AlternativeLending.io Finance • Technology • Legal & Regulatory • Strategy THE ALTERNATIVE LENDING REPORT Volume 2, No. 2 January 25, 2018 INSIDE Poll Reveals Vigorous INDUSTRY NEWS Lending Scene for 2018 A recap of recent news By Mark Henricks of importance to lenders, brokers, and service providers .......................... 2 More than a third of U.S. lenders plan them lending more to borrowers. “These to loosen borrower requirements in 2018 calculated modest rate hikes look good LOANTAPE and nearly 90 percent expect to lend for lender sentiment,” Sioukas conclud- more capital, according to a survey by ed. The other 44 percent of lenders who Select Banks with Significant Magilla Loans. The survey of more than answered this question indicated, how- Exposure to Small Business Loans ....... 5 200 lenders included large and commu- ever, that Fed rate adjustments would not nity banks as well as alternative lenders affect how much they loaned. Specialty Finance Companies with and credit unions. In what could be a positive sign for Exposure to Small Business Loans ....... 5 Magilla, an anonymous search engine loan approvals, more than a third – 36 for business and residential loans, did percent – of the lenders said they would not break out results by source of funds. be reducing their current requirements Online Lenders ..................................... 5 CEO Dean Sioukas said, however, that for loan approval. A majority – 56 per- small and alt-fin lenders considerably cent – said they would not change their Funds of Interest .................................. 5 outnumbered the large banks included in requirements, and 8 percent said they the poll. would tighten requirements. Indices of Interest ................................ 5 “Since the majority were community “I took it as a positive,” Sioukas said. banks and alt-lenders, while there are “Banks don’t move that quickly. When we M&A + Partnerships ........................... 6 only so many big banks, it really does saw that over a third are willing to reduce show you what they’re thinking,” Siou- their requirements – what does that mean New Investments ................................. 7 kas said. “The sentiment was consistent for the other two-thirds?” across the different lender types.” Although only a minority of lenders New Technology & Product Launches .. 8 About 40 percent of the lenders sur- anticipated loosening borrower require- veyed indicated that they were primarily ments, Sioukas speculated that it could serving business borrowers. The other 60 turn into a broader trend. “I’d say that U.S. SMALL BUSINESS LOAN percent were providing residential mort- you’re going to end up with followers in INTEREST RATES BY LENDER gage financing. the other two-thirds,” he said. Nearly 9 in 10 Lending Optimism Depends Avg. Annual Interest Rate (AIR) Expect to Lend More on Where You Live Type of All SBA Lender Loans Loans One of the most definitive findings There was some regional variation of the survey was that a large majority of in the degree of optimism lenders had Online & 3.00% - 4.39% - lenders – 88 percent – said they expected about the market. Approximately 60 Alternative 71.00% 7.01% to lend more in 2018 than in 2017. percent of respondents indicated they Lenders “That was stronger than I’d expected,” would like to lend in the Northwest and Sioukas said. “I think that’s related to a Southwest. Just 16 percent each pre- Large 2.55% - National 5.14% 6.24% prediction on interest rate moves, their ferred the Northeast and Southeast, and Banks assessment of the Fed and their assess- about 25 percent expressed a preference ment of the economy in general. From a for the Midwest. Small 2.48% - National & 5.40% 5.96% personal standpoint, I think there’s still “That one was unpredictable,” Sioukas Reg. Banks pent-up demand.” said. “That was not something we knew Foreign Banks A majority – 56 percent – of the lend- or even had a good guess as to what the 1.45% - ers surveyed said they believe an interest answer was going to be. But those seem (by U.S. 5.66% branches) rate adjustment by the Fed will result in to be the targeted regions for the lend- Source: Federal Reserve, SBA Turn to ‘Poll’ on page 9 For use by original recipient only. It is illegal to forward or otherwise distribute without permission. THE ALTERNATIVE LENDING REPORT Industry News Why Is Asset-Based 100% growth in issuance over the year- Lending So Expensive? ago period. PeerIQ expects issuance to Editor & Publisher grow by 30% to $18 billion in 2018. bit. Steve Dresner There is a common belief, especially ly/2BivPuz among business borrowers, private equi- Managing Editor ty funds and M&A sponsors, that inef- SBA Lending Begins Steve Evans ficiencies leading to predatory pricing 2018 on High Note exist in the small-cap and lower middle Contributing Writers market business lending space. That The current fiscal year has already Teri Buhl assumption may be incorrect because the seen a record amount of loans backed