Loan Provider BankMyBiz Aims to Continue Growth Through Partnerships
[Updated 5/25/17 4:47 p.m. See below.] People who have spent years working in a particular industry before deciding to hang out their own shingle need a few things to succeed: a business plan, plenty of gumption, and enough money to get a new venture off the ground.
That last piece—the startup capital—can be hard to come by. Some entrepreneurs raise seed funding from family and friends, while others seek loans from a bank. But many lenders, even smaller community banks, do not often issue loans of less than $100,000 to small businesses—more than many small upstarts need at first, says Michael Adam. He’s the co-founder and CEO of BankMyBiz.com, a Milwaukee-based company that works with banks to provide business loans. Most of them are worth between $5,000 and $100,000, Adam says, though some have been for larger amounts.
Someone who would apply for a loan through BankMyBiz’s website or mobile app might be “a guy who has worked as a personal trainer for five years, says he found an awesome location [to open a new gym], is bringing over 20 clients, and needs $11,000 for equipment,” Adam says.
BankMyBiz, which launched in 2013, is now working with 13 banks in Wisconsin and several more in other states, Adam says. Since 2015, the company has operated in partnership with Advantage+, a direct lender based in Brookfield, WI. The two organizations share underwriting and sales support resources, and Advantage is an equity holder in BankMyBiz, Adam says. According to its website, Advantage has a staff of 22 workers, while BankMyBiz has four employees, plus a few interns, he says.
Adam, who worked at two large Wisconsin-based banks before co-founding BankMyBiz, says the company was initially conceived as a software platform that lending institutions could use to search for businesses seeking loans. Its team gave countless pitches to investors early on, including at the 2014 South by Southwest Interactive festival in Austin, TX.
But BankMyBiz changed course when it agreed to partner with Advantage. “At first, we were a lead generation tool for bankers,” Adam says. “The real transition was when we went from that to [becoming] a direct lender.”
The money BankMyBiz started providing loans with after it teamed up with Advantage came from Advantage, Adam says, as well as other banks in Wisconsin with which it had longstanding relationships. BankMyBiz has not raised funding from outside investors in the years it has been operating, he says. [This paragraph has been updated to clarify BankMyBiz’s funding sources.]
Adam estimates that 90 percent of the loan applications BankMyBiz receives are referrals from banks the company works with, such as West Bend, WI-based Westbury Bank.
Like a typical bank, BankMyBiz makes money by charging interest on the loans it issues. The company passes a percentage of the interest it collects on to referring bank partners, Adam says. Interest rates on the loans BankMyBiz provides are usually between 9 and 13 percent, he says. That’s slightly higher than what most banks charge for small business loans, he says, but lower than the interest rate on an average business credit card. [This paragraph has been updated to clarify BankMyBiz’s business model.]
As the Denver Post recently reported, most loans from non-bank (or “alternative”) lenders carry at least 20 percent interest rates, though there are some exceptions.
Adam says that BankMyBiz has received applications from companies seeking to refinance loans they took out through online direct lenders like New York-based OnDeck.
The companies who have taken out loans through BankMyBiz include MobCraft Beer, a Milwaukee-based brewery that has raised money from a number of different sources, including a crowdfunding campaign.
Adam says one thing that sets BankMyBiz apart from competing lenders that also target the lower end of the market is the speed at which it is able to evaluate loan applications. Through the use of software algorithms the company has developed, BankMyBiz is able to underwrite many applications on the same day they are submitted, he says.
In the coming months, Adam says his company will focus on partnering with more community banks, particularly ones headquartered in the Midwest and Southeastern United States. He says part of what goes into forging these relationships is persuading leaders at banks that not all aspects of the emerging financial technology, or fintech, sector should be feared.
“Our major message to the banks right now is, ‘Hey, we’re a financial technology company for the banks,’” Adam says. “We are another arrow in your quiver. Don’t be scared by fintech. We’re a fintech that’s here to help you—let’s sit down and talk.’”