OnDeck and Association for Enterprise Opportunity will assist local community development financial institutions (CDFI) and non-profit lenders with tools to help businesses struggling to obtain financing. Up to $10 million in loans will be facilitated.
The partnership will facilitate up to $10M in mission-driven lending. So far $1.5 million in loans has flowed through four CDFI’s. The goal is to have ten CDFIs in place by early next year.
OnDeck’s Chief Operating Officer James Hobson said he is passionate about building technology and analytics.
“We were trying to figure out a way to help CDFI members and other small businesses,” Mr. Hobson said. “We decided to focus on the platform and analytics.”
Mr. Hobson called data and its interpretation great equalizers. Company size does not matter. All receive the benefits of scale.
Small CDFIs face two challenges, Mr. Hobson said. The first is how to create operational efficiencies which enable them to handle larger volumes.
“Many CDFIs are focused on local communities,” Mr Hobson said. “A national platform allows you to cut through many of their challenges.”
The second is how to effectively provide smaller loans to new customers.
Mr. Hobson said that when a small business comes to OnDeck via TILT Forward, they have to provide a little bit of information, which OnDeck is then able to aggregate across more than 100 data sources, the end result being a robust picture of the health and stability of a small business.
“When you are able to look at data as granually as we can it enables us to lend in 700 different types of industries,” Mr. Hobson explained.
Mr. Hobson said OnDeck is making good progress in its ability to understand data compared to where they were two years ago. He cited the OnDeck score which is a FICO-like score for small businesses. It is now in its fifth version.
“We are at an exciting time because our score is able to help allocate capital,” Mr. Hobson said. “As online lending becomes mainstream, these partnerships will bring added credibility to the sector while also producing more data from which we can learn and improve.”
Mr. Hobson’s early career was spent at an investment bank where he worked on mergers and acquisitions. He thought being on the operations side was more interesting than finance.
He returned to Harvard to earn his MBA. After two years with McKinsey, Mr. Hobson co-founded BuyYourFriendADrink.com, a site where friends could text and e-mail each other codes for free drinks. After beginning in New York, they expanded to Washington, D.C. and Chicago.
“It was a way overcomplicated Groupon,” Mr. Hobson laughed.
There is a happy ending. BuyYourFriendADrink.com was sold to a company interested in its technology.
Mr. Hobson moved to a private equity-backed company where he developed his interest in deep analytics, a passion which serves him well with OnDeck.
Association for Enterprise Opportunity is a national membership organization which has assisted more than two million entrepreneurs establish businesses. They also foster understanding of the important role micro-businesses play in the economy.
TILT Forward licenses products and services from companies and then offers them to micro-businesses. They also connect those businesses to CDFIs and non-profits best suited to help them.