US Small-business Borrowing Fell In November: PayNet

Category: Small Business Borrowing
Published: Wednesday, 07 January 2015
Written by Admin

Thomson ReutersDrew McClellan of A lucky Lawn and his wife Deb paint green dye onto drought affected grass at a home in Santa Fe Springs, California

(Reuters) - US small businesses reduced borrowing in November, sending the Thomson Reuters/PayNet Small Business Lending Index to its lowest level in eight months, according to data released on Tuesday.

The reading of 116 compares to a downwardly revised October reading of 129.7. The index was set at 100 at its January 2005 launch, and peaked two years later at 131.7 before plummeting to about half that level around the time of the Great Recession.

Still, the index was up 1 percent from a year earlier.

We dont see this as a sea change or an inflection point, PayNet founder Bill Phelan said, noting that the index rose by double digits for most of the year. This is a pause more than anything and its probably pretty healthy.

Loan delinquencies held steady at 1.56 percent, separate PayNet data showed, a sign that despite an overall increase in borrowing in 2014, businesses are for the most part repaying what they owe.

The US economy in the third quarter of 2014 registered its fastest growth in more than a decade, as the Federal Reserve finally ended two years of bond-buying stimulus and began to lay the groundwork for increasing interest rates this year.

Subdued inflation and lingering concerns over the recoverys staying power mean the central bank is likely to keep interest rates near zero for at least another several months, if not longer.

PayNet collects real-time loan information such as originations and delinquencies from more than 250 leading US lenders.

(Reporting by Ann Saphir; editing by Andrew Hay)

Credit union membership rolls grow by a record-high 100000 during three ...

Category: Small Business Borrowing
Published: Wednesday, 07 January 2015
Written by Admin

LANSING, MI (January 5, 2015) Michigan credit unions reported record setting growth through the third quarter with a combined 97,175 new members, bringing the total number of Michigan credit union members to over 4.73 million.

Consumer and small business borrowing also rose by record-high rates in almost all categories from new/used auto loans to credit cards while small business loans grew by over 17 percent from the same time last year.

"Consumers and small businesses in Michigan continue to discover the great service and tremendous value at credit unions in record numbers," Michigan Credit Union League amp; Affiliates CEO Dave Adams said, "We haven't seen growth numbers like these in decades."

According to financial analysts at the Credit Union National Association (CUNA), the state's 2.5 percent 12-month growth in memberships is the fastest annual increase recorded since 1998. The growth is particularly noteworthy because the state's population has remained stagnant over the last few years.

When it comes to lending, Michigan credit unions saw the largest increases in member business loans with a 17.3 percent year-over-year increase.

In the past ten years, and even through the financial crisis in 2008, credit unions have continued to lend to small businesses. Business loans have soared from $192.7 million in 2004 to $587 million in 2009 to $1.4 billion at the end of the third quarter of 2014.

The steady increase in new members could correlate with the steep rise in new and used auto loans, which are up 12.3 percent and 14.8 percent from the same time last year, respectively. The popular GM Credit Union Member Discount could account for a segment of the solid auto lending increases. The program helped General Motors grow its national market share when more than 160,000 credit union members used the discount to buy a new car or truck in 2014. CU Solutions Group, a subsidiary of the Michigan Credit Union League, manages this national program, encouraging thousands of credit unions across the country to promote GM product discounts to their 100 million members.

Here's how Michigan's lending performance breaks down.

  • Quarterly increase in new auto loans: 5.6 percent
  • Year-over-year increase in new auto loans: 12.3 percent
  • Year-over-year increase in used auto loans: 14.8 percent
  • Year-over-year increase in first time mortgages: 7.5 percent
  • Year-over-year increase in unsecured loans: 11.1 percent
  • Year-over-year increase in member business loans: 17.3 percent

CUNA analysts say an upturn in the national economy seen through strong personal consumption, federal government spending, softer energy prices and a decline in the Michigan jobless rate by 1.5 percentage points are all helping to fuel the credit union loan growth nationally. In Michigan, likewise, as the economy improves and households gain confidence, more and more credit union members are making home improvements, refinancing loans to lower rates and buying big ticket items such as cars, appliances and furniture, often financed by the very low loan rates offered at credit unions.

