CAN Capital hits milestone

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Alternative small business lender CAN Capital announced that it has provided small business owners $6 billion in working capital since its founding in 1998. The firm has facilitated over 170,000 loans to over 70,000 individual merchants, meaning that CAN has generated more working capital than any other company in the space, according to a company press release. And CAN continues to grow quickly — the firm hit $5 billion in originations last May, which means it’s originated over $1 billion in less than a year. 

In the past year, CAN launched two new products to better serve its consumers. One is a monthly installment program for longer-term loans and higher transaction sizes. The other, called TrakLoan, allows daily repayments to fluctuate based on the merchant’s card sales. This could help keep CAN competitive and maintain an early mover advantage as the alternative small business lending industry grows increasingly crowded. 

CAN’s success indicates that there’s still pent-up demand for loans among small business owners. Half of small businesses that applied for loans were rejected in the first half of 2014, according to a report from the New York Fed. Alternative lenders like CAN, which cater to firms that lack access to traditional lending mechanisms but need capital to thrive, can fill that gap.

CAN is not the only player in this space. A handful of payments companies including Square and PayPal are moving beyond their core market in payments to take advantage of an opportunity to help small businesses grow.

Following the 2008 financial crisis, banks severely restricted access to capital, disproportionately affecting fledgling and medium-sized businesses. Annual loan originations to businesses with $1 million or less in revenue fell dramatically between 2007 and 2013.

For payments companies like Square and PayPal this created an opportunity. They are now offering loans and advances to their small-business clients and charging a fixed fee for the capital advance. It's a way to develop a new revenue stream and help their merchants grow (which in turn, means more money from credit card transaction fees).

John Heggestuen, managing research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on small business loans that explains how these digital-lending programs work, how they stack up to alternatives, and why banks should be worried about these programs taking off.

BI Intelligence

In full, the report:

• Analyzes the market for small business lending and which business are most likely to use digital lending programs.
• Explains how these new lending programs work using Square and PayPal as case studies.
• Details the advantages that payments companies and other businesses see in small-business lending.
• Investigates why banks should be worried about these new lending initiatives and how they might push back.

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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of small business lending.