Enova’s Small-Biz Lending Soars as Main Street Turns to Nonbanks

As small businesses navigate an uncertain macro environment, they’re turning to nonbank lenders to gain access to capital.

FinTech Enova on Thursday (July 24) reported earnings indicating that consumers, too, particularly those in the non-prime designations, are moving to the platform model for funds.

At a high level, the results may bode well for originations momentum from other platform FinTechs including OppFi and SoFi (and a read across for both the FinTech IPO and CE 100 Indexes) when they report earnings in the coming weeks.

Outgoing Enova CEO David Fisher said on the conference call with analysts that overall second-quarter loan originations were up 28% year on year, and ahead 4% sequentially, to $1.8 billion. The total loan and finance receivables stood at a record $4.3 billion. Small business offerings represented the majority of that portfolio, at about two-thirds, while the remainer has been tied to consumer lending.

Small and medium-sized business (SMB) revenue increased 30% year over year and 7% sequentially to a record $326 million.

Originations for SMB were a record 1.2 billion in Q2 and Fisher said that “insights from internal and external sources reflect solid underlying trends for small businesses … Consistent with previous findings, [Enova’s surveys] found that small businesses feel increasingly optimistic about future growth, as over 90% of small business owners are expecting moderate to significant growth over the next year. In addition, 76% of small businesses now prefer non bank lenders for their speed and convenience, an all time high.”

He told analysts that “access to capital is crucial as they invest in growth opportunities, manage cash flow needs, and weather unexpected challenges … In addition, our SMB portfolio continues to be well diversified across a wide range of industries, geographies, loan sizes, product types, and price levels … we continue to expect that tariffs will not have a substantial impact to our portfolio largely due to the diversity, size, and industries of our borrowers.”

The latest Enova results come as PYMNTS has found in its forays into Main Street SMBs’ fortunes that traditional avenues of credit access — namely through banks — have been narrowed. Our data have found that most SMBs do not have access to credit cards. Just 37% have access to any credit cards, with 32% having access to business credit cards.

Resilient Non-Prime Consumers

As for the consumer portfolio, “credit quality continues to be solid,” Fisher said.

The consolidated net charge-off ratio for the quarter declined to 8.1% from point 6% last quarter and 7.7% in Q2 of last year.

“Overall, our consumer customer base remains on solid footing, driven by healthy wage and drop growth and low levels of unemployment,” he added, noting that “we serve nonprime borrowers, many of whom regularly face income volatility and are experienced in managing variabilities in their finances. Because of this, recessions or market downturns tend to have less of an impact on our non prime customers than on prime borrowers.” A slight increase in defaults has pushed the company to tighten its credit underwriting, Fisher said.

Steve Cunningham, CFO and incoming CEO, told analysts on the call that third-quarter revenue growth would be on the order of 15%. Investors sent the shares down about 3% at the start of trading on Friday.

“Small business credit performance remains strong sequentially and compared to the second quarter of 2024, and the charge off ratio, net revenue margin, fair value premium and 30 plus delinquency rate, all reflect continued and expected stable credit performance,” he said.

During the question-and-answer session, Fisher contended that “it’s a good time to be balanced between originations, growth and risk … I would say that the competitive dynamics on the small business side are more stable. There’s fewer players. We know who they are. Brand matters more. And so that  strong position we have in SMB helps with the stability a bit.”