Author Topic: Business Lending Coming?  (Read 14346 times)

edward

  • Full Member
  • ***
  • Posts: 195
    • View Profile
Business Lending Coming?
« on: April 29, 2013, 12:38:56 AM »
http://www.linkedin.com/jobs?trk=jobs_search_public_seo_page&jobId=5285963&viewJob=

Vice President, Small Business Credit

Job Description
 
Lending Club is looking to hire an innovative, hands-on credit strategy leader who can help drive Lending Club’s entry into the Small Business Lending market and create a low friction, high value product for small business customers. The initial focus will be on smaller companies within the Small Business segment.

The VP of Small Business Credit will report to the Chief Risk Officer, and to begin with will not have a team. He or she will be responsible for developing the credit strategy & policy for Lending Club’s Small Business products, as well as helping to drive the implementation of new operations and technology to support Small Business customers. The successful candidate with have a passion for launching new products (rather than optimizing existing ones), and a willingness to pitch in and take on a broad range of tasks to drive the business forward. He or she will be expected to work with existing policies and systems were applicable, to achieve objectives as efficiently as possible.

•Create Small Business credit policy and strategy
•Create Small Business collections policy
•Identify data and technology resources required to effectively underwrite small business
•Work with technology and credit operations teams to implement credit policy, application funnel, underwriting process and collections operations
•Contribute to strategy and implementation of new Small Business products
•Assist in negotiation of Small Business partnerships and technology solutions
•Other hands-on work as required to launch Small Business products
 
Desired Skills & Experience Requirements

•8+ years credit policy experience
•Proven expertise in small business credit policy, with experience across the customer lifecycle from modeling to underwriting to servicing 
•Understanding of small business banking/loan/credit market
• A hands-on, results-oriented approach to business with a ‘can-do’ attitude
•Detail oriented with strong analytical abilities and problem-solving skills
•Excellent oral and written communication, negotiation, and interpersonal skills with demonstrated ability to work effectively with business and technology leaders
•Must be self-directed, able to work independently, as well as work in a team-oriented and fast paced environment

Company Description
 
Lending Club utilizes technology and innovation to reduce the cost of traditional banking and offer borrowers better rates and investors better returns. Over $1.5 billion in personal loans have been issued through the Lending Club platform, which has more than doubled annual loan volume each year since launching in 2007.  The Company has been prominently recognized as a leader for its growth and innovation, including being named one of Forbes’ America’s Most Promising Companies in 2011 and 2012, a 2012 World Economic Forum Technology Pioneer, and one of The World’s 10 Most Innovative Companies in Finance by Fast Company in 2013. Lending Club is based in San Francisco, California. More information is available at: http://www.lendingclub.com.

Additional Information

Posted: April 23, 2013
Type: Full-time
Experience: Director
Functions: Finance 
Industries: Financial Services
Job ID: 5285963

rawraw

  • Hero Member
  • *****
  • Posts: 2768
    • View Profile
Re: Business Lending Coming?
« Reply #1 on: April 29, 2013, 04:54:25 AM »
Small business loans are a whole other animal. I'm not sure if I'd even touch it despite having a bit of experience in the credit function of banks who do small business loans.  But I'm sure plenty of people who know nothing about them will jump right in, which is scary IMO.

But it is interesting they are going to try.

rockinray

  • Full Member
  • ***
  • Posts: 108
    • View Profile
Re: Business Lending Coming?
« Reply #2 on: April 29, 2013, 08:36:38 AM »
Agreed - I think this would be very risky!  It will be interesting to see what they offer...

brycemason

  • Hero Member
  • *****
  • Posts: 801
    • View Profile
    • P2P-Picks.com
    • Email
Re: Business Lending Coming?
« Reply #3 on: April 29, 2013, 09:20:11 AM »
I recently invested in the small business credit segment (not through LendingClub). When I saw the approach of how the small businesses were vetted, the repayment method, and the effective interest rates, I was impressed. I think small businesses need access to credit and are willing to pay good returns not to disrupt their business. If done right LendingClub could have a good additional segment.

Fred

  • Hero Member
  • *****
  • Posts: 1421
    • View Profile
Re: Business Lending Coming?
« Reply #4 on: April 29, 2013, 10:38:12 AM »
I think small businesses need access to credit and are willing to pay good returns not to disrupt their business....

Agreed. 

