounted for $50 billion in monetary losses across the nation. It has also been difficult for small businesses to avoid scams because scammers pose as trusted bankers or brands.
  • There are several types of scams including advance fee scams, peer lending scams, funding kit scams and ghost investors, among others and small businesses are finding that they have to do due diligence on loan providers before applying for loans.
  • Examples of platforms that have been used for online lending scams include Craigslist, Facebook and Reddit.

Sources
Sources