US #

Fundbox #

Fundbox

• Fundbox offers credit and payment solutions to small businesses.

• It uses big data analytics, engineering, and predictive modeling to help optimize cash flow for small businesses.

• Services

  • Line of credit
    • The credit is intended for use by small businesses in the business-to-business space seeking to optimize cash flow and continue to successfully run their businesses while waiting for accounts receivable invoices to be paid.
    • This enhancement in cash flow is intended to help companies maintain consistent operations and make investments such as new equipment or payroll.
    • Fundbox’s customers are typically B2B small businesses with 20 employees or fewer.
    • As of June 2021, the solution was integrated into QuickBooks, FreshBooks, Xero and Indeed.
  • Term Loan

• Use

  • To establish a Fundbox account, users are required to link either their accounting platform or their business bank account with Fundbox.

  • There is no fee for this registration, connection, and approval process.

  • Fundbox then uses data analytics tools such as data science engines and machine learning algorithms to determine a credit line.

  • A typical credit line can vary between $2,500 and $150,000.

  • Before clearing an invoice, Fundbox customers can see the fee, which is based on the risk and probability of repayment.

  • Once a customer draws, Fundbox deposits the money directly into the customer’s bank account between 24 and 48 hours.

• Repayment

  • Customers can choose between 12 or 24 week repayment.
  • Repayment is completed through weekly payments that are automatically debited from a customer’s bank account.

Kabbage #

Kabbage

• Kabbage, Inc. is an online financial technology company based in Atlanta, Georgia.

• The company provides funding directly to small businesses and consumers through an automated lending platform.

• 2020.10.16 - Kabbage was acquired by American Express.

• Product

  • Since March 2020, Kabbage suspended lending services for active and new customers in favor of offering loans to U.S. businesses through the PPP (Paycheck Protection Program) introduced as part of the Trump administration’s COVID-19 economic stimulus package.
  • Through their product, Kabbage Funding, customers can access lines of credit up to $250K.
  • The company automates funding decisions based on a number of data factors, including business volume, time in business, transaction volume, social media activity, and the seller’s credit score.
  • Each draw against the line of credit is considered a separate loan issued by Celtic Bank, Member FDIC, with either six-, 12- or 18-month terms.
  • Funds are deposited either into a bank or PayPal account.
  • Each time a borrower takes a loan, he has six months or 12 months to pay it off.
  • Kabbage customers typically utilize the funding platform for working capital for equipment and inventory purchases.
  • In response to economic strains caused by COVID-19, Kabbage launched helpsmallbusiness.com, enabling anyone in the U.S. to purchase an online gift certificate from participating small businesses.

Small Business Administration #

Small Business Administration

• The U.S. Small Business Administration (SBA) is a United States government agency that provides support to entrepreneurs and small businesses.

• The mission of the Small Business Administration is “to maintain and strengthen the nation’s economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters”.

• The agency’s activities have been summarized as the “3 Cs” of capital, contracts and counseling.

• SBA loans are made through banks, credit unions and other lenders who partner with the SBA.

• The SBA provides a government-backed guarantee on part of the loan.

• Under the Recovery Act and the Small Business Jobs Act, SBA loans were enhanced to provide up to a 90 percent guarantee in order to strengthen access to capital for small businesses after credit froze in 2008.

