Everett Sands on the power of fintech lending

Editor’s Note: Since Everett Sands began Lendistry in 2015, it has provided 592,000 small businesses with $8.8 billion in small business loans and grants, making it the largest minority-led microbusiness lender in the country. During the pandemic, Lendistry was one of the top 10 lenders in the Paycheck Protection Program (PPP). It now employs 350 nationwide.

For the growing small business community, it’s a time of abundance, and financial innovation is crucial to support that abundance.

With equitable access to capital, this abundance can create upward mobility for underserved businesses and their communities and help them survive disruptions that affect their revenue, as we’ve seen clearly over these past three years.

For me, as with most small businesses, this is a personal issue. I’m writing today as a CEO who started a lending company in Orange County, but I grew up in Washington, D.C., where my grandfather owned a tailoring shop.

His was the first African American-owned business to have a contract with the Army, and his shop supplied the soldiers’ caps during the Korean War. The business was growing, expanding to multiple locations, but my grandfather needed help to reach the next level. What he got was bad tax advice from someone who should have been a responsible partner, and he couldn’t access capital to grow further.

When I was old enough, like many of my cousins and family members, I worked there sweeping the floors and working the cash register. I grew up surrounded by entrepreneurship—a picture of what it looks like day-to-day, and also how a local business supports its community. I also grew up with my mind filled with what ifs.

What if my grandfather had gotten the right guidance? What if he’d been able to get a quality loan back then?

These questions inspired me to be part of the answers for the business owners who still face a similar landscape today, because when it comes to access to capital for minority-owned businesses, things have changed very little.

When I’m looking for a solution, I always start with the numbers. Let’s start with what I meant by abundance. In 2020 and 2021, new businesses formed in record amounts, 20% of which are owned by women of color.

What others called “The Great Resignation,” I called “The Great Business Formation.” African American owners account for 26% of all new microbusinesses, that’s up from 15% before the pandemic. That number has been on the rise since before the pandemic, and it’s still on the rise in the face of increasing inflation. Abundance is still abundance, even when times are hard.

Now, here are the challenges. In 2021, 14% of Black-owned businesses received the financing they sought, compared to 26%-34% in 2019. For comparison, non-minority firms received 34% of the financing they sought in 2021, compared to 54% in 2019. Here in California, 5% of PPP funds went to African American businesses. I find these numbers galvanizing.

What if the exuberant numbers of new minority and womenowned businesses have access to responsible financing in amounts they need to rise through their growth stages and stay stable through times of economic hardship? The potential for new businesses to become major players is underestimated, and fintech is the key.

A recent NYU study showed that fintech lenders accounted for 17.4% of all PPP loans, but they were responsible for 53.6% of PPP loans to Black-owned businesses.

It cited three main reasons for this success.

First, lower costs per loan means they can serve more small businesses that need smaller loan amounts.

Second, no need to visit a bank branch is a plus for minority communities who lack relationships and access to traditional banking.

Third, automation removes the possibility of human biases affecting risk management and decisioning processes. According to the study, the more automation all kinds of lenders incorporated into their processes, the more equitable their approvals became.

Let’s take a moment to think about what all this means in real life. Today, the business equivalent of my grandfather is a single mom in Santa Ana who started a business in 2020 and is ready to grow.

From 9-5 she is working in her business. Then from 5-9, she’s figuring out dinner and the evening routine, and afterwards, she has time to work on a loan application to help her hire employees.

But 9-5 are the only hours when the branch is open, and she can’t make it there to apply or ask questions. With an online application, and all the steps of the process tech-enabled, she can apply on her own time. It turns out, by the way, that the time of day when she starts her application is 11 p.m.

With technology, we can not only learn from applicants like her what time of day she works on her application, but also where she’s getting stuck. Knowing this, we adjust those parts of the process with more information, create instructional videos, and provide extra resources and human assistance to help her get through the process. We also empower a network of grassroots, community-based business support organizations to help entrepreneurs like her complete the process in multiple languages.

What if that single mom can afford to hire people and start focusing on the high-level tasks that bring in stable revenue? For her, her family, and for the people she hires, that’s game changing. That’s what we’re doing at Lendistry.

I am writing this to encourage other financial institutions to respond to the needs of today’s small businesses and be part of the abundance.

I’m writing it now because our team is in the middle of celebrating a milestone we would like to share with our Orange County family. Lendistry opened in 2015 in a small office in Brea.

We’ve spread coast to coast, but this week, during Black History

Month, we’re excited to announce the grand opening of our new office at Flight in Tustin. It’s beautiful, and it’s filled with materials procured from small businesses. We’re proud to take up space there, to support local small businesses and to celebrate our origins in Orange County.