Mainspring Funding, a company that offers equipment, inventory and working capital loans recently announced that they were bringing these loans online to their newly created platform. Mainspring is a company that has seen the benefits of marketplace lending and subsequently moved to create a platform. We spoke to Jessica Hardesty to learn more about the business model behind Mainspring.
The team has a long history in small business lending and had historically operated as a traditional offline lender. A majority of their loans are originated by an equipment financing company that they also own called Blue Bridge Financial.
Going forward, Mainspring will be the forward facing brand for any originators they acquire. Jessica noted that by creating the platform, they will increase their market efficiency for both borrowers and investors. Both investors and borrowers can explore the site and potentially find products that fit their needs. Instead of manually sending opportunities to investors, they are now able to browse whole loans online, while borrowers on the other hand will be connected to each of the respective originators for their requested loan type. They have several funds that invest in loans, but a majority of their clients are banks. Investors currently have access to equipment and inventory loans with working capital loans being available upon request.
Loan terms for borrowers are 12 months to 5 years with an average term of 3 years. Interest rates to investors vary from 6% and up with some rates in the high teens. Loan size varies between $15,000 and $1 million, but most often fall between $50,000 and $100,000. Borrowers come from several different sources including brokers, vendors and direct, including through Blue Bridge. The company expects to sell a majority of its anticipated $100 million worth of loans over the next year via the Mainspring platform.
It’s interesting to see companies like Mainspring Funding jumping on board with the marketplace lending model. For companies that have typically done things more traditionally, there are some immediate efficiency gains when they decide to become an online platform. Mainspring’s model is also unique in that they can purchase or partner with other small business lending originators, which can then take advantage of the loan distribution opportunities via the Mainspring platform.