- 17 hours ago
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00:00So really excited to have Rhett Roberts here, who's the CEO of LoanPro, and some really great conversation I think will be upcoming.
00:11We've heard a lot of talk about access to capital, and I think we probably all know that there's a couple different ways for small businesses to get access to capital.
00:21One is get their own money in quicker.
00:25The second is seeking capital from the outside.
00:28So, Rhett, from your perspective, when you think about small businesses who are seeking capital, what are some of the most pressing challenges that you hear about, particularly, and I think this was brought up a lot in the previous conversation, speed, flexibility, digital convenience, and how do these challenges kind of shape how they can get capital in this fast-changing environment?
00:55Yeah, I think the last panel's conversation highlights the points really well.
01:00There's really a couple of pieces, right?
01:02So there's going to be, is there, a small business is kind of hard to underwrite because it's uniquely shaped in smaller tranches.
01:10And so we have to have a bespoke underwriting model, and that is dependent upon the data that's relevant that doesn't get contaminated from another silo.
01:18All right, so the organization of access to the data components.
01:21The second is going to be this concept of how do you deliver.
01:26David mentioned this concept of delivering a single pane of glass in the place that's convenient for them.
01:31Somebody, a small business, pick whatever it is, they're busy doing their business.
01:36They're wearing lots of hats doing that thing, and they don't have time during banking hours to go seek out a loan and fill out applications.
01:45And, by the way, that's probably not their expertise either.
01:48So can you deliver that in a unified experience for them in that pane of glass?
01:53We see a lot of efforts happening that way.
01:55Many in the room are doing efforts there.
01:57And the third piece, and where my business comes involved, designing your financial products in a way that meets your customers' needs.
02:05And so not only do you need to have your underwriting model not to be a one-size-fits-all,
02:09you need to have the actual financial product they got match what they need.
02:13So we see a few of those happening in the ecosystem of maybe cash flow underwriting resulting in something other than a vanilla amortized payment schedule.
02:24You can have a lumpy one that matches some schedules, but you also can have other kinds of products.
02:28So I think getting more, the concept is the future finance is highly personalized, and you need to have your inputs be aware of that as well.
02:35No, I think that's a really important point.
02:39And something that you said I think is critical is embedding the customer experience because they don't have the time, very often the knowledge, how to do that.
02:49So I think David spoke a lot about small businesses that are using QuickBooks for so many things, and they've got a lot of those capabilities.
02:59But as we think about partnership and we think about the concept of, I like to call it frenemies, fintechs, banks, organizations that are really forced to partner
03:10because they may not be able to build or sometimes buy the technology that they need.
03:17So LoanPro is really known for helping lenders modernize quickly.
03:24Sometimes, you know, inherently banks might be slower than fintechs.
03:28Sometimes they might be faster.
03:30But when they are slower, you really work with so many financial services companies like MasterCard, different issuers.
03:37How are you leveraging your technology and data to actually use these partnerships to transform the way small businesses operate?
03:48Yeah, that's great.
03:49A great question.
03:50So launching new products is hard, and it takes a long time, and people do a lot of research to figure out what should it be.
03:57And by the time they actually, like, print the thing, they probably need to iterate on it again.
04:03And so getting shortening feedback cycles is super, super key.
04:07And there's a few efforts to do that.
04:10One of the things we see in our business, right, we're supporting lenders of all shapes and sizes, doing all credit kinds of products, collateral-based and not,
04:19lines of credit cards, as well as installment loans.
04:22We see this concept of connecting an ecosystem.
04:26And so there's a lot of value add that's done there, like in our partnership with MasterCard.
04:30There's this concept where if you approach this from you're going to do it all, you'll probably run out of business before you actually print a successful product.
04:42And so if you can take the learnings from the generations of, you know, frenemies or yourself before you and implement those.
04:50And some of that's in the technology stack.
04:52So if you go and interview and talk to a lot of folks about the financial products that they have, not, I'd say more than 50% of the function of their financial products isn't on purpose.
05:04It was just a constraint of how it worked.
05:07And you need to ask them, should it work that way?
05:09Does it actually solve the problem?
05:10Is there a regulatory reason why it needs to do that?
05:13And generally the answer is, I don't really know.
05:15That's just like how it worked.
05:17And we just kind of did that.
05:18So we spent a lot of time unpacking those pieces and see, okay, what are the Lego building blocks that are required to make that happen?
