Fundation CEO says marketplace lenders moving to balance sheet funding in 2017 Exclusive

Fundation CEO says marketplace lenders moving to balance sheet funding in 2017 Exclusive

Thursday, 30 March 2017 10:53 AM ET

By Kate Garber

➤ Balance sheet funding model likely to win out among marketplace lenders, and they need permanent, diverse capital sources to weather credit cycles.

➤ OCC fintech charter applicants should expect significant oversight from regulators.

Digital small-business lender Fundation Group LLC CEO Sam Graziano spoke with S&P Global Market Intelligence about the company's balance sheet funding model and expectations for the OCC's proposed fintech charter. Graziano also shared his take on the broader digital lending industry. He pointed out that the word "profitability" was floated more at a recent industry conference and suggested that there is "an acute awareness" among digital lenders that they must prove they are sustainable by making money.

The following is a version of that conversation which was edited for clarity.

S&P Global Market Intelligence: Last time we spoke, which was in December 2016, we talked about your new partnership with Citizens Financial Group Inc. We also touched on bank partnerships and the merits of the OCC's proposed charter. What's new at Fundation since then?

Sam Graziano: We're just continuing to execute our strategy, which we're even more confident in. We do see the competitive environment within small business to be softening a bit, which is good for our long-term prospects as well as the other well-capitalized institutions in the market. We have nothing new yet to announce on other bank partnerships, but our pipeline is very strong.

Fundation announced March 21 that it secured an asset backed credit facility from MidCap Financial Services LLC. Graziano said the deal is another example of how the company is optimizing its balance sheet structure and gathering the capital and flexibility it needs to lend to more small businesses.

It adds leverage to our portfolio. We are a balance-sheet driven business predominantly. We put our balance sheet at risk. We do believe adamantly that that is the right model for the broader marketplace lending industry.

In fact, I think most marketplace lenders will end up with some form of balance sheet funding, probably by the end of the year. I think almost every firm in the space is taking that viewpoint which is that developing businesses that make money in lending is hard to do if you don't have a balance sheet.

Do you feel confident in Fundation's ability to shore up funding in the event of something like a turn in the credit cycle?

It's always harder in the midst of a credit cycle to secure funding. The magic is to be able to develop as permanent and diverse sources of capital as you can with very strong institutions ahead of a cycle, so that when you go into a market cycle you can take advantage of market dislocation. I think that's really what we're trying to do.

None of the arrangements that we will end up with from a capital supplier perspective will be like a marketplace model where it's: "hey, you can buy loans today, but if you don't feel like it tomorrow you can stop." That's not sticky, defensible capital. We're looking to develop more permanent, more long-term relationships with our capital suppliers that can support our balance sheet across cycles.

More details have come out on the OCC charter and more broadly there is the sense that financial institutions will benefit from regulatory roll-back. What's your take on how the new environment in Washington could affect digital lenders?

There are still more details to come, but I thought the OCC bulletin on the initial framework was extremely interesting. I thought it actually did give a pretty good amount of details. It does feel like there's a lot of momentum in that direction, to allow the industry to basically operate under a national framework, which I think ultimately would be beneficial to both consumers and small businesses.

What's interesting though is they also do make it clear that regulation of those that adopt the special charter will be substantial. It's not as if it's going to be a free pass. It's not as if it's going to be much more lax than [what] the banks operate under. That said, I imagine, where warranted, it would be a little bit more lax because at the end of the day, these are not deposit-taking institutions. Most of the companies I imagine will pursue the charter are lending institutions, none of which present any type of systemic risk to the financial services industry or to the economy at large.

One of the things that came to mind as I was looking at it was, given all the things that these institutions would need to do to be able to operate under the special charter framework, I could see some institutions saying "heck, if we're going to go this far, we might as well go all the way and basically apply for a banking license to be deposit-taking institutions."

Are you all more or less interested in applying for a charter after all of these details have come out?

I'd say we're more intrigued for sure. But we're still a ways off from making any decision. For us, it doesn't necessarily scare us off from what we've read because they make it very clear in terms of the types of products that they're going to be able to allow to have this charter.

We feel like we as a company are already in a pretty good place and potentially the level of investment we would have to make relative to others perhaps wouldn't be as large.

