COLUMBIA, SC (August 15, 2018) - South Carolina Community Bank rebounded from the financial crisis by developing a new network of Fintech partnerships.
“As a small bank, we don’t have a large innovation lab budget; we don’t have the thousands of people focused on product development that large banks have,” CEO Dominik Mjartan said. “But we do have some very good partners we’re working with that could really transform our ability to innovate and then scale the innovation.”
NEW YORK, NY (March 27, 2018) excerpt via THE FINANCIAL BRAND - Community banks are the most desirable source of financing for business owners, with significantly lower costs and greater transparency than the proliferation of predatory online lenders. However, the lengthy loan application process and challenge of bringing in new clients have held small banks back from serving more of the small business community.
The future for small business lending blends the best of both worlds - community banking and technology. Neill LeCorgne at The Financial Brand writes:
New technology innovations are available that eliminate data entry by scanning in tax returns, automate the spreading of financial data in minutes, price loans faster and more consistently, and score a loan using customized credit factors. What used to take days and weeks to approve and onboard a small business loan can now take organizations hours (or minutes), making quicker decisions available to borrowers who are eager to move forward.
Not only can deploying technology make the process more efficient for bankers and therefore quicker for borrowers – automation of certain steps in the process can also provide a more simplified, enjoyable experience for borrowers.
CHICAGO, IL (February 20, 2018) - Community lenders are increasingly finding success in blending the speed and efficiency of financial technology with the personal connection and attention of community banks, according to a new article in American Banker.
"Small-business owners typically want to do business with local financial institutions. At the same time, they don’t want to subject themselves to a longer and clunkier process,” Joel Pruis of Cornerstone Advisors says. Small business owners are “on the go and like to do things digitally, but they also like to have that face-to-face option as well.”
Chicago’s Marquette Bank successfully digitized its lending process and saw its credit memo creation time shorten by 25%.
SAN JOSE, CA (January 23, 2018) - Devin Wenig, CEO of eBay shares a compelling Op-Ed in USA Today highlighting the importance of connection and collaboration between the tech industry and the small business world.
“Creating pathways between remote areas and urban centers is beneficial in recirculating economic prosperity. Instead of painting the tech sector and innovation as job destroyers, we need a new model of public-private tech partnership where technology companies and public officials come together to rev the small business engine,” Wenig writes.
NEW YORK, NY (January 19, 2018) - Big Data and artificial intelligence have been hot topics in the media lately - and yet most entrepreneurs don’t realize that they can use these tools in their own business.
“The majority of techniques used in Big Data and the Internet of Things (even some artificial intelligence) don’t require a large budget or a huge staff. They only require a willingness to learn and experiment,” the business blog SmallBizTrends reports.
The blog presents a fascinating list of books on Big Data, introducing the opportunities that it offers for business and offering ways to utilize these resources.
ANN ARBOR, MI (September 29, 2017) excerpt from INSIDE SOURCES - Anytime they take out a loan, American consumers enjoy protections embodied by a handful of decades-old laws designed to ensure that they know how much credit costs, and that they can comparison shop. But the American small business owner enjoys no such benefits, something a new coalition is trying to change.
As banks have reduced lending to small businesses in the wake of the 2008 financial crisis, other lenders have swarmed into the sector, creating what critics call a rising tide of abuse — this time aimed at struggling business owners — that resembles the subprime mortgage sector that led to bailouts and the worst recession since the Great Depression.
“Small business owners are human beings, and they get taken advantage of the way consumer human beings do. But they don’t have the kinds of protections in the law that consumers have,” said Michael Barr, a law professor at the University of Michigan and a former assistant secretary of the Treasury.
LOS ANGELES, CA (September 27, 2017) excerpt via The Los Angeles Times - Mark Newman needed some fast cash last October to keep his small Studio City wine-importing business afloat. He went to his main bank but was rejected for a loan because of his relatively low sales.
So Newman, 61, turned instead to an online lending company called OnDeck. After submitting a handful of bank statements, he was quickly approved for a $65,000 loan, which allowed Newman to cover his wine shipments and keep his business running.
All good, right? Wrong, says Newman.
“These loans are predatory by nature,” he told me. Think payday loans for small businesses, he said, with interest rates well over 30%.
OnDeck Capital is representative of a new breed of online lenders known as financial-technology firms, or “fintech,” that have found a niche making money available to small businesses quickly and with minimal hassle.
Fairness in lending means clear and straightforward disclosure of terms and conditions. On that score, OnDeck seems to come up short.
For example, the company’s website boasts that term loans of up to $500,000 can be obtained with annual interest rates as low as 5.99%. Newman said that when he contacted OnDeck, he was hoping to get a loan at such a rate. But it didn’t work out that way.
“They were crafty about it,” he recalled. “They said they couldn’t offer me the lower interest rate, but they’d see what they could do for me.”
What he got was a 12-month, $65,000 loan, plus nearly $17,500 in interest and an origination fee of $1,625. That translated to an annual percentage rate of 55%.
