Launch HN: Lendflow (YC W21) – Infrastructure for embedded lending services
Does it take your users 15-90 days to get paid out by their customers? You can embed a factoring product that gives them the option to get paid instantly for a small fee. Do your users purchase materials, supplies, inventory, or equipment on your platform? Embed a loan in your platform to give them timely access to capital to help them spread out upfront project costs, take advantage of wholesale rates on their purchases, or invest in more assets for their business.
We’ve been in the lending space since 2014 and have helped tens of thousands of small businesses acquire financing. We saw the struggles on both sides: how tough it is for small businesses to find the right lending products and how difficult it was for lenders to find the right customer at the right time. Companies like Square, Shopify and Stripe have launched capital programs for their users that allow them to get better priced, more timely funding for their business than they could elsewhere. It’s helped their business customers invest in themselves, grow and transact more, and made them more loyal to those services. And we're only scratching the surface!
The problem is that launching lending programs is complex, timing consuming and costly. It can take a team of 10 at least a few million dollars and 18+ months to get to market with their program. It takes significant upfront commitment and investment, making it very risky. This means the lending services aren’t offered and businesses don't get access to the capital they need.
It is really gratifying to see the impact of providing increased access to capital. We’ve seen restaurants who invested money in a digital transformation not only survive through the pandemic, but double their revenues and improve their margins by embracing take out and delivery. We’ve seen an HVAC company gain the ability to hire more technicians and triple the amount of customers they are able to service on a given day. A home renovation contractor was able to spread out his upfront costs over time to take on multiple projects at once, increasing his monthly revenue by 3x over the past 6 months. An ecommerce company was able to purchase inventory at wholesale rates and invest in an ad campaign to drive traffic to their store to increase sales by 240%.
We provide all of the infrastructure and tools to make it easy to launch capital products that can have this impact for small businesses. We’ve had platform customers get a lending program up and running in a day. You can customize the funding products and experience based on the needs of your own customers. You can use our platform to build a data advantage and more efficiently go to market with your own funding service. We have a lending API, pre-built customizable applications, lending service provider aggregation API, white-labeled sales and support teams to walk customers through the process, and connections into 85 of the top lenders and funding products available to businesses. We also can spin up custom endpoints to add new data points to underwriting models to help businesses obtain better rates/terms and to deliver a better experience. We are paid by 3rd party lenders for the work we do to onboard the small business for funding, and we split those fees with our platform partners. If you build your own funding service, you simply pay a subscription for using our tools.
We’re live and integrated with 32 platforms and are processing thousands of business financing applications per month. We successfully helped businesses access millions of dollars from best-in-market lending services. We also have customers who've used the data from their lending program to build their own c...
38 comments
[ 3.3 ms ] story [ 41.0 ms ] thread1. Is the main draw for your customers being able to increase customer retention over time?
2. How are applications distributed to the top lenders, on the back end? Is there an auction process?
2. We compile data on the business as if we're underwriting them for a loan, although we never actually lend or take balance sheet risk. We use the data to place them with a batch of lenders (typically about 3) that's going to be the best fit for their risk profile and use of funds. We take the best pricing from the batch to present to the borrower. The goal is to send them to as few lenders as possible while acquiring the best pricing available on the market.
While you could certainly create that type of product on Lendflow, it's not limited to just buy now pay later. There's a much broader set of funding products you can build and user workflows you can integrate them into.
This sounds more like business short term lending. Ie, I have 100k in orders, but need 20k to buy materials up-front. Or I have 100k in outstanding payments due in 30 days, but I'd rather get 95k right now.
We're focused on business funding options placed in a broader set of workflows. Think lending services in workflows based around payments, procurement, invoicing, ect.
You can also build services for a broader set other use cases. Including financing purchases like inventory, equipment, supplies, inventory, real estate, ect. Or just more general purpose funding, it just depends on the user base and their needs.
Am I understanding this correctly?
Do you use the transaction history of the sellers to know if they're good to lend to?
We have an endpoint where we can generate prequal offers for a business based on the transactional data. We can also incorporate into the package we send to lenders to get business improved loan pricing.
With us, these are always your customers, we're just allowing you to launch your own capital program for them. We aren't having you "send us prospects." Instead, we're providing you the infrastructure so you can get them funded them on your platform. We keep them in your product and ecosystem, and your users never need to know who Lendflow is (if you wouldn't like them to).
We provide a lot as part of the program, including the technology, customer support and onboarding, dedicated phone lines and email integration, and the go to market sales and marketing collateral.We also provide the data and analytics for your program, so you can better run your service with us over time.
There are a lot of costs associated with these services, so the subscription keeps our incentives aligned with our platform partners and the small businesses we’re serving together.
1. How do you vet the lenders? Anything keeping them on a leash so they don't go too hard on past-due accounts?
2. Is the financing generally recourse to the owners?
3. Who's your biggest competitor?
2. There are both recourse and non-recourse options.
3. Stripe released a product with some similarities recently. On the marketplace side we compete with companies like Lendio and Fundera.
Are you a fit for us? If not, what are our alternatives?
Our platform partners makes money by earning a % of the loan value from each business that is funded.
If our platform partner decides to fund businesses themselves, then yes they'd need to collect from the small businesses and earn the full margin on each loan they issue.
Have you come across anything like your product that exists in EU/UK?
It can, but it doesn't have to.
Also: they key to running a lending business is risk management, and if there is any element that has led to lending businesses fail it is to appreciate the degree to which risk management skills dominate all others including technology skills.
"If you build your own funding service, you simply pay a subscription for using our tools."
If a platform uses your tools, but not 'your' capital, does it still pay Lendflow a 2%/3%/5% fee on all the loans it issues? Or does it only pay Lendflow the 500/2.5k/TBD subscription fees?