Small business loans are still the backbone of business in this country. In the SBA market alone, there is over $50M in new loans funded daily according to a recent Entrepreneur article. Despite the popularity of the small business loan market, the process to obtain a loan can often by complicated and lined with complications all along the process. Enter Fundera, which saw the holes in the market and sought to introduce a transparent, fair, and efficient process for obtaining loans by having prospective applicants receive quotes from a network of 30 lenders that are all competing for the business. The results have resulted in a win for the borrowers as this structure only takes a 1-3% commission from the lender compared to the previous ranges of 7-17% that were written into the borrower’s end. Investors have noticed and backed another round of funding, which brings the total funding for the company to $14.9M since its founding in 2013.
Today, CEO, Jared Hecht, joins us to discuss the state of the small business loan market, the funding, and the future of this fintech startup thats changing small business lending.
Who were your investors and how much did you raise?
We raised an $11.5M Series B funding round led by Susquehanna Growth Equity with participation from previous investors including QED Investors, Khosla Ventures and First Round Capital.
Tell us about your product or service.
Fundera is the online credit marketplace for small businesses. With one simple application, a small business owner apply for credit with our pre-screened network of thirty lenders and have them compete for their business. It’s the easiest way to shop and save on a small business loan.
What inspired you to start the company?
A few years ago my cousin, who owns a successful chain of sushi restaurants, told me that he was having trouble securing a bank loan for expansion. It made no sense to me that a thriving business was having trouble finding credit, so I began to look into the issue. As I learned more about the small business lending industry, I realized that business owners needed a solution that would help them find the best loan possible.
How is it different?
The alternative to Fundera is to use an offline loan broker. Unfortunately, almost all loan brokers will direct their customers to lenders where the broker makes the most amount of money, not the products that are best for their customers. Fundera is the first online marketplace designed to disrupt the loan broker status-quo and make the process of getting a small business loan as transparent, fair, and accountable as possible.
What market you are targeting and how big is it?
We believe that with the expansion of online lenders we are tackling a market with annual revenue potential of up to $15 billion.
What’s your business model?
Fundera receives a small commission of one to three percent from lenders when a loan is successfully issued to a small business owner—the business owners never pay a cent to Fundera. This is far lower than the average commission which typically falls between 7% and 17% which the borrower normally pays for without even knowing!
What was the funding process like?
It’s always a humbling experience. It’s an opportunity to learn from exceptional investors about what they both like and do not like about your business.
What are the biggest challenges that you faced while raising capital?
The biggest challenge was identifying a partner who understood the fundamentals of our business, and had hands on experience helping grow a similar company. Fortunately, we were able to build a relationship with Scott Feldman and Josh Elser at Susquehanna Growth Equity who have both been part of the growth of Credit Karma and know the ins and outs of what it takes to build a company that transforms credit access.
What factors about your business led your investors to write the check?
First was a belief that Fundera has the potential to build a prosperous business and be a transformative company. And second was a shared passion for empowering consumers and business owners with the tools they need to win. We both believe that a great product coupled with the right mission can upend an industry and create change for good.
What are the milestones you plan to achieve in the next six months?
We expect to connect small business owners with $100M in loans during 2015.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
If capital is needed come visit Fundera.com and explore your options! We are here to help.
Where do you see the company going now over the near term?
We plan to help as many small business owners as possible! We will be building new products that help educate and empower small business owners when it comes to their credit needs while growing our team in New York City.
Where is your favorite place to enjoy the summer weather in the area?
The Catskills – a quick two hour drive north of the city and it’s ten degrees cooler and ten times nicer.
