In this new era of banking, where real estate loans are often frowned-upon by regulators, niche markets are popping-up fast. Instead of loaning money for new buildings, financial companies are even lending money for new babies.
“Fertility Finance” companies are partnering with doctors to make loans for in vitro fertilization, fertility treatments and egg harvesting.
In the past, couples have used home equity loans and credit cards to fund fertility treatments. But with traditional forms of financing drying up, dozens of companies like Springstone Financial LLC in Southborough, Mass, NBT Bancorp of Norwich, NY, and My Medical Funding in Tampa, FL, are working with doctors to promote this financing.
Their pitch is that these loans will help grow patient demand.
Traditional loans made by banks are governed by state and federal banking regulators, but some of these firms that get money from private investors aren’t monitored by banking agencies. These loans are typically unsecured with interest rates averaging 17%. (Rates are generally based on a patient’s credit-worthiness.)
What makes these types of loans so interesting from a marketing perspective is that these firms have found a niche and positioned themselves as an expert in this area. They even supply brochures for the doctor’s office. I call this vertical marketing: finding a market and designing your product around a particular need.
Obviously, this could be applied to a variety of industries.
Instead of “fertility finance” you could have “farmers finance” and position your banking products and services around a farmer’s needs. Farmers need financing to buy seeds and fertilizer with plans to pay the loan back when they sell their ripened crop.
Or what about “manufacturers financing” that supplies loans when a manufacturer gets an order knowing it will be paid back by the vendor? Companies like PrimeRevenue in Atlanta, GA, bring buyers, suppliers and financial institutions into a common trading environment that is accessed securely over the internet. They operate internationally in multiple languages and multiple currencies. The finance companies are able to see purchase orders in real-time and the manufacturers are able to get their money sooner.
Niche loans are great, but how will companies be able to find funding in this economy?
One way, called “CrowdFunding,” is currently making its way through the House and Senate. The House has already passed legislation that will allow businesses to use CrowdFunding and Senate Majority Leader Harry Reid announced that the Senate will move forward on bills like this “to spur small-business growth.”
This legislation will enable companies to solicit small equity investments from large numbers of people using the internet. The most they can raise is $2 million, but this is a lot more than a majority of America’s small businesses would ever need.
As it stands, the bill would limit an investor’s investment to 10% of their income or $10,000. So, instead of investing $10,000 in a CD at a local bank that is paying .07%, an individual could “loan” that same amount to a small business and earn a lot more.
This way, the business can get funding much faster than waiting on a bank loan committee to make a decision. And since the internet is so transparent and fast, you’re able to track that company’s health even faster than the FDIC can keep up with your community bank!
The internet is changing the way we all “bank.” We can pay our bills using Google Wallet or PayPal and we’re able to borrow money for our business using CrowdFunding – all without going into a brick and mortar building.
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Neal Reynolds has worked with hundreds of banks and credit unions around the country helping them to grow core deposits and market share without growing their marketing budgets. Contact him at [email protected].
