{"id":8427,"date":"2015-10-06T08:32:51","date_gmt":"2015-10-06T15:32:51","guid":{"rendered":"https:\/\/www.nationalfunding.com\/?p=8427"},"modified":"2021-07-15T16:01:11","modified_gmt":"2021-07-15T23:01:11","slug":"disrupting-finance-since-1999","status":"publish","type":"post","link":"https:\/\/www.nationalfunding.com\/blog\/disrupting-finance-since-1999\/","title":{"rendered":"Disrupting Finance Since 1999"},"content":{"rendered":"

Many people believe that “alternative finance” started in 2005. US giant Lending Club was launched in 2007, two years after the arrival of major UK consumer lender Zopa. However, at least one market participant has been around for much longer. National Funding<\/a> was launched in 1999. As such, it has weathered the 2002 downturn, and of course the 2008 crunch. National Funding is not a “peer-to-peer” platform, but a non-bank lender focused on the SME space. AltFi spoke to Dave Gilbert \u2013 founder \u2013 and discussed how the world of P2P has changed in the last 16 years, the effects of the recession, and what\u2019s on the horizon for National Funding.<\/p>\n

To kick proceedings off, we asked Mr. Gilbert what the biggest operational differences were between 1999 and now:<\/p>\n

\u201cThe biggest difference in 1999 is both the availability and access to data.\u00a0 There was far less information about small businesses then we have today, and of course, the Internet was only in its early stages.\u00a0 Business operations were still efficient but ran a lot slower. Technology has helped us make better underwriting decisions, and speed up the process.<\/em>\u201d<\/p>\n

\u201cOne of the main [technological] differences is how we analyse a business. We don\u2019t solely have to rely on business owners\u2019 personal credit score anymore. Our technology platform looks at thousands of data points to determine creditworthiness. These data points look at overall business health, online accounts and social media ratings.\u201d<\/em><\/p>\n

\u201cAnother obvious difference is in the speed in which we are able to do things now. We can underwrite, approve and fund a small business in 24 hours. Speed and automation hasn\u2019t only helped us but has helped our customers, especially in the way they apply for a loan. It\u2019s helped remove the tedious, lengthy process of traditional bank loan applications.<\/em>\u201d<\/p>\n

The lack of technology certainly restricted supply. On the demand side, the founder spoke about the lack of public awareness back then:<\/p>\n

\u201cWhen we started, the term \u201calternative lending<\/a>\u201d was not even used. We spent several years educating small business owners on why they should choose us over banks. During the recession, awareness and demand greatly increased. Now, alternative lending has become the norm and small business owners are increasingly jumping on the bandwagon.<\/em>\u201d<\/p>\n

It\u2019s clear that the recession was a big turning point for his businesses. We asked Dave for a little more detail about the effects of the recession. He highlighted the fact that, whilst the recession did raise awareness and boost demand, it wasn\u2019t an instant boost. The important change for P2P lenders was that, whilst loan demand temporarily dried up, bank supply of credit has remained dry:<\/p>\n

\u201cAfter the recession banks started to have more stringent lending criteria. They actually weren\u2019t lending to small businesses (and are still not) that needed a micro-loan (between $5,000 – 100,000,000), and there is solid evidence that they have largely vacated the space of less than $1 million.<\/em>\u201d<\/p>\n

\u201cThe small business customer we had in 1999 is the same that we have today. They are in need of growth capital. Even back when we launched, it was tough for these business owners to get bank loans, especially \u2018micro-loans\u2019 (under $100K). We were and are still here for them. We wanted to create a solution for the under banked.<\/em>\u201d<\/p>\n

National Funding is on an upward trajectory, with 172% growth over the last three years and having loaned over $1 bn to 20,000 small business. We asked Mr Gilbert what his growth plans were:<\/p>\n

\u201cRight now we lend up to $500K. We want to bring that up to $1M. We are also working on developing micro-ticket products for smaller type companies as well as working on strategic partnerships<\/em>.\u201d<\/p>\n

To finish, we discussed the emergence of rival platforms \u2013 clearly something that wasn\u2019t around in 1999, and the effect of competition on business:<\/p>\n

\u201cCompetition is good. It\u2019s helped to show that there is a need for this type of disruption and small business owners are eager to try a non-traditional source and finally secure the capital they need to sustain and grow their business. <\/em><\/p>\n

\u201cThe competition will also keep helping to drive rates down.\u201d<\/em><\/p>\n

Interesting stuff, and reflective of the transformation of the industry over the last 16 years. It is hard to believe that the next 16 years will not produce an even bigger transformation in how individuals and companies are financed.<\/p>\n

 <\/p>\n

By Henry Thomas for AltFi News<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

National Funding has been around since the beginning of the alternative financing industry, for over 16 years. 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