It takes a strong vision and commitment to buy out a company, only to dismantle it and build again from the ground up.
Larry Chiavaro said First Associates began as a mobile home servicer 29 years ago but the focus changed six years back when he and his partners purchased the company.
“We took it apart and put it back together,” Mr. Chiavaro said.
Six years later First Associates is the first multi-asset servicing company in the space, working in a host of areas including green and solar technology, student loans, unsecured consumer debt, retail purchase finance, automotive, elective medical, tax liens and structured settlements.
Mr. Chiavaro said First Associates likes to participate in new areas such as solar technology, where they have done quite well in provide loan and lease agreements.
“I like the esoteric stuff, things that are a little funky,” he said.
First Associates are also active in merchant cash advances and small business financing, Mr. Chiavaro explained.
“We own 80 percent of the marketplace lending space,” he offered.
If you have participated in the space or even just shopped around, chances are you have visited the website of a few companies who work with First Associates. Their partners include Kabbage, Avant, AmeriMerchant (now part of Capify), Prosper and CAN Capital.
First Associates also have relationships with such mainstream firms as Deloitte, Citi, BlackRock, Wells Fargo and Capital One.
One area First Associates does not participate in is mortgages, Mr. Chiavaro said, because they wish to work in areas where ongoing relationships with customers can be developed.
Those companies who do partner with First Associates can access a suite of services covering every step in a company’s normal options from origination to capital provision, Mr. Chiavaro said, while adding First Associates employs cloud-based SaaS architecture.
At the origination stage First Associates offers online application technology, credit pull and decisioning services and digital signatures. At the funding stage they can make verification calls, validate documents and certify borrowing bases.
First Associates helps payment systems by providing automated processing and sales tax calculation, multiple payment options and an integrated lockbox service. Customer services comes with customized scripting and white label options.
They also provide delinquency management, investor reporting and backup servicing. All reporting complies with the SSAE 16 II standard
Mr. Chiavaro believes that while marketplace lending is still in the “second or third inning” of its development, new entrants cannot simply open the doors and expect the business to flow.
“The challenge now is to come up with something unique in originations or you won’t make it.” he explained.
The Prospers and Lending Clubs of the world have a bit of a head start, he added.
Mr. Chiavaro said he was recently on a discussion panel at an industry show and said in response to an audience question that he expects a handful of small platforms and at least one medium one to fail in the next 16 to 18 months. He added the industry should also see some consolidation during that time.
“Some people felt those were provocative statements,” Mr. Chivaro said. “A week later I shared the story at another event and three days later two platforms failed.”
One area with room for innovation is elective medical procedure financing, Mr. Chiavaro said. “It’s an area that has been around forever but there hasn’t been anything groundbreaking.”
Purchase financing for items such as electronics and appliances is a current growth area, he added.
Customers shopping for the right platform should know that many of the new ones are not compliant, Mr. Chiavaro said. Perhaps it is because, as a small player, new platforms cannot afford expensive compliance and processes. When they are audited, these deficiencies are exposed, Mr. Chiavaro added.
“For us, primary servicing compliance drives the bus,” Mr. Chiavaro explained. “We use state of the art technology, including five different cloud-based platforms.”
Others providers employ technology that may be three decades old and which reflects in the limited options available on some platforms, Mr. Chivaro said.
“Some platforms are basic. They cannot even process credit cards.”