
Jessica Bates
Head of Business Development
Dwight Funding
The exponential growth in e-commerce sales also has meant an increase in the number of businesses that sell to their customers — some exclusively — via e-commerce. This growth has created a new crop of e-commerce/direct-to-consumer (DTC) borrowers that generate little to no commercial accounts receivable (as they do not sell to their customers on commercial terms and are usually paid by credit card) and whose inventory is the centerpiece of their commercial collateral.
Director of Commercial Banking
Pacific Premier Bank
Before diving into the particulars of providing senior debt solutions to e-commerce and direct-to-consumer businesses, can you tell us more about Dwight Funding?
Dwight provides revolving lines of credit ranging from $500,000 to $5 million to lower middle market businesses with annual sales ranging from $3 million to $75 million. The company is headquartered in New York City with clients located throughout the U.S.
Bates: Dwight Funding was one of the first movers in developing tailored commercial finance solutions for lower middle market companies that sell direct to consumer via e-commerce. Some of the tech banks identified a need and found a solution for larger e-commerce businesses, but due to the increase in e-commerce payment processing platforms such as Shopify that reduced barriers of entry to selling direct, there was a growing segment of SMBs (small and medium businesses) in this market.
We then created a framework to evaluate and underwrite these business profiles and began filling the funding gap for these borrowers. Over time and with more data points, we have been able to create asset-based structures that maximize availability for our borrowers while also ensuring that Dwight Funding is effectively and prudently monitoring the underlying collateral.
Bates: As asset-based lenders, we’re still collateral focused. However, we have developed a unique way of underwriting the health of a DTC business and its collateral. This enables us to provide inventory only or inventory heavy revolvers to businesses of this profile.
How do you foresee the lending landscape evolving for e-commerce borrowers and lenders in the next 12 months to 18 months?
Lenders will need to evolve and tap into available data to meet these changing needs. My sense is that there will be more than enough growth in e-commerce and that there will be plenty of opportunity for additional lenders to enter and thrive in this space.
Asset-based lenders’ consistent focus on underwriting collateral on par with — and at times with precedence over — cash flow allows them to remain nimble and to deliver businesses (e-commerce and otherwise) with the creative working capital solutions they need. •