Forget About SaaS: Software-as-a-Lender Could Be The Next Big Thing

My Post - 2019-08-13T154614.889Ella is a first time business owner who started a landscaping company two years ago that is now growing faster than she ever could have imagined.

In order to keep up with the rush of new business, she needs a loan as soon as possible to hire additional employees and buy more equipment. If she doesn’t get it, she’ll need to turn away new customers – something that could cripple her company’s reputation. She has been to three banks and called a dozen more but the answer is the same from all of them – they’ll need hundreds of documents and three months to review them before they can even consider her for a loan. This is time and resources Ella does not have.

The next day, however, she gets a business saving email from her software-as-a-service (SaaS) provider, Green Software Systems. Ella uses Green Software to manage her scheduling, payroll, job status, and communication with employees. They also process all of Ella’s payments, making them a SaaS + Payments provider, which allows them to be in Ella’s payment flow collecting verified information about her business performance, and they have just announced they are launching a new lending product for their customers. With the click of a button, Green Software could issue Ella a one year loan to cover the new employees and equipment. It is the lifeline Ella needs and just like that, she is armed with the capital to expand her business and take on new customers.

Many small business owners constantly find themselves in Ella’s position, but the process of applying for a loan and getting approved is daunting and time-consuming. For example, if you’re applying for a Small Business Administration (SBA) loan, you typically have to provide a long list of documents: A business profile, resumes for “each owner and key member of management,” personal and business financial statements, cash flow projections, and many other statements and disclosures. The entire process takes an average of 60 to 90 days. Even if completed, there is still an 82% chance they will be denied. Even if approved, they still have to deal with the administrative headache of providing continuous and manual documentation after the loan is issued.

SaaS Companies Should Expand their TAM by Moving into Adjacent Products & Services

As we discussed in a prior article, many vertical SaaS companies like the one Ella uses have added payment processing functionality in order to expand their total addressable market (TAM) and become vertical SaaS + Payment companies. In the article, we used the example of Toast, a staff management, POS, and payment processor for the restaurant industry. As shown below, Toast increased their TAM 3.5x by incorporating payment processing into their SaaS solution. – Read more

Leave a Reply

Your email address will not be published. Required fields are marked *