Middle market lending lending to small and medium sized enterprises, or SMEs has long been the forbidden fruit of banks. While there is a significant need for capital amongst SMEs in most global markets, banks have not yet developed a profitable lending model for SME customers for two primary reasons. First, the sheer number of borrowing relationships to be managed by a large SME lender could be in the hundreds of thousands. Second, the diverse SME risk profiles create significant uncertainty in assessing credit risk and determining appropriate pricing.
The first wave of net-based business models, such as US-based LiveCapital.com and BizBuyer.com, provide borrowers with the ability to auction...
