3 Alternative Lending Startups to Watch
Large banks, e-commerce moguls like Amazon and eBay and tech firms are likely to enter the alternative lending space, and soon, according to Eden Amirav, co-founder, and CEO of startup LendingExpress.
In markets like Australia, this is already happening. National Australia Bank set up its own alternative lending arm called QuickBiz Loans back in 2016. Over the next two years, this will start in the U.S. markets, but for now, the alternative lending space, whether SMB lending or consumer, is dominated by fintechs like Lending Club, or Kabbage, etc. These fintechs have carved a niche for themselves by using AI and ML to lend to the traditionally underserved borrowers.
The vast opportunity of this market has given rise to smaller fintechs, paving the way for more innovation. Here are three startups that caught our attention this month:
Founded less than two years ago, LendingExpress is a marketplace for lenders and borrowers that uses an AI-based algorithm to determine the creditworthiness of an SMB candidate. Yesterday, the company launched a specialized dashboard called LendingScore that uses parameters like personal credit score, account balance, location etc, to determine the borrower’s score and then matches them with an appropriate lender.
“Even among alternative lenders, most small business loans are denied, and the applicant is never told why,” LendingExpress CEO Amirav, told Bank Innovation. “Lending Express’s new LendingScore dashboard pinpoints how a loan application should be modified to increase funding odds and generates personalized step-by-step plans that offer the shortest path for businesses to access funding,” Amirav said. “Also there is a gamification element there too, so say if a candidate is not likely to get a loan for a particular reason, we tell them that reason and direct them to tools that can help them solve that issue. For example, if a borrower is having budgeting problems then we would direct them to something like Mint, so they can improve their budgeting issues and then get a better score and increase their chances of getting a loan.”
Founded in October 2016, LendingExpress is based in Tel Aviv, Israel, but serves the U.S. market. So far it has raised $2.7 million in seed funding. Amirav told Bank Innovation that the company is currently in talks with a “few well known VCs for our next round, which will come soon.”
So far, LendingExpress provides borrowers access to lenders like Kabbage, OnDeck, and LendingClub.
“We’re experiencing a huge growth in the U.S. markets, so far we’ve loaned over $70 million, and most of that came in the past few months,” he said.
Yet to hit the market is P2P lender Lenmo. If the name sounds similar to P2P payments app Venmo, that’s intentional. The name is a play on the words Venmo and lender, it was established less than a year ago and is set to go live on Apple’s app store later this month or early next. The app will launch on Android sometime after the iOS launch. Its focus is exclusively on mobile, and its loans are smaller than competitors like LendingClub. It also more truly “peer-to-peer.”
Based in California, Lenmo has so far raised $261,000 in seed funding, Bank Innovation has learned. The app is a peer-to-peer app in which the lender can select a borrower and set their own interest rate. These individual lenders will facilitate small, unsecured loans ranging from as low as $50 to as high as $5,000. Borrowers can choose the various lenders available on the app and select the one they find most suitable.
The company has tapped payments platform Dwolla for ACH transfers and TransUnion as its credit bureau partner (more on this here).
Launched in April, Solo Funds is another peer-to-peer lending app (we’re sensing a trend). Since going live a few months ago, Solo Funds has processed nearly $200,000 in small-dollar short-term loans. With a default rate of 1%, Solo Funds’ average loan is typically under $1,000.
Founded by Travis Holoway, a former financial advisor, who previously told Bank Innovation that the company is currently in talks with both large and small banks for partnerships.
Based in New York, Solo Funds received $1.2 million in seed funding from Cincinnati-based Hillman Accelerator.
“I don’t know of any bank in this country where you can walk in and decide how much money you need when you can repay it, and if you’re willing to pay anything in addition to that, for banks it would be in the form of interest,” Holoway told Bank Innovation in a previous interview. “The platform is empowering individuals to post exactly how much they need, what they need it for, and that loan gets funded by another peer.”
