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When the economy tanked around 2008, enrollment in Olya Losina's fledgling art school began to wane. Marketing the San Diego-based Losina Art Center to a new crop of students required cash the painter and her husband/business partner, Bill Beatty, didn't have. So in late 2011 they created a profile on Lendio, a free online service that matches small businesses with lenders. Within minutes, they had a customized list of half a dozen potential lenders offering the five-figure, short-term financing they were seeking. Within days, they received the cash they needed.
Lendio CEO Brock Blake says 300 U.S. lending institutions and nearly 1,300 individual lenders participate in the automated web platform, from banks and credit unions offering traditional, long-term loans to fast-cash alternative financiers such as peer-to-peer lenders and merchant cash-advance providers. Each month, roughly 10,000 business owners come to the 2-year-old site looking for financing, 60 to 70 percent of whom are approved for a loan, Blake says.
Losina sketched out how Lendio and her specific lender, On Deck, helped keep her art school afloat.
Why did you go online for your cash infusion?
When the economy took a hit, our students pulled back. All of a sudden they just couldn't spend any money, and it left us struggling. We couldn't get ahead enough to do any marketing to expand. We needed to take out a small loan to build the business. The banks didn't want to talk to us; we'd destroyed our personal credit opening the business. We're renting our place, so we don't have equity. What interested us about Lendio is that they didn't look at equity; they looked at the cash flow. And we could show that.
What was it like working with Lendio?
It was a simple process. We filled out a quick questionnaire and Lendio got us in touch with qualified lenders without us having to research and qualify them ourselves. This definitely helped save us time. We scheduled a follow-up conversation with our Lendio representative, who gave us tips on how to evaluate lenders. Then we spoke to a few of them. And we took time making sure On Deck was legitimate.
What did On Deck ask of you?
They weren't looking at our personal credit score; they were looking at our cash flow and whether we'd be able to pay the loan back. The time from when we submitted our loan documents to On Deck to the time the money showed up in our account was three to four days.
What were your loan repayment terms?
We qualified for $15,000, but we took only $10,000. It was an 86-day loan, paid back on a daily basis. The amount we were paying back was just $127 a day. We were getting a couple of new students a week, so it was a number we could deal with. But coming up with an extra $3,000 a month all in one chunk--it would have been paralyzing to see a big number like that. The loan ended up costing 10 percent to pay back over those four months. It was not a hard decision to make. We used that $10,000 to make more money.
How did you spend the cash?
We used the money for brochures, a major upgrade to our website and creating videos for the site. In the spring of 2012, we started a program to help students create and put together a winning portfolio to get into art college. We created a video with one of our students who got into a very competitive college. He came to us with no drawing skills whatsoever. We saw that there was a real market for the portfolio program, so we're continuing to push it as a standalone product. The money we got helped us create that program; now it's 10 percent of our business.