2019-08-30 13:07:30

Lending small businesses money is becoming lucrative for financial technology startups, which hasn’t been lost on venture capitalists who have been throwing money their way. 

One fintech that is eschewing funding, at least for now,  is New York-based Fundera, which operates a marketplace for small businesses to access loans, credit cards and other financial services. To date, it has raised about $25 million in funding, less than rival Nav, which has amassed $99 million from investors. Despite less money in the coffers, Fundera has revenue and a growth rate that it says is higher than its rivals. From 2014 to 2017 Fundera said it grew by 4,336%, outpacing its competitors. It ended 2018 with $15.6 million in revenue, up 77% from 2017, when revenue stood at $8.8 million. In comparison, Nav’s revenue stood at $5.9 million at the end of 2017.   

So what’s behind its red-hot growth without the need for tons of capital? Co-founder and Chief Executive Jared Hecht points to the startup’s ability to carefully deploy its capital and its focus on being more than just a middleman to connect small businesses with lenders.

“We have needed far less capital than our major competitors in the space because we are super capital efficient,” said Hecht, noting the company is profitable. “We’re really not a transactional service in the sense that we help a customer transact and then we move on. We view every single interaction with a small business owner as a launching point to develop a long term relationship.”   

Founded in 2013, Fundera operates a marketplace that connects small business owners with lenders, credit card issuers and banks offering business banking. Small business owners fill out an online application that helps Fundera ascertain which lending products the borrower will qualify for. The fintech then assigns a lending specialist who will learn about the business and using advanced technology matches the business owner with the products he or she qualifies for. It offers small business owners access to the full suite of loan types including SBA loans, lines of credit, equipment and invoice financing, startup loans and short term loans among others. Small business owners can also find a credit card and a bank account through the Fundera website. 

According to Hecht what makes Fundera different than other lending marketplaces is its focus on forging long term relationships with its customers. Unlike other websites where people come to borrow money and move on, Hecht said the average Fundera customer uses the platform multiple times, whether its to refinance an existing Fundera loan or to access a totally separate product. “The majority of our revenue comes from existing customers, not new customers,” said the executive. “That’s unique for a marketplace. Everything is hyper transactional. We want to partner with small business owners to help them see better results.” That philosophy, said Hecht, has paid off for Fundera, which has become a viable business that he said doesn’t need venture capital to grow. A source close to the company said it did raise between $5 million and $6 million earlier this year, with most of the proceeds coming from insiders. 

While Fundera and its peers have been enjoying strong growth and interest on the part of the venture community, many of them haven’t lived through a recession. The economy has been booming for more than a decade, which means small businesses haven’t had much in the way of trouble when it comes to paying back their debt. But if the cost of goods increases and business slows for small businesses because of a recession, it could usher in defaults, which the fintech lenders may or may not be equipped to happen.  

Hecht, for his part, isn’t losing too much sleep over it. “A recession is inevitable but I wouldn’t say much has changed in sentiment as regards to small business behavior,” he said. “Some lenders will  survive some won’t be able to keep up with the default. Services like Fundera will become increasingly valuable to small business owners because they will be told no by banks.”



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