When Jules Dalsey founded Liberty Capital Group a decade ago, his business model was straightforward: seek out small businesses looking for equipment financing, learn their stories and connect them with banks or other funding sources most likely to issue a loan. Since 2010, the company has originated $100 million in loans.
Nonbank lending has boomed since 2008, attracting hundreds of millions of dollars in venture capital and even prompting some talk of overextension. Amid that explosive growth, smaller-scale companies such as Liberty feel the pressure to keep pace.
So Dalsey is in the midst of launching a sister company this month called Quote2Fund that will move Liberty’s offerings closer to mega alternative lending marketplaces such as OnDeck Capital. Dalsey brought on Bank of the Internet co-founder Mike Berengolts to lead the nascent company’s programming and technology efforts.
Quote2Fund will give applicants a series of possible offers based on some initial information about their businesses.
“An upfront quote makes the whole process more transparent,” Dalsey said. “It eliminates rate sensitives and tire kickers,” he said, referring to potential borrowers merely window shopping or uninterested in higher interest rates. Alternative lenders offer a tempting proposition for many small business owners who are either turned away from traditional banks or don’t want to wait weeks to get approved for a loan: potentially hundreds of thousands of dollars in a matter of days, albeit tied to a higher interest rate.
Some of the largest players, including Lending Club and OnDeck, were valued at over $1 billion during their IPOs late last year, though their stock prices have since fallen sharply. But there is still significant interest in the market, buoying several local companies. Dealstruck received $10 million in debt financing from Community Investment Management in July, while National Funding got its $30 million line of credit from Wells Fargo extended to $75 million this month.
Revenue Gains, Hiring
National Funding’s revenues have nearly tripled in the past three years to a projected $67 million in 2015. It hired 50 new employees in the first eight months of the year, bringing it to 150 workers, and plans on doubling its office space next month to accommodate even more. The added credit should allow the company to increase originations from $300 million this year to $400 million next year and potentially raise maximum loan sizes from $500,000.
“It’s a fairly material increase,” CEO Dave Gilbert said of the Wells Fargo extension. “The market for short-term working capital has been on fire the last couple of years.”
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