• Lending programs

  1. Loan Guarantee Program
     • The 7(a) Loan Guarantee Program is designed to help entrepreneurs start or expand their small businesses.
     • It is the most common loan program offered by the SBA.
     • The program makes capital available to small businesses through bank and non-bank lending institutions.
     • The Small Business Jobs Act of 2010 increased the maximum size of these loans, indefinitely, from $2 million to $5 million.
     • According to the SBA website, it can be used for working capital, both short and long term, refinancing debt, and purchasing furniture, fixtures, and supplies.
     • There are some businesses that are ineligible for this program, such as real estate investment firms (where property is held for investment purposes), dealers of rare coins and stamps, and lending institutions like banks.
  2. Disaster Loan Program
     • SBA opens Disaster Loan Center in Austell, GA, October 26, 2009 Homeowners and renters are eligible for long-term, low-interest loans to rebuild or repair a damaged property to pre-disaster condition.
     • Businesses are also eligible for long-term, low-interest loans to recover from declared disasters.
     • Disaster Relief Loans are often approved within 21 days.
     • If a business with a Disaster Relief Loan defaults on the loan, and the business is closed, the SBA will pursue the business owner to liquidate all personal assets, to satisfy an outstanding balance.
     • The IRS will withhold any tax refund expected by the former business owner and apply the amount toward the loan balance.
  3. Microloan Program
     • The Microloan program provides direct loans to qualified nonprofit intermediary lenders who, in turn, provide “microloans” of up to $50,000 to small businesses and nonprofit child care centers.
     • It also provides marketing, management, and technical assistance to microloan borrowers and potential borrowers.

OnDeck Capital #

On Deck Capital, Inc.

• On Deck Capital is a global online small business lending company.

• It has offices in New York; Arlington, Virginia; and Denver, Colorado in the United States; Toronto and Montreal in Canada; and Sydney in Australia.

• OnDeck uses proprietary software to aggregate data about a business’ operations, which is processed by an algorithm that determines loan eligibility.

• In 2015, the company expanded its operations into Canada and Australia, the latter operating as On Deck Capital Australia Pty Ltd in partnership with MYOB.

BlueVine #

BlueVine

BlueVine (formally BlueVine Capital) provides online business banking and financing to small- and medium-sized businesses.

• Services
  • BlueVine offers online business banking and financing services through three products - term loans, lines of credit and invoice factoring.
  • BlueVine’s factoring loans are an alternative to traditional daily cash advances.
  • Financing rates are based on the borrower’s financial metrics.
  • Banking customers have access to lines of credit and checking services.

Funding Circle #

Funding Circle Limited

• Funding Circle is a peer-to-peer lending marketplace that allows the public to lend money directly to small and medium-sized businesses.

• Using Funding Circle, businesses access lower costs of financing than they would get at a bank and the public are able to become lenders and in doing so make a return on their capital.

• Businesses can borrow up to £1 million in the UK, up to $500,000 in the US, and up to €250,000 in Germany and the Netherlands for up to 60 months.

• Funding Circle determines the loan rate offered based on risk category and loan term.

• The company is listed on the London Stock Exchange.

• 2019.4 Funding Circle SME Income falls on its sword as shareholders seek cash

• Covid-19

  • On 9 April 2020 Funding Circle announced the temporary suspension of their secondary market for loan parts stating “we have taken the decision to pause the secondary market while we continue to evaluate the potential impact of Covid-19.”

• Regulatory

  • As of 2012 Britain’s Financial Services Compensation Scheme does not cover lending by crowd funding or peer-to-peer lending and therefore Funding Circle’s customers are not protected and cannot turn as a last resort to the FSCS.

Kiva (organization) #

Kiva Microfunds (also known as Kiva.org)

• Kiva is a 501(c)(3) non-profit organization that allows people to lend money via the Internet to low-income entrepreneurs and students in 77 countries.

• Kiva’s mission is “to expand financial access to help underserved communities thrive.”

• Lenders do not receive interest on the money they lend.

• Kiva includes personal stories of each person who applies for a loan so that lenders can connect with borrowers on a human level.

• Kiva relies on a network of field partners to administer the loans.
  • These field partners can be microfinance institutions, social impact businesses, schools or non-profit organizations.
  • These partners are local organizations working in communities to vet borrowers, provide services and administer loans.
  • Borrowers pay interest on most loans to the field partners.
    • Kiva itself does not charge interest on its loans;
    • These microfinancing institutions lend out money with high interest compared to bank finance in mature markets, averaging a portfolio yield of over 30%.
• Operating costs
  • Kiva cover most of its operating costs through voluntary donations made by Kiva lenders.
  • The remainder of our costs are covered through grants and donations from foundations and supporters.
  • Additionally, select Field Partners contribute small platform fees.
  • Kiva never takes a fee from lenders. 100% of funds lent on Kiva go to funding loans.

