The only online lender focused on veteran-owned businesses has found a recipe for success
Last month we learned that small business lender, StreetShares, closed on a $23 million Series B. This got us thinking. Several other small business lenders such as Dealstruck, Bond Street, Bizfi and Able Lending have all closed up shop while StreetShares continues to thrive. We were curious to find out why so we called Mark L. Rockefeller, the CEO and Co-Founder of StreetShares to find out more (you can listen to my podcast with Mark and fellow co-founder Mickey Konson here).
When we asked him what his company has done right he pointed out three things:
- They picked a specific niche rather than the broader market.
- They focused on borrower acquisition costs
- They stuck to their credit model and never loosened their underwriting.
“One of the challenges of typical venture backed lending companies is that there is a constant pressure to grow originations,” said Mark. “And when your revenue primarily comes from an origination fee the temptation is to keep the growth going even at the expense of loan quality. That is not a recipe for long term success.”
StreetShares has been fortunate to have backers such as Accion and Fenway Summer who are patient and have different expectations to many of the Silicon Valley folks.
Their laser-like focus on the veteran community has also helped StreetShares grow. Because they are a veteran-owned company providing financing to the veteran community they have a strong competitive position in the market. It would be very difficult for any company to compete directly against them.
They consider themselves a kind of credit union for the military. This permeates all areas of their business. It also helps with loan performance. When a veteran knows that other veterans are funding the loan they are less likely to default. There is a unique connection between veterans that StreetShares is leveraging that enables them to provide better loan pricing than they would otherwise.