Bringing Funding Back To Small Business

It’s no secret that technology has been bringing business owners and lenders together quickly and efficiently. However, small businesses in the U.S. have been finding it hard to obtain working capital even seven years after the Financial Crisis of 2008. PYMNTS spoke with Jared Hecht, cofounder and CEO of Fundera, to get a sense of what small businesses need in order to get up and running.

Commercial lending is on the rise, yet small businesses continue to have a hard time obtaining working capital. How is Fundera prepared to address these lending challenges?

JH: By giving small business owners direct access to nonbank financing channels, and the advice they need on how to navigate their options. Fundera is a part of a new wave of companies that are combating this scarcity [of funding] and has gathered a network of trusted, prescreened lenders beyond the world of traditional banks — including Funding Circle, Lending Club, OnDeck, CAN Capital — that offers business owners accessible funding options they are most likely to qualify for.

What makes you different from similar offerings? What technology do you use to make lending more efficient?

JH: Because [Fundera’s] a marketplace that works with 30 different funding providers. Fundera streamlines the process of finding and securing a loan with a proprietary common application, meaning that borrowers can apply to multiple lenders with one application while identifying the products that best meet their needs.

After applying, borrowers are presented with loan products they qualify for and the price of each product. This transparency in pricing pushes lenders to compete for a borrower’s business, ensuring they receive the lowest interest rates from these partners.

This also means that the application process is much more convenient for busy business owners — it is fully automated and the entire experience is handled on the Fundera platform, consolidating the process from start to finish.

What are the top three drivers transforming the small business loan industry today? What role does Fundera play in this evolution?

JH: The first and most important driver is that technology has powered the industry to move online. This has allowed for a proliferation of options for borrowers, who traditionally relied on a small set of banks for their capital needs. More options have led to increased competition for borrowers’ business, which means borrowers get better rates and more choice.

The second driver is an outgrowth of the first — the use of Big Data and analytics in the application and underwriting process. With the vast amount of data online, we’re able to identify and analyze risk like never before — and faster than ever before — to ensure we’re facilitating loans to trustworthy borrowers.

The third driver is an increased interest in entrepreneurship, especially amongst Millennials. This is something we’ve seen in our own data, and something I can relate to personally as an entrepreneur. Starting your own business … is more popular than ever and is leading people to seek out working capital like never before.

This is great for Fundera’s business, since we work with businesses throughout all their stages of growth to help them access credit, consolidate their debt and grow sustainably.

When do you believe lending will ease up for small businesses and what should they do until then?

As we get further away from the Financial Crisis of 2008 and as the economy gets stronger, banks and other traditional lenders will lend to small business borrowers in greater numbers.

It’s not clear when exactly we’ll reach prerecession levels, but many growing businesses don’t have the luxury of waiting for capital as they grow.

That’s why online lenders and services like Fundera are becoming more popular with small businesses. Our hope is to continue driving awareness among small business owners and encourage them to educate themselves about their options using services like Fundera online.