When the giants enter into alternative loans to companies
Reflectors on the lending market to companies that banks do not finance. A profitable sector
Loans to SMEs – especially if disintermediate – are an increasingly interesting business. This is demonstrated by two recent news concerning two very different operators: the world’s largest e-commerce and one of the world’s fifty largest banks. The first is Amazon , in which the founder Jeff Bezos decided to open a credit marketplace at the beginning of this decade. The novelty lies in the numbers: to date it has disbursed 3 billion dollars in loans to over 20 thousand SMEs , one billion only in the last year. Amazon Lending , which provides loans to small and medium-sized businesses that sell their products on Amazon, has existed since 2011: an algorithm identifies solid companies by analyzing the data concerning them and sends to those with a satisfactory rating the invitation to apply for a loan . The loans are disbursed on the same day, taken from the balance sheet of the online commerce giant, and the installments withheld from the account of the debtor companies with total control of the financial situation. In the event that the accounts of the debtor companies are dry, Amazon freezes the goods of the insolvent company, immobilizing it in the warehouse, and unlocks it only after payment of the installment. Loans with a maximum duration of 12 months, with amounts between 1000 and 750 thousand euros and rates between 6% and 17%.
Rates all in all in the average of the markets to which it is addressed, which certainly did not scare companies. And that make the business very profitable for Amazon: first of all because the colossus assigns creditworthiness by drawing on data that already exists, relating to its own reselling companies, and therefore at virtually zero cost; secondly because it collects conspicuous interests paid by companies, and finally because contributing to grow companies drives sales and earns more commissions on sales. The countries where Amazon offers this service are the United States, Britain and Japan, but the intention is to extend it soon to Canada, France, Italy, Spain, India and China.
In Spain, meanwhile, the bank has set up a very unique digital system of loans to SMEs. The Spanish banks have long understood the need to make agreements with FinTech: already in 2014 Santander had signed an agreement in the United Kingdom with Funding Circle, the platform specialized in p2p lending to small businesses, with the aim of directing to the lender alternative the smaller companies that turn to the bank and that the bank can not satisfy. And itself, 750 billion euros in assets, one of the 50 largest banks in the world , is clear that it can not escape the disruption of FinTech: the CEO of the Spanish bank Carlos Torres Vila had talked about how “is changing rapidly the way to relate to customers “and that startups” operate in small niches and they do it at lower costs and with greater value for the customer. “Admitting that just at startups he looked to offer customers innovative services.
Not by chance, in March 2016 acquired the Finnish online bank Holvi, focused on SMEs and in 2014 the US Simple. Today it has decided to launch a startup in the new digital business division, with which to offer an alternative financing channel for small and medium-sized businesses . It will be called Trust.u and it will be aimed at SMEs with less than 30 months of life who struggle to hear from banks, offering them a 100% digital service based on a new model of risk calculation, which also takes into account the social aspect. In practice, to start operations, the PMI, which does not necessarily have to be a customer, must register with the platform and enter some data that will allow the Trust.u algorithm to assign a rating to the company. Finally, the platform evaluates, precisely on the basis of credit quality, how much of the financing requested will be provided by the bank and how much must be made by the circle of family members and friends of the entrepreneur. The company must take care of obtaining from its circle of knowledge the sum requested under the established conditions and only subsequently will the loan be activated by Trust.u which will handle all payments. Interest ranges from 4.23% to 10.47% of TAEs, against rates of other similar alternative solutions ranging between 15% and 50%. In short, everyone wants to finance SMEs . And SMEs start looking with interest at these innovative formulas.