About the Michigan Credit Union League amp; Affiliates
Organized in 1934, the Michigan Credit Union League is a trade association representing Michigan's Credit Unions. Based in Lansing, the MCUL works to build awareness of these locally owned, cooperative institutions and their mission to support members, communities and local businesses. For more information, visit, follow us on Facebook at and connect with us on Twitter at

David Prosser: Reasons to be cheerful about the prospects for small business ...

Category: Small Business Borrowing
Published: Tuesday, 30 December 2014
Written by Admin

Before despairing, it's worth considering the quality of lending as well as its quantity. The British Business Bank, launched two years ago as the Government sought to provide small businesses with new sources of finance, says that while businesses may not be borrowing any more money today than when it was launched, their reasons for borrowing have changed. Its research suggests a shift towards growth-oriented credit over the past couple of years.

Two years ago, 45 per cent of small business borrowing was used to boost cash flow, the British Business Bank says, but the figure today is more like 33 per cent. Meanwhile, the number of companies borrowing in order to buy fixed assets, or to expand in another way, has risen from 39 per cent in 2012 to 54 per cent today.

Keith Morgan, the bank's chief executive, believes these shifts are evidence of "increasing confidence among businesses and an appetite for growth". That's a logical conclusion: in an improving environment, you would hope to see small businesses taking on additional financial firepower in order to gear up for growth, rather than to be borrowing to keep their day-to-day operations on track.

Still, there's a more fundamental discussion point here. Is bank debt even the right option for small businesses looking to the future in this way? Britain's economy has been fuelled by credit for so long that it's easy to forget that borrowing money isn't the only way to raise finance; for many small businesses, persuading investors to put up growth capital may be a better option.

There are all sorts of reasons why this is the case. For example, what growing businesses often need just as badly as finance is support and advice - equity investors are more likely to provide this than a bank, whether through formal structures such as seats on the board, or more informally through mentoring, networking and other types of help.

Also, bank debt is often an inhibitor of growth rather than a catalyst. Over-borrowed companies find themselves caught out by restrictive covenants on their debt that leave them unable to invest for growth. Equity capital, on the other hand, leaves companies with room to operate.

The good news is that more small companies are embracing growth finance. Research by the analyst Beauhurst has revealed that growing businesses raised £1.62bn of equity capital during the first three quarters of the year alone - 9 per cent more than in the whole of 2013.

Similarly, the Business Growth Fund, the bank-financed equity funding scheme set up by the Government three years ago, is enjoying its busiest year yet, funding more growing companies than ever before.

Nevertheless, the shift towards an equity culture is a slow one. Research from the Confederation of British Industry suggests that while half of Britain's small and medium-sized companies use bank debt, only 3 per cent have ever raised growth capital. By contrast, the average across Europe as a whole is 7 per cent.

Part of the problem is that many entrepreneurs are suspicious about equity investors - above all they are reluctant to cede control of their companies, though not all providers of growth capital require them to do so.

The bigger issue is that small businesses have relied on bank debt for so long that Britain now lacks a culture of equity investment. Building that culture will take time, but if we want to provide more businesses with a stable and sustainable foundation for growth, it is worth making the effort.

Heart behind the Hype

Category: Small Business Borrowing
Published: Saturday, 20 December 2014
Written by Admin


Oh, wait - wrong buzzwords. It's now cloud computing, pivoting, big data, 3D printing and FinTech.

Tech and entrepreneurship have gained popularity among Wharton MBAs with 13.7% of the 2014 class accepting full time positions in tech, up from 5.6% in 2010. It is the top 3 industry choice among MBAs after financial services and consulting.

Some are skeptical about this exodus of students into the industry. Is this yet another empty business school hype, a new herd mentality?

In heart behind the hype, we ask CEOs who live and breathe the industries and innovation we consider 'hot' to understand what gets them excited about their fields and how to succeed in them.

