New Concept in Small Business Loans Blends Online Data Analysis with Collaborative Underwriting

Kim Mays
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Evan Baehr and Will Davis have decided to ditch their mail-digitizing service, Outbox, in favor of a whole new concept: small business loans. And though you may think that small business loans aren’t exactly a new concept, you may want to check out the duo’s latest business model for the company they call Able.

Baehr and Davis plan to launch the loan service later this summer, but the concept is creating a bit of a buzz. The partners are dedicated to helping small businesses succeed in the modern digital world. Able plans to provide service to the Fortune 5 Million, or “the 5.8 million small businesses that represent the backbone of the American economy.” These are the same businesses that provide jobs to nearly half of the American workforce, but many cannot lock down sources of credit that are “reliable and affordable.”

According to Baehr and Davis’ blog on their upcoming company, the true issue that inspired them to create Able is that small businesses often cannot meet the required levels of credit:

This systemic problem traces its origins to the historical pattern of growth, collapse, and consolidation within our banking system. As fewer banks control ever larger portions of the capital supply, they have become “too big to fail.” To prevent failure, government regulation has attempted to eliminate risk altogether, creating an environment where only the soundest businesses can receive credit. These are often the very ones who do not need it, making it nearly impossible for smaller and less established companies to receive credit when they need it most.

The idea behind Able sounds simple, according to TechCrunch:

Able will help to provide credit to smaller entrepreneurs using a method to price risk through what they’re calling “collaborative underwriting.” Though the name sounds like it might be leveraging the so-called “wisdom of the crowds” for something like peer-to-peer lending, that’s not quite the case. Instead, the post says, they’re “innovating on the information layer, not simply the capital layer.” In other words, they’re using the crowd’s wisdom to price the loans, not entirely fund them.

Able will analyze the small business’ data via social media, online reviews and check-ins by patrons. The approved borrowers will then be required to find three to five “backers,” which could include friends, family or customers who will assist them in funding the initial 25 percent of the loan. The remainder of the loan will then be covered by Able, which will receive scheduled payments from the small business and redistribute that money to repay the backers and Able itself.

Baehr and Davis believe that by accessing a small business’ “information layer,” they can better discover possible risks to loan it money. For small businesses, the “capital layer” alone isn’t enough to base a loan decision upon. And though the thought of needing “backers” may sound intimidating to some borrowers, the partners say that having the support of those who truly believe in a business shows a lot about its owners and its future.

According to TechCrunch, Able has loaned money to 40 small businesses even though it hasn’t officially launched.

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