Garrison Investment Group, along with minority partners Solel Investment Group LLC and The Leo Group, LLC, have announced the execution a joint venture agreement with Fundation, Inc., a New York City-based small balance commercial loan (SBCL) platform. This large, undisclosed amount of funding provided by this transaction will enable Fundation to substantially increase its capacity to deploy loans to the small business market and permit Fundation to continue to develop its market-leading credit and risk management technology and customer experience.
John Bunting, Managing Director with Garrison, commented, “We have seen a number of platforms over the last several years aiming to address the small balance commercial loan market. It was immediately clear to us that Fundation took a lengthy, deliberate and thoughtful approach to put the building blocks in place to develop an intelligent and scalable solution for this important segment of our economy. Small balance commercial lending has a variety of different barriers to entry. We believe Fundation has built a highly defensible business model and we look forward to supporting their growth.”
Fundation’s Chief Executive Officer, Sam Graziano, added, “Garrison is an ideal partner for Fundation. Garrison recognized that we have the people, processes and technology to build a highly successful lending platform if provided with the appropriate level of capital support and strategic oversight. We expect that this commitment from Garrison will enable us to immediately heighten our brand awareness as a leading source of debt financing for small businesses across the country and to grow our company unconstrained by access to capital.”
Fundation offers its business customers a simple, efficient and transparent borrowing experience. Fundation provides credit-worthy borrowers nationwide with access to capital through a modernized, entirely electronic process and a sensible loan product - a fixed-rate fully-amortizing loan with 2, 3 or 4 year terms. Fundation’s product was specifically designed to be an alternative to scarcely available bank loans and high-rate, short duration working capital products available through other non-bank lenders.
The company’s technology condenses what was traditionally a one to two month borrowing process into an efficient 5 to ten minute paperless, online application process. The company delivers funds electronically to borrowers’ accounts typically within 3 business days of an online loan application. Mr. Graziano added, “Our technology platform and customer experience were designed with a ‘customer-first’ mindset. We don’t use the words simplicity, efficiency and transparency as catchphrases. Our customer experience and our corporate culture are manifestations of those values for our customers.”
Unlike traditional lenders, applicants on Fundation’s website are processed through a first-of-its-kind, interactive loan application process designed to educate applicants on their credit profile and their industry. Mr. Graziano explained, “We are fundamentally changing what applying for a loan looks and feels like. Customers shouldn’t be kept in the dark with respect to how a lender, or any service provider, makes decisions that affect them.”
Most of Fundation’s customers borrow to make capital improvements, renovate facilities, open new facilities, expand products or services offered, purchase equipment, hire new employees, launch marketing campaigns and refinance higher cost debt. To date, Fundation’s customers have borrowed an average of approximately $165,000 per transaction over 3 years. Fundation attracts companies from a diverse range of industries including, but not limited to: health and personal care; retail; education; engineering; technology and technical services; manufacturing; hotels and hospitality; transportation; wholesale; agriculture and a variety of other professional service industries.
Mr. Graziano and Doug Gordon, the company’s Head of Business Development, founded Fundation with the goal of developing a loan sourcing and underwriting platform specifically designed around addressing the legacy challenges in small balance commercial lending. Mr. Graziano and Mr. Gordon recruited three highly experienced professionals to manage Fundation’s credit and risk management function: Chris Corinaldi, the former head of small business lending risk strategy for Dell Financial Services, serves as the company’s Chief Credit Officer; Sandip Nayak, a former Capital One and Citigroup consumer finance professional, heads credit automation and analytics; and Mahinda Yapa, the former head of credit strategy for Pitney Bowes’ financial services division, oversees all activities related to risk management. Collectively, these individuals have overseen more than $15 billion of small business loan originations and leases and $2 billion of consumer loans. According to Mr. Corinaldi, “The challenges in small business lending have always been the cost inefficiency of the underwriting process and what we call ‘thin-file customers.’ Lenders in this market must adopt a technology and data-centric approach to succeed.”
The company’s underwriting technology utilizes a process called data aggregation, which gathers Fundation’s proprietary data and a wide array of third party data in real-time to collect the information necessary to render credit decisions rather than relying on physical documentation collection and review. Fundation plans to continue to adopt new sources of data as they emerge and to continue to develop its own proprietary data sets to broaden the scope of its borrowers and expand the company’s product set over time.
With the launch of this joint venture, Fundation has announced its “1,000 x $100 Million” program, whereby Fundation will seek to monitor the hiring activities of its customers. To date, borrowers have created an average of two jobs each as a result of loans received from Fundation.
Fundation’s aim is to infuse $100 million of debt capital into the small business economy, fueling the creation of as many as 1,000 new jobs.
Fundation owns and operates a highly advanced and proprietary technology and operational platform designed to meet the debt financing needs of the small balance commercial loan market. Fundation seeks to finance established commercial borrowers across the United States. The company was founded in 2011. Visit http://www.fundation.com for more information.
Garrison Investment Group is a leading middle-market credit, distressed and asset based investor based in New York City with more than $3.2 billion of assets under management. Garrison has a team of over 60 employees and targets transactions in financial assets, corporate and middle market credit, and commercial real estate.