On Thursday (Oct. 5), Alenka Grealish, senior analyst at Celent, penned an article for American Banker with a prediction: The small business (SMB) credit space is headed for a “shake-up.” The small business loan market is oversaturated, she argued, creating a “FinTech credit bubble” that first showed signs of deflating as investors pulled out of some players like CAN Capital and LendingClub in 2016.
“The market is ripe for consolidation and beneficial partnerships,” Grealish wrote. “Indeed, the remainder of 2017 and 2018 will see more partnerships between the banks and FinTechs.”
That’s because banks still hold the strongest traction with small business borrowers, are able to provide the strength in underwriting capabilities and revenue and liquidity cushions necessary to remain viable. Alternative lending players, she wrote, don’t have enough time to diversify their portfolios, creating a significant danger to some firms in the event of a financial downturn.
Between market consolidation and partnerships with traditional banks, alternative lending is certainly already an in-flux market. But that hasn’t seemed to stop new market entrants from coming in or kept investors from backing these players. In this week’s B2B venture capital breakdown, alternative lending for small- and medium-sized businesses (and their employees) is the clear winner.
Here’s an interesting alternative lender to land on the B2B investment board. SalaryFinance technically isn’t a corporate lender: The firm lends to employees, using their paychecks for repayment of the loan. The company, based in the U.K., recently announced about $52.5 million by Legal & General, while Blenheim Chalcot also participated, according to reports. The funding round will need approval from the Financial Conduct Authority, reports added. The reason why SalaryFinance landed on the B2B investment roundup is due to the company’s business model, which, it says, could have positive impacts on the workplace by improving employee finances. SalaryFinance said 17 million U.K. employees have less than £100 in savings. Helping employees access financing, the company said, could lead to more effective employees at the workplace.
This supply chain financing company has been mum about the funding, with reports only catching onto the investment of about $20 million (so far) through a Securities and Exchange Commission (SEC) filing. Taulia offers supply chain financing in addition to invoice discounting and management services for business traders. According to reports, the firm plans to raise a total of $33.29 million, though it is unclear who provided the funding or when Taulia will officially announce the raise.
Based in Dubai, Beehive offers a peer-to-peer (P2P) lending platform for small- and medium-sized business borrowers. The company announced $5 million in Series A venture capital funding round this week led by Riyad TAQNIA Fund, while Mohammed Bin Rashid Innovation Fund also participated, among other backers. According to Beehive, the investment in P2P lending signals support for the alternative finance market across the Middle East. The funding, reports said, will go toward product development and market expansion, while Riyad’s acting CEO Adel Al-Ateeq will join the company’s board.
Colombia’s Siigo, which provides accounting and administrative software for small- and medium-sized businesses, raised an undisclosed sum late last week by Accel-KKR, reports said. The investment will go toward product innovation and to strengthen Siigo’s market position in the country, while the firm also plans to look toward other geographic markets in the region for expansion. The firm, which has been in operation for about a decade, provides accounting, payroll, invoicing and inventory management solutions to SMBs; the platform operates with more than 15,000 accountants and 100,000 SMBs in Colombia alone, reports said.