Two online small business lenders, Camino Financial and Fundation, are merging in a deal that its architects say is well timed to capitalize on a pullback in available financing for entrepreneurs.
Camino Financial focuses on smaller or newer businesses without an extensive credit history, and it's a government-certified community development financial institution. Fundation focuses on more established small and medium-sized businesses, and it often partners with banks on loans.
When the two companies are put together, they'll be able to make their processes more efficient, which will help them offer more loans to small businesses whose credit options are often limited, said Mickey Konson, who will be CEO of the combined company. Camino customers, for example, will be able to get the lines of credit some of them have been seeking.
"We can serve a much broader set of needs," said Konson, a former senior executive at Capital One Financial and co-founder of the online business lending firm StreetShares, which was acquired last year.
Under the terms of the deal, which was led by the Philadelphia-based private equity firm LL Funds, Camino Financial is acquiring Fundation.
Shivraj Mundy, an LL Funds partner who will chair the combined company, called small business financing an attractive sector. He said that the market is underserved, and that demand is rising, given the
The U.S. economy has thus far avoided a recession, but the environment has grown more uncertain, Mundy noted. While credit demand falls during downturns, the supply of credit "falls to a far greater degree," which provides an opportunity for those ready to lean in, Mundy said.
"The lenders who enter a downturn in good shape and maintain their credit standards are usually really well placed to build up a profitable … business, capture market share, and do it while maintaining both underwriting and pricing standards," Mundy said.
The combined company will be known as Camino Financial, but both firms' brands will continue to be used after the merger.
Fundation's model of partnering with banks on small business loans will also continue, said Konson, who added that he hopes to expand the company's loan volumes and its list of partners.
The integration with Camino, a CDFI, may also help Fundation's partner banks as they look to get more credit under the Community Reinvestment Act, Konson said.
