Applying for a business loan – or any type of loan for that matter – is nearly always a frustrating process. The reality is that not every business is going to qualify for the first loan they apply for, nor is the loan they’re granted guaranteed to meet their needs. This means business owners are often going from lender to lender in an effort to find the right fit. Launched in CeBIT last month, Loandesk is an online match-making service that aims to simplify the process of connecting small businesses with the right lender for their funding needs.
On Loandesk, borrowers simply fill out an application online; and within seconds of completion, are algorithmically matched with potential lenders. Founded by entrepreneurs Leigh Dunsford and Simon Creighton, the purpose of Loandesk is to optimise the chances of finding the right loan for every small business.
Since early May, Loandesk has been steadily adding new lenders at an average rate of two per day across 23 different loan categories; and in its first two days alone, secured over 1.5 million in loan requests from users.
Dunsford says businesses usually default to their local banks when trying to find a loan, but nine times out of ten, they are declined.
“Loandesk is looking to change approval rates for borrowers, estimating that 60 percent to 70 percent of applicants will be approved with a lender within the network. The trouble is that entrepreneurs don’t even know that these options are out there and tracking down these lenders can result in a huge waste of time and money,” he adds.
Recognising the rise in alternative lending sources within Australia, Loandesk has been quick to partner with 33 lenders, with another 70 in the process of being integrated into the platform.
In addition to matching borrowers with lenders, Loandesk is partnering with third-party service providers to offer easy access to legal advice, accounting, bookkeeping and credit reporting agencies. These services will be recommended to users based on their unique situation.
The founders of Loandesk are not new to the industry they’re seeking to disrupt. Between them, Dunsford and Creighton have over 26 years of experience in business lending and technology.
The duo had a vision over a year ago to change the way businesses find loans, but the product they initially had in mind failed.
At first, they built a platform that managed how finance professionals refer clients to each other. The platform allowed finance professionals to load the borrowers’ details and match them to a broker who could assist for that particular loan.
Problems with their first iteration became apparent very quickly. Dunsford says the challenges – which were ‘extensive’ – centred around getting brokers onto the platform in the first place. Rather than dwelling on their failure, the co-founders decided to work on a new idea – this time, with the end-user or borrower in mind.
“Our challenge was to cut down the time it took to find the right lender that suited their exact needs, based on their situation. With so many unknown lending sources in Australia we needed to create something that could play matchmaker in real-time delivering live pre-qualified borrowers directly to lenders exposing the alternative-lending market to a greater pool of borrowers that would otherwise not have known they existed,” says Dunsford.
“Traditionally a borrower would approach a bank, having been declined they would start searching online, use a finance broker or their accountant. We knew the timeline when approaching a third party to find a lender could be drawn out to weeks with paperwork exchanges and decisions on which lenders could potentially result in an approval. A greater challenge with approaching third parties was the depth their lender network and relationships, especially in the alternative business lending market.
“We have partnered directly with lenders that provide their lending criteria so that borrowers can get real-time answers by being matched through a kind of self-service model, instead of how they would traditionally approach finding a business loan.”
The startup has been bootstrapped to date; and while they have no immediate plans to raise capital, because of the traction they’re gaining with user uptake, the founders are open to the prospect of raising funds at a later stage.
“It is very clear that funding will be required at some stage in the very near future for user acquisition and a roll out of partnership programs. There are also plans to replicate this model overseas, however our target market will be Australia for sometime,” says Dunsford.
One of the biggest challenges they’ve faced has been outsourcing development.
“Overseas developers are very good at coding, however if you don’t have someone that is very good at articulating step by step the exact implementation and design you can be really bogged down in micro management,” says Dunsford.
“[L]uckily Simon has a very strong background in IT and has been invaluable in managing the project from inception. Our front-end design was all done in house, as creative concept is very hard to convey to a third party.”
From the user perspective, simplicity and minimalism were the principles driving the design.
“We set out with a very clear goal in mind of how we wanted the site to look and behave … There is a fine line between asking to much and not enough in order to achieve a very complex result, which has been a balancing act that is constantly being worked on,” says Dunsford.
He adds that the back-end algorithm handles hundreds of permutations of user and lender data to achieve matching results.
“We have been careful to design the platform to allow for scalability of lender data as it grows and also allow for feature upgrades, which are being released each month mostly through demand driven requests from lenders,” says Dunsford.
Currently, the co-founders are evaluating their monetisation options, so they don’t have a business model set in stone. They believe, however, that most of their income will come from lenders and strategic partnerships, not borrowers.
Loandesk’s marketing strategy has been two-fold – online and offline. Dunsford says trade shows have been very useful, followed by PR exposure, which to his surprise yielded great results from end-users as well as attracting new lenders to the platform.
“We place enormous value on creating valuable content for our audience and understand that this strategy has a long lead-time before it yields results. We are also implementing a very unique partnership program [and more about this will be revealed at a later stage],” he adds.
Dunsford says his proudest achievement to date has been building a platform from scratch, that people want to use and lenders are excited to be a part of.
“Anyone that builds something that has never been done before or tested in a market would have reservations as to whether or not it will gain traction. Of course we always had an excitement that because we knew the market so well and had already failed at one idea that it would only be a matter of time before people would see value in what we had achieved,” he adds.
“Luckily for us, we had users coming through just two days after going live.”
For the Loandesk team, 2014 is all about testing new features and making further refinements to the product.
“We are working on backend design to give the user a better experience when completing their profiles. We understand that users want a seamless experience and we are working to integrate things such as direct data pulls from Xero and other online accounting cloud providers,” says Dunsford.
The other goal for the startup is to build strong strategic partnerships with other businesses, before attending to their accelerated growth plans.
More information on Loandesk is available via www.loandesk.com.au.