Access to Capital Summit, was held at Rutgers Business School in Newark. The event focused on alternative ways for entrepreneurs to fund their businesses when banks can’t or won’t lend to them. Sen. Cory Booker in partnership with Rutgers Business School convened a panelist of technological innovator, and industry leaders in the field of alternative to the conventional commercial funding sources. “As much as we complain, and rightly so, about the tightening capital markets and no access for small businesses, there are actually a lot of alternative means with which to get loans now with the aid of technology,” Booker said after the event held at Rutgers Business School. “… There are options out there for entrepreneurs and, so, what I want New Jersey to really know is that, don’t give up if you’re being denied from a traditional bank because there’s other folks that have a much better process of getting more capital out there.” These panelist include CEO’s, and other executives in discussing peer to peer lending and micro-finance. They also discussed how new lending models improve efficiency, lower costs, and make capital more accessible to communities and small businesses cut off from credit after the financial crisis.
This is the fourth forum in a series of discussions designed to help small businesses, the New Model to Improve Access to Capital Summit will hone in on the needs of New Jersey small businesses. This is the first session moderated and led by Senator Booker. “Where the traditional banks are falling behind, these folks at this table are filling that void in creative ways,” Booker said of the panelists at the event. “We’re in the foothills of what I think is going to be … a revolution in lending and banking, a revolution in our country. The traditional banking model is going to be democratized by using technology and give more opportunity to people in our nation.”
What made this an important topic of discussion are these technologies and innovation are having a major impact of the traditional lending model, and can be the needed game changer in better supporting small business financing. The forum highlighted how these technologies have changed the lending landscape and new innovative ways to get capital to small business. Small businesses represent close to 70% percent of new job creation, there is tremendous demand for individuals with as little $5,000 in savings are looking for a better returned then the minimal interest rates in the traditional banking system, or unknown stock purchases. Resulting in peer to peer lending. Peer-to-peer lending (also known as person-to-person lending, peer-to-peer investing, and social lending, is the practice of lending money to unrelated individuals, or “peers”, without going through a traditional financial intermediary such as a bank or other traditional financial institution.
“Technology has created innovation in both the direct lending and the platform side of the business. Traditional lenders would depend solely on FICO and credit report scores”, said Steve Allocca “these new platforms can us other information determining a business credit worthiness, and now you have using information available by transaction, such as pay pal that does not depend on a credit score, and looking at other information sources”.
They panelist could be segmented into three categories, entrepreneurial training (Rising Tide capital), direct lenders (Kiva Zip, Intersect, Kabbage,OnDeck, POayPal and Accion), and platform providers (Biz2Credit, VistaCredit, and Lending club). P. This lending takes place online on peer-to-peer lending companies’ websites using various different lending platforms and credit checking tools. Bringing the people to have money with those that need money.
For example, of lower operation cost for funders and borrowers was highlighted by David Nayor, CEO of BoeFly. “Bo Fly is marketplace or an aggregator of lending and finance, we do three fundamental things for business borrowers, one we access whether a business is fundable, when you consider the consumer credit market place you have FICO score, there has never been a universal measurement for small business, we now have small business credit scores FICO, we help get the borrowers structured and packaged for financing, and our on-line platform connects business borrowers to lender (3,700), whether that be traditional lender, merchant cash advance, peer-to-peer, SBA lender”. Through innovation and origination automation the cost to the lender overall has been reduced, resulting in a lower transaction cost to the borrower. This has resulted in a better liquidity for borrowers, quality low cost deal flow for lenders”. One particular lesson the panel wanted to impart was that some nontraditional lenders don’t necessarily want to know scores and statistics as much as they want to know their customers, Mathew said. Sometimes, character and networking can be just as important as data, Renfro added, because nontraditional borrowers may need to rely on nontraditional selling points when they seek out capital.
Additionally, the senator partnered with U.S. Small Business Administrator (SBA) Maria Contreras-Sweet in a discussion highlighting new programs offered by the SBA, and also innovated ideas that could provided other collaborative programs aims to highlight new financing resources for small businesses and the incredible innovation occurring in peer to peer and micro-lending models. The summit will also address key questions facing peer to peer lenders, whose explosive growth is disrupting traditional banks. Maria Contreras-Sweet, a member of President Barack Obama’s cabinet who talked about the ways the SBA works with companies to help them get funding and her hopes going forward. “I’m looking very much forward to working with Sen. Booker on ways that we can do things, through executive action or through legislation,” she said during the forum. “But we need to make certain that we are looking toward the future and being inventive.”
Jay Savulich, managing director of programs, Rising Tide Capital;
Jeff Bogan, senior vice president, Lending Club;
Justin Renfro, associate manager of business development, Kiva Zip;
Noah Breslow, CEO, OnDeck;
Paul Quintero, CEO, Accion East;
Rohan Mathew, president and CEO, Intersect Fund;
Rohit Arora, co-founder and CEO, Biz2Credit;
Steve Allocca, head of credit, PayPal;
Robert Frohwein, CEO, Kabbage;
And David Nayor, president and COO, BoeFly.Quintero,
Technology, continued low interest rates and high demand, a created an exciting new market for lending. The sector will be something to continue to watch in the coming months as these lending program become more main stream.