Even though he has worked in finance for more than 20 years, it didn’t take nearly that long for LSQ chairman and CEO Max Eliscu to see the void in small business financing.
So he founded LSQ in 1998, and invoice financing and factoring company which in the ensuing two decades has provided more than $16 billion in funding to businesses in amounts ranging from $5,000 to $50 million.
Expect that total financing number quickly grow. In 2016 LSQ advanced $1.8 billion while in the second quarter of 2017 it provided $455 million.
Mr. Eliscu credits a few factors for LSQ’s success. One is its 40 partnerships, including 16 signed over the past 12 months, with banks including U.S. Bank. Another is its underwriting process, which has allowed LSQ to cut its average time to funding for businesses seeking less than $250,000 from 28 days to three and to a week for those seeking higher sums.
“No other company in our market offers the combination of technology, funding scale, and 20 years of operating history of LSQ,” Mr. Eliscu said. “It’s why banks are increasingly turning to LSQ to support clients that don’t yet qualify for bank loans or other traditional financing.
“We make it easy for banks to keep and serve their customers.”
Integration with banks can take many forms, Mr. Eliscu explained. It can come directly with the lending system so when a bank declines a prospect they can send them to LSQ. Banks can also send communications informing clients that while they are not eligible for one option, they may be for another. The customer can link back to the bank’s portal, which is integrated with the LSQ application system, and possibly be approved in minutes.
That option allows banks to maintain a relationship with customers they may be able to serve in the future, Mr. Eliscu explained.
“You don’t want clients to work and then say ‘no’.”
That application process can occur within the bank’s own environment, which allows the customer to have an experience consistent with what they see across the brand.
One advantage LSQ Finance shares with a small number of companies across all sectors of alternative finance is its access to decades of data. That data, combined with more than 20 years of experience, allows LSQ to make quick decisions that are highly accurate and which produce lower losses than other providers, Mr. Eliscu said. Investors have noticed, and that allows LSQ to access capital at a lower rate, with clients sharing the benefits.
Mr. Eliscu is also excited about LSQ’s future. As technology evolves he envisions tapping into the interconnected relationships fostered by the web to improve both business’ access to capital and the entire borrowing experience. How businesses even receive and approve invoices is going to change. The pace at which this all occurs will free up the billions of dollars in capital tied up in outstanding invoices.
Expect LSQ to be at the forefront of this change, Mr. Eliscu said. Their technology helps businesses rapidly scale by quickly turning invoices into deployable cash. That is golden for a small business growing faster than traditional financing options can ascertain.
What excites Mr. Eliscu the most is the sheer scale of the market’s potential. In the United States, it’s $100 billion per year, while globally it’s estimated to be $3 trillion.
“There is a massive opportunity as we make out technology and the user experience better,” Mr. Eliscu said. “We think this will be the primary form of financing for small, growing companies rather than an alternative form of financing.”