• Lending process

  • Kiva works with more than 300 microfinance institutions, social impact businesses, schools and non-profit organizations around the world, called “Field Partners”, that post profiles of qualified local entrepreneurs on the Kiva website.

  • Lenders browse borrower profiles on kiva.org and choose an entrepreneur they wish to fund.

  • The lenders transfer their funds to Kiva through credit card processing or PayPal, which waives its transaction fee in these cases.

  • Lenders can loan money in increments of $25.

  • After receiving lenders’ money, Kiva aggregates loan capital from the individual lenders and transfers it to the appropriate Field Partners, which disburse the loan to the borrower.

  • Kiva does not charge interest on the capital sent to Field Partners, but often Field Partners do charge some level of interest to borrowers to cover administration costs.

  • Interest is typically higher on loans from microfinance institutions in developing countries than interest rates on larger loans in developed countries because of the administrative costs of overseeing many tiny loans, and the increased risk.

  • As the entrepreneurs repay their loans with interest, the Field Partners remit funds back to Kiva.

  • As the loan is repaid, the Kiva lenders can withdraw their principal or re-lend it to another entrepreneur.

• Loan use

  • Female-owned businesses
  • Covid-19
  • Green loans
  • Support for higher education
  • Medical loans
  • Support for refugees
  • Shelter
  • etc.

• Kiva U.S.

  • In 2011, Kiva launched Kiva U.S. , a 0% interest peer-to-peer lending pilot program for entrepreneurs in the United States, as part of efforts to “cut lending costs through technology”.
  • The loans posted to Kiva U.S. are often from borrowers who have been rejected for loans by traditional banking institutions, but on Kiva U.S. they do not need to be able to produce high credit scores or collateral.
  • Kiva U.S.uses a system of trustees, who vouch for the borrowers.
  • Kiva U.S.trustees can be local non-profits, service organizations, businesses, faith organizations or community leaders.
  • The average loan size for US borrowers is $5,000. US borrowers average about two years to repay loans.

• Kiva City

  • Kiva City provides local business owners and entrepreneurs in U.S.cities with the opportunity to crowdsource loans.
  • It was launched by Kiva and former US President Bill Clinton at the Clinton Global Initiative America conference in Chicago in 2011.
  • Kiva City locations include: Detroit, New Orleans, Los Angeles, Washington D.C. , Newark, Richmond, Little Rock, Pittsburgh, Philadelphia, Milwaukee, Louisville, San Francisco, New York City, and Oakland.

• Kiva launched a more direct peer-to-peer microlending platform, called Kiva Zip, in 2012.

  • Kiva Zip transfers funds directly to borrowers without outsourcing disbursements and repayment collection to field partners.
  • Instead, Kiva Zip partners with local institutions called Trustees, who vet loan applicants, provide mentorship, and may post profiles and updates on their behalf.
  • Currently, Kiva Zip borrowers do not pay any interest or fees.
  • Lenders are protected from currency risk but do not earn interest.
  • Kiva Zip is considered an experimental platform, and offers loans in the United States and in Kenya.

• Kiva Labs

  • Google awarded a $3 million Global Impact Award to Kiva in 2013 to fund the Kiva Labs project.
  • Labs initiatives include lowering interest rates, providing more flexible repayment terms that accommodate issues like seasonal profits in farming, and offering longer-term loans for investments like education.
  • Labs also focuses on providing access to clean energy technology and using mobile technology in ways that will bridge the knowledge gap.
  • At the time of the lab’s launch, Kiva lenders had crowdfunded “132,000 agricultural loans; 4,600 green loans, and 670 mobile tech loans.

