Why We Started Fundera
Small businesses are the lifeblood of America. 28 million small business owners employ 49% of the U.S. workforce, create the majority of new job opportunities, and are responsible for 46% of the country’s GDP.
What’s amazing is that given the contribution of small businesses to our economy, the odds are continually stacked against us. The number one problem small businesses face is access to capital — businesses need money to make money.
This problem hit home for me two years ago. My cousin Zach is a fellow entrepreneur. He and his brother own and operate a chain of restaurants in Ohio called Fusian — think Chipotle but for sushi rolls. It’s a remarkable establishment and one of my favorite places to eat. I fell in love at first bite when I visited their original location in downtown Cincinnati.
I wanted to be part of Zach’s journey, so I offered to invest in the company to help him open a third location in Columbus. Zach turned down my investment because he takes great pride in the fact that he and his family own 100% of the company, and he did not want to take on equity capital. Instead, he asked me for a loan to cover the expansion costs. He wanted $300,000 and to pay it back over three years with 10% interest.
I asked why he didn’t just go to a bank and was shocked when he told me that he had visited several banks, all of whom denied his request for a loan. The fact that a thriving business that employed more than fifty people was being denied the chance to grow seemed downright wrong to me, and the reasons he was denied — that he hadn’t been in business for more than five years and restaurants were “a risky industry” — were unreasonable.
Zach isn’t the only entrepreneur who has had this problem. Banks are failing to meet entrepreneurs’ demands for credit. Every year, more than 40% of small businesses seek funding to grow, but less than 20% of them receive the capital they need from banks. Another 5 million business owners need funding but don’t ask because they assume they’ll be rejected. The numbers are astounding, especially considering the important impact small businesses have on our economy.
As a result of banks’ inability to meet this need for capital, an entire industry of alternative lenders has surfaced over the past decade to satisfy demand. It’s an industry that can be confusing and overwhelming to entrepreneurs, with credit products that can be unfamiliar and intimidating like equipment financing, merchant cash advances, accounts receivable factoring, term loans, franchise loans, and real-estate loans.
Today I am proud to launch Fundera and be a part of the solution to a problem plaguing millions of small business owners looking to grow their businesses. Fundera is an online marketplace that connects small business owners seeking credit with the best lender for their business.
Inspired by conversations with entrepreneurs like Zach from Fusian, we believe that small business owners deserve access to the same tools that empower consumers to make sound financial decisions. That means that getting a small business loan should be as easy as booking a flight on Kayak or reserving a room on Airbnb.
During the next decade, non-bank alternative lenders will emerge as the primary capital providers to small businesses, which will drive nationwide economic growth, boost employment, and solve the number one problem entrepreneurs encounter: access to working capital. We will empower entrepreneurs to grow their businesses by helping them find the financing they need while expanding the market for small business credit.
— Jared Hecht, co-founder of Fundera
Originally published at www.fundera.com on February 5, 2014.