According to the Federal Reserve Small Business Credit Survey 2016, small businesses in the U.S. are still having a hard time getting financing through conventional means. The principal reasons given for the credit gap include weak credit scores and the fact that most small businesses have insufficient credit histories.
While the traditional financial institutions are turning their backs to small businesses, other financing options are opening up. According to the survey by the Federal Reserve, most small businesses are getting financing from P2P micro-lending platforms.
With Research and Markets predicting that the global microfinance market will maintain a CAGR of 15.56% until 2020, this sector holds significant opportunity for both entrepreneurs and investors.
We believe that the best performing micro-lending platforms in 2018 and beyond will be those leveraging technology especially AI and Machine Learning to improve user experience. Here are the top 9 platforms that we believe will be the game changer in 2018.
Founded in 2012, Upstart is among the U.S. leading micro-lending platforms.
The online micro-lender targets millennials with the average borrower being around 28 years old and the average loan amount being between $14000 and $15000. Since launch, the platform has originated over $350 million worth of loans.
Upstart is the first micro-lending platform to leverage AI and machine learning to price credit and automate the borrowing process. In its latest round of funding, the firm has raised $32.5 million to expand its technologies.
In total, Upstart has raised over $85 million in five rounds of financing. Its key investors include First Round Capital, Khosla Ventures, and Third Point Venture.
Kiva is a non-profit online lending platform that allows people to lend money to low-income entrepreneurs and students in over 80 countries across the globe.
The platform was founded in 2005 and has since then issued around $1 billion in microloans to over one million entrepreneurs. In regards to financing, the platform has so far raised over $9 million in three rounds of funding.
Kiva has been on the front line in using big data analytics to identify and connect lenders and entrepreneurs. The firm is currently working on a facial recognition system that will make it possible to screen and approve loan applications faster.
Accion is a global nonprofit committed to creating a financially inclusive world, with a pioneering legacy in microfinance and fintech impact investing. For more than 50 years, Accion has helped tens of millions of people through its work with more than 90 partners in 40 countries.
In the U.S., Accion is the largest nationwide nonprofit small business lending network. As of December 2016, Accion members have lent over $500 million and provided over 60,000 loans to small businesses.
Accion provides fair and flexible loans, connections to business experts, and access to resources and opportunities specifically tailored to each business owner's unique needs and goals.
Opportunity Fund is a micro-lending platform that provides financing to small businesses in California.
The platform was launched in 1993 and has since then issued over $164 million in loans, generating over $257 million in economic activity.
As of November 2017, Opportunity Fund has raised around $27 million in one round of funding. The firm’s key investors include Charles Schwab, BBVA Compass Bancshares, and Mechanics Bank.
Founded in 1994, LiftFund Inc is among the largest non-profit microlender in the U.S. The platform provides loans ranging from $500 to $250000 to startups and small businesses in 13 US states.
Since launch, LiftFund Inc has issued over $180.5 million in loans to over 15000 small businesses. The firm has raised over $3.7 million in two rounds of financing with the lead investors including JP Morgan and the U.S. Department of Treasury.
LiftFund has been leveraging big data analytics in decision making a thing that will continue to put it among the industry leaders in 2018 and beyond.
Funding Circle is a micro-lending platform that provides financing to small businesses in the US, the UK, and continental Europe.
The platform was founded in 2010 and has so far originated loans worth over £2.2 billion to small businesses.
Funding Circle has so far raised over $413 million in eight rounds of financing. Its key investors include Accel Partners, BlackRock, DST Global, and Index Ventures.
In 2018, Funding Circle growth is expected to skyrocket as the firm continues to invest in improving its platform to enhance user experience.
Grameen America is a non-profit micro-lender founded by the Nobel Peace prize winner, Muhammad Yunus, back in 2008.
The firm provides business loans and mentorship to women from low-income neighborhoods to help them start sustainable businesses.
Among the key backers of Grameen America is Ray Dalio, the founder of the world largest hedge fund, Bridgewater Associates. Recently, the micro-lender has announced that it is seeking an additional $250 million in funding which it aims to turn into $5 billion in capital loaned by 2028.
LendingClub is an online platform that brings together lenders and borrowers in the US.
With over $30 billion in loan issuance, it is the world largest P2P platform. The micro-lender is listed in the NYSE with an IPO valuation of $5.4 billion.
Prior to the IPO, Lending club had fundraised over $392 million in 14 rounds of financing with top investors including Two Sigma Investments, Foundation Capital Flint Capital, DST Global, and BlackRock.
The firm is currently making massive investments in its big data analytics technology for a competitive advantage in 2018 and beyond.
Kreditech is a German microlender that leverages AI and Machine Learning to provide access to better credit for the unbanked.
The lending platform was launched in 2012 and has since then grown to cover more than 5 markets worldwide.
In regard to financing, the firm has raised over $497 million in 13 rounds of funding. Kreditech key investors include International Finance Corporation, Victory Park Capital, PayU and Rakuten and PayPal co-founder, Peter Thiel.
The firm’s investment in big data analytics, AI and Machine Learning is expected to rank it among the global leaders in the industry in 2018 and beyond.