I have a few friends who run their small businesses.  One of the trickiest situations they often had was when they received big orders but did not have enough capital to fulfill them.  If they could get a loan (which is hard to get from big banks nowadays), everybody (clients, business owners, lenders) wins, IMHO.

rev

  • Sr. Member
  • ****
  • Posts: 308
    • View Profile
    • Interest Radar
    • Email
Re: Business Lending Coming?
« Reply #5 on: April 29, 2013, 01:31:07 PM »
Small business loans are a whole other animal. I'm not sure if I'd even touch it despite having a bit of experience in the credit function of banks who do small business loans.  But I'm sure plenty of people who know nothing about them will jump right in, which is scary IMO.

I agree 100%.

berniemadeoff

  • Guest
Re: Business Lending Coming?
« Reply #6 on: April 29, 2013, 01:33:54 PM »
Just look at the proliferation of BDC's and it's apparent that the small business loan segment holds a ton of opportunity for yield seekers.  A friend of mine is a small business owner and when he told me what he pays on his term loans I was shocked at what banks can charge in terms of interest rates (very high).  I guess the key is the vetting as small business lending is generally a relationship business and it will be interesting to see how P2P handles this without letting lenders tour the operations, review books, meet management, etc.

Peter

  • Administrator
  • Hero Member
  • *****
  • Posts: 754
    • View Profile
    • Lend Academy
    • Email
Re: Business Lending Coming?
« Reply #7 on: April 29, 2013, 03:46:56 PM »
Nice find Edward. I had heard this was in the pipeline but didn't realize it was at this stage of development.

I invested in the same fund that Bryce did for similar reasons. People should keep in mind that most small business lending is not done to startup businesses, that most of the platforms that are starting to emerge are focused on established and profitable businesses. What has surprised me about this segment is that the default rates are lower than consumer p2p lending but interest rates are about the same which leads to a higher ROI for the investor. I am going to be focusing quite a bit on small business lending in coming months.

There has been a much publicized dearth of small business lending by banks so it is only natural that others are filling in the void.
Publisher of the Lend Academy blog

See my returns here: http://www.lendacademy.com/returns

Zach

  • Administrator
  • Hero Member
  • *****
  • Posts: 622
    • View Profile
    • Email
Re: Business Lending Coming?
« Reply #8 on: April 29, 2013, 03:55:45 PM »
Nice find Edward. I had heard this was in the pipeline but didn't realize it was at this stage of development.

I invested in the same fund that Bryce did for similar reasons. People should keep in mind that most small business lending is not done to startup businesses, that most of the platforms that are starting to emerge are focused on established and profitable businesses. What has surprised me about this segment is that the default rates are lower than consumer p2p lending but interest rates are about the same which leads to a higher ROI for the investor. I am going to be focusing quite a bit on small business lending in coming months.

There has been a much publicized dearth of small business lending by banks so it is only natural that others are filling in the void.

Which fund are you referring to Peter?

Peter

  • Administrator
  • Hero Member
  • *****
  • Posts: 754
    • View Profile
    • Lend Academy
    • Email
Re: Business Lending Coming?
« Reply #9 on: April 29, 2013, 03:58:00 PM »
Which fund are you referring to Peter?

I would rather not say right now but I will be writing about it in the next month or so.
Publisher of the Lend Academy blog

See my returns here: http://www.lendacademy.com/returns

rawraw

  • Hero Member
  • *****
  • Posts: 2768
    • View Profile
Re: Business Lending Coming?
« Reply #10 on: April 29, 2013, 05:12:23 PM »
Nice find Edward. I had heard this was in the pipeline but didn't realize it was at this stage of development.

I invested in the same fund that Bryce did for similar reasons. People should keep in mind that most small business lending is not done to startup businesses, that most of the platforms that are starting to emerge are focused on established and profitable businesses. What has surprised me about this segment is that the default rates are lower than consumer p2p lending but interest rates are about the same which leads to a higher ROI for the investor. I am going to be focusing quite a bit on small business lending in coming months.

There has been a much publicized dearth of small business lending by banks so it is only natural that others are filling in the void.
When were you investing?  The whole thing about the "credit function" of a bank I don't think many understand unless they are actually in a bank is that things just don't go bad.  Bad loans "Pay as agreed" for long stretches of time.  Just so happens that when the adverse event happens, all those "paying as agree" loans all stop paying and the collateral values disappear.  This is much different world than consumer debt.

