Within marketplace lending, most of the coverage of this emerging fintech sector is in regards to the connecting of investors and borrowers on P2P platforms. But, another market taking shape are three way marketplaces that match borrowers, investors and vendors. Learning more about this sector, Finance Magnates spoke with Scott Harmon, CEO of Noesis, whose firm operates a lending platform focused on the $30 billion a year energy supplies market, such as heating, ventilating and air conditioning (HVAC) equipment.
Operating in a niche market, Noesis connects vendors of commercial energy equipment and installers with customers and investors who can provide financing for projects, in what Harmon refers to as ‘vendor aligned finance’. The typical example of a Noesis customer is a building manager who uses Noesis to receive bids from vendors for their HVAC needs, and upon getting prices, also connects them to lenders.
Overall, the marketplace is used to find and help fund energy and cost reducing projects, of which Harmon cited proper modernization of infrastructure which can reduce energy costs by 20%.
But, beyond connecting the players, the real technology of their platform and what may allow Noesis and other vendor aligned fintech firms to grab meaningful market share are the project insights they provide. In Noesis’s case, their software analyzes building projects to determine what the cost savings of installing new HVAC equipment are and the long-term benefits.
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On the surface, the obvious benefit of project evaluations are reports that vendors can use to pitch potential customers of the worthiness in upgrading their energy infrastructure. For customers, the energy estimates and cost estimates are useful for factoring future cash flows.
Harmon also explained that beyond vendors and their customers, the cost expectations and energy savings are useful for lenders. With it, they gain a clearer perspective on a building operator’s future cash flow and ability to repay their debt. As a result, the additional cash flow information allows lenders to provide capital for projects where simply evaluating the future resale of purchased equipment may not make economic sense.
Overall, Harmon described that because of the overall benefits he believes, “That there is a trend in fintech to create three way marketplaces.” He cited that traditionally, vendors will have their own sales people to attract new deals, with some of the larger players also operating financing divisions. Through marketplaces, vendors have the ability to outsource segments of their sales process, as well as no longer needing to worry about sourcing financing for their customers.
In regards to their platform, Harmon stated that Noesis is working with a group of lenders that he described as “all have knowledge in the equipment financing space.” For lenders, the marketplace reduces the cost of acquiring loans as new deals are funneled to them through the platform. Currently, Harmon revealed that average loan sizes are for around $350,000. Overall, Noesis and other similar firms show the continued direction of marketplace platforms and their ability to carve out new niches in alternative finance.
Fintech Spotlight is a new column on Finance Magnates devoted to reviewing innovative financial technology companies and sector trends.