Maria makes the best enchilada in Orlando, she's known for them. People have traveled from neighboring cities to enjoy them. For the past two years, her enchiladas have been selling like hot tamales, and everyone tells her she should open her own restaurant. Maria has dreams of opening up a small taqueria (restaurant) to sell her enchiladas, but how to make this into a reality?! Maria has spent countless hours online, sifting through 44 different types of business funding, discovering APR's ranging from the single digits to over 150%, and is not sure where to start.
Each year, small businesses struggle to get loans, and the lack of access to credit quickly is time lost, which translates to slow growth and lost revenue. As a result of the pandemic, 92% of small businesses said they suffered negative effects. For ease and convenience, 50% of Small and Mid-Size businesses (SMBs) prefer to apply for a loan on the web. Based on the service received, 92% of SMBs usually select their primary business financial institution as their lender. SMBs owners face financial bias during the interview with the loan officer. While not overt, the loan officer's bias towards certain groups of people based on their race, religion, socioeconomic status, social demeanor, ability to build rapport, appearance, etc. may influence the loan outcome.
Fortunately for Maria, her friend recommends LendSBA, and she soon discovers how easy it is to get the loan. With a few clicks, Maria is pre-qualified for a loan, and matched to several credit unions for funding. Maria soon starts selling her enchilada's out of her new taqueria funded by Florida Credit Union! Guests are now able to enjoy her enchiladas in air-conditioning with full service, that’s a lot of enchi-LOT-as!
To remove the negative bias of the loan originator, our group was inspired to build a Machine Learning app that would positively bias towards overlooked groups, including women, minorities, and the determined for acceptance of a loan approval. The app would provide small business owners faster access to capital, and a relationship with a local credit union that would partner with the business to grow and flourish in the community. Saving businesses time from researching the best companies that offer competitive rates, in addition to time going into the bank, submitting documents, speaking with a loan officer, and waiting days, weeks, or even months for an approval.
What it does
A mobile app where small business owners can apply online for a loan in minutes, and eligibility is checked for credit union pre-qualifications. If eligible, several offers are suggested, and the applicant can review the terms and select the most favorable one. This app helps bridge the gap between the small business owner and the Credit Union. Saving Money for the business owner with LOWER APR rates, TIME with instant pre-qualification and avoiding bias with anonymity with the loan application process. This solution will increase revenue for the Credit Union by expanding their loan portfolio, supporting the local community by supporting the local business and give the business FASTER access to credit. It also decreases the time a loan officer spends on prequalifying and vetting customers, allowing them to spend time on other activities.
When applying for credit, banks are the top choice for SMBs, followed by online lenders. The top reasons SMBs seek online lenders is the speed of credit decisions and the chance of being funded (Federal Reserve Banks, 2020). Credit Unions are known to provide loans with better rates and better services to their members, ‘People helping People’ is their motto. Credit Unions are community oriented and focused on serving their local communities which pairs them up nicely with the small business owner. Credit Unions offer personalized services, as they understand the culture and business conditions in the local economy, and are more likely to build long-lasting relationships that evolve with business growth and banking needs.
Our customers are owners of small to medium sized businesses who are looking for funding, under $5 million. The customers identify as minority and persons that are in underserved communities that are often overlooked, including the determined, the LGBTQ community, women, and veterans. Years of experience can range from start-up to less than 5 years in business. Owners would have a solid business plan, an idea for what the money would be used for, ongoing revenue or projected revenue, and collateral when applicable.
Backed by data driven Machine Learning algorithms, the probability of an applicant being approved by the Lender can be accomplished with a few clicks of the Small Business Application Loan, and the applicant is instantly matched to a few credit unions in the area. This gives the applicant options, and information to the favorable terms. By moving to an online process, financial bias is removed from the equation, and the approval rates are much faster.
