The pandemic has had a devastating effect not only on small businesses, but also the lenders who provide them with financing. Many lenders were unable to adapt their servicing practices to accommodate distressed merchants while maintaining a viable revenue stream for themselves. In addition, those lenders relied upon their standard data and underwriting procedures which resulted in overbroad restrictions, that led them to stop approving applications and originating new loans. As a consequence, those lenders wound up violating the financial covenants of their warehouse lines and/or securitizations. The lenders then had to pause or cease their operations while they looked to be acquired or find new financing sources.
Credibly, consistent with its innovative and strategic approaches to helping small businesses, immediately offered tailored relief to its affected customers, allowing them to keep their businesses open throughout the pandemic. Of equal importance, Credibly’s securitization bondholders and warehouse lenders overwhelmingly approved the necessary amendments, allowing Credibly to provide the short-term modifications that the merchants needed. These agile and forward-thinking steps, along with a diversified financing strategy, allowed Credibly to maintain the use of all of its financing sources – their asset-backed securitization and warehouse lines with two national banks.
“Although Credibly did not have a contractual obligation to assist our merchants and modify their obligations during this period, we felt it was the right thing to do in the long-term interests of both our customers and our company. Fortunately, our bondholders and bankers shared this view”, said Ryan Rosett, Founder and co-CEO. “Helping business owners during their time of need proved to be the right decision for all parties.”
Credibly was proactive with its portfolio at the onset of the pandemic. They moved approximately one third of its staff to their Portfolio Management team, in order to assist thousands of small businesses with account modifications.
As for new originations, by analyzing not only new data, but also data from the past fifteen years, Credibly quickly refined its underwriting model and processes to effectively measure risk under the new normal, and proceeded to roll out incremental iterations with the goal of continuing to serve a full array of industries across the U.S. By virtue of taking these proactive steps, Credibly continued funding throughout the pandemic. Today, Credibly’s funding volume continues to grow, and both its pre-COVID and post-COVID portfolio performance is best in class, while other lenders are still trying to figure out how they will underwrite and fund small businesses.
On September 23rd, Kroll Bond Rating Agency removed it’s Watch status for Credibly’s public market securitization, and affirmed the ratings on Credibly’s bonds. This is a major testament to the quality of Credibly’s Origination, Portfolio Management, and Treasury teams.
“The fintech working capital space has primarily existed through an expansionary economic period,” said Rosett. “I’m proud of our team for accepting the challenge and successfully adapting to the current economic environment, while simultaneously supporting America’s small- and medium-sized businesses. We look forward to maintaining this momentum and investing in our growth so that we can continue to do what is required to be a trusted financing source for small businesses nationwide.”
Credibly continues to invest heavily in its technology and infrastructure to allow for dramatically increased scale, while also making its technology services and other resources available to partners in the small business financing ecosystem. Credibly is pursuing new partnerships with businesses that have active SMB customer bases in order to provide much needed financing at this critical time.