Fundation works with, not in place of, banks

Fundation works with, not in place of, banks

Tony Zerucha, March 27, 2017


In fintech’s early moments much of the talk was how these new tech upstarts were going to eliminate the big banks. Emboldened by spending their formative years in the midst of recession, many entrepreneurs (and rightly so) worked to create trust in finance by providing products and services from outside the system to meet the needs of those disaffected by it.

You don’t hear so much talk about the banks going away any more. In some corners you never did.

There definitely isn’t such talk at Fundation, CEO Sam Graziano said. A direct lender, Fundation commits their own capital to finance institutions’ small business loans. They hold them on their balance sheet and manage the loan servicing.

“We made a conscious decision a couple of years ago that we were going to build an enterprise that is an integrated part of the banking system,” Mr. Graziano said. “At the time the talk was technology was going to replace the banking system. You don’t hear that now.”

Many institutions find small business lending problematic as they seek to balance cost efficiency and reward. If you spend the same to underwrite both a $50,000 loan and a $250,000 loan, and there is enough business in the latter range, why swim with the small fish?

Advancements in technology make it worthwhile to work with those seeking small sums, Mr. Graziano said.

“Fundation helps banks engineer the small business lending process. We assist our partners with leveraging technology to improve service or expand their products and services.”

The recipe is a successful one. Fundation has grown over the past 18 months as they’ve cemented integrated lending partnerships with Regions Bank in the fall of 2015 and Citizens Bank last December. Expect more such announcements in the future.

Bank executives have of course noticed developments in fintech but, especially at the largest institutions, change is easier said than done, Mr. Graziano said. But they do have choices as they look to capitalize on the technology. Some develop their own capabilities while others acquire companies that have developed the technology they need. A third option is to outsource their technology needs by working with providers to develop white label solutions that work for their environment.

Before jumping in there a many factors to consider, Mr. Graziano said. First, decide how important this investment is to your business, because you are about to embark on a complex, and potentially expensive, decision-making process.

Are your expectations reasonable? Is their a justifiable ROI?

Mobile banking is growing in popularity and will serve some needs, but Mr. Graziano said he has yet to hear from one mobile banking provider who is delivering everything customers want to do via mobile. He sees customers mostly wanting to conduct more routine transactions through their mobile devices.

“For the more emotional decisions like borrowing and wealth management people want to talk to someone,” Mr. Graziano said.

But not all aspects of wealth management, Mr. Graziano explained. He sees advisors losing huge fees through systematic robo advisory services as customers move to lower cost investment vehicles such as ETFs. Some aspects of mortgages, insurance and deposit accounts are other areas that can be automated.

“I also think biometrics are one of those trends where you are going to see a lot of change happen,” Mr. Graziano continued. “People have to remember hundreds of passwords. Biometrics create a more convenient way for consumers

Fundation Secures Credit Facility from MidCap Financial

Fundation Secures Credit Facility from MidCap Financial
Additional Credit Facility Provides Funding to Support Acceleration of Company’s Growth
Business Wire
21 March 2017

NEW YORK--(BUSINESS WIRE)--Fundation Group LLC, a leading digitally-enabled lender and credit solutions provider, today announced that it has secured an asset backed credit facility from MidCap Financial, a leading specialty finance firm focused on the middle market. This credit facility meaningfully enhances Fundation’s capacity to extend credit to small businesses across the United States.

Sam Graziano, CEO of Fundation said, “We are thrilled to add another world-class institutional investor to our capital base. Our new relationship with MidCap provides us with substantial new lending capacity and diversifies our funding sources, allowing us to strengthen our competitive position in the small business lending market.”

Fundation focuses on delivering credit to small businesses through various forms of strategic partnerships, including banks, other financial institutions, and various service providers to the small business market. Fundation currently has strategic partnerships with Regions Bank, Citizens Bank, the BancAlliance community, the Minority Business Development Agency and a host of other partners.

”We are excited to begin this new relationship with Fundation. Fundation has built an excellent business, with a unique approach to providing credit to small businesses. We look forward to continuing to grow and evolve our relationship with Fundation,” said Michael Cheng, Managing Director of MidCap Financial Services, LLC.

