Finding Funding, Bizfi Rides FinTech Wave

In FinTech, technology wows investors. And then, investors wow FinTech — by pouring money into the coffers. In what has become a hallmark of 2015, the sector found itself awash in cash as private equity firms, venture capital firms and, most recently, traditional lenders have looked to bankroll nascent technologies that have existed under a new buzzword: disruptive.

So is the case with Bizfi, an alternative lender that just secured $65 million in financing from Metropolitan Equity Partners, with a focus on providing working capital to small businesses.

In an interview with PYMNTS, Bizfi Founder Stephen Sheinbaum said that as FinTech companies sell products that “are close to what banks offers in terms of loans, along with better technology,” the collaboration between FinTech and banks will grow ever closer. He noted the recently struck deals between JPMorgan and OnDeck Capital and said that his own firms have been in discussions with a series of top five banks to bring services to their own platforms.

The company operates with what it terms a “tri-silo” approach — aggregation, funding and marketplace originations. The target audience for Bizfi is an SMB, with Bizfi traditionally offering what Sheinbaum termed a “lower cost, longer term” product, with an average size of about $30,000, typically employed to satisfy working capital needs. The company’s aggregation platform offers brokerage and direct sales force products, with funding, of course, enveloping loans and the marketplace existing to serve both institutional and retail investors. In the aggregation silo and with roughly three dozen lenders in place as of this writing, Bizfi has managed to snag partnerships with marquee names in alternative lending, such as Kabbage, OnDeck and Prosper, said Sheinbaum.

Speaking specifically to B2B activity, Sheinbaum said that financing through the interconnected platform offered by his company especially helps supply chain management in industries such as food and hospitality and also helps franchise companies, such as Subway, wherein, in one example, a franchisee may opt to take on additional units but has a short turnaround in which to raise cash — a small window served well by quick loan approval and cash that can be at the ready in two to three days.

The $65 million just raised will help Bizfi boost its technology platform, chiefly through increased hiring of data scientists. That will come in tandem with the goal of increasing, as Sheinbaum described it, the robustness of the company’s in-house analytics operations, which, according to the executive, “will speed the analysis of funding options and scoring the likelihood of funding and repayments.” And, in order to expand the technology that helps such decisions, added Sheinbaum, new IT staff is needed “because you need people who are able to write code.” Moreover, marketing efforts will get some of the cash, moving across radio, TV, direct mail and other forms of outreach, he added.

The financing from Metropolitan represents an example of cross-pollination that is possible across broad, multifaceted platforms, such as Bizfi’s, and Sheinbaum noted that the investors, along with others, did, and currently still do, own some skin in the game by lending to small businesses.

Looking broadly at the small business lending environment, a recovery in demand has been deep and wide, said Sheinbaum, across several industries here in the United States. That’s been borne out by gross originations that have jumped from $235 million during the nadir of the financial crisis to as much as $1.3 billion as of the middle of this year. The most notable standouts have been companies in the housing and construction markets, medical practices and the like — companies that need access to working capital as they expand rapidly.

That expansion should continue even amid a rising interest rate environment, given what Sheinbaum said would likely be a staggered, prolonged push higher, and 25 basis points on a historically low base is unlikely to deter healthy companies from seeking access to capital.