How does InterNex Capital’s online process differ from all of the other FinTech lenders out there?
Paul DeDomenico: One of the things that you must have in place as an asset-based lender is the right infrastructure to be able to properly monitor and manage any type of ABL facility. We chose to focus on technology enabled infrastructure first to make sure we could deliver an optimal client experience while ensuring strong risk management as a lender. We have a dynamic borrowing base that updates in real time as a result of our integrated technology platform. Our borrowers have strong flexibility and the ability to draw on demand in their facilities with our true revolving line of credit product.
For us, the infrastructure and technology platform is paramount so we focused on building an end-to-end user experience to where we would have a fully integrated platform from the day they apply, onboard with us, and through the life of the facility. Our mission is to deliver superior customer experience for our clients so they continue to renew, and stay with InterNex. The borrower experience is key for us.
In terms of our platform and how it is different from some of the players in the alternative finance space, I’d like to separate us from what I would call the micro space, defined as companies with revenues below $1 million and facilities normally below $250,000. In the micro space, online application funding timeframes come into play and are a huge factor. When you are completing an asset-based facility of $250,000 to $5 million, speed is important, yet we feel the time it takes to properly underwrite and deliver on a transaction of this size takes more than ten minutes or instant approvals where you may see in much smaller deal sizes.
We make sure that when our partners originally introduce a deal to us, and the borrower starts to interact with us, we automatically take their information through our portal and it runs through our credit-scoring algorithm. We are able to respond very quickly with an early read, and then look to accelerate the delivery of that facility within a very competitive period of time.
We are aiming to be within a three-to-five-day target period from application to funding, which we think is very competitive, especially in the asset-based lending and the alternative finance space, specifically in terms of players who are doing comparable facilities of $250,000 to $5 million.
Unless you have the end-to-end underlying infrastructure, it is really difficult to provide a comprehensive customer experience. At InterNex, we have built a borrower portal that effectively replicates the sub ledger of our clients so they can seamlessly manage their working capital and customer accounts receivables through our platform. When our borrower logs in to our portal, we want them to get a dashboard snapshot of their overall working capital performance for their accounts receivable. They are able to get their visual online aging anywhere from Current to 0 to 30, 30 to 60, 90+, and overall performance, and how that also then translates into their own availability and their own borrowing base. Borrowers, once they are integrated and work with the InterNex platform, we hope will see it as their own user-friendly sub ledger and their own customer dashboard. We believe that is going to be something our clients see as a key differentiator.
What are some of the industries you are going to be serving?
Paul DeDomenico: We target manufacturing, business services, transportation, waste management, wholesale trade, and industries that traditionally have A/R rich type balance sheets so that we’ll have a collateral base that borrowers can leverage to access capital to help run their business. Accounts receivable is the primary collateral for our revolving line of credit, and we are focused only on business-to-business.
Please provide some background on InterNex Capital and the team.
Paul DeDomenico: Even before putting the team together, my co-founders Lin Chua and Simon Hermiz, first focused on the tremendous opportunity in what we deemed the lower middle-market lending segment of the market, or customers with annual revenues between $1 to $25 million. This is a part of the market that is underserved as a result of the banks leaving the smaller loan side of the market to do larger transactions, primarily driven by increased regulation and higher capital costs triggered by the financial crisis. We confirmed a significant market need existed to provide working capital financing to lower middle-market companies because of the significant gap in providers and attractive products to address the demand in this segment of the market.
We then decided to put a team together with tremendous domain expertise in asset-based lending, specifically in short duration working capital financing, and marry that with technology expertise and process efficiency enabling us to deliver loans into this lower middle market segment while doing it profitably, and with the ability to dramatically scale.
Lin, Chief Operating Officer and Head of Capital Markets, worked with me at GE Capital in the past so we have had significant experience working together, including building and scaling business platforms as “intrapreneurs” within GE Capital versus as entrepreneurs like we are doing now with InterNex.
Simon Hermiz, Managing Director of Risk, is a BNY/Fifth Third Bank trained credit executive with strong experience in the FinTech space. We classify him as one of the smartest guys in the room and he was instrumental in the initial development and build of our initial credit scoring and data analytic capabilities.
In the three of us, we possessed the initial domain expertise in asset-based and commercial lending, yet we needed to secure a very strong chief technology officer who could work with us on leading the technology build, and someone who had proven experience and track record as an entrepreneur.
