Brock Blake and Levi King have founded more than six companies between them. Over the course of their various entrepreneurial endeavors, like many other small business owners entrepreneurs, Blake and King applied for dozens of business loans — and received dozens of rejections. When they did receive approvals, they usually came with terms, rates or amounts that made the loan more of a hassle than a help.
In 2011, Blake and King launched Lendio, a service that aims to simplify the process and help match small business owners on Main Street with the right type of loan (and lender) for their business. Rather than forcing small business owners to go bank to bank, lender to lender and wade through complicated terms and thousands of options, Lendio essentially automates the process, partnering with hundreds of lenders and aggregated more than 3,500+ loan options across those lenders to help remove the friction.
Rather than compete with small business lenders like On Deck or Capital Access Network, much like Kayak does for airfare, Lendio partners with these lenders to enable business owners to receive (what is often same-day) pre-approval, while providing their partners with access to quality candidates (and business).
Today, having helped hundreds of thousands of small business owners connect with loans, Lendio is announcing that it has closed a $4.5 million round of Series B financing, led by Runa Capital. Two of the startup’s previous investors, Tribeca Venture Partners and Highway 12 Ventures, also participated in the round, bringing Lendio’s total investment to $10.5 million.
For the average Main Street small business, sorting through the thousands of loan options can be a headache. Generally speaking, entrepreneurs have to start from scratch, with little knowledge of which loans work and which don’t, and the research required to find the right loan takes time that could be better spent elsewhere. Furthermore, it’s no wonder that, writ large, small business lending suffers from a lack of transparency, when brokerage firms charge exorbitant fees to help businesses find the right loan options.
Like Zenefits is doing for startup health insurance and benefits, Lendio is essentially attempting to become a next-gen broker, streamlining and automating the process by cutting the middle men out of the process and connecting lenders directly to those in need of capital. To do so, the startup asks business owners to answer four questions that help them build a profile on the business and get a sense of what type of loan would best suit their needs.
Lendio allows entrepreneurs to choose the best loan from a set of options it serves, then introduces businesses directly to lenders. And, in the case of some of the more tech-savvy lenders, like On Deck and CANN, Lendio has built a set of services and API tools that integrate with their underwriting platforms.
This means that, when Lendio finds a quality applicant that is a good match to one of their loan packages, it pings the lender and can get an answer on whether or not they’re pre-approved and what the loan amount will be within a matter of seconds. This isn’t true for every lender, Blake says, but the number of lenders integrated with its APIs is growing.
Lendio wants to optimize the chances of finding the right loan for every small business, but the fact of the matter is that not every business is going to qualify. The startup claims that about 70 percent of businesses are approved and, for those who aren’t, the platform offers tools to help them prepare.
But Lendio isn’t the only startup that’s trying to make the lending process less of a pain. In fact, at the end of last year, Levi King left Lendio to tackle another point of friction within small business lending: Credit. Launching earlier this year, King’s new startup, Creditera, aims to give business owners easy access to personal and business credit reports, scores and ongoing alerts through a single sign-on interface for both types of credit data.
After watching hundreds of thousands of business owners come through Lendio attempting to acquire financing for their business, he says, the biggest obstacle that stood in the way of securing a great loan came down to credit, personal or business. This, in and of itself, is the same reason why On Deck developed its own scoring system for a business’ creditworthiness — because so many banks rely on personal credit score to evaluate a business owner’s credit. While an owner may run a legitimate, profitable business, forced to let their own credit stand in place of their business, their personal credit score often rules them out.
With Creditera, King isn’t looking to compete with his former startup, especially considering he’s still a shareholder, he says. Instead, Lendio helps business owners get loans by matching them to the right loan and lender, he explains, but personal and business credit are the two most important qualification factors in underwriting.
So, by allowing business owners to get quick access to credit reports, scores and alerts, becoming a kind of aggregator for all the “freecreditreport.coms” of the world, King thinks Creditera could be a potential partner for Lendio and other commercial lenders. It’s also intended to be a place where small business owners can go to find educational material and resources on credit, something he believes is sorely needed in the space.
King says that he believes that there’s a huge market opportunity, considering that there are 30 million small businesses in the U.S. and many of them aren’t keeping an eye on their credit score, in spite of the fact that it’s the lifeblood of their business and has a huge impact on success. The company wants to differentiate from other options out there by offering small business a platform that combines personal and business credit with identity theft solutions into a single platform.
The business model, for now, is simple, King says, with Creditera charging business owners for access to their credit, but that could change going forward. Using this model from the get-go allowed the startup to become cash-flow positive within three months of beta, and raise $650K in seed funding, $500K of which came from Kickstart Seed Fund, and $150K of which came as royalty financing from Rock & Hammer Ventures.
For more, find Lendio at home here and Creditera here.