I just returned from the largest conference dedicated to connecting online lending platforms, investors, and service providers. Although the majority of the 4000 attendees were involved in consumer lending there was a significant presence of online commercial lenders. Many of them are involved in small ticket business lending and it was apparent that a minority appear to be acting like prudent lenders while many others will likely have an expensive education. Either way we must assume that they will ultimately get it right.
Commercial lending is taking place online and will likely continue to grow. And, yes, there are online lenders reaching well into the lower end of middle market lending with facilities as large as fifty million dollars.
Some online lenders are partnering with traditional brick and mortar lenders such as Chase, Santander, Capital One, Regions, CIT and others. P2P (peer to peer), marketplace lending and other variations of Cyber-Lending have sufficiently established themselves and traditional commercial lenders need to recognize that change is well underway.
That is not to say that traditional lenders will be replaced by algorithms. I strongly doubt that can happen but there are platforms that gather, organize and evaluate due diligence information that the commercial lending community should not ignore.
While some of these novice lenders appear to be on the right track many will likely have an expensive education. Either way we must assume that they will ultimately get it right.
Of course there will be many failures amongst these startups and near startups but there will be a number of survivors who intend to take the food that feeds the children of traditional lenders. You are not going to beat them so you better join them.
You all have expensive websites to provide information to those shopping for a lender online. The challenge is how to get comfortable with using the cloud to engage in a dialogue with borrowers.
I do not believe that the personal judgment calls of commercial lenders will be replaced by a computer. I do believe, however, that the process will be streamlined by cloud data.
My message is that whether or not you embrace the CyberLenders they will ultimately grow into dominant players in the lending community. I would rather work with them as I do with traditional lenders and help them become smarter at what we do.