How to Fund Business Loans Online

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Nov. 7 (Bloomberg) -- Funding Circle Co-Founder Sam Hodges discusses funding business loans and his investment ideas with Deirdre Bolton on Bloomberg Television's "Money Moves." (Source: Bloomberg)

Ahead with this?

I get that question a lot.

My cofounder alex and i come at this from the perspective of being small business owners ourselves.

We have a successful set of gym franchises.

We had 90% profit in those businesses and despite the fact that we had lots of cash flow and good business, we were not able to get a $100,000 loan to expand business.

That got us thinking, if we can get -- if we cannot get access to capital, is this a systemic problem?

The more we looked, the more we realize banks are not making loans of the size we were talking about.

In the u.s., we are making loans of $25,000 up to $500,000 to quality small businesses.

You create more valuation and a great experience for the borrower and the investors.

How exactly are you evaluating credit?

Normally we think of banks with big heavy infrastructure and tons of staff to do this.

But you are saying this -- saying this is not how it has to be any longer.

No it is not.

Some of the factors that banks look at are the same that we looked at when we evaluate credit.

We look at over 260 points of data ranging to the cash flow of the business as well as the individuals behind the business and the entity.

We look at the stability of the individuals behind it and many other things.

We come up with our own proprietary score.

What banks are doing is more paper-based and multistep process.

They have people who are responsible for originating loans and then the centralized structure.

It makes it more cost-effective for them.

A new just raised money.

What you doing with it?

We are excited about our backers.

We had excel and others come in on the back of some of the best venture capitals -- capitalists out there.

We are deepening the technology that we used for the online borrower as well is the investor experience.

We are also investing heavily in marketing, so we can find the best small businesses across the united states and make sure that they are coming to us.

I guess the marketing spin is part of this, but how are you going to protect your first- mover advantage?

There are other business peer to peer lending groups that are aiming at this same space.

Everyone has guns a blazing.

Sure thing.

The segment we are going after it is a massive opportunity.

We estimate it is somewhere between $200 billion and $250 billion a year.

There are a lot of winners.

Their relatively small relative to the overall size of the market.

The second thing is, from the ground up, we have been built to focus on small businesses.

But that is obviously your spirit -- your area of specialty.

Thank you for joining me.

Sam hodges, cofounder of funding circle usa, live from san

This text has been automatically generated. It may not be 100% accurate.

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