UK #

Assetz Capital #

Assetz Capital Limited

• Assetz Capital is a British peer-to-peer or “marketplace” lender which allows private and institutional investors to lend money directly to small businesses (SMEs) and property developers.
• Regulation
  • Assetz Capital received full FCA authorisation in September 2017.
• Risk
  • If a borrower fails to repay a loan a lender risks losing all or part of their investment.
  • Assetz Capital take asset security from the borrower to mitigate against losses to the lenders.
  • It is important to differentiate between loan defaults and losses, the difference being the recovered capital via the security taken against the loan when it was first extended.
  • Assetz Capital uses a recoveries team to recover capital through security taken on a loan.
• Investment accounts
  • Assetz Capital has a number of investment accounts.
  • Target rates of interest vary based on the types of loans they invest in, security types, diversification of the investment, ease of access to funds in normal market conditions, and any additional cover such as a provision fund.

Folk2Folk #

Folk2Folk

• FOLK2FOLK is a Marketplace lending platform (MPL) specialising in secured lending for business owners across regional Britain.

• It matches businesses looking for finance with local individual (retail) and institutional investors who receive a fixed interest rate typically 6.5% p.a. secured against UK land or property.

• Investors receive the same interest rate that the Borrower pays, with FOLK2FOLK making its profit from an arrangement fee and annual renewal fee charged to Borrowers.

• FOLK2FOLK enables money to be borrowed and lent based on the concept of ‘fair exchange’ and secured against land and property.

• Regulation

  • FOLK2FOLK is authorised and regulated by the Financial Conduct Authority.

• Sectors

  • FOLK2FOLK borrowers come from a variety of sectors including renewable energy, property development, agriculture, hospitality, leisure and tourism facilities and land and property acquisition.

• In July 2020, FOLK2FOLK was accredited by the British Business Bank to deliver CBILS loans.

• In February 2021, FOLK2FOLK announced its evolution from a P2P platform to a Marketplace lending platform.

• Model

  • FOLK2FOLK introduces people and institutions with at least £20,000 to invest to businesses looking for finance of at least £100,000.
  • The company requires loans to be secured by land or property owned by the borrower but not the borrower’s home.
  • Investors are high net worth individuals or institutions.
  • It aims to enable businesses to access finance in weeks not months.
  • This model of allowing people in business to access interest-only funds (and an opportunity for people to lend within their local area) is said to have helped mobilise money in the countryside and re-energised many small businesses that would have otherwise lacked the necessary investment to develop.

ThinCats #

ThinCats

• ThinCats is an alternative lender that provides business loans to mid-sized UK businesses using capital from institutional investors including pension schemes and asset managers.

• Thincats, was launched in 2011 as one of the first peer-to-business lenders in the UK allowing individuals to lend money to limited companies.

• In December 2019, ThinCats announced that all future funding would be sourced from institutional investors only, resulting in the closure of its P2P platform to new business, which entered a run-off phase.

• In 2020 ThinCats was one of the first alternative lenders to be accredited by the British Business Bank to lend under the government backed Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS).

• ThinCats funds UK SMEs with loans from £1m up to £15m.

• It offers various funding solutions to meet a number of needs including working capital, refinancing, growth capital and acquisitions.

• In 2018 ThinCats launched its data modelling system; PRISM (Propensity and Risk Model).

  • This is used to help the business price risk and also looks to predict an SME’s future funding requirements.

• ThinCats enables institutional investors looking for income from an alternative asset class to lend directly to UK businesses.

Other Regions #

Lendwithcare #

Lendwithcare.org

• Lendwithcare is a microfinance lending website from the development charity CARE International UK.

• It allows individuals and groups to make small loans to entrepreneurs in developing countries, and help them work their way out of poverty.

• It supports entrepreneurs in Cambodia, Togo, Benin, the Philippines, Bosnia and Herzegovina, Vietnam and Ecuador through partner microfinance institutions (MFIs).