Description: Kabbage provides cash advances to small businesses and more recently personal loans through online channels to collect data and underwrite risk. They appear on Forbes America's most promising Companies list at #37

Area: Financial technology / start-ups


Rob Frohwein, co-founder and CEO of Kabbage               

Years position held: Rob: 6 years

Years in tech: 15 years

Education: JD, Villanova University and BA, Economics from Dickinson College in Carlisle, PA

Kathryn Petralia, co-founder and CEO of Kabbage

Years position held: Kathryn: 6 years

Years in tech: 20 years

Education: BA English Literature, Furman University


1. How is Kabbage revolutionizing lending and creating impact?

Kabbage has not only provided tens of thousands of small and medium businesses with access to capital, but has reduced the time and friction previously associated with small business borrowing.  Kabbage maintains an NPS in the 60s versus less than 20 for most banks; customers number one reason for preferring Kabbage is the speed and ease of the application process, and the permanent access to capital that only a credit line can provide.  Permanent working capital has previously only been available to very large, established businesses due to the inherent risk associated with it, and the extensive management and diligence required by lenders to provide it.  Kabbages unique access to a variety of data sources, to which Kabbage stays permanently connected, gives an ongoing measure of risk and business performance, mitigating the risk of a line of credit.  This data-driven approach has created a technology standard that has now been imitated by most of the incumbent alternative lenders.

2. Chance or choice: what led you to your current role in the industry?

For Rob: I would call it a bit of both.  Although I was not involved in the financial services industry to any material extent, I came up with the idea for Kabbage.  Ideas have always been central to my personality having kept a business idea book since the age of 9; I have alway started businesses.  Most failed and a few have enjoyed moderate success but Kabbage is my biggest idea in terms of how large the company has become.  So chance plays a part, but Ive always chosen to pursue my ideas.

For Kathryn:  Its very difficult to chart a course for a career as an entrepreneur.  I was fortunate that when I was 8, in the late 70s, my parents gave me a computer.  Although Ive never been drawn to writing code, I am an avid consumer of technology and have always believed in its transformative abilities.  From a couple of dotcoms in the 90s, to 7 years at a specialty finance company in the last decade, to another fin tech startup to Kabbage I have always been drawn to innovative concepts.  The burden of regulation has caused financial services companies to adopt technology more slowly, which has created an unbelievable opportunity in the industry.  Atlanta is a hub for financial services companies, particularly in payments, big data and security, which makes it easier for companies like Kabbage to grow.

3. You just graduated today and plan to work in start-ups / FinTech. What would you do?

I would do two things, not necessarily in a specific order.  I would spend a couple of years at a traditional finance company to gain a broad understanding of the space and the opportunity (and to reinforce my love of startups!).  I would also look for internships and entry-level positions at startups/small companies that are gaining traction and have the potential to become very large businesses.  Its not possible to learn this type of business in school; the best education comes from working in the industry.  When you join a startup, put yourself in a position where you will be forced to understand every aspect of how the company works (technology, marketing, user experience, etc.).  Product, for example, is a great place to start.  And avoid seeking a strategy role!  Real startups should not designate a strategy role early in the companys life.

Description: Udemy is the world's largest marketplace for teaching and learning; it is also a leading provider of Massive Open Online Courses (MOOC). Udemy has served over 4 million students from over 190 countries and overs 20,000 course alternatives.

Area: Educational Technology

Dennis Yang, CEO of Udemy

 Years position held: 2 years

Years in tech: More than 15 years

Education: MBA from the Stanford Graduate School of Business; BS from Northwestern University

 1.       How is Udemy revolutionizing online learning and creating impact?

Udemy is creating an impact by bringing knowledge via 20,000 online courses on everything from Java to Excel to photography to our more than 4 million students. We're asking, "How do we take the number of people who have access to skills and increase that access exponentially?" While other companies focus on the K12 or traditional higher education space, Udemy is committed to helping adults gain the necessary skills to advance their careers, change jobs or pursue passions. We're empowering individuals and companies to survive and thrive in a global economy where 65% of grade-school kids will have jobs that don't exist today.

