An Online Small Business Lender’s Strategy: Quickly Turn Uncollected Payments into Cash

dollarA leading online small business lender is turning uncollected payments into cash in 24 hours ─ without sacrificing customer relationships. The strategy? TBF Financial, a commercial debt buyer, purchases the company’s non-performing loans on a regular basis so the lender can funnel cash back as quickly as possible into making more loans to small businesses. I have been attending fintech events like LendIt USA and am reaching out to online small business lenders to let them know that this option is available to them, too. Plans are being made for speaking at LEND360 on the topic.

Though TBF’s services are tailored for today’s online lending business models, they are based on a time-proven strategy. Our company has provided similar services to banks and equipment finance companies for almost 20 years. Now we are pioneering commercial debt buying services for online small business lenders just as we once did with the equipment finance industry.

Most online small business lenders I’ve spoken with are aware of only one option for dealing with bad accounts that have not been resolved: continue to handle the transactions indefinitely in-house, and perhaps turn them over to a collections agency eventually.

Lenders handling non-performing loans in-house throughout the life of the account have told me that they are concerned about the inefficiency of chasing bad transactions past a certain time frame. Their business model is focused on speed and on making loans, so at some point it makes sense to partner with a third-party.

On the other hand, some lenders who have eventually turned bad accounts over to collections agencies say that the process is still a lengthy one requiring too much time and overhead for relatively little gain. They are also concerned about losing their relationships with customers in the process, are worried about negative contacts with the customer, and want to maintain the customer’s loyalty in the event their business turns around and they can make more deals in the future.

A Better Option

TBF’s services provide online small business lenders a way to turn unresolved collections into cash while maintaining control over their customer accounts. Lenders we work with value the ease and speed of trading their non-performing loans for immediate cash.

We buy all kinds of non-performing finance products up to 4 years old from the date of last payment. For example, we purchase commercial loans, leases and lines of credit, which have personal guarantees, no personal guarantees, are secured, unsecured, pre-agency, post-agency, pre-litigation, reduced to judgment, etc.

We will work with you on a single engagement, periodic engagements, or establish a forward-flow relationship with your company where you regularly send information on non-performing finance products to us for pricing. Once a lender has a forward-flow relationship with us, it usually takes 24 hours or less to receive payment.

Here’s how it works.

  • Supply TBF with nominal information regarding the pool of non-performing assets to be sold. For example, we will ask for approximate information on the number of accounts in the pool and total of outstanding balances.
  • We value the non-performing assets and provide an offer price. 
  • Lender signs the purchase agreement. 
  • We wire payment. 
  • We work discreetly to collect debts over time without using the lender’s name. The process offers brand protection to the online lender because of our special collections approach and because TBF does not resell the accounts.
  • Regular transactions after that are typically handled online and completed within hours. Some lenders, for example, provide us a monthly list.

This strategy allows online small business lenders to infuse cash back into revenue generating processes while maintaining customer relationships. Their collections professionals, in turn, can focus efforts on resolving accounts that can be recovered more quickly.

manager-brett-boehmBrett Boehm is a principal and director of business development for TBF Financial. He can be reached at bboehm@tbfgroup.com, phone 847.267.0600, Ext. 101 or via LinkedIn