#StartupsEverywhere Profile: Bernard Worthy, Co-Founder and CEO, LoanWell
This profile is part of #StartupsEverywhere, an ongoing series highlighting startup leaders in ecosystems across the country. This interview has been edited for length, content, and clarity.
Platform Helps Streamline Loan Origination and Servicing Processes for Community Lenders
LoanWell—a Durham-based fintech startup—is seeing years of hustle pay off, and finding ways to help get financial relief to small businesses across North Carolina, during the pandemic. We spoke with Bernard Worthy, LoanWell’s CEO and Co-Founder, to learn more about his startup, the company’s unique efforts to support economic relief, and his thoughts about how communities and governments can and do support underrepresented founders.
Can you tell us more about LoanWell?
LoanWell is an automated loan origination platform. We provide the end-to-end technology that many community lenders desperately need. Our focus has been to develop tools for the “little guys”—Community Development Financial Institutions, loan funds, community banks, credit unions, and other mission-driven lenders. A lot of those smaller entities find themselves pulling together several tech-based services across the spectrum of loan origination and servicing because they lack resources bigger lenders used to build specialized technology in-house. But cobbling together services from multiple vendors creates inefficiencies for small lenders, because the different services are disconnected and not designed to communicate with each other. This means lenders have to expend tremendous manual effort to manage the origination and servicing processes. That is where LoanWell comes in—providing loan origination under a single technology solution. And the money our customers save on loan origination means lenders can prioritize meaningful work and can utilize their teams differently, make more loans, or add new programs.
How has LoanWell been affected by the coronavirus pandemic?
Being part of North Carolina’s coronavirus response has sped LoanWell’s growth to something much faster than we planned. LoanWell has been powering NC’s Rapid Recovery Loan Program. A collection of partners launched this $140 million recovery-lending program to support entrepreneurs and small businesses in the state. The idea is to provide loan funds to small businesses which need help bridging the gap until federal loans (or other funds) are approved, or until businesses have time to recover from the current crisis.
The opportunity to support the Rapid Recovery Loan Program kind of fell into our laps in early March. It is a huge effort and has been difficult for us operationally to scale so quickly, but the program has been really successful to date. Funds have been deployed across all 100 counties in the state, and right now the funders are re-upping loan amounts to qualifying businesses. Some of the loan program partners were LoanWell clients before, like the NC Rural Center, but the program has created a natural collaboration for us to work with similarly mission-driven lenders.
How does your work with the Rapid Recovery Loan Program compare to, for example, federal efforts such as the Paycheck Protection Program (“PPP”)?
There is a tremendous opportunity, and need, for financial support that PPP missed. For one, PPP loans were not a fit or were not accessible to a lot of main street businesses, underrepresented businesses, minority- and women-owned businesses, and historically underutilized businesses. Applicants for PPP needed existing bank relationships, which many of those small businesses do not have; and not everyone needs such a big loan (with a big origination fee), so smaller applicants may not have been a priority for some banks. Also, companies who got PPP loans often had better runway, access to lines of credit, or could have gotten funding somewhere else.
By contrast, the Rapid Recovery Loan Program focuses on smaller lenders, and as such, also gets money to different applicants. Small lenders do the day-to-day main street lending that helps expand and create local jobs, bolstering the entire economy. But they are making much smaller loans that can be supported by smaller institutions. Here again is where LoanWell comes in, because our technology can make those small business lenders more efficient.
Our mission is to increase loan access and affordability for small businesses that really need it, and the Rapid Recovery Loan Program has been completely consistent with that. What gets us super excited, for example, is that 58 percent of the loan recipients in the program have been minority- or women-led companies.
Turning to the broader issue implicit here, do you have thoughts about how communities and governments can do a better job providing resources and support to startups?
This is a complex question, because resource needs are going to vary company-by-company. Durham, for example, has a healthy ecosystem with many moving parts. The city has focused on talent retention in collaboration with local universities. NC IDEA is focused on early-stage startup investment. And there are programs and incubators targeted at those early-stage companies—incubators where you graduate in four weeks. Further along the pipeline are the entities like American Underground—places where one-person companies can grow to the next stage, taking companies full-time and bringing on employees, with resources and a community dedicated to supporting that type of growth. From there, companies—like LoanWell—are at the point of growing quickly and connecting with angel investors. Beyond that are the companies that need to start connecting with venture capital.
A company’s location and growth stage will dictate the resources it needs, or highlight those that its community potentially lacks. For us, we’ve been through accelerators and capital raises, and do not have the same needs as an early-stage company. I think it is valuable to prioritize alignment and bring together founders who are at a common stage. For example, you can learn from other founders who are doing product-market-fit at the same time as you, and the menu of options for next steps will include similar directions, like further R&D, team growth, or additional funding. Similarly, there are efficiencies that can come from companies at a similar stage who would benefit from common advising, professional services, and counsel.
When it comes to capital for minority businesses, there is a deficiency. But there is also variation there. A main street business does not need venture capital. Tech startups have a lot of options for financing, but have to decide which they want. Some will not want loans, some will want to look at VC funding, and others will not want to give up so much ownership. We chose to raise convertible debt, because it fits our goals and our company best. Relatedly, I think there is a particular gap for companies looking to raise in the $500,000-$2 million range—for those companies in the pre-seed investment rounds, there’s an absence of investors cutting $200,000 checks.
Do you have thoughts about how communities and governments can better support underrepresented founders, and whether there is a need for more programs run by minority- or women-founders?
Community and connections are so important here. For example, we have learned so much from our peers just by being in Slack channels with companies at our different stages of growth (and those ahead of us). It has been more valuable than what many programs can offer. And we were recently connected to Goodie Nation, a non-profit that creates networking opportunities and connects Black-owned businesses to big companies and VCs in the Southeast. Another good example of this is Google for Startups Accelerator for Black Founders, of which LoanWell is an alumni.
I think online communities are the best format for networking and getting diverse perspectives and advice. If a company only has one mentor, that’s only one person’s advice. A diverse, online community can give you more feedback to help you make your decisions. And the beauty of the online community is that it can transcend geography, so that a founder in a small county in North Carolina can connect to larger networks in Raleigh or Charlotte. Similarly, if I can find someone in an online community who looks like me and landed a big sales deal, then it is easy to ask them about how they landed the deal and what the experience of being the only Black person in the room was like for them. You cannot manufacture this sort of community locally.
At the end of the day, we do not need to reinvent the wheel. Much of the work is being done. But we need to create more networks and make these communities, connections, and investment resources more accessible. This is the sort of connective tissue startups need, and online connectivity offers a great opportunity coming out of the pandemic.
All of the information in this profile was accurate at the date and time of publication.
Engine works to ensure that policymakers look for insight from the startup ecosystem when they are considering programs and legislation that affect entrepreneurs. Together, our voice is louder and more effective. Many of our lawmakers do not have first-hand experience with the country's thriving startup ecosystem, so it’s our job to amplify that perspective. To nominate a person, company, or organization to be featured in our #StartupsEverywhere series, email edward@engine.is.