• It does not charge any interest on the loans made to entrepreneurs by supporters - the MFIs do.

• The process

  • Lendwithcare works with a number of partner microfinance institutions (MFIs) in the countries in which it operates.
  • If the MFI is happy with an entrepreneur’s idea or business plan, they approve the proposal and provide the initial loan requested.
  • Lenders can browse the list of entrepreneurs on the website, read about their businesses, see the value of the loan they have requested, the percentage of the loan already provided by other lenders, and then choose an entrepreneur to lend to.
  • Once the entrepreneur’s loan is fully funded, the money is transferred to the MFI to replace the initial loan already paid out to the entrepreneur.
  • During this process lenders receive progress updates regarding the entrepreneur’s progress.
  • The entrepreneur gradually pays back their loan according to a repayment schedule.
  • The MFI transfers these repayments to CARE International who then credits the payment into lenders’ lendwithcare. org accounts.

• Partner MFIs

  • Benin - Association des Caisses de Financement à la Base (ACFB), established in 2004. Based in the capital Cotonou with branches across the country.
  • Bosnia and Herzegovina - Zene za Zene, established in 1997 by Women for Women International. Based in Sarajevo with branches around the country.
  • Cambodia - Cambodian Community Savings Federation (CCSF), established in 2003. Based in Battambang and Banteay Meanchey provinces.
  • Ecuador - Fundación de Apoyo Comunitario y Social del Ecuador (FACES), established in 1991 and based in Loja.
  • Philippines - SEEDFINANCE, established in 2007. Based in Mandaluyong in Metro Manila with field operations in Luzon, Cebu, Leyte, Southern Leyte, Panay, Negros, Samar, and Mindanao.
  • Togo - Women and Associations for Gain both Economic and Social (WAGES), established in 1994. Based in Lomé with 10 branches across the country.
  • Vietnam - Microfinance and Community Development Institute (MACDI), established in 2007. Based in Hanoi with most activities in northern and central Vietnam.

Capital Match #

Capital Match Holdings Pte. Ltd.

• Capital Match is a peer-to-peer lending and invoice financing platform for small and medium enterprises (SMEs) in Southeast Asia.
• Headquartered in Singapore, it operates an online platform for SMEs to seek funds from investors.

In early 2017, Capital Match’s subsidiary, CM Advisers Pte. Ltd., obtained a CMS Licence with the Monetary Authority of Singapore (MAS).

• Business model
  • Capital Match provides an online platform for SMEs to obtain short term financing from individual and corporate investors
  • Investors can browse the facilities on the platform and make a minimum commitment of S$1,000 per facility and earn interest on their investments.
  • Capital Match earns by charging borrowers a processing fee and late payment fee (in the case whereby repayments from the borrower are delayed) and investors a commission fee.

Funding Societies #

Funding Societies Pte Ltd

• Funding Societies is one of Southeast Asia’s largest SME digital financing platform.

• Funding Societies operates an online platform that enables Small and Medium Business to seek funding for their growth from a pool of investors, through digital lending.

• The standard loan period ranges from 3 months to 1 year and borrowers can loan up to SGD$2,000,000.

• In January 2016, Funding Societies launched Modalku, which means “My Capital” in Bahasa Indonesia to reach out to SMEs in the Indonesian Market.

• In February 2021, Funding Societies broke into its 4th market, Thailand.

Zidisha #

Zidisha Incorporated

• Zidisha allows people to lend small amounts of money directly to entrepreneurs in developing countries.

• It is a peer-to-peer microlending service that link borrowers and lenders across international borders without a local microfinance institution intermediary.

• The Zidisha website facilitates microlending transactions between individual web users worldwide and computer-literate, low-income entrepreneurs in developing countries.

• Users can fund loans, which borrowers use to develop businesses that improve their families’ incomes.

• Borrowers can share business updates and communicate with lenders as they repay loans.