05:25And from that, you get the learnings of what is needed.
05:29And so we engage with lots of customers as they launch products to actually meet the end needs.
05:35So we see a much higher performance of the portfolios that are ran on Loan Pro because you have real-time visibility of the data that's happening on the accounts.
05:45But you also have products that are a little bit more bespoke.
05:48And when you meet the need, one example, we do both consumer and small business.
05:54But small business, if you give somebody a loan that's like a straight-line amortized loan, when you see the cash flow underwriting, they have really lumpy schedules of when the flow of funds come in.
06:05Think of way back when how a farmer's loan worked, right?
06:09They understood this back then.
06:11They had seasonality to it.
06:13But if you just gave them a cookie-cutter loan and then you're surprised when they have difficulty of performance, yeah, well, you kind of knew that going in.
06:21So it's actually we're seeing a lot of effort to remove the cookie-cutter and instead have an array of different products and matching the customers for those instead of the other way around.
06:31Yeah, no, that makes a lot of sense.
06:32It's that customization and, quite frankly, a lot of people that I talk to in all different of our verticals are actually looking at things from that perspective from an industry lens.
06:43So, look, if nothing else, we've talked a lot about access to capital, and it's often cited as one of the biggest barriers to growth.
06:52A couple stats.
06:52I love stats.
06:54The average small business only has 27 days of cash on hand.
06:59Roughly 80% of small businesses that go out of business do so because of lack of access to capital.
07:05We know that timely and reliable funding is so important, and some of the stats that I talked about in the beginning, we are impacting employment.
07:15If they are employing almost 50% of the people in the U.S., if they don't have this funding to really seize opportunities and maintain resilience, it can really cause a significant ripple effect.
07:27So, the opposite way, as you look at it from the things that you're doing to help small businesses, what ripple effect does improved access to capital have on things like job creation, innovation, how local economies can survive?
07:44Yeah, it's a great question.
07:46So, I love small business.
07:48The first thing that comes into mind is, even beyond the stats, people who have the courage to go ahead and start a business, this is their passion.
07:56This is their desire.
07:57So, they're wearing so many hats, and as Dave said earlier, or David said earlier from Intuit, this idea that they're behind on entering their invoices because they're so busy doing the thing that they do, and so having real-time visibility.
08:13So, a piece of that is the access to capital, and as they have access to capital, can they increase the velocity and predictability of the flywheel that they're doing?
08:23And so, you think of small business, it's not just their job, it's often, like, integrated with everything within their life.
08:31There's tons of businesses that are maybe a married couple that's doing that, and they're spending, like, all their waking hours, and it's part of their family.
08:38So, if a small business folds, it has a ripple impact beyond just the economic numbers of that business itself.
08:46And that's part of the reason we love supporting small business so much, and everybody in the room sees the impact that they're making that way.
08:52When we see the successful products, we see very positive correlation that's happening when you design a financial product that does those three things.
09:00It uses unique data for underwriting, delivers it embedded, a huge time save, but you can also, you know, it's like popcorn at the movie theater, right?
09:10It's right there, right temperature, right everything for them, as well as the third piece, design the product to be successful for them.
09:18We see much higher retake rates.
09:22We see lower cost of capital aggregated.
09:26We see folks build up their financial skills and abilities, where maybe they're starting with one of the challenges of small business is how do you determine the amount of money to give them based off of the underwriting model of the data.
09:38And so, they usually start with slightly smaller amounts that are issued, and then they, like, earn into a bigger number.
09:44We see the velocity of the change of their credit limit increase is much faster on the performance side as the products are designed the right way for them.
09:53So, it's this virtuous cycle that can occur that if the financial product is designed in a bespoke solution, that is actually helping, like, cure some of the problems at the beginning of it's difficult to underwrite them because you can actually create the data set used to train the model.
10:09And I love this concept of a flywheel.
10:13So, I think in closing, there's one other thing I'd want to add.
10:16The thing that sometimes people forget is every small business is also a consumer.
10:23And so, when you do not help a small business, when a small business is impacted, it is impacting their consumer life as well.
10:32And anywhere between 14% and 25% of consumers actually own their own business.
10:39And we do propensity modeling where we see this.
10:42So, the importance of small business to the entire ecosystem, including their life as a consumer, is another really important aspect.
10:51So, thank you for everything you do to help them.
10:54And thanks, everyone, for attending.
10:56Really appreciate it.
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