My guest today is Marc Glazer, chairman and interim CEO of BFS Capital. BFS is somewhat of a pioneer in the industry. The South Florida-based company has been lending money to small businesses via small business loans and merchant cash advances for 16 years.
Over this time, BFS has leant out $1.75 billion. Throughout his career, Marc’s seen the online lending space change dramatically and we discuss where he sees the industry heading. We talk about how BFS tries to differentiate itself from its competition and the process through which Mark found his ideal clients across 400 industries.
The following excerpts were edited for clarity.
You have been doing this a long time. How has BFS changed since you started it 16 years ago?
I’m an entrepreneur at heart and come from an entrepreneurial family. Before I started BFS, I was running a portal for small businesses in the late nineties that helped brick-and-mortar businesses do business on the web. That sounds passé today but back then, it was very important to educate businesses.
From that and my time as an entrepreneur, you realize one of the biggest gaps for small businesses is getting financing to grow them. Banks typically look for collateral-based loans, inventory, receivables — if you’re growing a service business, there aren’t really any assets to attach to. So, it doesn’t really fit with the way banks underwrite businesses.
We saw a big opportunity in the early 2000s to fill this gap.
How has small business lending changed?
It’s changed dramatically. Look, I think the needs of businesses are the same. But as far as how the financing is delivered and the way customers are marketed to have changed a lot. There’s a lot of technology used. If you go back to when we started, to underwrite a business, you created thick folders, put on a little visor and tried to look into the health of the business.
Now, much of the process is automated and speed is really important to be competitive in the industry. You really need to be on your game to be able to succeed. The business changes quickly, even over a year or two.
What do you see ahead for SMB lending?
It’s not more of the same. Things are changing quickly. The changes of the last 12 months were faster than the year or two before. Technology is driving it. Back then, companies began as manual shops, creating a front end and back end as part of their legacy systems. Now, everything is cloud-based. It’s all API-enabled. And so you’re in an environment where you can bolt on different pieces to create a user experience and data-driven models that can make automated, quick decisions.
That said, on larger transactions, we use technology to enable our underwriters to get the data they need to make a credit decision.
What differentiates you guys?
We embrace technology. What we’ve done is marry the intellectual capital we’ve learned doing over 40,000 transactions and you build it into your scoring models and risk ratings. If you look at our smaller transactions, the decision making is fully automated.
We finance in the U.S., Canada, and the U.K. We fund over 400 different NAICS codes. I looked at what deals we’re funding today and it varies dramatically: commercial electricians, a landscape company, pharmacy, a trucking company, roofing company, and more. It’s obviously all over the place and that’s a great thing. When we only had a merchant cash advance business, we were only able to work with companies with an end customer using a credit card, like B2C. With the advent of our loan product, we work with B2B.