When Banks Say ‘No,’ Cash-Strapped Businesses Turn to Lending Marketplaces

As companies continue the never-ending work of making processes more efficient, today’s chief financial officers (CFOs) play a critical role in helping to determine where they should put their resources.

At Lendio, a marketplace that brings together lenders and small business owners looking financing options, David Bedell, the company’s newly appointed CFO, puts a high priority on resources that help people get through the application process. Sometimes that’s best done with automation, sometimes with people.

“So, that’s what I spend a lot of my time on, helping to figure out that balance,” Bedell told PYMNTS. “When do we spend the money on the engineering side to get the bang for the buck?”

Also contributing to Lendio’s efficiency is that it doesn’t often have to deal with collections or paper checks. Bedell said he hasn’t had to spend much time looking at collections and hasn’t seen any checks during his time with the company.

“Our lenders are the ones paying us and they don’t want paper checks either,” Bedell said. “These are very progressive lenders who are trying to make everything as fast as possible on their side.”

Meeting Growing Demand for Business Borrowing

Business borrowing on the Lendio platform has been growing very quickly and continues to accelerate since the Paycheck Protection Program (PPP) loans ended. Bedell attributed that to two factors.

First, businesses that had been on the platform but left to use PPP loans instead are coming back for second loans or second draws on a loan they had before. Also, more people are starting new businesses and need capital to do it.

To meet these demands, Lendio gets people funded in days. When a business applies on the platform, it sees responses quickly, oftentimes with three to five options.

“We’re getting people funded extremely fast,” Bedell said. “What a lot of these small businesses really need is just access to capital to get a deal done, to do something really quickly, so timeliness matters.”

Following an acquisition it made last year, Lendio has the technology to bring banks onto its platform and help them compete. As more regional lenders sign onto the platform, there will be even more opportunities for small businesses to get funded.

Accessing Capital Quickly and at a Comparable Rate

The platform sees a lot of demand for unsecured loans because they’re quicker and easier to fund.

The current inflation isn’t expected to have much impact on the volume of borrowing happening at Lendio, Bedell said. A lot of the businesses that come to the platform have opportunities to make big returns, so another percentage point or two in the loan isn’t going to make a difference.

As a CFO, Bedell said it’s tough to say if businesses in general should be taking on debt, because restaurants, retail and construction are all different. Having seen what happened in 2008, he said he wouldn’t advise people to leverage up to a point that’s dangerous. For many people, though, having access to capital can mean they can grow faster and expand their business.

“I think the simple CFO answer I would give people is that if you can grow your business faster and get the leverage impact of debt, a lot of times it makes sense,” Bedell said. “A lot of times you do get more equity return if you use debt.”