To fill this void, a wave of online lenders has emerged.
Seizing on an opportunity overlooked by bank lenders, online lenders are using technology to make small-business lending more efficient and profitable. They provide simplicity and convenience in applying, a quick decision on loan approval, and speedy delivery of capital.
In 2011, Krista Morgan was living in the United Kingdom. She watched how peer-to-peer lending was changing how loans were financed and made. She and her father began discussing whether this model could be applied to asset-based lending in which a loan is secured by inventory and/or account receivables. They thought it could and Morgan moved to Denver, where her father was living.
Many small business online lending products target loans under $250,000. Rates are high for these products. Companies generating $1 — $15 million in revenue seek more affordable financing. However, some are growing quickly but not making enough profit to qualify for a bank loan: large banks turned down 34% of these companies that applied for loans and small banks turned down 21%, according to theOn the business side, “getting referrals has been hardest,” said Morgan.
“We just closed our fifth year of lending,” said Morgan. “We’ve advanced $1 billion to growing businesses. With a sub 2% annualized default rate and the ability to collect on 50% of defaulted loans because we are an asset based lender, we have developed a strong track record for investors.”
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