Fundation, majority-owned by New York based private equity firm Garrison Investment Group, retains the vast majority of loans that it originates on its balance sheet. In August 2016, Fundation secured a $100 million asset backed credit facility with Goldman Sachs Bank USA.

About Fundation

Fundation Group LLC is a digitally-enabled lender and credit solutions provider. The Company develops integrated small business lending solutions with banks, enabling them to deliver credit online, drive cost efficiency into their lending programs and maximize customer retention by providing a positive customer experience and meeting the needs of the small businesses they serve. The Company also partners with a variety of organizations that serve the small business market in various capacities to deliver small balance commercial credit products. For more information, please visit

About MidCap Financial

MidCap Financial is a middle market-focused, balance sheet lender that provides debt solutions to companies across all industries. The company’s subsidiary, MidCap Financial Services, LLC is headquartered in Bethesda, MD, with regional offices in Atlanta, Charlotte, Chicago, Los Angeles, New York and San Francisco. The company focuses on the debt needs of the middle market in five areas:

• General Asset-Based: working capital loans collateralized by third-party accounts receivable, inventory, and other assets;
• Leveraged Finance: cash flow based loans to Financial Sponsor backed companies;
• Life Sciences: financing for venture backed and micro/small cap pharmaceutical, biotech, and medical device companies;
• Lender Finance: loans provided across the consumer and commercial finance sectors; and
• Real Estate: loans for the acquisition, refinance and recapitalization of healthcare and commercial real estate properties.

MidCap Financial refers to MidCap FinCo Limited, a private limited company domiciled in Ireland, and its subsidiaries. MidCap Financial is managed by Apollo Capital Management, L.P., a subsidiary of Apollo Global Management, pursuant to an investment management agreement between Apollo Capital Management, L.P. and MidCap FinCo Limited. References to MidCap Financial prior to January 2015 are to its predecessor, MidCap Financial, LLC.

Additional information about MidCap Financial can be found at

Barry Feierstein
MidCap Financial
David Moore, 301-760-7600

Where the money is: A small business lending gap

Washington Business Journal
By Andy Medici
3 March 2017


Martine Rostan had won a new contract.

Her company, Silver Spring-based Professional Business Interiors LLC, has helped firms pick furniture and lay out their new offices for more than 20 years. She needed a loan to purchase furniture as her latest client, a federal agency, would only pay once the contract was fulfilled.

So, she went to an online lender, Fundation. In her experience, traditional banks took too long to get back to her, and their answer might have been no. In that time, the client may have taken its business elsewhere. The Fundation dollars took just a few days.

“You only can get funding when you get the order,” Rostan said. “And when you get the order, you don’t have time to go to a bank for funding.”

She’s encountered online lenders that were less than clear about their loans or charged exorbitant rates. Fundation, she said, was transparent about both, and she walked away happy.

It’s a growing sentiment. In recent years, Greater Washington has seen a wave of community banking consolidation — conditions that could spell trouble for small businesses looking for loans at lower rates than those charged at national bank brands. It’s caused smaller businesses to increasingly turn to alternative financing, including equity sales and online lenders such as New York-based Fundation.

A shrinking pool

At the heart of this is the wave of banking industry consolidation.

In 1992, there were 11,463 banks across America, according to the Federal Deposit Insurance Corp. That shrunk more than half to 5,170 by 2016. Locally, there were 70 banks headquartered in the region in 1999. That was halved to 36 last year.

Much of the consolidation can be attributed to survival and better prospects for growth, especially thanks to increased regulations since the Great Recession that industry leaders say have weighed more heavily on smaller banks with fewer resources. Many banks retrenched a bit in the wake of the financial crisis, while others have since been absorbed.

And small business loan amounts, at least in Greater Washington, dipped last year. Banks loaned $290 million to small businesses in fiscal 2015, but that slipped to $240 million in fiscal 2016, according to the Small Business Administration. That was lower than fiscal years 2012 and 2013.

As banks become larger, the amount of overhead needed for each loan is the same regardless of the loan’s size, which means the banks gravitate toward larger loans, according to Sam Graziano, CEO of Fundation.

Fundation is a direct lender that partners with banks to provide the small business loans the banks cannot or are unable to do themselves, Graziano said. Banks often refer borrowers to Fundation, which can make the loans while keeping that small business customer at the partner bank.

