100 Conversations: What I've Learned About Small Business Lending
Hub Financing, LLC was officially launched on the second day of February, 2019. Since then, I've spoken to over 100 entrepreneurs looking for funds to grow their business
This is going to be a quick foray into what I've learned since then in an effort to give other entrepreneurs a realistic expectation of what the alternative lending space provides.
There's a lot of buzz going on about the automation of underwriting guidelines for small business loans. Most of the industry leaders in the online lending space are developing algorithms to make the approval process more efficient for their applicants and their underwriting teams.
For qualified borrowers, there are platforms available that streamline the process to access funds when needed. Companies like BlueVine and FundBox are leading this charge.
By making it easier for qualified borrowers to get money, lenders make more money. This is an obvious tactic. Inefficiency kills deals, and smart companies are capitalizing on the opportunity by developing self-serve lending platforms.
While this may seem like a positive development for small business borrowers, the foundations of lending still have not changed. Automation simply serves the purpose of weeding out anyone that is not an "A" paper borrower more efficiently.
A gap still remains, and technology won't necessarily solve this problem. The advent of underwriting algorithms along side prohibitively stringent guidelines for low interest, government backed SBA loans continues to foster an environment of under-banked entrepreneurs.
As a result, there are countless companies stuck in gridlock as demand outpaces their ability to access strategic growth capital. The chasm between "hard money" and "A" paper lenders gives little option to countless entrepreneurs that need access to financing with reasonable rates and terms.
The solution to this is a human one. Technology, while it serves a purpose, will never replace the fundamental need to develop relationships based on trust and service.
Every day I speak with entrepreneurs that have built businesses progressing towards serious growth. They have developed platforms and grown teams that serve a vital purpose in the marketplace.
The challenge for most of these entrepreneurs is knowing where to start in the process of securing debt financing. Any business owner can find and apply for a loan with the big online players. Most of these lenders are venture backed and only want businesses that fit their specific underwriting criteria.
The word broker has historically carried with it negative connotations, no matter the industry. Regardless, these "middlemen" connect consumers with suppliers and are typically subject matter experts in their industry. In the alternative lending space, a good broker has potentially hundreds of relationships with different niche lenders. They can underwrite deals at a high level with the right questions and identify lending solutions most business owners, even established ones, are completely unaware of.
After a hundred conversations with entrepreneurs in the past two months, it's obvious that the small business market is under-served. Access to capital is one of the most significant issues small business owners deal with, and a google search will not serve solve their problems.
If you own a small business, i.e., a company with less than 1,500 employees, work with an established broker that will take the time to inform you of your lending options. As a business owner, your goals are aligned with theirs. They are not trying to hit quotas, they are trying to build relationships. When entrepreneurial goals align, opportunity expands.
After 12 years in B2B sales, helping entrepreneurs secure capital to grow their business is undeniably one of the most enjoyable roles I have had in my career. I am constantly looking for unique, customer focused lenders to partner with that help me better serve small business owners. If you are a business owner looking for capital, reach out to me. I will do everything I can to help your business be successful.
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