January 15, 2015
Lending has one of the most innovative financial products of recent times. It enables creditworthy borrowers lower their cost of loans and individual lenders/investors to lend directly to their peers and community thereby earning higher returns. The new breed of lending companies offer affordable lending facilities especially to the SME market. Recent estimates claim that this sector could be a trillion dollar industry within the next decade. Here are some prominent upstarts contributing to the sector:
The company gives that extra edge to small and medium businesses (SMBs) when it comes to financing. It offers loans upto $10,000 to SMBs with feasible interest rates. Behalf assesses multiple factors to determine credit worthiness of the borrower and also determines optimal payback period based on the same. The best thing about Behalf is that it considers the terms and conditions of those it serves and takes the risk if possible. In case an SMB requires some form of inventory for expansion, Behalf will help it attain that through its partner vendors. Vendors benefit from the deals as they more sales without having to negotiate with the SMB directly.
This online lending service targets millennial borrowers and offers customized interest rate for its customers. The company offers low-interest loans, typically between 4.25% and 5.25% for qualified customers. The company’s average loan size is around $10,000 and it offers loans of up to $30,000. To date, Earnest has lent more than $3 million. Using data analytics Earnest is able to offer loans, for a period of 1 to 3 years, to new borrowers who have short credit histories, large student loans, or are just entering the workforce. Earnest bases its interest rates on not just a credit score, but also on a person’s employment history and future earnings potential. The company raised $15 Mn in funding last year.
The company offers low-income workers, awaiting paychecks, with interest-free credit. The company’s key services provide workers with alternatives to payday loans and other traditional lending products where compounding debt make things difficult for workers. The company’s idea is to offer consumers with interest free credit to get them through bad days. The lending program is still in the pilot testing phase, available to customers via the mobile app. The service works in sync with a customer’s bank account and offers features like automatic budgeting and aid in emergency expenses. The company recently raised $1.5 Mn in funding.
Fundbox helps solve a simple problem many small businesses in the B2B space face i.e. cash flow from client payout. Most business owners have to handle customer invoices that may take 60 to 90 days to get paid. This long wait in clearance of those invoices puts a strain on working capital. Fundbox lets small business owners choose invoices they want paid out, and puts the money in their account the very next day. Fundbox is focused more on B2B businesses rather than B2C businesses. Using Fundbox, a small business owner or bookkeeper can connect with their accounting and bookkeeping apps. The Fundbox risk engine assesses the customer’s network and invoices for risk automatically and instantly. The merchant can then view all outstanding invoices through Fundbox account and choose which invoices to clear. The company raised $17.5 Mn in funding last year.
The startup focuses on real estate with its platform allowing borrowers to complete the home loan process online from start to finish without a loan officer as middleman. Lenda’s platform lets borrowers receive rate quotes from Lenda, apply for a loan, sign lender disclosures, upload or snap photos of their documents, receive real-time status updates, process and close the loan — all online. Lenda integrates with mortgage loan pricing engine LoanTek, electronic signature vendor DocuSign, online payment firm Stripe, and MeridianLink’s credit check toolkit CreditAPI. The company raised $1.54 in funding last year.
Loanz is a Private Credit Platform for marketplace lending upon which many loan products and companies can be built, all using common underwriting infrastructure powered by Loanz. The company portrays itself as the next generation of peer to peer lending. Loanz offers a private credit lending platform that connects borrowers and investors in a new way. The company had raised $2 Mn in funding last year. The lending is poised to go live in Q1 this year.
This social lending startup leverages a person’s social network to make loans cost less. The company’s ideation is to give consumers a way to receive lower interest rates on loans by having other family members and friends vouch for them. What Vouch does is it actually plots user’s network and social ties in order to deduce credit worthiness within loan application. Those vouching for others are required to fill a short survey that asks them to detail how they know the borrower, and how financially responsible they think the borrower is. They’re also asked if they are willing to contribute if the borrower is unable to make payments on loan. In the ongoing pilot testing period, Vouch is offering installment loans of $500 to $7,500 to be paid back over the course of one to three years, with interest rates varying between 5% and 30%. The company recently raised $3 Mn in funding.