Why closing the financial inclusion gap is imperative

By LoanWell co-founder and CEO Bernard Worthy

Entrepreneurship is in my blood. While many of my family members have started small businesses in a variety of trades and industries, each one struggled to access the necessary capital to scale their business. The reasoning? Community lenders were using multiple disconnected systems, which often resulted in boxing people out.

Today, nearly half of black households are unbanked or underbanked, causing a huge gap in financial inclusion. Closing this gap is imperative, as it would improve economic opportunity and outcomes, especially for communities of color. In March 2017, my cofounder Justin Straight and I teamed up to create LoanWell, to increase access to capital for those typically left out of the financial system, based in Durham, North Carolina. LoanWell brings all of these systems under one piece of software, to make the loan origination process more efficient and more equitable.

Over the past four years, I’ve brought a product to market and fundraised over $1M to increase access to capital for thousands of small businesses with over $100M loans in 2020 alone. We also helped small businesses receive funds amid Covid-19 through powering NC’s Rapid Recovery Loan Program. Along the way, I’ve uncovered a few tips for navigating the process as a startup founder:

Launch Your Boat into the Ocean

Justin likes to highlight the mistake many early founders make with the analogy of building a boat on a dry dock. It could be a great boat, but you have to get it in the water to find out where the leaks are because there will always be leaks. If the modeling is set in a dry dock, you haven’t experienced the waves or tested the navigation capabilities. It is essential to weather test your product. Get your boat out on the ocean as soon as possible, get feedback, and make sure you can fix the leaks before bringing others on board and pushing for scale.

It’s important to start from a position of strength. In order to find your strength in terms of product-market fit, take the time to craft your startup well before birthing into the world. Make sure you have a clear understanding of your competitors, differentiators, and what you are hoping to accomplish. Understand that it is helpful to have a pilot customer before you fundraise or build a team.

Your Mission Should Not be Secondary When Fundraising

When you are ready to bring in an ecosystem of support, your mission should be the priority. Find partners, investors, and employees that believe in what you have set out to accomplish. Do not settle for anything less.

We have taken many investor calls where it is instinctually clear that we do not align or share the same mission. Often as entrepreneurs, you’re grasping for resources and can find yourself in compromising positions. Trust your gut and lead with your mission over money. We aren’t building LoanWell just to flip it, we’re doing it to impact lives.

Networks Know No Bounds

If there is one thing Justin and I have learned, it’s that — once accessed — networks offer limitless potential. Certainly, access to venture capital is more difficult in Durham than it would be in a larger market, but we’ve found that it’s made us grittier, more focused on revenue, and has led us to much more aligned investors on our cap table.

Overall, I don’t think one region can have it all and most will tell you that networks are the way to build and scale a startup. We’re thankful to American Underground, Google for Startups, and the many other networks including NC Idea, Praxis Labs and Common Wealth Impact that have helped LoanWell grow.

Pivot Sooner Than You Think

Our partners have prepared us for fundraising, hiring, customer acquisition, and how to pivot. One piece of advice that’s been well-received: pivot sooner than you think.

While juggling the trade-off between bringing your product to market and having a clear-cut mission can be difficult; it is even more challenging to be nimble and pivot once you have received funding, have employees to pay, and have investors with expectations.

Pivoting takes strategic intel and vision. When things are going well, it can be easy to get blindsided. Just because you are on a good path doesn’t mean you are on the best one.

We were doing our best when we decided to pivot to a bigger market. We took the risk of jumping off the diving board to the bigger swimming pool. Once we did it, we realized that we probably could have done it six months earlier. If you have a hunch, it might be time to jump in a different direction.

My advice is to put yourself in a position to grow and remember that it is about the journey. We’re always developing and learning and giving that grace to the rest of the company as well. We’ve learned to accept that what we want to accomplish at LoanWell is not close to finished — we are just getting started.