Dealstruck started making loans to small businesses five months ago. This came after a successful seed round of financing where they raised a significant amount of capital (total was not disclosed) to see them through their first year of operations.
I chatted with co-founders Ethan Senturia and Zalman Vitenson earlier this month to discuss their progress. While Dealstruck is most clearly a startup it is more than a couple of guys working in a basement. They have a team of 11 people now with all the core competencies covered. Senturia also pointed out that their team has a combined 75 years of experience in alternative commercial finance.
What is Dealstruck offering? Right now they have one product: secured term loans for small businesses. But, they have big plans with several different product offerings in development. Let’s focus on the term loans for now. Here are the details:
- Term: 12 – 36 months, average 24 months
- $25,000 – $250,000, average just over $100,000
- Rates: 8% to 24%, average mid teens
- Blanket lien and multiple personal guarantees from business owners
Dealstruck is not targeting any specific vertical markets for borrowers and is instead seeking to serve a broad array of industry segments. They are finding good traction with businesses that are light on assets but have good cash flow. They are also not targeting startups; businesses must be profitable with a decent operating history.
They are working both from the top down as well as the bottom up when it comes to sourcing borrowers. By this they mean, they are looking for companies who have solid financials but just miss out on meeting the criteria for a bank loan. Maybe they had a personal credit blemish or some other hiccup that disqualifies them from getting approved at the bank. They are also taking on those companies who are looking to transition from a high interest loan product such as a merchant cash advance.
They are finding these companies primarily through excellent press coverage and online marketing. Their initial efforts have yielded a decent pipeline of borrowers. When I asked about total loan volume they would not give a number other than to say it is in the multiple millions of dollars.
How is Dealstruck different?
The online small business lending space is heating up. With Lending Club entering the fray soon and Funding Circle USA set to be a dominant player what would set Dealstruck apart?
Senturia responded with a couple of points. First, he said that Dealstruck is building a very strong team. They will have the most commercial finance experience of anyone in the space and they are also very strong with technology. Once version 2.0 of their platform launches in the next couple of weeks they will have a great user experience that will differentiate Dealstruck from the competition.
What is in it for investors?
Before launch Senturia rounded up several high net worth individuals to fund their first loans. Their first loan, issued back in June, was for $250,000 and was funded by 21 different investors. They have had a steady inflow of investors since then.
Like all platforms outside of Lending Club and Prosper they are only open to accredited investors and the minimum investment per loan is $5,000 right now. Investors can browse the available offerings and choose to invest in loans one at a time. They are also putting together an investor pool that will provide more diversification for investors.
They did not provide projected investor returns but based on the borrower interest rates and solid underwriting we can assume that it will be in the double digits.
Dealstruck is a company to watch. While it is really only suitable for the high net worth investor today, as they scale they could have much broader appeal.
Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.