October 19, 2015

By Bob Coleman
Editor, Main Street Monday

Main Street Monday — My Five Takeaways from a Small Business Alternative Lending Conference

“Alternative” small business lenders, or, “Marketplace” lenders, or “FinTech” lenders, or “Online” Lenders. Who knows what to call whom?

That is takeaway number one from my experience at LEND360 small business lending conference last week in Atlanta. The terminology isn’t quite set.

And the old school small business bank “brick and mortar” lender? Some now consider yourself “storefront” lenders.

2) Speed to market pays off — funding a small business loan in one day is extremely lucrative. While some lenders tout offering single digit interest rates the norm average rate for Main Street appears to be “credit card interest rates” — and higher.

3) Big Data is augmented with Big Brains. Lenders continue to tweak their credit underwriting algorithms. Only until the next economic downturn will we know who has it right.

4) Yes Virginia, I’m calling it an online small business lending bubble. Billions of investment dollars are flowing into online small business lender coffers with promises of double digit returns. With historical small business loan performance at minimum default and charge-off numbers, there is a high level of exuberance by everyone in the room. That will last until default numbers begin to turn.

5) The elephant in the room is the pending Dodd Frank small business lending regulations to be issued from CFPB. Oh, and don’t smirk too much at the disruptors if you are a “storefront” lender. All small business lenders will be affected.