Quote
A friend of mine is a small business owner and when he told me what he pays on his term loans I was shocked at what banks can charge in terms of interest rates (very high).
The high interest rates are there for a reason.   It's not the banks being evil, it's banks have done it enough to know the risks.  You have to remember, a bank is highly leveraged (usually 10 percent owner capital, 90 percent borrowed funds).  It doesn't take many problems to clean you out.  I think that's the only competitive edge P2P Business lending would have.  But like any financial product, people will get greedy and invest.  We will only learn the risk they were taking ex post facto.  Now if its people who have experience in these sorts of deals, I think they'd have a better idea. 

But history tells us that no one will listen to those who say things like I am lol  They'll just dive right in and hope for the best.  And I'll be hoping for the best for them as well :)  There *is* a reason large banks don't do much small business lending. 

« Last Edit: April 29, 2013, 05:15:27 PM by rawraw »

Fred

  • Hero Member
  • *****
  • Posts: 1421
    • View Profile
Re: Business Lending Coming?
« Reply #11 on: April 29, 2013, 06:30:20 PM »
Bad loans "Pay as agreed" for long stretches of time.  Just so happens that when the adverse event happens, all those "paying as agree" loans all stop paying and the collateral values disappear.  This is much different world than consumer debt.

Consumers also experience sudden adverse events: job loss, medical expenses, etc.  Are there differences between adverse events experienced by consumers than those experienced by businesses?

Care to elaborate the "This is much different world than consumer debt"?

Fred

  • Hero Member
  • *****
  • Posts: 1421
    • View Profile
Re: Business Lending Coming?
« Reply #12 on: April 29, 2013, 06:45:09 PM »
The high interest rates are there for a reason....

Yes, one big reason: banks has high operational expenses, and require high NIMs.

I think that's the only competitive edge P2P Business lending would have.

These are a few advantages from LC Form 10-K:

-  lower expenses: online lending entails significantly lower operating costs compared to traditional banking and consumer finance institutions because there are no physical branches and related infrastructure, no deposit-taking activities and an automated loan underwriting process.

- technology & lean process: we aim to use technology and a more efficient funding process to lower costs so we may provide borrower members with rates that are generally lower, on average, than the rates they obtain from unsecured credit provided through credit cards or traditional banks, and offer interest rates to investors that they find attractive.


Show Me The $

  • Full Member
  • ***
  • Posts: 167
    • View Profile
Re: Business Lending Coming?
« Reply #13 on: April 29, 2013, 06:53:31 PM »
Are you guys referring to specific small business lending or general? To clarify, there's are many business finance functions. It could so a new restaurant can buy a new oven, purchase order financing, factoring receivables etc. I think it is a very interesting space, one in which I have a good friend who runs a small family fund. Needless to say, they do exceedingly well and are nicely secured overall.


Very interesting.

rawraw

  • Hero Member
  • *****
  • Posts: 2768
    • View Profile
Re: Business Lending Coming?
« Reply #14 on: April 29, 2013, 07:08:39 PM »
Yes, one big reason: banks has high operational expenses, and require high NIMs.
No, that's not it -- you are reading too much LC material.  It's because they haven't figured a good way to standardize it like a consumer loan.

Quote
The ability of small businesses to finance growth is, in turn, largely dependent on the capacity of local community banks to lend them money. Although small and mid-sized banks ($10 billion or less in assets) control only 22 percent of all bank assets, they account for 54 percent of small business lending. Big banks, meanwhile, allocate relatively little of their resources to small businesses. The largest 20 banks, which now command 57 percent of all bank assets, devote only 18 percent of their commercial loan portfolios to small business. . .

One reason is that big banks rely on computer models to determine whether to make a loan. Because the local market conditions and the circumstances surrounding each borrower and his or her enterprise are so incredibly varied, this standardized approach does not work very well when it comes to understanding the nuances of risk associated with a particular small business.

And I don't know if you've ever worked in a bank or not, but getting into small business lending will increase their over head.  It is nothing like the one page of data you get on LC -- again, one of the reasons why the big banks haven't gotten involved heavily yet.  I'm sure it'll be good for small business if "the internet" can figure it out.  It's not rocket science, but it's not a 1-4 family mortgage or consumer credit either.