But here’s the bottom line: Able’s lending model sharply reduces both risk and borrowing costs, allowing it to go head-to-head with national rivals like Funding Circle, Bond Street, OnDeck and StreetShares. But when loans from friends and family form 10%-15% of the total loan, he says, drawing squiggly lines just to the left of the box, a cohort with less-than-stellar credits now becomes credit-worthy.īecause of the “peer pressure” and “behavioral change” exerted by the involvement of family and friends, the formula produces a “positive-selection effect on the loan portfolio” Davis says, declaring: “We can serve more of the market.” “We all compete here in this box on price,” Davis says, drawing a square at the topmost point of the bell curve, indicating where the near-prime borrowers abide and where lenders are crowded in pursuit. Dressed for the balmy Texas weather in tan Bermuda shorts, a black tee-shirt and Nike running shoes, the company’s chief executive and co-founder is explaining how Able’s friends-and-family lending formula “widens” the risk curve. It is here, in a tiny conference room, that Will Davis, a slim man of 35 and an alumnus of Harvard Business School, is drawing a bell curve on a whiteboard. Once the main source of electricity for Texas’s capital city, the natural gas-fired boilers have given way to a warren of glassed-in offices and meeting rooms connected by angular metallic stairways and a carpeted mezzanine. The fortress-like building anchors an inner-city complex of offices and residences, chic restaurants, boutique shops, and a Trader Joe’s. We’re at Able Lending in Austin, Texas, a financial technology company occupying three floors deep in the heart of the Seaholm power plant overlooking Lady Bird Lake. To receive copies in print, SUBSCRIBE FREE This story appeared in deBanked’s May/June 2017 magazine issue.
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