While banks meet about 90 percent of the demand for small business loans from $250,000 to $500,000, they fall short on the smaller loans, according to Graziano. There is about $80 billion in demand for small business loans less than $250,000, and banks only fill about $52 billion, he added. Three-quarters of Fundation’s loans are for $150,000 or less, he said.

Another factor that could have slowed small business lending is the historically low interest rates that have lasted for prolonged periods. They make the profit margins on small business loans razor thin, making banks even more hesitant to lend nowadays.

“It’s rarely, if ever, because they don’t want to,” Graziano said. “It’s always been a challenging thing for banks to do small business loans.”

And yet, demand grows

He said the problem hits the youngest businesses the hardest.

Those without a long-term credit profile or those in service industries, such as restaurants, construction, florists or even nail salons, might fail a typical bank underwriting test. But some online lenders use their own private capital, which comes with a different level of underwriting. Fundation said it tries to provide transparent loan terms so businesses know what they're paying across the loan's lifetime.

“There is a really broad ecosystem of companies that are trying to serve the unmet need for capital from the small business market,” Graziano said.

Another funding source has been peer-to-peer lending and other digital lenders that are targeting equity in a business — much like the venture capital community, but on a smaller, more informal scale, said Anirban Basu, economic consultant and CEO of the Sage Policy Group. Essentially, small businesses can get funding by giving up a portion of the equity in their business.

“It’s not so much about lending to these emerging businesses. It’s taking an equity stake in them — and not debt,” Basu said. “You are buying into an idea.”

But Basu also thinks community banks are doubling down on efforts to build up their small business lending. The current loan crunch in that niche, he said, is mostly a holdover from the financial crisis, and small banks are now trying to diversify their portfolios.

“Many banks are working very hard to migrate their loan portfolio from real estate toward commercial lending,” he said. “And many banks want to be aligned with a rapidly growing businesses.”

That goes for a few larger banks, too, who remained some of the region's top small business lenders in 2016. Brian Smith, senior vice president of small business lending at Capital One Financial Corp., said the company has created an online loan application system where small business owners get an answer within 24 hours.

“The big thing that we found is that many small business owners care how long it takes to get an answer as the absolute criteria,” Smith said. “We are trying to address that situation. We are trying to make it easier.”

Flushing Bank Announces Expansion of Small Business Lending Efforts

UNIONDALE, N.Y., Feb. 01, 2017 (GLOBE NEWSWIRE) -- Flushing Financial Corporation (the “Company”) (Nasdaq:FFIC), the parent holding company for Flushing Bank (the “Bank”), announced today that it has joined the Small Business Loan Program created by BancAlliance and Fundation.

The Small Business Loan Program introduces a new financial technology platform that allows small businesses to access an online portal that will guide each small business customer to the products that best meet its unique need. This program is designed to enable banks to address the challenges of underwriting small businesses by providing a simplified and streamlined borrowing experience. Flushing Bank’s small business customers now have the ability to apply online by visiting and may receive approval in as little as one to three business day.

John R. Buran, President and Chief Executive Officer, stated: “We have been serving the small business market for over ten years. Our participation in the Small Business Loan Program allows us to expand our offering to better serve the rapidly evolving small business lending market.”

Fundation provides credit for working capital and expansion purposes to a wide array of businesses nationally. Unlike most non-bank lenders, Fundation’s products are conventional loan products but using its best-in-class technology platform, Fundation makes the process for applying for credit an extremely efficient and customer friendly process.

Sam Graziano, CEO of Fundation, said, “We are invested in driving the success of small business owners and partnering with Flushing Bank to do just that. The program we have created with our partner BancAlliance is unmatched within the industry, empowering community banks like Flushing Bank to serve their small business customer base and their local communities in an unparalleled way.” Brian Graham, CEO of BancAlliance, stated: “Our commitment is to the asset growth and diversification of the community banks we serve with a focus on expanding their relevance to their customers. This unique partnership with Fundation puts community banks at the forefront to be competitive with larger lending institutions without changing the traditional mission of community banking.”

