Office Depot Inc., which has been looking to offer more types of financial services to its small-business customers, found its plans delayed recently by the demise of its partner, PrimeStreet Corp., an online lending marketplace that ran out of money and closed in February.
Office Depot had intended to offer small-business loans on its Web site through PrimeStreet, which was based in Boston and was a conduit for 60 financial institutions. A note on PrimeStreet's Web site says the company is seeking a buyer.
Staples Inc., Office Depot's largest competitor, uses LiveCapital, a similar service that offers online applications for loans ranging from $10,000 to $20 million and provides financing through more than 70 financial institutions.
"We believe financial services provide an important offering to small-business customers," said an Office Depot spokeswoman.
Meanwhile Office Depot, the nation's largest small-business supplier in terms of revenue, has been taking other steps to offer financial services to its customers online. The company aims to sell more of its products by becoming a one-stop shop for small businesses and home offices. Using its Web site as a platform, Office Depot has struck deals with 15 companies that supply various small-business services, such as bookkeeping and debt collection. It also has ties to a market exchange for purchasing and selling goods and services.
But until it finds a partner to replace PrimeStreet, Office Depot, with $11.6 billion of worldwide revenues in 2000, will have to postpone its plans to offer small-business loans and unsecured and secured lines of credit.
Its ambitions are similar to those of numerous nonbank companies - from automakers to package delivery services - to offer loan products without directly involving traditional commercial banks.
This has hardly been good news for banks. For example, 60% of small-ticket leasing is handled by nonbanks, according to Financial Institutions Consulting, a New York firm that advises executives at financial services companies. "Banks don't have this market," said Charles Wendel, president of the consulting firm. "But they should have it, given the nature of the business."
In leasing, for example, retailers have turned to specialists such as Heller Financial Inc., GE Capital Corp., and the CIT Group. Leasing specialists have wrested the business away from banks, despite banks' broad relationships with small businesses.
Similarly, Office Depot's deal with PrimeStreet would have put a nonbank on the front end, interacting with customers. "The companies dedicated to this space are the nonbank players," Mr. Wendel said.
Mr. Keenan, a former American Banker reporter, is a free lance writer in New York.