2.       Chance or choice: what led you to your current role in the industry?

Both chance and choice. As a lifelong learner, I have a great passion for constant learning and improvement, and am deeply interested in technology's potential to impact practical skills-based education around the world. I was first introduced to Udemy in 2012, and I immediately jumped on the opportunity to lead the company in fulfilling its mission to help anyone learn anything online. The real impact we're having on the lives of students and instructors is incredibly powerful and rewarding.

3.       You just graduated today and plan to make an impact in the tech education industry. What would you do?

There are so many challenges in today's world in need of thoughtful solutions that it can be hard to know where to get started. What are you passionate about? Do you have a great idea for solving a big problem? For example, we at Udemy saw unmet demand for skill-based learning content globally. To meet this need, we're tapping into the knowledge of experts around the world to help students and companies everywhere build applicable skills. The first step is to identify a deficiency in an industry (there are plenty), and stay rooted in your mission to fill that void.

My next answer is to consider joining us on the Udemy team. We're hiring in many roles across marketing, business development and operations. We're proud to help people get the information they need to improve their lives in measurable ways more skills, better jobs and more satisfaction in being able to realize their dreams for themselves.

We project that in the next three years, one in six people will be taking Udemy courses globally. If you're not ready to join our company, consider teaching on Udemy. The marketplace model we developed means we can quickly help individuals transform expertise into practical courses. Teaching a course is also a great way to demonstrate mastery of a topic for current and prospective employers and clients

Description: A Wharton homegrown, CommonBond started its first fund lending to 40 Wharton MBA students in 2012. In two short years, it has raised $100 million in funds and expanded student lending to graduates from law, medical and engineering programs across the US

Area: Financial technology / start-ups

David Klein, CEO and co-founder of Common Bond 

Years position held: 3 years

Years in tech: 3

Education: Brandeis University with a BA in Politics, Economics, and International Business and attended the Wharton School at the University of Pennsylvania.

1. How is CommonBond revolutionizing the lending and creating impact?

When I started the MBA program at Wharton in 2011, I was shocked at the high cost of my student loans. It didnt make sense to me that I would be charged the same flat rate as every other student, and I found the process of getting a loan to be unnecessarily painful. I connected with two Wharton classmates - Michael Taormina and Jessup Shean - and we realized that if we found a way to provide loans for ultra-credit worthy borrowers, then we could charge better rates and offer better service. We estimated that ultra-credit worthy borrowers represented a $60 billion market segment. And so we started CommonBond, with a vision of lowering the cost of higher education with a better student loan experience.

We are also the first financial services company to bring the one-for-one model to finance and education. For every loan fully funded on our platform, we pay for the education of a child in need for a full year through our partnership with Pencils of Promise. A big source of inspiration for our social mission is Warby Parker. When I first started pre-term at Wharton in 2011, I heard Neil Blumenthal speak and I was able to talk to him directly, about how he's been able to make the social mission work in a for-profit business. His answer still influences the way we think about it today - in short, it's not about dollars and sense so much as it is about who you are.

2. Chance or choice: what led you to your current role in the industry?

Both. I made the choice to go to business school with the express purpose of starting a company. But it was pure chance that CommonBond was going to be the idea that turned into a company. It was because I had to get loans myself to pay for school. And in that process, I stumbled upon a pretty broken student loan industry that wasn't giving borrowers a fair shakes.

3. You just graduated today and plan to work in start-ups / FinTech. What would you do?

I'd go start a company. I have that bug, and used Wharton as the time and space to uncover that clarity about myself - entrepreneurship is my "calling."

But if I, instead, wanted to join a company, like many people at Wharton, I'd probably want to work at CommonBond. Seriously. It's small enough for one person to have a major impact on growth; It's a company that shares my deep-rooted belief that business can and should be a positive force for change; And it's a company that's really helping people - saving its average borrower about $10,000 - and treating its borrowers like human beings.