About Flushing Financial Corporation

Flushing Financial Corporation (Nasdaq:FFIC) is the holding company for Flushing Bank®, a New York State-chartered commercial bank insured by the Federal Deposit Insurance Corporation. The Bank serves consumers, businesses, professionals, corporate clients, and public entities by offering a full complement of deposit, loan, and cash management services through its 19 banking offices located in Queens, Brooklyn, Manhattan, and Nassau County. As a leader in real estate lending, the Bank’s experienced lending team creates mortgage solutions for real estate owners and property managers both within and outside the New York City metropolitan area. The Bank also operates an online banking division,®, which offers competitively priced deposit products to consumers nationwide. Additional information on Flushing Bank and Flushing Financial Corporation may be obtained by visiting the Company’s website at

About Fundation

Fundation Group LLC is a digitally-enabled lender and credit solutions provider. The Company develops integrated small business lending solutions with banks, enabling them to deliver credit online, drive cost efficiency into their lending programs and maximize customer retention by providing a positive customer experience and meeting the needs of the small businesses they serve. The Company also partners with a wide array of organizations that serve the small business market in various capacities to deliver credit products to the business community nationwide. For more information, please visit

About BancAlliance

BancAlliance is a collaborative network of community banks that offers an array of lending programs and business services that might not otherwise be available to its members. The services of BancAlliance are designed to expand the impact and reach of member banks, enhancing their profitability, serving their customers in new ways, and growing and diversifying their loan portfolios. BancAlliance’s mission is to enable its members, the banks that direct its activities, to prudently diversify into high-quality loans in a manner consistent with the highest commercial and regulatory standards – without changing the nature or mission of the traditional community bank. BancAlliance has member banks located throughout our country. Learn more at

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this Press Release that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, risk factors discussed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and in other documents filed by the Company with the Securities and Exchange Commission from time to time. Forward-looking statements may be identified by terms such as "may", "will", "should", "could", "expects", "plans", "intends", "anticipates", "believes", "estimates", "predicts", "forecasts", "potential" or "continue" or similar terms or the negative of these terms. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The Company has no obligation to update these forward-looking statements.

Maria A. Grasso
Senior Executive Vice President, Chief Operating Officer
Flushing Bank

Fundation Review: Best Alternative Lender for Working Capital Loans (3rd Consecutive Year)

Our 2017 research and analysis of alternative lenders leads us to again recommend Fundation as the best alternative lender for working capital loans. We chose Fundation from dozens of alternative lenders. To understand how we selected our best picks, you can find our methodology and a comprehensive list of alternative lenders on our best picks page.

Why Fundation?

Fundation offers an easy application and approval process, simple loan terms and impressive customer service. Here is a breakdown of why it's our best pick.

Application and Approval Process

Applying for a loan with Fundation is quick and simple. The application can be completed online in less than 10 minutes. In addition to asking the basics about you and your business — name, address, email address, social security number, phone number, etc. — Fundation requests a few other details up front to help determine if you have a reasonable chance of being approved for a loan, including:

    • What your business does.
    • How long the business has been open.
    • Annual sales.
    • Annual business profit before taxes.

Based on that information, Fundation provides an instant profile analysis that includes how much of a borrowing risk businesses in your industry are, whether the amount of time you have been in business meets the company's guidelines and how your business profit before tax compares with other, similar businesses.

Moving forward, Fundation's online application asks you a number of other questions, including:

  • The type of legal entity your business is.
  • The percentage of the business you own.
  • How you plan to use the money.
  • If your business has any outstanding debt.
  • How many employees you have.
  • Whether you own or rent your primary office space.
  • If you have property or liability insurance.
  • The type of benefits you offer your employees (health, retirement, etc.).
  • The value of your personal bank and retirement accounts.
  • Household income.
  • Annual charitable giving.
  • If you have personal life insurance.

Fundation's proprietary application software then automatically captures additional information from credit, public-record and government-database sources in order to see if you might be a good fit for a loan. The software provides real-time, interactive feedback so you know where you stand. Based on this data, Fundation can give you a preliminary decision within minutes.

Businesses that get preliminary approval then work with a loan specialist, who gathers more specific financial data. Among the items Fundation will ask to see are three months of bank statements, a debt schedule for any outstanding debt, two years of tax returns and year-to-date financials. You have the option of sending this information to Fundation, or letting the company's system electronically retrieve these documents directly from the IRS and your bank.

