It continues to be a challenge for SMB lenders to get in front of their prospects. And while many of the top players in the space do direct and digital marketing, it’s really partnerships that help them scale their originations.
Just three years ago when Luke Voiles arrived at Intuit to lead the firm’s direct lending efforts, the firm acted solely as a broker, routing SMB prospects to a handful of lending partners. Firms like BlueVine use the QuickBooks ecosystem to find new SMB borrowers. Intuit still has that business, even as it now originates its own loans via QuickBooks Capital.
“Intuit’s core focus and goal is to make sure our customers have access to capital,” said Voiles on a Tearsheet webinar on SMB lending trends in 2019. “It doesn’t need to come from us. If BlueVine has a line of credit and factoring product — two things we don’t offer ourselves — we want to make sure our customers can access that BlueVine product as simply and efficiently as possible.”
With five million SMB customers in the U.S. using QuickBooks Desktop and QuickBooks Online, Intuit’s QuickBook Capital is a different animal than other lenders. Where other lenders need to constantly figure out where to acquire their next customer, QuickBooks Capital spends its resources figuring out how to service the customers it already has.
Intuit sees partnerships as an extension of the lending products it offers customers. With a mixture of direct partners and a more open app store, fintech firms are able to reach SMBs in ways they couldn’t before. As an ecosystem, that’s a win-win-win for Intuit, SMB customers and third party lenders. “So for us, the more open and active our ecosystem is, with our partners serving our customers, the better,” said Voiles.
Partnerships also play a key role in growth for BlueVine. The company has over 300 partners it works with to acquire new customers. These range from collaborations with large partners like Intuit and QuickBooks to ISOs and brokers.
Partners enable BlueVine to reach more small businesses. “Working with partners helps us to significantly increase our reach,” said Eyal Lifshitz, founder and CEO of BlueVine. “It’s a very scalable and profitable way to reach customers.”
There’s an added benefit for SMB lenders to partner with more established firms: branding. The trust built up with a large partner rubs off on a growing firm when it aligns with a more established firm to co-market their services.
Most lenders use a portfolio approach when crafting partnerships. For a lender hungry to grow underwriting, there isn’t a single partner that can provide the growth that SMB lenders are looking for. “I joke around that there are a thousand shitty ways to acquire a customer and we need to be good at all of them,” said Rob Frohwein, co-founder and CEO of Kabbage.
One of the oldest mature digital lenders, Kabbage has used partnerships to help fuel its growth. Kabbage has about 350 distribution partners and made a conscious decision to avoid brokers. “From our perspective, we tested the broker model five years ago. We believe there’s a misalignment with how you pay a broker, on the base of originations ,and the performance of the customer. ”
Kabbage recently announced a partnership with Alibaba.com where it will provide point of sale financing on the Chinese B2B marketplace. A customer that gets to checkout can choose to finance that purchase via Kabbage. The company also has partnerships with UPS and FleetCor that act as a channel to deliver SMB loans to many customers.
“Partnerships are critical to the growth of the business,” Frohwein said.