[amikassar]

Hi everyone - I posted my weekly inc column today - and thought it would make for an interesting discussion in this forum. What do you think ?

http://www.inc.com/ami-kassar/is-tec...s-lending.html

[JayBallentine]

Ami,

Regarding this quote:

"Most businesses would rather make monthly payments on a credit card and have the ability to revolve balances then being in the hands of a new alternative lender who is debiting out of their bank accounts at the close of business each day."

A company has tried and failed at doing sub-prime business credit cards.

Furthermore, TECHNOLOGY DOES NOT drive INNOVATION. People do. Technology is merely a vehicle to innovation. For example, I made a post recently which spoke about how there is a company who helps folks in portions of Brazil to access credit as they are underbanked.

They are doing this by analyzing the individuals' telephone records as most folks are under pre-paid plans. So, if a guy blows through all of his minutes instantly - that shows a lack of responsibility. Therefore, this individual will probably be declined by the alt lenders who look at telephone records. However, the people behind the business INNOVATED, using pre-existing technology (pre-paid cell phones + call records).

Technology doesn't make / build great products or great product experiences. People do.

So the question should be; "WHAT ARE SOME WAYS WE CAN USE TECHNOLOGY TO INNOVATE IN SMALL BUSINESS LENDING?" If that's the question, then we'll have some very clear answers for the world soon.

Innovation starts when people connect seemingly unconnected things to make them useful. As is the case with pre-paid phone records being used for credit... As was the case with the internet communicator, iPod, and phone - three seemingly unconnected things that turned into the iPhone.

Finally - if I become a friend of Ami Kassar, can I earn banklinks in high authority publications too?

[jbrown]

I don't agree with your thesis or your article. The dirty secret about small business credit cards is the typical business owner maxes out the available balance quickly and has the card fully drawn for about 5 years. At 30% p.a., plus late and other fees, the cost over 5 years is enormous.

The innovation on large loans - $100k - $500k - is that alternative lenders do them without collateral. We do loans up to $500k, and it is based on the ability to repay - cash flow lending. Banks and other financial institutions require hard collateral (real estate etc.)

[Jared_Weitz]

I don't agree with your thesis or your article. The dirty secret about small business credit cards is the typical business owner maxes out the available balance quickly and has the card fully drawn for about 5 years. At 30% p.a., plus late and other fees, the cost over 5 years is enormous.

The innovation on large loans - $100k - $500k - is that alternative lenders do them without collateral. We do loans up to $500k, and it is based on the ability to repay - cash flow lending. Banks and other financial institutions require hard collateral (real estate etc.)

Have to agree with Jeremy here. While Ami makes a good point in theory about how some merchants want a monthly payment the truth is most can't make it monthly and most don't have the credit to do so. The fact that funders are basically doing this without collateral means the funders do need to be paid back daily to help the security of the loan/advance.

[Finance1]

For a well capitalized business without any cash flow problems, a long term deal with monthly payments makes complete sense. For the 95%+ of the business we see on a daily basis, long money and monthly payments makes zero sense from a risk perspective. Another apples to oranges comparison.

I don't think Ami has experienced what we see each and every day. If he can find enough businesses who fit the gap between MCA/ACH and bank to make a living then I applaud him. The 2 products can co-exist peacefully with only a minor overlap. Long money is no game changer IMO. It's merely filling a gap.

As I've said before, long money may solve long problems and needs but short problems and needs will always be there. And for those businesses with long money in place and a short term need/problem, the long money will get stacked.