The loan specialist also talks with you to get a better understanding of your business and how it operates. The specialist wants to get the "story" of your business, so he or she can advocate on your behalf if an underwriter has questions. We like that these specialists take the time to put some context to your financial info. We didn't see this type of personal attention with many of the other lenders we examined.

An underwriter then reviews the application and financial data and makes a final approval decision. The underwriting process typically takes about 24 hours, which is faster than some of the other lenders we investigated. If you're approved, the company emails you loan documents to sign. Once signed, the money is typically deposited into your account the same day.

Who Qualifies

There are a wide variety of variables that determine which businesses qualify for loans. The business's profitability, how much debt it has, how much money you need and what it will be used for are all taken into consideration.
While there are no hard-and-fast rules about who gets approved, there are several minimum requirements that must be met before you can even be considered. You must:

  • Have been in business at least two years.
  • Have at least three employees.
  • Have annual revenue of at least $100,000.
  • Have personal credit above 600.

We found it especially useful that Fundation clearly defines its minimum requirements; some of the other lenders were a little vague about theirs.

Loan Terms

Fundation offers conventional fixed-rate loans. This means that the interest rate remains the same for the entire length of the loan, regardless of whether market conditions change. We found it appealing that you know exactly how much the loan will end up costing you from the beginning. Some of the other lenders we looked into had variable-rate loans, which could end up costing you a lot more than you were envisioning at the start.

Fundation offers loans between $20,000 and $500,000. The money can be used for a variety of purposes, including working capital, business expansion and inventory purchases.

Since each business receives different loan rates, it is impossible for us to say how much a loan will cost you. However, Fundation's annual percentage rates (APR) range from 7.99 to 29.99 percent. Fundation was one of the few lenders we examined that even provided an APR range. The total APR rates include origination and closing fees.

Repayment terms are between one and four years. Shorter terms are for working-capital and cash-flow-management loans, while longer terms are for loans for business growth and expansion purposes.

To repay the loan, borrowers make fixed-amount payments twice a month. The payment is automatically deducted from your bank account, which helps ensure you pay on time each month. Depending on the terms of your loan, you're eligible to refinance after nine months of good payment history.

Fundation gives businesses the option of paying off the loan early for no additional costs. Many of the other online lenders we analyzed charged businesses a fee for repaying their loan amount early.

Customer Service

We were very impressed with Fundation's customer service. To test the type of support you can expect, we called the lender on several occasions and posed as a business owner interested in a loan.

A loan specialist, who was happy and able to answer all of our questions, immediately answered our initial call. Many of the other lenders we talked with wanted us to answer their questions — how much money we needed, how soon we wanted the money, if we were ready to apply over the phone, etc. — before addressing any of ours.

During our first call, we talked about the application process, the types of documents we would need to provide, what went into the underwriting process, how quickly we could get our money, how the repayment process worked and the types of loans offered. Our questions were answered clearly and in enough detail to make us feel confident about Fundation's processes. Some of the other lenders we spoke with gave us only one- or two-word answers that left us puzzled about their loans and how they operated.

When we made subsequent customer service calls, a friendly loan specialist answered, and spoke with us in great length about the Fundation loans, the process to get approved and repayment terms.

These loan specialists were also the only ones we spoke with who encouraged us to investigate other, alternative lenders to make sure we would be comfortable with Fundation. They explained what made their loans different and listed some specific questions we should ask other lenders. We liked that they were so confident that they had the best offering that they were willing to so far as to invite us to investigate other options.

Fundation also offers live-chat support, and is one of only a handful of lenders we looked into that made this option available. When we tested this service, our questions were quickly answered and they gave as much detail as when we spoke to the company representative over the phone.

In addition to being available via phone and live chat, Fundation loan specialists can also discuss loan options via email and an online form.


The biggest limitation with Fundation is that some businesses might not meet the lender's minimum requirements. If your business hasn't been open for at least two years, doesn't have at least three employees and doesn't bring in at least $100,000 a year, Fundation won't even consider you for a loan. We would encourage businesses that don't meet these criteria to check out our second-place winner in this category, OnDeck, which only requires at least one year of operation and $100,000 in revenue over the past two years. If your business has been open for less than a year, you should consider our best pick for startups, Accion.

