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Small business loan platform Able ended its local pilot period today, expanding its outreach to entrepreneurs nationwide.
The Austin-based service has funded 24 small businesses locally and grown its portfolio to $3.5 million. Able’s 100 members comprise the entrepreneurs themselves and the backers they recruit among family and friends to fund 25 percent of their loan at an interest rate of their choosing.
Able funds the rest, which is just one of the ways it distinguishes itself from crowdfunding sites like Kickstarter and Indiegogo.
“We cheer on other crowdfunding platforms, [but] we have a different model,” says co-founder Evan Baehr. “Backers become lenders, receiving monthly interest payments."
They also help borrowers raise significantly more money because Able funds three times the amount the family and friends contribute.
Baehr also highlights Able borrowers’ accountability as an advantage for backers over crowdfunding. His staff includes financial experts who engineer the formal framework required for lending and ensure compliance while regulations catch up with the tech.
“Currently there’s no structure to friends and family investing,” he said. “There’s no legal structure, no underwriting, managing repayments, etc. Our product makes all of these challenges better and less problematic.”
So far, Able’s track record is solid, with zero defaulted loans, and zero borrowers unable to find backers. In fact, some businesses have been exceeding their backer goals, and multiple backers are now backing multiple businesses.
But Baehr says Able’s aim is beyond simply lending capital, with a value proposition that is “fundamentally different” from crowdsourcing and banks — they're building a network of trust.
“It’s important that borrowers have a pre-existing relationship with backers,” Baehr says. “We bring them in because of what it tells us about the borrower, and for the continued support from both over time as part of the Able Network.”
Jae Kim has been part of that network for about a year. His Korean-Mexican fusion restaurants started five and a half years ago as a food truck. Now, Chi’Lantro has two brick-and-mortar locations.
“I started with nothing, so it’s been bootstrapped all along,” he said. “I’d taken out a few loans from the bank, but Able was so much faster and easier.”
Chi’Lantro, which has evolved into a popular Korean barbecue spot, had four backers who funded equal shares of the first 25 percent of his loan. Able funded the rest.
“There are so many unexpected costs when you open a restaurant,” Kim said. “Having the cash from the loan allowed us to control that and make things more efficient.”
“Able’s approach was different and refreshing,” he added. “They’re unconventional in the way they look at the business as a whole, instead of just looking at the finance. They were looking at who’s operating it, how involved they are in the community, and even our brand on social media."
The platform is available to small businesses seeking loans from $25,000 to $500,000, with rates starting at 8 percent.
