Our Head of Capital Markets spoke on a panel earlier this month at Opal’s Marketplace Lending & Alternative Financing Summit. We asked him how it went. “Great!” he said. So we asked him a couple more specific questions.
What did you learn at the conference?
People are focused on the next possible recession. Nobody seems to believe we are that close, but there were multiple conversations around one taking place in 18-24 months. There were specific conversations around ways to protect capital-heavy businesses in the event of a recession. Many stressed a focus on uncorrelated capital and multiple funding sources, as well as avenues outside of the securitization market.
Whether right or wrong, it feels like the number of new entrants is slowing down.
What was your top takeaway from the conference / event?
My key takeaway was that companies that are generating assets (i.e. credit card and loan receivables) are very sought after by investors.
We remain in an environment where investors continue to be starved for yield. As a result, Banks have begun to increase their efforts to work with earlier-stage platforms in the hope of becoming a multi-year growth partner that can generate differentiated yields and revenue streams for investors and the bank.
Bank risk metrics haven't loosened, meaning the amount of capital that banks are willing to lend against a dollar of asset value has remained stable. The traditional entrance point to working with a bank has been closer to $100-150mm of assets, where today banks are showing willingness for companies that can show a reach of $100mm in the next 12 months.
On the higher-priced and higher-risk spectrum, hedge fund lenders are increasingly stepping up efforts to compete with one another through looser terms and lower pricing. It is a good time to be a lender that is accessing the capital markets.
Steve Lapin is LendUp's Head of Capital Markets.