• Zidisha’s lending process works as follows:

  1. Borrowing
     1. A first-time loan applicant creates a profile that describes his or her business and personal details.
     2. The applicant’s details are independently checked by Zidisha or a Zidisha partner, such as a local credit bureau.
     3. If the loan is approved and successfully funded, first-time borrowers are charged roughly $12 to cover this cost of processing their application.
     4. Upon joining Zidisha, borrowers also make a deposit into a reserve fund that is used to compensate lenders in the event of default.
     5. These costs are only paid once and entitle the borrower to raise an unlimited number of consecutive loans through Zidisha.
     6. Approved applicants post a loan request that describes their life story, the proposed investment, desired loan amount and repayment period.
     7. Zidisha’s lender participants then have the opportunity to finance all or a portion of the loan at zero interest.
     8. If enough lenders commit to lending the designated loan amount before the loan expires, the loan is funded and disbursed to the borrower;
     9. otherwise, it’s expired, lenders are refunded and the borrower may try again with a new application.
     10. For successfully funded loans, 100% of lenders’ accepted bids are disbursed to the borrower.
     11. Loan values are fixed in local currency, using the exchange rate effective at the time the loan is disbursed.
     12. Because loan values are fixed in local currency, lenders bear the risk of any currency exchange rate fluctuations.
  2. Repayments
     1. The borrower is obligated to repay principal and interest according to the schedule proposed in the loan application (usually in weekly installments).
     2. Each time the borrower makes a repayment installment, lenders’ shares of principal repayment are credited to their accounts on the Zidisha website.
     3. Zidisha borrowers are allowed to adjust their weekly installment amount upward or downward an unlimited number of times, as long as a single payment has been made since the last adjustment.
     4. Throughout the loan application and repayment period, lenders may post comments and questions, and borrowers may supply additional information and business updates through a weblog on their profile pages.
     5. Loans are covered by a reserve fund. If one of these loans falls behind on payments by 10 days or more, lenders may opt to receive a full reimbursement of the amount they lent from the reserve fund.
     6. Lenders may post feedback on all lending transactions with which they are involved, thus creating a performance record that allows borrowers to request progressively larger loans with each successful repayment.

• To maintain a low interest rate, Zidisha operations are mostly supported by volunteer teams.

  • The tasks vary from email correspondence to borrowers and lenders, to disbursing loans, to translation and reviewing member user profiles.

• Interest Rates

  • After 2015.2, borrowers no longer pay interest.
    • Instead, they make a one-time deposit into a reserve fund upon joining Zidisha, and thereafter pay a service fee of 5% of each loan raised.
    • The reserve fund is used to compensate lenders in the event a loan is not repaid on time.
    • The service fee goes to Zidisha to cover money transfer costs.
  • The inflation rate in developing nations varies widely.
    • Zidisha does not provide protection from losses due to currency risk, but also does not restrict lenders’ ability to profit from currency fluctuations.

• Regulatory Status

  • Typically, peer-to-peer microlenders offering interest on loans to US lenders are regulated by the Securities and Exchange Commission.
  • In 2008, the SEC required that peer-to-peer lending companies offering interest on loans to register their offerings as securities, pursuant to the Securities Act of 1933.
  • Zidisha has not registered with the SEC, and has publicly stated that they are not a securities broker.
  • The website states in its terms of use that unlike a securities broker, Zidisha is under no obligation to return lender funds and honor withdrawal requests:
    • “Zidisha makes no guarantee or representation that funds lent through its website will be repaid to lenders, regardless of whether the loans financed with lender funds are repaid to Zidisha. Any cash payouts are promotional gifts offered solely at Zidisha’s discretion.”
  • The tax treatment of these promotional gifts is unclear.
    • Gifts are taxed in the United States, which would mean that for US lenders, the original loan principal, if withdrawn, would be subject to taxation.
    • Zidisha states in its terms that, “It is the responsibility of website users to report and pay any applicable taxes on any cash payouts received from Zidisha.