When Ben Enaye was searching for traditional bank financing for his six-year-old limo services company in recent years he found the process frustrating.
He was rejected by some banks and not offered the loan amount he was looking for by others. The process was also time-consuming and filled with uncertainty, Enaye said.
“I was frustrated with banks because the process was a mountain to climb,” said Enaye, who owns Post Road Limousine in Fairfield County. “It’s a drawn-out process and anyone’s guess if you are actually going to get the loan.”
Unable to secure the financing he needed, Enaye decided to turn to a different funding source.
A few weeks ago, he received a loan for an undisclosed amount from On Deck Capital, a New York-based company that provides financing to small businesses that may not be creditworthy in the eyes of a traditional bank.
On Deck, which was founded in 2006, uses data aggregation software to evaluate the financial health of small businesses beyond a tax return or credit score. Their software also incorporates factors like cash flow, payment history, revenue trends, customer counts, and other categories to help determine the creditworthiness of a prospective small business borrower.
Enaye said the financing, which he received in less than two weeks, will help his 21-employee firm, which relies heavily on corporate travel, to prepare for the upcoming busy season by adding to and/or conditioning his fleet of a dozen or so limos, as well as adding some employees.
The rate on the loan, which he declined to disclose, was also competitive, Enaye said.
Since 2007, On Deck has made about $140 million in loans including $2 million distributed to Connecticut companies, but the firm is looking to increase its presence in the state.
On Deck recently hired Todd Rowe as a senior business credit advocate for Connecticut, and he will be working to boost lending volume in the state. Rowe, a long-time Connecticut resident, joins On Deck from New York-based payroll services company PayChex.
Noah Breslow, On Deck’s chief product officer, said the company’s business has grown 100 percent so far this year. The company lends capital raised from private investors, mainly venture capital firms.
On Deck has raised $38 million from various well-known investors including Contour Venture Partners, First Round Capital, and Khosla Ventures.
Breslow said the premise of the company is to be an alternate source of credit for small businesses such as restaurants and retailers. On Deck doesn’t evaluate creditworthiness solely on personal credit scores or tax returns, which is what banks weigh heavily when looking at small companies.
Instead, On Deck uses a computer algorithm that sorts through various company data points to determine the creditworthiness of a borrower.
“We are trying to build a different kind of lending model,” Breslow said.
Breslow said On Deck has historically sold loans through partners like community banks or equipment leasing lenders, but is now investing in a direct sales force to boost activity.
He said their average loan amount is about $35,000, but the firm has provided as much as $150,000 in financing to companies. Loan terms go up to about 18 months.
Analyst upgrades Webster
Despite a seeing its stock price fluctuate with the recent broader ups and downs of the stock market, at least one analyst is bullish on Waterbury-based Webster Financial Corp.
FBR Capital Markets analyst Bob Ramsey recently upgraded Webster Financial, the parent of Webster Bank, to outperform and set a target stock price for the company of $24.
Webster Financial has been trading in the mid-to-high teens in recent weeks off its 52-week high price of $23.73.
In his assessment, Ramsey said the recent decline in Webster’s stock price “has created an attractive buying opportunity for a company that has successfully executed on plans to strengthen credit quality and capital and has now shifted its focus to improving efficiency and profitability.”
Ramsey wrote that he has confidence in Webster’s new “P260” initiative, in which the bank is setting out to improve profitability by targeting a 60 percent efficiency ratio.
“We favor the progress that Webster has made on the credit front, as well as its focus on growing loans, and believe that valuation is compelling at these levels,” Ramsey wrote.
FBR also reiterated its 2011 and 2012 operating earnings per share estimates for Webster of $1.57 and $1.75, respectively.
Greg Bordonaro writes the Financial Sense column every other week. Reach him at gbordonaro@HartfordBusiness.com.
