Behind The CapitalFront/Lenders One Cooperative Cooperation

In an initial profile in this space on CapitalFront, we noted that small companies had been, and still are, stepping into the void where big banks fear to tread when it comes to lending money to smaller businesses.

Roughly six months since we interviewed CapitalFront Founder and CEO Brian Simon, the announcement comes that the alternative lender has forged a pact to become the preferred provider of unsecured business loans for the Lenders One Cooperative. That latter firm is an alliance of mortgage industry stakeholders, ranging from lenders to independent mortgage bankers to mortgage servicers.

In an interview with PYMNTS, Simon said that the partnership enables cross-referencing of business leads for both his firm and also for the Lenders One Cooperative, which counts 250 members in its roster. Simon’s own experience with Lenders One stretches back to his tenure with past firms, including New Penn Financial and Caliber Home Loans, which had been members of the collective themselves.

As Simon noted, the cooperative refers business to CapitalFront, in the event those mortgage borrowers are also seeking business financing. The potential business is significant, as, he noted, “one in five mortgage borrowers are, in fact, also self-employed business owners.”

Though not directly involved in the mortgage business and not extending the mortgage loans, CapitalFront does have the wherewithal to work with individuals funneled through the cooperative to CapitalFront, as the firm has a roster of SIC codes and industries it focuses on for lending, which are typically overlooked or bypassed by traditional lenders, including hospitality, medical device companies and younger firms that may be marked (initially) by erratic cash flow.

For Lenders One, the relationship also has benefits, with the ability to strengthen new and in-place relationships with mortgage borrowers who may need access to capital for commercial purposes (CapitalFront pays a commission for referrals that sign on for funding). Henceforth, marketing efforts will extend across direct mail and email, with co-branding efforts also part of the positioning of the unsecured business loans. As has been noted in past conversation with PYMNTS, Simon said that loans average about $70,000, with terms of between six to 18 months, and fixed rates are within the range of 20–30 percent.

In describing the “sweet spot” of firms that would tend to explore loan options for business funding, Simon said the revenue range stretches from annual top line tallies of $250,000 to $25 million, with the firms having been in business for at least one year (Simon said CapitalFront does not extend loans to startups).