Online matchmaking services have become a common resource for individuals seeking a date. But an increasing number of business owners are also turning to online matchmakers–in search of suitable lending partners, rather than romance. A new breed of websites, including Biz2Credit, CNF Exchange, BoeFly, and Lendio, are serving as middlemen who connect businesses seeking loans to banks and other lenders.
Online matchmakers such as Biz2Credit are less industry-specific than most traditional loan brokers. Upon receiving a loan request, they analyze the potential borrower’s financial data and suggest a handful of lenders based on their assessment. Biz2Credit pulls from a database of over 1,100 lenders, according to its co-founder and CEO, Rohit Arora.
Once the list of most promising lenders is presented to a potential borrower, negotiations are conducted as they normally would be. It’s left entirely up to the would-be borrowers and lenders to iron out the details and close the deal on a loan. More and more business owners are being attracted to these online marketplaces. Biz2Credit, CNF Exchange, BoeFly, and Lendio expect to complete a combined total of $1.5 billion in lending in 2012, which would double their total for 2011. Michael Mack, founder of CNF Exchange, expects to make $60 million for his site’s 590 lenders, a 100 percent increase over last year.
National Small Business Association Chairman Chris Holman calls lending middlemen “essential” in the current financial climate, arguing that they’re helping to fill “a capital void.” David Nayor, co-founder of BoeFly, says his site allows its 2,400 lenders to finance businesses “that we may have otherwise thought couldn’t get funded.”
In addition to improving credit access for small business owners, online matchmakers are attractive to banks because they streamline the process of finding new borrowers. “It’s hours and hours of time and interruptions in trying to develop a borrower yourself, as opposed to one just being presented to you,” says Borrego Springs Bank vice president Jim Mueller.
Fee and commission structures vary between individual lending matchmakers, with a common conceit being the importance of keeping costs relatively low for both borrowers and lenders. Biz2Credit charges a commission from lenders, while BoeFly charges borrowers a fee starting at $149 per loan request. “The problem with taking commissions on deals,” says BoeFly’s David Nayor, “is that it drives up the cost of origination [for lenders].”
Leiber, Nick. “Helping Businesses and Banks Hook Up” Bloomberg Businessweek, 10/25/12.