Jim Miller is our CTO, and also a co-founder, and he is what I call a ‘FinTech pioneer’. He has been a financial technology builder for the better part of his career. Notable companies that he was a co-founder and CTO of were Creditex and trueEX. We happened to meet Jim through another pioneer in the FinTech space, Justin Brownhill, Managing Partner at SenaHill, who is also one of our Board Members. Jim was intrigued by the market opportunity and the strong potential to leverage technology in building a unique platform capability in the small business lending market. Leveraging his financial technology domain expertise and proven track record to offer loans in a more efficient, seamless and frictionless way, to this segment of the market, provided Jim a clear path to his next build venture in the FinTech space through InterNex.
In addition to the above, risk management is paramount, especially as an asset-based lender, so we brought onboard a chief risk officer who had tremendous domain expertise and track record in asset-based lending; not only in ABL, but also in this segment of the market. Paul Puryear, who joined us as CRO from GE Capital, and had been at Heller Financial prior to that, has spent most of his career in the asset-based lending space, including the small and medium-sized business market space that we are looking to target.
Rounding out the team with strong sales and marketing talent to go after the small to medium-sized businesses, we hired Matthew Gillman from OnDeck and Simrita Singh from Newtek Business Services. We believe OnDeck has done an excellent job of building and scaling their business in the last 5 to 7 years, and Matthew played a big role in that as one of their channel development leaders. Matthew as our Head of Business Development, brought in an additional player who also came from OnDeck, Corbin Godfrey, to build and develop our channel sales. Simrita as our Director of Marketing came from Newtek Business Services, which is focused on SBA lending where she was also their Marketing Leader. InterNex has a very strong mix of experienced ABL players from GE Capital and leading banks, strong technology leadership, and lending experts from Newtek and OnDeck.
This all came together from concept and business plan in May of 2015 to the actual formation of our company in August of 2015 when we formalized our operating agreement, and capitalized the company with initial founders funding to launch the business. We also kicked off a strategic partnership with Genpact, which is an NYSE-listed company and a global leader in digitally powered business process management and services to help us build and scale our platform. We have been building the technology and operating infrastructure since August until we officially launched on September 13th. We will of course continue the build and development of InterNex as we look to deliver industry leading financial solutions and services for our partners and clients.
How are you getting the word out that you are open for business?
Paul DeDomenico: We have been proactively marketing the company and our client value proposition to our channel-based origination partners since the beginning. We will continue to work with current, potential and future origination partners who are going to help bring deal flow to us since we originally started, especially sounding and leveraging SMB contacts we have in the market, intermediary financial service advisors, potential partners, e-invoicing providers, and asking them all about client needs in the market. We have been collecting tremendous data and feedback from the market along the way. Addressing specific market and client needs has been our primary focus in how we built and developed our business to best service demands in the SMB market.
We already have dozens of intermediary and channel partners signed up. As soon as we announced that we were live, we were able to get those partners registered and on our partner portal to start receiving applications very soon after that.
We are very excited about the premarketing efforts that we made and we are even more excited about the post go-live marketing efforts. Simrita, Corbin and Matt have been doing training sessions with our partners in terms of our strike zone related to our market, key industries that we are looking to serve, and how the InterNex revolving line of credit, accounts receivable-backed type facility, can deliver to the demands and needs of the market.
What are the goals for the future?
Paul DeDomenico: Our initial focus post go-live is to operationalize, and institutionalize the business, go through data, complete our first transactions and really test the plumbing of our platform. We want to collect feedback from our initial clients and our partners to focus on the ongoing development of our platform and our capabilities.
We are very much customer zealots here, so client and partner feedback is paramount for us. As we complete our first handful of transactions, we want to get that very important feedback from the borrowers and our partners in terms of how the customer experience is and how it compares to their expectations. Confirming positive client experience will enable us to put the foot on the accelerator, and look to really grow and scale the business as we move into 2017. At that point we will look to complete more partnership opportunities with additional partners including regional community banks through a network of contacts that we have in the industry, through E- invoicing providers and also corporate relationships on the supply chain finance side where SMB opportunities and needs are tremendous. The opportunity to access this market is significant and it really relates to the significant demand of the small- and medium-sized businesses who are looking for the right working capital facilities that can help them run and grow their business.
We are very excited having been in the asset-based lending world, specifically small business financing for almost 28 years now, to build a business, leverage ABL expertise and new technology to be able to transform the way working capital lending is done for the lower middle market small business segment. The team that we have put together is one of the most dynamic teams I have ever seen come together to go after this segment of the market, and we are very excited to deliver to the small and mid-sized business community. It’s an absolute dream for our team. Now it’s all about execution.
Eileen Wubbe is senior editor of The Secured Lender.