In order to succeed as an entrepreneur, you have to be passionate about what you do. That is the only way to withstand the long hours, potential for rejection and other obstacles making yours a longshot proposition.
On occasion you get to meet someone for whom their venture is also a deeply personal nature, formed by powerful early experiences.
Jerry Nemorin is such a person. Mr. Nemorin is the Founder and CEO of LendStreet, a company leveraging partnerships with financial companies to negotiate debt discounts for their clients.
LendStreet was one of the companies in the inaugural class of the Financial Solutions Lab, a virtual laboratory for companies using technology to improve America’s financial health. Managed by the Center for Financial Services Innovation in partnership with JPMorgan Chase, the goal is to produce products which benefit low and moderate income Americans.
Financial stress affects a majority of Americans. Roughly three out of four report feeling financially stressed. On average, they spend up to 20 hours each month addressing personal finances at work. Half cannot come up with $2,000 in a month if they experience a financial shock and 30 million have an account in collection.
Financial stress is the number one cause of divorce.
Born in Haiti, Mr. Nemorin lived there for ten years before his family settled in South Florida. They had to learn a new language and culture. Mr. Nemorin dove right in, often working two jobs to help his family while going to school.
He learned powerful lessons during this period which helped form LendStreet.
“Lots of people look at those struggling financially and think it is something they bring on themselves,” Mr. Nemorin said. “They do not realize many people have the right intent and do what they can to help themselves.”
Mr. Nemorin attended the University of Florida and worked summers in the corporate treasury at Tyco International before moving to Wall Street with Bank of America/Merrill Lynch and a front row seat for the recession.
“The world was coming to an end,” Mr. Nemorin said. “Companies and bankers didn’t know what was happening.”
Many companies truly suffered during the recession, but they had options to restructure and refinance their debt. Individual people had few such options and the ones available took advantage of them.
Prior to 2010, debt settlement services got their fees up front before they negotiated the debt down. If you did not fulfill your obligations, it was fine because they had collected their money. Those who stayed in such programs were more work for the administrators.
“Maybe one percent of people in debt settlement programs received the services they were promised,” Mr. Nemorin explained. “The industry made a ton of money without delivering the service.
“I had a visceral reaction to that. It’s against my belief system – ethically, personally ,and as a business person.”
Mr. Nemorin began to wonder why the processes made available to companies under financial duress could not be made available to individuals.”
What many consumers do not know is lenders are prepared to take less that they are owed, but they want a lump sum up front to assume short-term debt. That does not help many people who cannot leverage their debt.
Mr. Nemorin studied people who restructured their debt on Prosper. Many had some delinquencies on their credit report and were looking for a consolidation loan. He also looked at debt settlement, credit counseling and bankruptcy servicing organizations.
Debt settlement, while important, is only part of the equation. What if this process could help rebuild your credit score?
LendStreet will help people pay a percentage of their debt over a period of 48 or 60 months. Borrowing from peer-to-peer concepts, people are rewarded for making regular payments. Given that 35 percent of credit score weighting is payment history, this is a significant credit rebuilding opportunity.
“Instead of keeping them delinquent, we lend them the money so they can negotiate a settlement,” Mr. Nemorin said. “It eliminates collection calls and people get relief.”
Eschewing the standardized loan format, LendStreet develops a customized loan for each person, based on their lifestyle and ability to repay. It reflects a starting point not of profit, but of the desire for the borrower to have a successful experience, one from which profit will naturally flow.
LendStreet is also developing tools which help people better understand and manage their credit – teaching them, for example, that not all credit is bad and if you can cheaply obtain the best credit rates you can build assets instead of creating liability. Clients are rewarded for additional and larger payments with waived fees and skipped or reduced payments.
In addition to LendStreet’s ability to negotiate discounts with lenders, the other reason for their sustainable business model is technology, Mr. Nemorin said.
“Technology allows us to get to more people with less resources. As a startup, that ability is critical.
“With internet-based businesses, customer experience is always the number one priority.”
When five banks control 80 percent of households, there is no need to have a customer-first philosophy, Mr. Nemorin said.
“They couldn’t afford to even if they wanted to, because they are not built for that.
“It’s not necessarily that they do not want to. Their legacy costs do not allow them to make those leaps.”
LendStreet has raised a $28 million facility from Atlanta-based FLOCK Specialty Finance to fund LendStreet loans. FLOCK designs financial products to support financially underserved markets in distressed debt and subprime consumer obligations.
“FLOCK’s capital allows us to begin scaling our loan portfolio and expand our customer pipeline,” Mr. Nemorin said. “Aside from the financial partnership, FLOCK brings significant experience and expertise in this market segment. Their mission and values are closely aligned with ours.”
FLOCK Chairman and CEO Michael Flock was impressed with LendStreet.
“The team at LendStreet is first-rate. We like their business model, technology, and processes.“