Valiant: helping SMEs find finance and grow
Valiant is an online broking platform designed to empower owners of small-to-medium enterprises (SMEs) by making finance easier to access, and supporting them as they research the market, analyse the available lenders and submit their application.
As part of The Dubs’ ongoing series of fintech interviews, Valiant co-founder, Ritchie Cotton explains why there was a need for Valiant in the small business loans space, and how their algorithm matches businesses with customised loans.
Valiant’s message is clear: small business owners are time-poor and often don’t have the spare hours required to research options outside of their personal financial experience. They often don’t have documentation readily available, yet need to be able to move quickly to take advantage of opportunities. These are the areas where the go-to finance brands of the past are failing them.
How did you come to realise there was a gap in the market?
I was on the Technology and Telecommunications Team at Credit Suisse and working on the IPO of Lending Club. This put fintech on my radar, and I was seeing RateSetter, OnDeck, and Prospa coming through.
My co-founder, Alex Molloy, was working as a financial services consultant with McKinsey. He had also identified fintech as an area of opportunity. He saw the potential for a solution that supports SMEs as we were seeing a flood of new entrants into the market, a lot of competition and little regulation.
In the residential mortgage space, there were already a couple of players who were scaling, such as Aussie Home Loans and Wizard, and this was levelling the playing field for consumers in a market where there is an overwhelming number of options. We couldn’t help wondering whether this approach would translate well in the small business finance space. What could we build today without bricks and mortar? How could we solve this problem with modern technology and a scalable application process?
How have small businesses in Australia traditionally sought business loans?
Many small businesses seek finance locally, through tried and tested channels. They may head down to their local bank branch and speak to the manager, who they’ve come to know well over the years. They might even ask the broker who managed their home loan. A considerable number of SME owners also consult their accountant when they’re looking at their options.
Small business finance has traditionally been tied to the owner’s personal approach to finance, but there’s so much to be gained from owners branching out and really exploring the market.
What problems were small businesses up against when searching for the right loan – or any loan?
From the bank’s perspective, it requires a huge amount of time and resources to understand a small business and underwrite an appropriate loan. Small businesses are required to provide a lot of documentation and the banks aren’t incentivised to fund small business loans. We’ve spoken to many small business owners who say that banks have taken up to four weeks to assess their loan, and ultimately decided not to fund it.
While this is understandable given the process the banks need to go through, it can be hugely detrimental to small businesses who might have time constraints or be depending on the loan to take advantage of a time-bound growth opportunity.
Also, when we speak to small businesses who have been turned down by the banks, they often tell us it’s because it was too tricky to underwrite. The amount of money the bank is required to hold in reserve for a small business loan is eight times that of residential mortgages, due to the higher level of risk.
It can be hugely detrimental to small businesses who might have time constraints or be depending on the loan to take advantage of a time-bound growth opportunity.
What are the resources you have in-house that find finance for SMEs?
We have an in-house team of credit specialists who provide product-agnostic assistance to business owners every day of the week, to ensure they understand the array of finance options available to them. We have access to over 60 lenders and we have a deep knowledge of each lender’s criteria in order to best serve the customer.
We’ve spent the past 18 months codifying the human expertise involved in writing credit and we’re confident that the interplay between our human-centric technology and customer service solution are helping Australian business owners because we’re seeing the results every day.
What kinds of businesses have you helped?
Valiant funds a range of small businesses across a number of industries. We’ve been able to find finance for bakeries and cafes looking to refurbish or upgrade their premises. We’ve helped gym owners finish their fit-out. We’ve helped chefs expand their line of business and acquire local suppliers. We’ve helped a limousine service add a Tesla to their fleet.
The businesses we help are so diverse and the types of funding they require so varied, we spend a lot of time ensuring the business owner understands why a particular financial product may be best suited to their specific project.
What kinds of information do you need from businesses to suggest the right loan?
Our proprietary algorithm takes into account the characteristics of the business, the preferences of the business owner and the need for the loan. In some cases, a business owner needs the funds urgently, so the speed of funding is more important than the rate, or they may have a complex project and their needs are quite specific.
What has the feedback been overall from clients and lenders?
Our Trustpilot rating currently sits at 9.6 which is a great reflection of the effectiveness of our platform and the dedication of our credit specialists, but we’re most proud of the positive impact that this is having on Australian small business owners.
Our lenders tell us that Valiant streamlines the process of lending to small businesses because we’ve already vetted the customer. They also tell us that this saves them time and helps them deliver a great customer experience.
How will you maintain customer centricity in years to come?
Our customers are at the heart of everything we do. We’ve spent the last 18 months codifying the knowledge base that we have in our business, and ensuring that our technology has the intelligence and expertise of a banker who’s been in the industry for more than 30 years. This helps us make every customer interaction smarter, and allows us to diversify into other types of finance rather than just maintaining where we are now. The technology we’ve developed is scalable and transferable, so there’s plenty more to explore.