In fact, OnDeck told me its average annual interest rate for term loans, excluding fees, is 38%.
To read the rest of the article, click here.
HOUSTON, TX (September 18, 2017) — "Imagine starting your new business and going online to take out a loan. You find what you think is an attractive yearly rate of 9 percent. You think you are set until — after you sign — you are shocked to realize it’s 9 percent per month.
These kinds of soul-crushing predatory loans can put you out of business, sometimes before you’ve even started. Millennials, in particular, can be susceptible, as they are most likely to go online to search for a loan.
If you Google “small business loans,” ads for several FinTech lenders pop up even before the U.S. Small Business Administration’s (SBA) site. One lender offers loans from $15,000 up to $2 million, while another seeks customers by promising they can “get funded as fast as 24 hours.”
Some lenders condition their loans on switching to their merchant card-processing service, then add excessive fees to every transaction and subtract their payment from every credit card sale, eroding profits. Others charge interest rates north of 50 percent annually.
Another red flag is the prepayment terms. Often, these loans have a prepayment penalty equal to the sum of the remaining payments. So even if you pay it off early, you pay all of the interest and fees that would have been paid off if you made the scheduled payments."
To read the entire article, click here.
NEW YORK, NY (September 14, 2017) — There are all sorts of legal and technical issues about how lending rules apply to the new breed of online lenders, but here’s a more fundamental one: How sure are they their automated technology is colorblind?
Even if a company has the best intentions of following fair-lending principles, it’s debatable whether the artificial intelligence engines that online lenders typically use —and that banks are just starting to deploy — are capable of making credit decisions without inadvertently lending in affluent sections and not in minority neighborhoods."
To read the entire article, read here.
RICHMOND, CA (September 12, 2017) — Che Al-Barri remembers feeling like he was drowning in debt last year. He had taken out a $70,000 loan for his small cleaning company, but was struggling to repay it.
The lender, a financial technology — or fintech — company, automatically collected $331 from his bank account daily, Monday through Friday. The frequent hits depleted his income and took a toll on his business, he said.
“If you get hit every single day you have no time to breathe,” said Al-Barri, 45, who grew up in Richmond. “It put me up against the wall. There was many times I pulled the covers over my head and just laid there like, ‘Oh my gosh, what am I going to do?'”
To read the entire article, click here.
NEW YORK, NY (September 4, 2017) — Two years of fin tech driven reach has helped banks grow about 15 to 20 per cent indicating that banks’ dependence on `feet-on-street’ to campaign for loans may recede in a few years. Bankers said nearly a third of their customers below 30 years were on-boarded through the digital platform.
Banks are using FinTech players to qualify good customers faster and give on the fly credit. Significant reduction in time used for taking better credit decisions have led to higher conversion in disbursal of loans.
To read the entire article, click here.
NEW YORK, NY (August 23, 2017) — Traditional financial services providers have tightened their lending requirements, leaving many small business owners with few channels to uncover the capital they need.
The financial crisis of 2008 caused global shockwaves, wrecking businesses and wiping away thousands of dollars’ worth of individuals’ savings. World markets are still recovering to this day, and governments have enacted strong reforms to prevent a repeat occurrence. These new, stricter regulations have deeply changed the financial world. Along with shifts in consumer preferences, banks and lenders are now faced with a vastly different financing landscape.
To read the entire article, click here.
NEW YORK, NY (August 10, 2017) — While startups and small business are often (rightly) hailed as the engines that power growth in the American economy, when it comes time to secure funds — the situation gets tricky. Stated simply, ten years out of the financial crisis and small business lending remains a chronically sluggish and difficult to work in environment.
According to a report by the country’s 12 regional Federal Reserve banks, over half of all startups report difficulty in securing loans and 81 percent report having had to dip into their personal funds to cover gaps in their corporate cash flow. Startups, as defined by the new report, are firms that are less than two years old and employing less than 500 workers.
“Given the importance of startups for the economy, the question of startup capital is of central importance,” according to the 2016 Small Business Credit Survey Report on Startup Firms. “While funding is the lifeblood of every company, capital is especially critical for startups. To reach scale, startups need to be able to secure expansion capital.
To read the entire article, click here.
NEW YORK, NY (May 1, 2017) - Online lenders have been facing an uphill battle recently as investors question whether they are truly getting the loan transparency they need to confidently invest in this young industry. Investors, credit providers and ratings agencies are worried about loan data integrity as well as collateral and ownership rights behind the loans.
To read the entire article, click here.
With Credit for Businesses Tight, Nonbank Lenders Offer Financing at a Price.
PHILADELPHIA, PA (January 7, 2014) - When Khien Nguyen needed $180,000 to open his 13th nail salon near Philadelphia in November, he didn't go to a bank. Mr. Nguyen's credit score had dropped during the recession, so he figured a bank would put him through weeks of aggravation, then reject him.
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