The recent recession and the tightening of credit have made it challenging for small businesses to get funding in recent years. As a result, some companies are coming up with new ways to get small businesses the money they need to expand and hire.
We talked to Brock Blake, CEO of Lendio.com, which offers small businesses the ability to see their lending options in minutes from a single application. He shared his thoughts on the landscape of small business lending.
Tell us a little about how Lendio works.
Our mission at Lendio is to fuel the American Dream by making small business loans simple. We match small businesses with the best loan for them. Our focus is to provide three essential benefits to the business owner: offer a wide variety of business loan options; speed up the process and reduce the time and effort it requires to get funded; and provide a white-glove trusted experience. We have eliminated the need to go bank to bank or website to website; small business owners can fill out one easy application and see all of their loan options in one place.
Once they pick an option, a dedicated Lendio loan specialist will walk the small business owner through the entire loan application process - all the way to getting the money into their bank account.
How has the lending climate for small businesses changed in the past few years?
After the recession, businesses have had a hard time finding access to capital. Banks have been under heavier scrutiny and regulation, causing them to focus on larger loan volume with more established borrowers. This makes it really hard for small businesses that have recently started and don't have the history or the revenues an older business might have.
Because of this gap left by banks, we're seeing the alternative financing space heat up. These innovative lenders have found new ways to underwrite loans and help those business owners that don't qualify for traditional small business loans. This surge in access to capital has been great for small businesses, allowing them to buy more equipment, put more into marketing, and hire more people.
How have crowdfunding sites like Kickstarter changed the financing game for small businesses? What do lenders think of them?
Sites like Kickstarter help small businesses validate their products or projects before they spend a lot of money on them. The part that is game-changing is really the validation. If a product or project has legs, the business owner not only gets validation, but they can start selling the product.
Kickstarter has created a lot of opportunities for small businesses, especially for ones that are creating innovative products. Instead of spending thousands of dollars developing a product no one wants, they can get the audience and the buyers first, then build their product.
I think lenders should really like this concept. Lenders typically have trouble helping startups in the idea phase, especially if the entrepreneur doesn't have a good credit score or revenue; but Kickstarter clients will need other financing as they grow, and that's where the lenders can help.
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Do you think it's easier or more difficult for a small business to get funding than it was, say, two or three years ago?
Today, you have a lot more funding sources than you had 3 years ago. With technology improving, you can easily find more loan options online; and with other innovative financing sources like crowdfunding and alternative lending, business owners have more options.
What's the most interesting business concept you've seen looking for funding?
We've seen a worm farm come through; that was pretty interesting. Honestly, we've got so many businesses coming through that we get to see the majority of American industries represented. Most of these businesses have similarities, but they all have their own takes on their business model, and it's always interesting to see what people bring to the table when they start their own small business.
What does the "ideal" business look like to a lender - years in business, sales, type of business, type of ownership, etc.?
As long as you have good personal credit, you're going to have access to capital. But lending institutions are usually looking for businesses that have been in business for six months or more and bring in over $8,000 in revenues every month. If you've got that, you're going to have a lot more loan options.
What should a small business owner do to maximize their chances for securing an attractive loan?
To best secure your chances of an attractive loan, it starts with what we call the "four pillars of business financing." First, you're going to want to have a good credit score (700 and above). Second, you're going to want to be in business at least 6 months. Third, you're going to want to have decent monthly revenue. And lastly, having collateral like equipment or property is going to improve your chances of getting the loan.