7 minute read
Startup Story

Fintech startup LoanWell empowers aspiring entrepreneurs with access to capital

Founders, Justin and Bernard, are walking in front of a mural. 00:00

How two founders aim to continue the rich legacy of Black banking in Durham

The video above was filmed in 2019.

Entrepreneurship is in Bernard Worthy’s blood. Born and raised in Atlanta, Bernard’s family members started small businesses in many trades. But no matter what industry they pursued, Bernard’s family struggled to access the necessary capital to scale their businesses. Bernard realized that community lenders were using multiple disconnected systems which often resulted in boxing out the same groups of people. After moving to Durham, North Carolina, Bernard teamed up with Justin Straight to bring all of these systems under one piece of software to make the loan origination process more efficient and more equitable. Their startup, LoanWell, offers an automated loan origination and portfolio management software for community lenders—including banks, credit unions, CDFIs (Community Development Financial Institutions), loan funds, and foundations—through a white-labelled platform with end-to-end functionality for application intake, origination, task management, underwriting, closing, servicing and reporting. And it’s not just the borrowers who benefit. “The money our customers save on loan origination means lenders can prioritize meaningful work and can utilize their teams differently, make more loans, or add new programs,” says Bernard.

Bernard and Justin also hoped LoanWell could be a catalyst for wealth generation for those typically left out of the financial system by improving access to affordable capital. As a Black-owned fintech startup in Durham, LoanWell hoped to continue the rich legacy of the historic Black Wall Street just a few blocks away. It felt right to headquarter their business at American Underground , a historic tobacco factory turned Google for Startups tech hub near downtown. The factory had once been the backbone of Durham’s economy, and now revitalized, it once again was the epicenter of the Research Triangle’s booming tech industry. “It was immediately apparent that American Underground was very different from other coworking spaces, with their focus on community development and prioritization of minority and female led companies,” remembers Bernard. “It felt as though they single-handedly created the broader startup ecosystem in Durham. They thought about every aspect of the startup journey and put their team to work. If that meant finding mentors, investors, talent pipeline, even lobbying the state legislature for bills and policies that would make for a friendlier startup environment.”

We can help small businesses continue to grow, to survive, to thrive in their communities. And that leads to all kinds of things, from jobs to wealth creation, wealth generation.

American Underground staff also encouraged Bernard to apply for the Google for Startups Black Founders Exchange, a curated program designed to move companies with a high-growth, scalable model from initial product to successfully raising seed capital with their business. Black Founders Exchange, hosted by American Underground and Google for Startups, provides rich hands-on training, meaningful connections, and a supportive community to help Black-led startups grow. Bernard and Justin hesitated to apply as LoanWell was still testing their MVP but they were accepted for the 2018 cohort—and the experience was game-changing. “It was one of those experiences that gave us the permission to dream much bigger than we had been allowing ourselves,” said Justin. “Google showed up with best-in-class mentors and industry experts that provided relevant advice and guidance for startups. They helped with sales, product, legal, fundraising, and business model development. The pitch preparation and ability to pitch to investors was incredibly important in our development as that would be our life for the next two years.” But the real takeaway from the program was the community. Bernard added, “The camaraderie was the best part of the program. It is rare to have so many Black founders in a room together. The founders and businesses they have started are so impressive. The relationships that were built and time together was a big encouragement.”

Founders, Bernard Worthy and Justin Straight, stand side by side in a parking lot looking up.

The team also used the opportunity to hone the LoanWell business model. LoanWell first launched as a DTC (direct-to-consumer) platform that enabled users to receive loans from community members in a crowdfunding-like feature, but the product wasn’t scaling as rapidly as he had hoped. “After launching at Black Founders Exchange Demo Day, we were growing 30% month over month from 2018 until early 2019 but the cost to acquire customers was too high to support a sustainable business model. We knew we needed to find a solution or LoanWell was not going to survive another six months,” remembers Bernard. So he started asking community lenders to refer businesses that did not qualify for their loans, but would be at a stage where a friends and family loan would be more appropriate—but the banks were more impressed with his software than his business pitch. “After demoing a number of community lenders we received the same comment halfway through, “This is better than we use internally. Could we use your software?’” said Bernard. He quickly realized that LoanWell should pivot into a B2B software program for community lenders—and that they would be able to accomplish more missionally by working within the ecosystem rather than disrupting it. LoanWell went from serving hundreds of small businesses to thousands and helping facilitate hundreds of millions of dollars in loans in a little over a year. “It’s a big mission of ours to really be a part of the story, the local fabric of where we live, but wherever our customers are as well,” Bernard said. “We can help small businesses continue to grow, or to survive, or to thrive in their communities. And that leads to all kinds of things, from jobs to wealth creation, wealth generation.”

