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BitX Funding Middleman Approach to Small-Business Lending

BitX Funding Middleman Approach to Small-Business Lending

Todd Rowe

For Todd Rowe, the road to entrepreneurship began after the 2008 economic meltdown.

“About four to five years ago, I worked for OnDeck Capital in Manhattan,” said Rowe, referring to a non-bank lender to small businesses, where he was a senior business development manager. “Back in 2008, when we had the market correction, banks stopped lending, and small-business owners had nowhere to go to get funds. OnDeck, at the time, filled that gap.”

“But they only offered one product” for prospective borrowers, he said. “I would see all of this paper that came across my desk that said ‘Denied, Denied, Denied.’ I said to myself, ‘If we opened up a marketplace where small-business owners needed an SBA loan or a merchant cash advance or a short- or midterm loan, they’d have one location to come to, and we’d work with our funding sources and connect them to the correct business product.’”

In 2013, Rowe in Southport launched BitX Funding as an online marketplace for small-business owners and aspiring entrepreneurs to seek financing for their endeavors.

BitX Funding works with a borrower to fill out data on the company regarding how much money they want to borrow, the time frame they are working in to receive their funds, and how long they have been in business. Rowe reviews the information and contacts the applicant to receive more information about the depth and scope of the requested loan. The BitX founder Rowe, who is now working with 20 banks as his company’s financing outlets, determines which applicants have the best chance of moving forward.

“We see a lot of applications,” he said. “We are working with a 20 to 1 ratio — we might see 20 applications, but we can fund one.”

BitX has received loan requests ranging from $5,000 to $500,000. “The largest loan we’ve secured was a $300,000 loan for a printing company out of Las Vegas,” he said.

To date, Rowe has secured 100 small-business loans for clients. He noted that applicants do not pay him a fee or a commission for the service, with his revenue coming from the participating lenders.

“Each funding source has different pay scales” of loan middlemen, he said. “We negotiate that upfront. The funding source pays me directly and varies between each funding product. An SBA loan can be 1 percent; another product can be higher.”

As a lending middleman, Rowe said, he makes life easier for the banks working with him.

“I’m pre-underwriting the applications. Because of Dodd-Frank and all the other regulations and paying an underwriter a $100,000 salary for a $50,000 loan, it’s not really in their (lending banks’) wheelhouse.”

Rowe said half of his applicants are startups seeking their first cash infusion, and the other half are established but still young companies needing additional money to grow. Many would-be borrowers approach lenders with too much confidence in their ability to score financing, with dismal results.

“They think they can go out and request funding with a FICO of 550 or liens and judgments, or with somebody going after them to pay their bills. Once your name gets put into the system, it’s amazing what’s on you and how all these funding sources can grab that data and quickly decide on you. Or you can land on a web page with an online lender, answer a few questions wrong, and get quickly denied, and that’s the end.”

“With me, I go right to the underwriter and say, ‘Hey, wait a minute, don’t look at the black and white — there is color, and let me show you the color.’” In a loan application.

Rowe is also branching out his service to reach the “entrepreneurial home flipper,” seeking money to acquire, upgrade and quickly resell residential properties. “I can provide the capital the banks and mortgage companies don’t touch,” he said, adding that it helps if the flipper files as a limited liability company when applying for capital.

Rowe operates BitX Funding as a one-man shop. “My goal is to become very large and have private equity and private capital reach out to me and say, ‘We want to take it to the next level,’” he said.