The partnership is an attempt by Credibly to grow its customer base through better offerings and better risk management. By offering instant funds, the company hopes more small businesses will be drawn to the platform. Credibly also wants to use the spending data gleaned from Wirecard to improve its underwriting model, which could help it provide better loan terms and reach more borrowers.
Jeffrey Bumbales, director of marketing and strategic partnerships at Credibly, told Bank Innovation the company feels its credit underwriting model is its biggest differentiator from other small business lenders like BlueVine and Kabbage. He added that the spending data from Wirecard will help Credibly reach borrowers throughout the credit spectrum.
Although he declined to give specifics, Bumbales said Credibly pulls from more than 1,000 data points to underwrite small businesses. He noted, however, that the most important data the company looks at is cash flow data, and the partnership with Wirecard greatly improves Credibly’s insight. Before the partnership, Credibly had relied on self-reported data from companies to gauge how they spend capital. In addition to refining its credit underwriting model, the company can better understand what new products to develop and improve its customer support with the Wirecard data, he added.
For Wirecard, the partnership with Credibly is part of a larger plan to become the primary payment provider for businesses around the world. “This partnership showcases our ability to provide a one-stop payment solution with fully digitized acceptance services and issuing of digital products,” a Wirecard spokesperson said.
The Wirecard-issued debit cards, which can be either physical cards or digital cards accessed through the Wirecard app, connect to businesses’ pre-existing bank account. In the past, businesses would have to wait at least a day, sometimes two, to receive their funds through ACH. With the Wirecard partnership, businesses get the funds instantly. Bumbales said this can make an especially big difference for businesses during the upcoming holiday season, when small businesses need to quickly order more merchandise or hire more people to meet increased demand.
For its part, Credibly offers working capital loans and merchant cash advances of up to $400,000, which can last up to 18 months. It also offers business expansion loans of up to $250,000 between 18 and 24 months. According to Bumbales, the average loan is between $55,000 and $65,000 and 11 and 13 months. All the loans have a 2.5% origination fee.
Credibly, which is headquartered in Southfield, Michigan, was founded in 2010 and has raised $70 million in capital so far. According to the company, Credibly has lent more than $1 billion through more than 23,000 financings. Germany-based Wirecard, meanwhile, provides payment solutions to brands and retailers. The company recently launched a new app for U.S. customers to increase its presence in the country.
Credibly faces an increasingly competitive field in the small business lending space. Competitors like Kabbage, which has raised a total of $2.5 billion, and OnDeck, which has raised a total of $1.2 billion, are growing their own market share with small businesses.
David O’Connell, a senior analyst at Aite Group, recently told Bank Innovation a looming recession could make the small business lending market even more challenging. “The lending cycle is going to peak sometime in the next 24 months,” he said. “These are tricky times to be in the credit market.”
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