It’s not by chance Funding Circle has been able to lend $2 billion to American SMBs in just over five years, U.S. managing director Bernardo Martinez said. They also have more loans outstanding than 98 percent of FDIC-insured banks.
Reaching such a milestone this quickly is testament of the size of the gap Funding Circle and other new platforms are filling in the economy. But even though the need is strong, you have to do more than hang your shingle and wait for business owners to knock on your virtual door.
In Funding Circle’s case Mr. Martinez credits two initiatives – their partnership channel and their direct marketing programs.
“We’ve been investing a lot in these two areas over the last five years,” Mr. Martinez noted.
Those partnerships come in a few distinct types, he explained. Funding Circle works closely with some banks and jointly markets with them. They also team up with lead aggregators. Some of the bigger name partnerships yielding success include a deepening relationship with Stripe and further integration with Intuit. Funding Circle has yet to focus on retail partnerships with office supply firms and other types that work closely with SMBs though Mr.Martinez doesn’t rule out pursuing such avenues in the future.
Direct marketing has to have a strong customer experience component in an era where Amazon, PayPal and Square have large captive markets and are becoming more relevant in small business finance, Mr. Martinez said. They are offering speed and larger loan amounts, crucial factors at a time when SMB owners in search of financing have to wait weeks for a funding decision and often receive less than they need from traditional lenders.
“But one thing we’re seeing, is there’s not really a lot of platforms trying to compete with banks,” Mr. Martinez explained. Early in the P2P era much of the talk was about replacing the banks, but as anger over the recession receded and the industry began to mature, the mood became much more collaborative.
“It’s a different dialogue now. Banks partner with companies like ours,” Mr. Martinez said. “It’s a good trend we’re starting to see.”
Mr. Martinez said he feels pretty good about the outlook for 2019. As for the coming recession, he said smart companies prepare in advance, and part of his job is to let investors know Funding Circle is keeping an eye for changing times.
“We’ll continue to do what we’ve always done,” Mr. Martinez concluded. “We’re doing nothing different at this point. What we want to make sure of is what we’re booking today makes sense for the next couple of years, to have that discipline.”
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