Access to credit from lenders is crucial for the growth and survival of firms, and is an important source of growth for the US economy. 99% of US firms are small businesses, employing over 47.1% of the private sector. In 2019, over $644 billion in small business loans were provided by bank lenders in the United States. Small Business Lending makes up $13.1 billion, or about 2% of the market. Small Business Lending, 2019 The health of small businesses depends on how banks and other institutions respond to credit needs. The market share for LendSBA is $260 million.
SMBs will not be charged for using the platform. To monetize our platform, credit unions and banks would give LendSBA a small percentage of the loan for the service of bringing customers to their bank, and there are also opportunities for Finastra and other parties to have an affiliate link on their website or app, and they would receive a small fee for the referral. Advertisements from advertisers for banners and ads, and payment for listings would be additional sources of revenue.
For example, if a credit union pulls in $6million a year from Small Business Loans, and we bring in 10% of the customers, we would take about 5% of the commission, and aim to have about 100 credit unions partner with us, which is at least 2 credit unions per state.
How we built it
Used React native for the front end to build the user interface, and for the back end we used Finastra fabric APIs. Fusion Fabric APis and datasets used here: Datasets used from FusionFabric: Customer Loans, Demographics, Portfolio, Transactions Apis: Fair Lending Data Transfer Loan Product Configuration Banks Information
Challenges we ran into
Finding datasets that contained no bias for the algorithm to train on
Accomplishments that we're proud of
From our interviews with a few small business owners, we learned the problems that were facing with getting a loan, and we created a product that would help them to get funding in an unbiased and quick manner.
We worked across 6 different time zones and were able to put everything together in about a week's time.
Learning how to create a use case based persona, and ran through several iterations before finalizing our persona. Sharing her story, and understanding her needs throughout the process as a small business owner. With the help of AI, we were able to make the process faster and unbiased.
We used Finastra's fusion fabric cloud app and the color scheme from the github link provided.
What we learned
We attended the Finastra sessions, and learned how to bring an idea from concept into design, putting the user at the heart of the experience with UI/UX design. We also learned about the hurdles that small businesses face in getting loans, and discovered ways that we could combat the bias through Machine Learning Algorithms and positive bias to have a preference for persons such as women, minorities, and the determined.
Food trucks have grown and become a staple across many cities in the US. There were 23,873 active food truck businesses in the US in 2020, and the mobile food truck industry earns over $2B+ annually. The food truck industry is outgrowing the overall commercial industry at 5.4% vs 4.3%. Legal bottlenecks are slowing down the industry, which was expected to grow 0.4% in 2020. In 2019, $985M was the overall revenue stream food trucks grew by. The food truck industry is highly profitable, with an average startup cost of $50k-$60k. A $100k investment can result in a revenue stream of $250k-$500k/yr. There are about 45 government mandated permits and licenses that must be in affect before operation, that costs over $28k, and can be completed in 37 business days. Food truck diners rate their quality experience either excellent or good, and that's over 90%! Over 80% of them said that the dining experience was "different and unique", "new", "fun" or "exciting". Fast service, convenience, high quality, and low price are a few of the reasons why people love food trucks. Hmm . . perhaps we should look into starting a few truck too, who knew it could be so profitable?! 2nd Kitchen - food trucks
Thank you to Ms. Tanaya Jasubhai for leading the design thinking sessions, helping us in setting up our Mural, and meeting us to guide our design. Thank you to Mr. Pierre Quemard for meeting with us, and helping us to narrow down our pitch idea and walking us through the thought process. Thank you to Ms. Anita Lee for inspiring us to help small businesses, and providing us the resources and guidance in developing the app.
What's next for LendSBA
LendSBA has the opportunity to be a platform that provides integrated banking solutions by partnering with third-party vendors that can provide the tools and capabilities that SMBs want, in addition to partnerships in the community with financial advisors, small business associations, etc. It would be a community that helps community members to build and grow together, helping small businesses with getting funding quickly, and help in navigating business rules and regulations.
Partnering with Small Business Association's, applicants could access grants provided by the government, and have access to additional resources and workshops. Credit unions could give more favorable terms to applicants that complete the workshops with the SBA, as they would be less risk averse.