Q&A Break with Sam Graziano, CEO of Fundation

This is a reposting of the piece "Q&A Break with Sam Graziano, CEO of Fundation," published by Politico Pro / Politico LLC.

Fundation is one of a growing number of online small-business lenders that have popped up in the last several years. Company CEO Sam Graziano took a few minutes out of the fintech conference to chat about the company’s hopes and concerns on government policy toward small-business lending.

This transcript has been edited for length and clarity.


You’ve mentioned your concerns about regulating small-business loans like consumer loans.

My main concern would just be if there ends up with state-by-state rulemaking that is too prescriptive. An example would be, there are some people that feel different ways about ability to repay, the concept of ability to repay [in small business lending]. And while on the surface that seems like, "yeah, the customer should be able to pay," when you sort of peel the onion back a layer and sort of look at that issue it would actually be very dangerous.

The businesses that need capital the most tend to be younger, higher growth businesses. And those tend to be the businesses where expenses come before revenue. So you can look at that on the surface and say that business doesn’t have the ability to repay, but in reality they are a business that needs capital the most and is in a position to sort of do the most for society.

And so while I think some rules and regulations could be well-intentioned, I am worried that they could end up having the wrong effect. So that would be my concern if we end up with a state-by-state regulatory regime that could be too prescriptive, more onerous for small business finance companies.

So shifting that to the OCC fintech charter, what was your reaction to that proposal, and moving forward what are things you’re looking at in terms of your decision as to whether to go for a charter?

I think we need to see it play out a little more, to see a little bit more of the substance behind what does it actually mean to have the charter. What areas that exist within bank regulation today are going to be applicable to a company that has this sort of special charter?

So something like capital standards.

A perfect example? Should capital standards apply to a business like ours and what is the risk to the economy at large if a business like ours goes down? Our whole industry is still tiny in the grand scheme of the capital markets, so it’s those types of things in particular.

The Community Reinvestment Act is another thing. For us, the CRA’s probably not an issue at all, the vast majority of our loans are less than a million dollars for companies with less than a million dollars in sales, and we’re like the poster child for CRA-style lending.

Nonetheless, there are things that just need to be a little bit clearer. I think the benefits are certainly allowing institutions like ours a safe harbor, if you will, out there. If you have this charter and you operate a certain way, you can do your business without having to worry about any type of state-by-state law or type of regime.

What’s your policy wish list for this administration?

I think further fleshing out the OCC charter is certainly a big one. Another that comes to mind, the different regulators that supervise the banking industry in essentially similar ways, but they all have their own take—the Fed, the OCC, the FDIC—you’re talking about a number of different regulatory bodies that are all essentially regulating the same things, I think jointly having very clear guidance of, when is it ok for you, Mr. Bank, to partner with a fintech, and what exactly needs to be in place for that to happen? What exactly does that fintech need to be doing to make that OK?

Third-party vendor guidance.

There’s some guidance out there. The FDIC has some, the Fed has some, but I think one comprehensive document that is signed off on by each of those regulatory agencies to say we’re comfortable with fintech partnerships when they look and smell like this, I think that would be great.

Several trade associations for online lending have popped up recently, do you think there’s going to be consolidation on that front?

I think there has to be. I think, again, there’s a lot of good intentions out there. They’ve been in a little bit of … a chess match with some of these associations and coalitions of different philosophies and different things like that. Generally speaking, pretty well-aligned but it’s sort of been a messy process to get people to come together.

Whatever the subtle or not-so-subtle differences are between one group or another, I think not sorting that out is more dangerous than not having a unified voice to be able to say to government, "Look, here’s what we’re doing well for society, here’s our concerns" and to talk about what those clear issues are. But if they’re getting conflicting points of view from different groups, or different groups are saying different things, it could sort of start to muddy the waters a bit.

And for an industry that is in the grand scheme of things not that big — we look at it and feel that it’s big.

You’ve attracted a lot of attention.

