On this week’s Tearsheet podcast, we go deep inside the world of small-business lending. Brock Blake, the founder of Lendio, a small-business lending marketplace which has 75 lenders, joins host Zack Miller to discuss its very unique franchise model and why other fintech firms can’t make that happen.
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Below are highlights, edited for clarity, from the episode.
The role of a marketplace in SMB lending
“If you think about our consumer world, whether it’s travel, flights or hotels — anytime you have a lot of choices, it’s challenging to figure out the best flight to take or which hotel is best in downtown Manhattan is best for price and my schedule. A marketplace takes an very inefficient and complex decisioning process and allows you to simplify, bring it all into one place, and comparison shop. That’s what Lendio does for SMB lending. It’s unique for small business lending because there are so many loan products: term, lines of credit, accounts receivable, equipment financing etc. There are like 15 different loan products which makes it challenging to the small business owner to become an expert in all the loan products out there. If I can go to one place to simplify the loan process for me and get access to 75 different lenders with one application, that’s a win for the borrower. It’s also a win for the lender because they don’t get customers who aren’t a good fit for their product. By screening the customers, we make sure that doesn’t happen.”
Lendio is launching a franchise model
“We’re super excited about our new franchise strategy. You’ve got millions of small business owners across the U.S. Many of these SMB owners go to their trusted networks of attorneys and accountants to get financing advice. We wanted to figure out if there was a way for us to target small business owners on a very localized basis and make them aware of Lendio’s marketplace. It’s incredibly expensive to do that from a centralized place in a direct marketing campaign. We considered a lot of ways to do that and think that the best, most scalable way to penetrate these local markets in the U.S. is through a franchise model. We probably spent a year on research and development on this strategy. We now can have a person who buys a geographic region — they own it. Our franchisee’s goal is to become the go-to source of financing advice in their market. Marrying the franchise model with the technology we’ve built to solve matching SMB financing to prospective borrowers. We have five franchisees in market now and others in the pipeline. It’s early but we are excited about this strategy. These franchisees are out acquiring customers in a way we just couldn’t before.”
Owning the entire customer experience
“Making sure customers experience the same Lendio process is one of the reasons we chose the franchise model. The franchisee is a business owner. This person is investing tens of thousands of dollars in their business and our businesses are now in lock. They are a part owner in that brand in their local community. We invest a lot in our franchisees to make sure they’re successful. It’s as important for a prospective franchisee to investigate Lendio as it is that we evaluate them to see if they’re a good fit in representing our brand. We’re proud of the customer experience we built and we want to make sure we’re expanding upon that and not detracting.”