Even Staff

2015-10-26

The Funding Solution More Startups Are Turning To

The world of alternative finance has come on strong in recent years, and more and more small businesses have begun turning to it in the search for favorable loan terms and/or alternatives to borrowing from banks. But the world of online lending can be an uneasy transition for many business owners who have always relied on banks for loans. Here’s a breakdown of what alternative finance has to offer startups and other small businesses.

 

The AltFi Advantage

 

Marketplace lending is just one new addition within the alternative finance landscape. The lending platforms advertise several major benefits to borrowing money from a marketplace lender versus using traditional banks. The advantages start right at the applications process. Most marketplace lending websites boast quick and easy loan application processes that can be conveniently completed from the comfort of home. Not only does the borrower get to avoid the hassle of going to a bank branch and dealing with bank bureaucracy and long waits, online lending platforms don’t have to pass the inherent costs of operating brick-and-mortar bank branches on to customers. Marketplace lending also promises a fair share for borrowers with less-than-ideal loan applications. For some borrowers, credit scores and credit history may not be up to bank’s restrictive standards. A first-time borrower that is funding his or her startup has likely never applied for a business loan before, and the banks will often penalize borrowers for lack of experience. In addition, many banks limit their underwriting activity to large business loans. It costs banks about the same amount to process a $50,000 loan as it does to process a $1 million loan, but they profit much more off of the larger loan. Therefore, a small business owner in need of a micro-loan (less than $35,000) may be rejected by banks even if he or she has a perfect credit history. This gap is bridged by marketplace lending loans where borrowers enjoy the benefit of not being defined by the rules established by banks. With the ability to take out personal loans ranging from $500-$100,000, a small business now has a resource for overcoming the rejection from banks. A borrower could have their application approved in a matter of hours and money in their account within days. Finally, the marketplace lending process promises to deliver more transparency and more control to the borrower. Both lenders and borrowers, through the online platforms, have clarity into the processes, fees, returns, and other variables associated with this new alternative financing option.

 

What’s Holding Business Owners Back?

 

Despite the explosion in popularity, many businesses are not taking advantage of the opportunities that marketplace lending claims to offer. According to a Manta survey of small business, many business owners are not comfortable with the technology involved in this lending process. Thirty percent of those surveyed reported being “unsure” of the risks involved in alternative lending options, 20 percent claim they do not understand the technology involved in the process, and 14 percent reported that they do not trust marketplace lenders.

 

But lending startups are on the map now...

 

The appeal of marketplace lending has caught the attention of a growing number of new startups. According to The Lending Mag, P2P loan startups raised $15 billion in funding in 2014. Data from CB Insights indicates that funding for lending companies is continuing to grow dramatically each year. In Q1 of 2015 alone, various lending startups have raised an estimated $385 million combined. It appears as though, for now, many business owners and entrepreneurs are still waiting for marketplace lenders to establish more of a track record before jumping on board, but the numbers prove that it is already making a major impact on the business world.

Disclaimer: The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the suitability of any Even Financial product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional. Any information or statistical data sourced by Even Financial through hyperlinks, from third-party websites, are provided for informational purposes only. While Even Financial finds these sources to be accurate, it does not endorse or guarantee any third-party content

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Haven Life, which offers Haven Term and Haven Simple, and is backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual), is known for its customer-centric approach and for its commitment to making life insurance more affordable and accessible. Haven Life’s term life insurance offerings will be available on Even properties and via its wholly owned subsidiary LeapLife.   “In these uncertain times, the majority of U.S. adults want the financial security of high-quality life insurance, but are often dissuaded by the complex application process and need to complete an in-person medical exam,” said Phill Rosen, Founder and CEO of Even Financial. “Haven Life’s groundbreaking, all-digital application experience brings tremendous accessibility and peace-of-mind to consumers. 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"On the heels of introducing even more affordable pricing for the Haven Term product, our partnership with Even Financial allows us to marry that affordability with greater accessibility to offer comprehensive financial protection to shared clients with ease and efficiency.”    Even entered the life insurance industry in 2020 through its acquisition of LeapLife, a leading insurtech and licenced life insurance agency. Since that acquisition, Even has worked with its large network of channel partners to make the process of getting personalized life insurance fast, easy, and accessible for consumers. In addition to Haven Term and Haven Simple, products offered by leading insurance companies including Lincoln Financial Group, Pacific Life, and Mutual of Omaha are available through LeapLife, Even’s life insurance platform. Companies such as TransUnion and Lantern by SoFi rely on Even’s embedded finance marketplaces to power 100% digital personalized life insurance policy quotes for their customers, with live agent support.   Even has continued its rapid growth trajectory in 2021 by reaching over $3 billion in consumer credit issued through its API and expanding its platform to over 800 partners. Earlier this year, Even was named one of “America’s Best Startup Employers'' by Forbes for 2021 and placed in the Top 50 of the 2020 Deloitte Technology Fast 500, which recognizes the fastest growing tech companies in the world.   About Even Financial   Founded in 2014, Even Financial is a B2B fintech company that is transforming the way financial institutions find and connect with consumers. As the leading search, comparison, and recommendation engine for financial services, Even seamlessly bridges financial institutions (such as SoFi) and channel partners (such as TransUnion) via its simple yet robust API and embeddable solutions. Even turns any consumer touchpoint into a comprehensive financial services marketplace with full compliance and security at scale. The company is backed by leading financial services firms and VCs, including American Express Ventures, Canaan Partners, Citi Ventures, Fidelity’s F-Prime Capital, Greatpoint Ventures, Goldman Sachs, LendingClub, and MassMutual Ventures. Learn more at www.evenfinancial.com.   About Haven Life Insurance Agency   Haven Life Insurance Agency, LLC (Haven Life) is re-thinking how people financially protect the ones they love. Haven Life is committed to delivering exceptional products, delightful purchasing experiences, and meaningful moments of service to the modern life insurance customer. Haven Term is a Term Life Insurance Policy (ICC21 Haven Term in certain states, including NC) issued by C.M. Life Insurance Company (C.M. Life), Enfield, CT 06082. In New York (DTC-NY), and California (DTC-CA), and other states, it is issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001.    Policy and rider form numbers and features may vary by state and may not be available in all states. Haven Term is available through Haven Life Insurance Agency, LLC (Haven Life), whose agency license number in California is OK71922 and in Arkansas, 100139527. Both Haven Life and C.M. Life are wholly owned subsidiaries of MassMutual.   Please note that issuing the policy or paying its benefits depends on the applicant’s insurability, based on their answers to the health questions in the application, and their truthfulness.   MassMutual and its subsidiaries C.M. Life Insurance Company and MML Bay State Life Insurance Company are rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of June 1, 2021 and is subject to change. MassMutual has received different ratings from other rating agencies.   Media Contact media@evenfinancial.com    
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