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Start Your Business Startup Funding

Online Lending Site Greases Wheels of Credit Market

Perhaps you’ve heard: there’s a jobs bill on Capitol Hill, loaded with measures designed to jumpstart small businesses. A crucial component of the legislation is a $30 billion lending fund that community banks could tap into for cheap. Logic follows that community banks will lend that money to small businesses. All the bill requires is some goodwill among senators. Good luck.

BoeFly.com has a vested interest in the Senate’s ability to play nice. The startup matches small businesses with lenders over the web, and stands poised to capitalize on reinvigorated debt markets. The company debuted in March with a mission to standardize most of the loan application process and create more avenues for companies to network with banks. Borrowers and lenders are flocking to the site, the company says.

The startup rose from the ashes of a traditional lender. BoeFly’s president, Robert Tannenhauser, previously led Business Loan Express, once one of the largest SBA lenders in the country. The company, already devastated by a fraud case perpetrated by an executive now in federal prison, proved fatal to the company when later combined with the 2008 collapse of the financial markets.

But the episode served as a wake-up call.

“During that time, [small business lending] was a very lucrative, inefficient market,”  Tannenhauser said. “We were doing it all wrong. Too much brain damage.” A booming business can overlook inadequate practices. Recessions, however, reveal all the ugly details.

Tight margins

BoeFly, which stands for Business Opportunity Exchange (the “fly” refers to how quickly the process works) acts as a meeting place for borrowers and lenders. Banks pay $165 a month for complete access to all loan applications. Borrowers fork over a one-time fee of $465 to be seen by the lending community. Brokers, loan buyers and service providers can also join. The single convening point eliminates headaches from all sides.

With margins tight, small businesses need to spend time doing what they do best.

“If your business is baking cakes, you don’t want to have to do the financing, too,” said JaCee Demartino, director of operations for American Association of Government Finance, a Las Vegas for-profit loan broker. The company, which strives to make credit accessible for businesses, is finding that BoeFly has made its job easier.

That doesn’t, however,  make finding loans easy. Demartino said she now has to reach out to six or more lenders to land a deal for a client. Not that long ago, she could get the deal done with one or two banks. But she credits BoeFly’s standardized Smart Form, approved by the member banks, with making the process easier.

The credit market is loosening, however slightly. The Federal Reserve’s July survey of loan officers indicated that for the first time since 2006, banks eased standards for small businesses. The timing matches BoeFly’s take-off.

Membership on all fronts has increased about 25 percent each month, according to David Nayor, an executive vice president at BoeFly. The company recently crossed the $1 billion mark for loans facilitated. And Tannenhauser said that lending members have another $250 million waiting in the pipeline.

Greasing the wheels

The concept of simplifying the application process seems obvious. Getting better, more accurate financial information to lenders greases the wheels.

“When borrowers consult with people who are very familiar with process, their loan applications are more likely to be accepted,” said Mike Stamler, a spokesman for the SBA.

For now, the $30 billion loan program sitting on Capitol Hill is just a number on a piece of paper. It may never escape the Senate’s chambers, given the fierce partisan politics surrounding passage of the bill. But the economy will rebound one day, and BoeFly is ready.

“Hopefully,”  Tannenhauser said, “we become the standard for efficiency.”