Helping SMEs get capital from New Zealand to New York

You don’t build a FinTech in New Zealand – with a population of five million and just over half a million SMEs – on the scale only in New Zealand.

As Dave Lewis, CEO of Ranqx, told Karen Webster of PYMNTS, the goal was always to go big in an effort to solve what plagues millions of small and medium-sized businesses (SMBs) seeking faster access. capital from banks and other lenders. worldwide.

“We’re just a small country,” he remarked, “and we’ve always looked to the United States”

As he told Webster, the New Zealand-based company dates back to the pre-pandemic era of 2014, when the company saw an opportunity to help democratize finance. They did this for the company’s fifth largest bank, Kiwi Bank – launching Kiwi Fast Capital – early on in the pandemic.

“It’s a weird time to throw something,” Lewis said, only a little wryly. Now Ranqx has crossed the Rubicon, announcing last month that it has officially launched operations in North America.

See also: Ranqx small business lending platform launched in North America

The mecanic

In terms of mechanics, the company’s platform speeds up and accelerates banks’ existing credit and underwriting processes, without changing underwriting risk parameters or underwriting principles. The platform provides direct loan applications to small businesses, unsecured or secured, and offers instant decision on SME applications.

Banks, he noted, benefit from more accurate decision-making and can benefit from the myriad data points collected by Ranqx (in partnership with Visa), covering years of data, including financial statements. , balance sheets and credit bureau information.

Lewis noted that the platform, in a sense, offers a form of new wine/old bottle combos for potential lenders as they grapple with new business candidates who may have unfamiliar business models or records of thin credit.

“What we do in a two to five minute process is we say, ‘Here’s who this company is, here’s their financial condition and their ability to repay loans,'” he added. “They get the information in a much less confrontational way.”

With at least some statistics that show the success of the model, in New Zealand Lewis provided the details where, with insights based on data in 100 apps, one-third would be an automatic yes, one-third a firm no, and the rest would be sent back for further consideration – and a large majority of them (nearly 80%) would also be approved.

The platform also enables real-time monitoring of performance over the life of loans, which can help foster conversations between banks and SMEs to sort things out before delinquencies become unmanageable.

The data-rich environment helps banks answer some age-old questions: Whose loans are they and when will they be repaid? Along the way, with much of the data collection automated, banks themselves can save the thousands of dollars — up to $4,000 — it can cost to originate loans.

If the loan isn’t approved, Lewis said, well, that’s a huge sunk cost that ripples through the bank’s entire business. As a result, many megabanks push anything “less” than a $500,000 loan into their retail banking system, sending applicants to a branch to begin the traditional paper-laden process.

An expandable model

The Ranqx model is in stark contrast to traditional channels, where banks take days, weeks, and even months to onboard businesses and disburse loans. He compared the model to Blend, which has been busy digitizing the mortgage process.

Time is running out, of course, for SMEs – many of which are e-commerce businesses and other businesses seeking loans in the range of $10,000 to $500,000. The platform is also scalable to other stakeholders in the financial services ecosystem, such as merchant payment provider and even physical services and trading businesses.

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This means the tap is turning on a bit for lenders and businesses looking for loans, where many loans made through the platform average between $25,000 and $35,000. This money can be used by the SME to buy inventory or hire additional staff – and by extension, keep the US economy running.

“It’s possible to expand your loan portfolio to the smallest segment of the market because you can do it efficiently,” he said.

Some market differences

There are at least some differences between the New Zealand and US markets, Lewis noted. For one thing, an overwhelming majority of SMEs in New Zealand use cloud-based accounting software, and there is strong federal register data. However, in the United States, there is much more disparity in data quality and sources.

To that end, Ranqx has worked with partners, including Visa, to have everything from tax data to accounting data to bridge these disparities and create a data ecosystem. Without these collaborative efforts, he said, banks and credit unions — which are data-swamped — struggle to orchestrate that information into a meaningful workflow.

“We’re sitting in the cloud and we can say, ‘Look, you don’t have to fix everything in-house to be able to deliver a smoother customer experience here.’ We can take care of the data, we can do it on your brand,” he said, respecting the internal policies and risk dashboards of banks – across the country and without the friction of retail banks. Banks effectively find themselves competing with FinTechs on digital services and access to capital.

Looking ahead, the opportunity for green space creation is significant for banks and SMEs navigating what appears to be a challenging and recessive environment.

“Everyone has to work together to figure this out,” he said — and using the platform and data points can help smaller businesses not just survive, but thrive.

As Lewis told Webster, “Every big business started out as a small business.”

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