As the LoanWell product pivoted, so did its tech needs. So Bernard applied for the inaugural Google for Startups Accelerator: Black Founders, a three-month virtual program for high-potential seed to Series A tech startups. Designed to bring the best of Google’s programs, products, people, and technology to Black founder communities across the U.S, the Google for Startups Accelerator offers deep dives and workshops focused on product design, customer acquisition, and leadership development for founders in addition to mentorship and technical project support. Bernard worked with Google mentors to leverage Google Cloud Compute Engine and Document AI. “We spent the majority of our focus on AI/ML and optical character recognition (OCR) as this would allow us to speed up the time it takes to close a loan,” said Bernard. “It was also an area Google could truly accelerate our progress in this space internally from their deep bench of experts and tools. Creating machine readable documents is an important part of automating the loan origination process and we’ve had really solid results using Document AI. The text, character, and image recognition has allowed us to offer future products to our customers that will speed up their time to process applications and save cost at the same time.”

And LoanWell wasn’t the only team seeking support in 2020. The COVID-19 pandemic hit small businesses and Black entrepreneurs—just who Bernard had set out to help—disproportionately hard. LoanWell saw an opportunity to help, and teamed up with North Carolina to power the state’s Rapid Recovery Loan Program. A collection of partners launched this $140 million recovery-lending program to support entrepreneurs and small businesses in the state by providing loan funds to small businesses which need help bridging the gap until federal loans (or other funds) are approved, or until businesses have time to recover from the current crisis. Funds have been deployed across all 100 counties in the state, and now the funders are re-upping loan amounts to qualifying businesses. The program has also created a natural collaboration for LoanWell to work with similarly mission-driven lenders. “Our mission is to increase loan access and affordability for small businesses that really need it, and the Rapid Recovery Loan Program has been completely consistent with that,” said Bernard. “58 percent of the loan recipients in the program have been minority- or women-led companies. Small lenders do the day-to-day main street lending that help expand and create local jobs, bolstering the entire economy. But they are making much smaller loans that can be supported by smaller institutions. Here again is where LoanWell comes in, because our technology can make those small business lenders more efficient.”

The camaraderie was the best part of the program. It is rare to have so many Black founders in a room together. The founders and businesses they have started are so impressive. The relationships that were built and time together was a big encouragement.

Bernard’s hard work to help others did not go unnoticed. In October 2020, LoanWell was one of 76 recipients of the $5 million Google for Startups Black Founders Fund, which provides non-dilutive cash awards to Black-led startups that have participated in Google for Startups programs or have been nominated by the partner community. Selected founders receive between $50,000 and $100,000 in capital along with hands-on support to help their startup grow. “Being an underfunded startup that is experiencing growth, the grant allowed LoanWell to hire the customer support and software engineer we needed to meet the demand,” said Bernard. “Without the grant, LoanWell would have had to stall growth and miss out on 5 to 6 figure multi year licensing agreements...receiving a grant instead of an investment is so exceptionally rare and a definition of a true gift. Most Black founders have to give away more of their equity to receive investment and in the end are limited in their ability to create wealth for themselves, their families, and greater community. To not have to give more of the equity away especially for a Black founder is especially meaningful.”

And LoanWell’s not slowing down anytime soon. Armed with product support and a strong network, Bernard feels confident as he looks ahead to the next step of his founder journey. “We have a product our customers love and repeatable sales under our belt so it is sell, sell, sell,” says Bernard. “Community lenders have two primary hurdles to growing and reaching more small main street businesses across the country: 1) The need for an automated end-to-end loan processing solution they can deploy from their kitchen table and 2) Access to more capital to increase their ability to lend. LoanWell is providing solution #1 with next-gen tech to speed up the loan origination process. We are working on a number of products to address #2 and are excited to reveal those in 2021.”

Learn more about LoanWell