Build beautiful lending infrastructure to bring more funding to the real economy
There is so much more to lending than simply finding businesses that require financing, and then deciding the loan terms. Unfortunately, it’s not as simple as shaking hands on the deal and forgetting about it.
Once a loan is made, the work does not stop there - behind the scenes, there is a lot of work that lenders do throughout the lifecycle of loans. The below graphic gives a flavour of this.
Today, most lenders use manual tools such as Microsoft Office, and borrowers send a jumble of documents in different formats. Data is not connected or centralised. Workflows are manual, offline & usually very time-consuming.
The consequence of this is that lenders are unable to scale operationally - issuing more loans requires an army of expensive administrative staff, or massive investment in the development of their own tech stack. Both of which are very expensive. Lenders are also unable to access institutional funding they use to actually make the loans because these institutional funds require top-tier systems and a clear audit trail for data.
The end result? Lenders don’t scale to their full potential, and many small & medium sized enterprises (SMEs) don’t get the funding they need to grow.
<aside> 🤷🏽♀️ *Why does this matter?
SMEs form the backbone of our economies. In the UK, they account for 61% of total employment and 52% of total private sector turnover. They are similarly crucial across the world. Ensuring SMEs have adequate access to funding is therefore essential to growth and innovation.
Yet, SMEs are chronically underserved by the financial sector – it is estimated that there is a £59bn funding gap for UK SMEs, with traditional banks funding only 8% of SME loan applications. This is where alternative lenders come in – as banks have retrenched from SME lending in the wake of the financial crisis, they have become the primary source of capital for many businesses.*
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