ImpactAlpha, July 29 – As the U.S. Congress debates another stimulus package, an initiative in Colorado is going beyond government to sow seeds of business recovery.
Community Investment Management has secured $10 million to help fintech lenders get small business loans flowing to underserved businesses in Colorado.
“This is about what comes next, both for businesses who were able to get funding from the Paycheck Protection Program, and for those the program didn’t reach, which are disproportionately minority and women-owned businesses,” CIM’s Jacob Haar told ImpactAlpha.
CIM’s first partner is Camino Financial, which lends to undocumented Latinx-led microbusinesses. It plans to announce new fintech partners in the coming weeks.
CIM’s goal is to raise $25 million to deploy and eventually expand to other geographies.
As the pandemic drags on, many traditional financial institutions have all but ceased originating new business loans. Deeper data capabilities help fintechs underwrite loans despite market uncertainty.
“Underwriting based on a business’s pre-COVID revenue and expenses isn’t all that relevant right now,” says Haar. “The past 60 days may not be indicative of the next 60 days.”
CIM’s partners will originate small loans first as borrowers build a track record for follow-on lending, much the same way microfinance institutions do for first-time borrowers, Haar explains.
Camino’s loans will range from $5,000 and $30,000. Future CIM partners may work with larger businesses
Haar hopes larger institutions will adopt the new underwriting approaches.
“One of our core impact goals is to get larger institutions to see underserved customers as a market that deserves better financing than what it gets today,” he says, adding that signs are promising: Traditional banks have been hiring fintech companies to help them adapt their lending operations for COVID.