Goldman Sachs Wants A Bigger Share Of SME Finance

Goldman Sachs may be more strongly associated with major conglomerates, but according to unnamed sources at The Wall Street Journal, the firm is now seeking out a greater share of the small business lending market.

Reports published this week by WSJ said that Goldman Sachs has enlisted new hire Harit Talwar, recruited from Discover Financial Services, to gather a team to promote the company’s entrance into SME lending. Unnamed sources said the team will present their plan to senior executives in the near future.

But according to reports, industry experts find Goldman’s new focus a bit strange. “My first reaction was, ‘Wow, this business is now really mainstream,’” Kathryn Petralia, cofounder and chief operating officer of alternative online lender Kabbage, told WSJ, adding that she believes it is “really weird” Goldman Sachs waited until now to enter the market.

Details of the firm’s plans are scarce. There is little-to-no information regarding how the company will promote the new venture, reports said, or how big it will be. Talwar did not comment on the matter for reporters. But sources said the firm will focus on consumer and small business lending and target borrowers with good credit.

Despite corporate secrecy on the matter, the company’s Chief Executive Lloyd Blankfein did mention new horizons ahead for Goldman Sachs during the company’s May annual meeting. “We’ll want people who previously didn’t know where we were,” he said, referencing an effort to attract new customers unfamiliar with Goldman Sachs. “So that will, over time, cause us to have to develop new muscles.”

Those “new muscles,” it seems, will be necessary for the business to enter the market of smaller, individualized loans, a far cry from its traditional business of lending to the ultra-rich and to major corporations.

But sources said that the move is merely a reaction to where Goldman Sachs will see profits. According to reports, the company estimates that it can produce a return on equity of more than 20 percent, much higher than its averaged 11 percent return on equity in recent years.