Bond Street, a small business lender is the latest company to announce a significant round of equity and debt financing. The deal, totaling $110 million was led by Spark Capital and Jefferies. There was other participation from previous seed investors which included Homebrew, Founder Collective, Collaborative Fund and Red Swan. New investors included Slow Ventures, Eagle Cliff, Nathan Blecharczyk (Co-Founder of Airbnb), David Chang (Chef and founder of momofuku) and Nic Jammet, Nate Ru and Jonathan Neman (Co-Founders of sweetgreen).
We reached out to David Haber, Co-Founder and CEO of Bond Street to talk more about Bond Street and what this latest announcement means for them. Bond Street started lending in the summer of 2014 and loans were initially capitalized by friends and family. In a short time, they decided they wanted institutional money to help fund the loans. In this deal, Jefferies will be the main investor in loans on the platform for the next 12 months. David mentioned that they may take these loans to the securitization market, something we are seeing more frequently in this space.
Bond Street currently offers a 1 to 3 year term loan for borrowers looking for $50,000 to $500,000 with interest rates starting at 6%. The average loan on their platform is a $175,000, 3 year year loan with an interest rate of around 11%. Average yield to investors is in the 11-11.5% range, but David mentioned that returns may shift higher as loan sizes decrease slightly. As for new product offerings, David mentioned that in the future, they may offer a line of credit product as well.
How Bond Street is Different
When we asked David about their differentiation in the marketplace, he had several things to say. He believes that their advantage is currently technology and over time, it will be their brand as well. Beyond just providing a term loan to a company, they want to establish a meaningful relationship with their customers and they plan to use technology to help with this. Through their integration with Quickbooks and other software products, David provided the example of using a companies transaction history as a way to better serve the customer. By seeing a company that historically has a ramp up of purchasing during a certain timeframe, they could potentially extend a loan product even before the customer asks for it.
By focusing on the customer and anticipating needs, they will become more of the businesses financial advocate beyond just simply the term loan lender. David stated that this building of a community and a positive customer experience is the way you win long term. He hopes that if we were to ask about differentiation in another 18 months, that it should be much more clear on how they are different from other small business lenders.
David spoke to the fact that the influx of cash will help them scale more quickly by building the team and the technology needed. They also continue to focus on proprietary data sources for borrower acquisition, which will help them attract the right borrowers. With credit applications growing 35% month-over-month and these large commitments, Bond Street is certainly a small business lender to keep an eye on. It will be interesting to see the results of their borrower focused business model over time.