We’ve attracted a lot of attention for an industry that is sort of a rounding error in the scheme of the banking system. And I think it’s because it’s an early manifestation of what digital technologies can do to the lending markets in terms of the type of experience they can offer consumers and small businesses, the number of consumers and small businesses that can be served more effectively. So it’s almost like an incubation ground for the banking industry at large so it deserves a lot of attention, but nonetheless the industry is small. We need to be careful of and mindful of that to some degree because I think there’s probably only so much attention we’re going to get from the people making decisions in Washington.

Fintech Ideas Festival Rapid Fire Emerging Tech Panel

Fundation’s CEO, Sam Graziano, spoke at the Financial Services Roundtable’s FinTech Ideas Festival on Tuesday, January 10, 2017 as a participant on the Rapid Fire Emerging Tech Panel. Other panel participants included Anil Arora (CEO of Yodlee) and Bo Lu (CEO of BlackRock-owned FutureAdvisor). The panel was moderated by Deirdre Bosa of CNBC.

Click the image below to watch the full panel.

Fundation CEO Sam Graziano to Present at Financial Services Roundtable’s Inaugural FinTech Ideas Festival on January 10, 2017

January 9, 2017 09:00 AM Eastern Daylight Time

What: Fundation Group CEO Sam Graziano will be speaking on the “Rapid Fire Emerging Tech” Panel at the Financial Services Roundtable’s inaugural FinTech Ideas Festival. The panel discussion will focus on how FinTech companies are partnering with banks to change the financial landscape and help banks meet the evolving, complex needs of their customers. The panelists will also discuss their views on the future of the FinTech Industry.

• Sam Graziano, CEO, Fundation
• Anil Arora, CEO, Yodlee
• Bo Lu, CEO, Future Advisor
• Moderator: Diedre Bosa, CNBC

Why: Fundation Group LLC is one of the nation’s leading digitally-enabled small business lenders and credit solutions providers that offers conventional term loans and lines of credit for small businesses through its banking and other strategic partnerships. Mr. Graziano will share his unique perspective on the industry and describe Fundation’s innovative approach, which has enabled it to become the leader in bank partnerships, with long-term agreements now in place with top banks and financial institutions, including Regions Bank, BancAlliance and, most recently, Citizens Bank.

When: The panel will be held in San Francisco, CA and live streamed on from 11:45am-12:15pm ET (8:45am-9:15am PT) on Tuesday, January 10, 2017.

About Fundation
Fundation Group LLC is a digitally-enabled lender and credit solutions provider. The Company develops integrated small business lending solutions with banks, enabling them to deliver credit online, drive cost efficiency into their lending programs and maximize customer retention by providing a positive customer experience and meeting the needs of the small businesses they serve. The Company also partners with a wide array of organizations that serve the small business market in various capacities to deliver credit products to the business community nationwide. For more information, please visit

Media Contact:
Barry Feierstein

Citizens Bank Next To Take The Leap With Alt-Lender

Traditional banks are beginning to embrace their alternative lending competitors as a way to reach more borrowers and get a jumpstart on the technology and digitization behind the lending industry.

The latest bank to take part is Citizens Bank, which announced Tuesday (Dec. 20) a partnership with Fundation Group.

Fundation has emerged with a reputation to collaborate with banks, not work against them, by offering up its credit solutions and lending technologies to traditional FIs. For Citizens, this means small businesses can apply for loans and lines of credit through an online application at Citizens’ website, with Fundation powering the technology that enables the online application and a faster process. According to the companies, applicants can see approval within a few minutes and get their cash within three business days.

Fundation will also offer up its own lending services to SMEs that don’t meet Citizens’ requirements.

“We know that time is valuable for our business banking customers,” said Citizens Bank Head of Business Banking Chris Ward in a statement. “This simple digital application process will be quicker and more efficient for customers making smaller requests for credit, enabling them to get back to running their businesses sooner.”

“We believe that our new, automated lending platform will complement the tailored, advice-based services available through relationship managers and bankers to our customers who need larger loans or have more complex needs, such as cash management,” Ward added.

The partnership with Fundation mirrors an initiative in the U.K. that sees traditional lenders guide SMEs that have been rejected for a bank loan to an alternative lender to fill cash flow gaps.

The deal with Citizens follows recent partnerships inked between Fundation, Regions Bank and the Department of Commerce’s Minority Business Development Agency. The company also recently secured a $100 million credit facility from Goldman Sachs, it added.