P2Binvestor (P2Bi) is an online lender providing access to capital for businesses which are typically not able to access traditional bank financing. The 5-year-old Fintech lender provides term loans and lines of credit based off of a borrowers assets – mainly accounts receivable. P2Bi explains that it uses a “unique asset-based lending model” that takes parts of factoring, purchase order financing, and asset-based lending to provide credit. P2Bi will lend up to $10 million against an A/R balance and will also lend against inventory.
If you are an investor (accredited only), you can participate in the platforms lending opportunities. As a marketplace lender, P2Bi also leverages relationships with institutional investors. P2Bi is also partnering with a growing number of traditional banks where the bank can seamlessly provide access to capital, building important relationships, while supporting high growth businesses. P2Bi is a bank-friendly Fintech.
P2Bi was founded by CEO Krista Morgan who has established herself as a leading female Fintech founder. Crowdfund Insider recently spoke with Morgan about P2Bi’s growth and her expectations for the coming year. Our discussion is shared below.
How is P2Binvestor doing?
Krista Morgan: P2Binvestor is doing great! I’m really happy with the progress we’ve been making. The company has hit some big milestones recently including passing the mark of $1 Billion advanced, and we are scaling – which is fun, but also a challenge.
Our portfolio is now 5 years old, which gives us a big enough data set and plenty of operational learnings to speed our growth rate while maintaining credit quality.
Because we fund growing businesses, our portfolio continues to experience strong organic growth. We have also been focusing on building our bank partner channel to deliver more cost-effective and high-quality acquisition.
What type of returns are investors receiving?
Krista Morgan: Our platform investors have seen average annualized returns of 10.0% over the past 5 years, net of fees and losses.
What are default rates like?
Krista Morgan: Since P2Bi’s inception, our default rate on all money advanced has been 1.4%. About 10% of those clients will go into a workout situation. We have a strong proven record that we have the ability to collect on the assets that we lend against. To date, we have collected over 50% of funds that have gone into default. We built an in-house collection team and typically fund the cost of collections ourselves, which gives us the ability to return principal to investors first.
What about terms and liquidity?
Krista Morgan: P2Bi provides a 1-year revolving line of credit to our clients. Most investors sign up and keep their funds rolling into new A/R for a borrower until the line of credit renews or is retired, but we can offer liquidity earlier due to the short duration nature of the assets we are lending against.
Many of our investors see this as a huge benefit to participating on our platform, and they use P2Bi for cash management when they are between investments and sitting on cash.
Is there a specific business sector that is more inclined to use your online lending service?
Krista Morgan: Currently, we have specialties in CPG [Consumer Packaged Goods] and Staffing because we bridge the cash gap between shipping and payment on the A/R, and a lot of those companies face this issue.
How competitive are you with traditional banks?
Krista Morgan: We don’t see ourselves as a competitor with banks.
Our mission is to be a strategic partner for quickly growing companies that don’t currently qualify for traditional bank financing, We have a bank partnership program where, over time, we are able to graduate clients from our product offering to a traditional client of the bank. It’s a great partnership because the clients are able to access traditional bank relationships much sooner, as well as have opportunities for larger lines at cheaper rates. At the same time, banks are able to establish earlier relationships with potential clients so that once these clients have grown large enough, they will want to become a client of said bank . You can learn more about our bank partnership program.
All loans are asset-backed. Can you provide some additional detail?
Krista Morgan: Unlike most other SMB platforms, P2Bi runs a daily borrowing baseline of credit with a lockbox, so we only lend on eligible assets. We re-assess those assets each day as payments come in from payors. This is where our Fintech competitive advantage comes in – the line of credit requires heavy management by our team, so we have technology that makes it easier for us to manage the risk and also makes this a lot less expensive to service.
From your point of view, how is the economy doing? What happens when a recession hits?
Krista Morgan: I think the economy is doing well right now. The advice I give to all of our clients is to keep an eye on fixed costs and be ready to cut costs very quickly if things start to change. Surviving in a recessionary environment is about cost-effectiveness and being able to right-size your business to lower sales if need be. If you can do that, then you can use the tough climate to increase your market share over your competitors.
As a female Fintech founder and executive, can you provide any perspective regarding your experience?
Krista Morgan: My personal experience has been that it is harder to get taken seriously as a founder, which has impacted raising institutional debt and equity capital. I can’t speak to whether that is because I’m a woman, or because I didn’t come into this industry with a background in lending. It’s probably a bit of both.
That said, I love this company, and I can’t imagine doing anything else. Being an entrepreneur isn’t easy for anyone, but it is so rewarding when you see something you built from nothing succeed. I think my lack of experience in this industry has led me to be more creative and think differently.
Any advice for aspiring female entrepreneurs?
Krista Morgan: The best advice I have is to build networks of other female CEOs, investors, and executives. Most of us are explicitly trying to help one another succeed, which lets you leverage your network to gain connections and opportunities.
Another important thing to remember is to be yourself and don’t worry about what other people are doing. My instinct is to compare myself to other CEOs and I often find myself lacking, which is not helpful to me or my business. Every CEO is struggling, every CEO is worried they’re making mistakes – it’s up to you to move forward on your own path, not anyone else’s.
And finally, just go for it. The world needs more women starting companies, so if you are so inclined, take the leap, because we need the numbers if we’re going to change the trends in financing and executive leadership.
How does 2019 look? What are your expectations for performance this year? Do you see any opportunity for expansion into other sectors or markets?
Krista Morgan: We have big plans for 2019. We are on a mission to help 10,000 growing businesses in this country with our innovative approach to lending, and we expect this year to deliver a lot of growth. We are also planning to expand our bank partnership program into new markets and sectors.