William Freedman ABL cost structure is very different in by the U.S. Small Business Administra- Mark Henricks comparison to inexpensive bank lending. tion (SBA). The key lending program, Joao-Pierre Ruth bit.ly/2DWr1xY SBA 7(a) loans, surged nearly 20 per- cent year-on-year in dollar terms in the Production Editor Mulvaney Sets first quarter of the 2018 fiscal year. bit. Gary Newman Public Review of ly/2Ddzhf1 Entire CFPB Operations How Blockchain Will Mick Mulvaney, acting director of the Lenny La Sala Revolutionize Invoice- Consumer Financial Protection Bureau, Backed Financing has issued “a call for evidence” seeking Technology comment on how the bureau can fulfill One of the biggest risks in invoice Tarun Gupta its functions to best protect consumers. financing is fraud. Buyers often have Miguel Larreynaga The CFPB said it plans to publish a concerns over the legitimacy of an series of requests for information in the invoice, the power a given user has to Federal Register in the coming weeks. execute a transaction or even the pos- THE ALTERNATIVE LENDING REPORT bit.ly/2F0QBkT sibility of impersonation. In some cases, DealFlow Financial Products, Inc. the seller may have financed the invoice P.O. Box 122 Victory Park Eyeing repeatedly without the financiers being Syosset, NY 11791 Global Expansion aware of this. The use of distributed led- T (516) 876-8006 ger technology can put an end to these F (516) 876-8010 Chicago-based Victory Park Capi- concerns. bit.ly/2r4DKf0 [email protected] tal is reportedly looking at opportuni- www.alternativelending.io ties for expansion in global markets. Banks Cautious The Alternative Lending Report™ is published on every “For us, I see a worldwide opportunity,” Thursday, except on Thursdays where there is a holiday in Mulling Fintech during the week in which U.S. stock markets are closed. Brendan Carroll, senior partner and co- Subscription rate: $1,495 per year. Acquisitions founder said in an interview. He noted a All rights reserved. © 2018 DealFlow Financial Products, Inc. Photocopy permission is available sole- steady rise in “underbanked” populations Banks may be intrigued by fintech ly through DealFlow Financial Products. Copying, around the world. “I think the U.S. is a distributing electronically by email, or duplicating this innovations, but remain cautious when publication in any manner other than one permitted by massive, massive market, but I definite- considering M&A. Top officials at banks agreement with DealFlow Financial Products is pro- hibited. Such actions may constitute copyright ly think opportunities exist outside the have trouble gauging fintech targets’ earn- infringement and leave perpetrators subject to liabil- U.S.” bit.ly/2mYpsr1 ings power, and many find that there may ity of up to $150,000 per infringement (Title 17, U.S. code). AlternativeLending.io™ and The Alternative not be a cultural alignment. bit.ly/2r25gdl Lending Report™ are trademarks of DealFlow Finan- MPLs Set Record-Breaking cial Products, Inc. 4Q Securitizations of Lendio Joins Entrepreneur’s The Alternative Lending Report is a general-circula- tion publication. No information herein should be $4.4B; 30% Increase Franchise 500 construed as legal advice or to be recommendations to purchase, retain, or sell securities, or to provide Expected in 2018 investment advice of the companies mentioned or Lendio announced that it joined the advertised. No fees are accepted for publishing any ranks of Entrepreneur magazine’s Fran- editorial information. DealFlow Financial Products, Peer IQ reports 10 marketplace lend- Inc., its subsidiaries, and its employees may, from ing securitizations priced in the fourth chise 500. Lendio was also recognized as time to time, purchase, own, or sell securities or other investment products of the companies quarter totaling $4.4 billion, a record the #1 brand in the Business Financial discussed or advertised in this publication. for quarterly issuance, representing Services category. bit.ly/2r3pByH AlternativeLending.io 2 January 25, 2018 For use by original recipient only. It is illegal to forward or otherwise distribute without permission. THE ALTERNATIVE LENDING REPORT Industry News Fintechs Offer Views Amazon Lending U.S. SME Lending Builds on Open Banking to SMBs Tops Momentum: PayNet $3B in 2017 Zopa and Spotcap executives weigh Small business lending expanded in on the implications for fintech firms Amazon in a press release said it in November, according to the latest in the wake of new open banking laws, loaned more than $3 billion in 2017 U.S. Small Business Credit Monthly where individuals and businesses manage to small businesses operating on its Report from PayNet, a provider of small their finances by opening up access to platform. More than 300,000 SMBs business credit data and analysis. bit. the heretofore closely guarded reserves joined the platform last year and ly/2DvCDYE of transactional data held by the big more than 140,000 small businesses banks.