By LAURA LOREK
Reporter with Silicon Hills News
Able recently struck an agreement that will enable the company to provide loans to 25 new companies in Austin. It’s aimed at bootstrapped businesses like hair salons, restaurants, breweries, bakeries and more. The company launched in July of 2014 and has been proving out a new collabortive lendng platform ever since.
Able announced a partnership with Garrison Point, which will underwrite Able, which is lending to Austin’s small and medium sized businesses. This is the first time the company is not lending out of its own account. The financial technology startup made the announcement during South by Southwest at an event with Floodgate Venture Capitalist Mike Maples Jr., one of the company’s investors and Josh Hare, owner of Hops + Grain Brewery, an Able customer.
“Mike is one of our biggest supporters,” said Will Davis, co-founder of Able. “He’s been a great investor and advisor to us.”
This month, Able began taking application for its third “cohort” of loans, the “Able 25.” Evan Baehr discussed the company’s strategy on Medium in a blog post.
Able’s loan range from $25,000 to $250,000 with the average loan amount of $125,000. Its customers, on average, have annual revenue of above $500,000.
The key to an Able loan is a company’s friends and family and fans provide 25 percent of the loan amount and Able covers the rest. Interest rates range from 8 percent to 16 percent. Able also offers a package of benefits and services to each of its loan customers which include everything from photography, online business profile, marketing, promotion and public relations.
“We approve an entrepreneur and they go out and sell their story,” Davis said. “Once all those pieces are together that loans is priced.”
And Able offers incentives to anyone who refers a business that becomes part of the Able 25. The company gets $500 off their loan and the referrer gets a $500 credit to buy goods or services from the company.
“Anyone that makes something we love,” Davis said. “We love makers. We also like providers.”
So far, Able’s customers include Chi’Lantro, Branch Basic, Esby, Raven + Lily, Good Seed Burger and more. The company has provided loans to more than 25 businesses.
“There’s a fundamental lack of credit that is happening right now in the marketplace,” Davis said. “These small businesses play an important role in the economy and yet ironically they are not getting access to capital.”
The majority of Small Business Administration loan applications are rejected or withdrawn, Davis said. And when they are approved, it takes an extremely long time to get an SBA loan, he said. Some times the business is rejected for a nonfinancial reason like a short length of time in business, Davis said.
“We are going after companies in that category that are close to being bankable but are still being told no by the big bank,” Davis said.
The draught in startup capital for small to medium sized businesses can be traced to the 2008 financial crisis, Davis said. Since then, many banks have become risk averse, he said.
“The risky or hardest category for banks to lend into are small businesses,” he said.
That lack of access to credit is where Able finds opportunity, Davis said. Able is reducing the cost of a small business loan and making it available to a whole new class of borrower, he said.
Right now, Able is only lending in Austin.
“In the next several months, we’ll be branching out of Austin and to the nation after that,” Davis said.
In addition, Able plans to raise a new venture round by the end of the summer.
“We have tested and proven this model,” Davis said. “We’re finding insanely low rates for entrepreneurs. Backers are earning 10.5 percent on their money. The macro-economic climate of Austin is so good for small business.”
As Able expands nationally, the company will partner with a bank moving forward, Davis said.
“Banks don’t like the fact that they can’t lend to small business,” he said. “There is a very strong and promising relationship with banks. And we fit very nicely.”