As published in

Fundation CEO Sam Graziano says he prefers to stay under the radar and does not want to discuss hard numbers on his firm’s loan volume — but he makes it clear that Fundation’s partnership strategy has helped it take market share from rivals.

Graziano says his company, a credit solutions provider, is not an online lender in the traditional sense and does not invest in direct-to-customer marketing strategies. Fundation’s growth has come through partnerships with big banks and referral sources. “We’re trying to create a convenient way for those partners to bring customers to us,” Graziano says.

This seems to have given Fundation the edge on rivals such as OnDeck, despite the latter’s relationship with JPMorgan Chase. Rather than work with one megabank, Fundation has relationships with multiple banks across a broad product spectrum, Graziano says.

Fundation’s partnerships with big banks, which began in late 2015, have gained momentum, he says. Typically the banks source the transactions or Fundation performs lending activities on behalf of the bank, and in the future in the name of the bank, he says. “We will originate for the benefit of the bank’s balance sheet as well as our own,” Graziano says. “We’ve been able to do that while no other firms in the market have.”

One reason why banking institutions wanted to partner with Fundation, he says, is banks need to re-engineer their credit delivery process for small commercial loans and lines of credit. Working with a firm such as Fundation, which does the heavy lifting on behalf of the bank, is one option. Another route is to find a software solution that meets the bank’s need.

Fundation does business with big banks as well as groups of small banks to “move the needle” in terms of the volume the company does, Graziano says. His company also works with other firms that sell products and services or provide consulting to a small business. This lets Fundation introduce its own products through its partners. “We’re trying to build a defensible, strong portfolio as opposed to growth for growth’s sake,” Graziano says.

Capital backing for Fundation comes from private equity firm Garrison Investment Group and debt facilities with Goldman Sachs and Midcap Financial. Graziano says Fundation made a decision several years ago to adopt the partnership-driven strategy with regulated banks. It was a harder route to take, he says but offered the potential for a strong payoff.

Despite some turmoil among companies in the market for traditional customers, Graziano says Fundation actually took market share from competitors by not getting aggressive on pricing loans or loan approval rates — a mistake he says overzealous competitors made. “They wanted to grow for the sake of growing originations without making sure they had the right credit risk management framework in place,” he says.

More difficulties may lie ahead for online lenders as fatigue sets in among the investor community, who have grown weary of companies with little differentiation in their growth plans, the executive says. “There’s too many companies out there that do the same thing. That’s why you’re seeing companies try and exit, shut down, or run into walls.”

A crackdown on this market may also be in the works from state regulators, who are less hesitant about taking action. “There are some companies that have gotten away with things they shouldn’t have for a long time,” Graziano says. “The regulatory environment will start to shift to make it more challenging.”