On Being ‘Nimble’: The Flexibility of Alternative Funding
“Nimble” is a guiding principle at Credibly. It means maintaining flexibility, and not overextending in a way that makes your business too rigid. From a product development standpoint, it means breaking down large projects into component parts that are easily accomplished — which makes planning and execution and pivoting that much easier.
Being nimble also means being able to take advantage of opportunities as they arise. That’s been a key to our success, and it’s one thing that we have in common with the business owners who partner with us to access capital.
You get a call from your landlord. “The space next door is available,” he says. You’ve been thinking about expanding your business, but maybe you didn’t plan on doing it right now. If you’re nimble, you can respond to that opportunity very quickly. That’s the primary advantage of alternative funding: The ability to secure capital with speed, simplicity, and confidence for specific needs.
Amongst its other benefits, alternative funding facilitates small businesses to be more responsive. We always give the example of the pizza oven that breaks, and the restaurant owner who needs funding quickly to get back on his feet. But other times it’s about staying ahead and anticipating opportunities. We’re coming into the holiday season, and a business owner might have some opportunities to buy inventory at a discount. You could be looking to expand, or planning a project six months down the road. Flexibility and quickness are critical when it comes to accessing capital. Think of an NFL linebacker who can run a 40-yard dash in 4.5 seconds: Being fast and nimble separates those elite players from their lumbering competition.
The other way that being nimble is important to Credibly’s business lies in how we fund small businesses. When business owners are approved for funding, we will finance them in one of three ways:
Banks lend us money, we loan it to a borrower, and we hold that loan on our balance sheet for the term of the loan. We earn the difference in interest between how much the bank charges us for the money, and how much we charge our borrowers.
Whole Loan Sales
Think of it as the exact opposite of a balance-sheet loan. We originate the loan from our end, then sell it to somebody else who wants to own it. Instead of collecting interest throughout the term of the loan, we’re paid a fee upfront for selling it, and the loan doesn’t sit on our balance sheet.
A hybrid model, where cash flow on the underlying loans is structured to provide somebody with protection against losses. Let’s say an investor comes along and says, “I don’t want to own the entire loan myself because I don’t want to take all of the risk — but if you’re willing to sell me a hundred of these loans, I’ll accept a 10% interest rate, when I know that you’re going to be earning 25%.” So, we hold a portion of the loans in the form of a 10% reserve fund on our own books and we sell off the rest. If there are losses on any of the loans, the losses are absorbed and the investor still has a very high likelihood of getting their 10% return.
In managing our business, we use all three options so that we can stay nimble. If we relied on only one of those financing types and for some reason it went away, we’d be out of luck. But by having all three available, we have flexibility in case there are changes in the market or the economy. Fully committing to one strategy would put our business at risk. The ability to pivot is what gives alternative capital providers like Credibly its strength.
Glenn Goldman is the CEO of Credibly, driving the company’s expansion by offering a comprehensive suite of financing products to a broad range of small businesses. Formerly the CEO of CAN Capital for 12 years, Glenn helped create the alternative lending market, building and growing a leading financial technology platform that revolutionized the availability of capital to small businesses.