Bond Street Services a Funding Gap to Fuel Small Business Growth
Small businesses play an important role in spurring job growth and innovation, but it is not always easy for budding companies to secure adequate financing. Bond Street, a fintech startup in New York City, introduces an effective lending channel to provide small business companies with timely access to capital to fund their daily operations and future expansion.
The 2015 Small Business Credit Survey shows that 63 percent of microbusinesses and 58 percent of startups failed to access sufficient funding. Overall, 41 percent of all small business firms surveyed did not apply for loans because they were discouraged or debt adverse.
To streamline the process of small business lending, Bond Street has successfully shortened the pre-approval procedure, which typically requires months at a traditional bank, to 48 hours by automating the review of tax returns, bank statements and credit profiles. Beyond vetting the numbers, Bond Street assesses the viability of the business to determine a reasonable amount that its customers can repay.
A key part of the approval process is a 30-minute credit call with the business owner, according to Jamie Shulman from the underwriting team. On each call, Shulman gathers information about the business and the specific loan use, whether it is for refinancing debt, hiring more people or opening a new store or office. She inquires into the growth drivers and strategies applied in the past before projecting the future income streams.
“The credit call is really important because while you could definitely make assumptions based off of what they have done in the past, there is more information gathered on the call that isn’t present in the historical figures,” Shulman said.
Bond Street’s business model strives to achieve a win-win situation for borrowers, lenders and investors that are funding the loans. On each transaction, a 3 to 5 percent loan origination fee is charged and interest payments go to investors like Jefferies as returns for its $100 million credit investment in Bond Street. Being able to offer rates as competitive as 6 percent helps Bond Street win deals from other online lenders.
By contrast, predatory lending sources can demand annual percentage rates (APRs) surpassing 90 percent and daily cash repayments that will strain the operating capital of a small company, according to Shulman. Concerned about the health of its customers’ businesses, Bond Street caps its interest rates at 22 percent so that the companies it lends to can operate smoothly without being strapped by exorbitant borrowing costs.
Many customers are struggling to refinance their existing debt under onerous terms, according to Shulman. Compared to some of its competitors, Bond Street offers biweekly payments and a majority of three-year term loans, making its repayment terms relatively more favorable. “This allows our customers to have a little bit more breathing room,” Shulman said.
Being every customer’s financial advocate is central to Bond Street’s culture and is a mission that CEO David Haber has instilled in his team. The startup currently gains access to the financial and operational data of its customers post-funding. Going forward, it plans to build products beyond loans that will use customer data to assist small businesses with their everyday financing needs.
“We succeed when our customers succeed and we want to make sure we are growing with them,” Shulman said.
