The demand for small-business lending services is an ever-growing part of the financial world. New York-based Biz2Credit is positioning itself to keep riding this trend.
Like others in this sector, co-founder and CEO Rohit Arora says Biz2Credit exists to address gaps in lending when businesses qualify for loans but have difficulty finding the right financing. Biz2Credit’s software platform connects small businesses, based on their history and credit profile, with lenders. Since its inception in 2007, Arora’s company has worked with more than 200,000 small businesses that have collectively secured more than $1.2 billion in loans.
Biz2Credit itself is in growth mode, Arora says. It’s on track to make $40 million to $45 million in revenue this year, with $125 million projected for 2016. And while his company is making gains, he says the landscape is getting increasingly competitive with more startups diving into the lending and financial world.
“When we started, there wasn’t even a term like fintech,” he says. Over the past two years, more attention and money has come the way of this sector, which Arora says is still in the early stages of transformation. “This is one of the last industries that has not been disrupted by the Internet.”
These are indeed heady days for tech companies that get traction in the financial world, particularly in New York. At the end of 2014, Biz2Credit got a $250 million commitment from Los Angeles-based Direct Lending Investments, which is the general partner of a fund—for accredited investors—that owns small business loans.
That news came around the same time OnDeck, also based in New York, raised $200 million through its IPO. OnDeck’s online platform uses software and data to determine if small and midsize businesses qualify for the loans it provides.
Another local startup in this sector, Orchard Platform, last October raised a comparatively smaller amount of funding, $12 million, but still shows the collective attention fintech is getting, especially in New York. Orchard Platform develops analytics software for online direct lending.
Arora says the spread of hardware and software—namely smartphones, Web access, and mobile apps—to the masses has made it easier to handle finances online. During its first two years of doing business, the majority of inquiries into Biz2Credit came from people who initially tried to get loans through their banks. Now, he says, most of its customers look to online sources first to see what options are available before comparing options at their banks. The average business that uses Biz2Credit is about seven years old and generates $2 million in revenue, Arora says.
Biz2Credit’s staff of 150 is divided among its U.S. offices, including San Francisco, and India, where research, development, and data science work is done. Customer service and other business operations are largely handled stateside.
Though he had some background and history working in the New York financial world, which included stints with Goldman Sachs and Deloitte Consulting, Arora says he still had to weigh his options on where to found the company—here or in Silicon Valley: “New York is expensive, but it is the financial hub.” Furthermore, the tightly packed population of small, diverse businesses here offered Biz2Credit a target-rich environment to pursue customers.
Arora says his company talks with banks, and some institutions license the technology for their small-business lending services. Furthermore, loans that are booked on Biz2Credit’s platform can also be bought by banks. “That helps them meet their lending targets and get a better return,” he says. Non-banking firms that offer lending, such as family offices, credit funds, and insurance companies, also work with Biz2Credit.
Making the platform more than just a place to find leads on access to credit, he says, is part of the company’s broader strategy. For instance, Biz2Credit entered into a partnership in 2013 with Paychex, to create an online small-business lending resource center. More partnerships are coming, Arora says, in September and later in the fall, but he could not go into details yet.
