By Laura Alix
Sean and Kenny Salas want to get you a loan – but unlike greasy salesmen advertising on daytime television, they’re using sophisticated algorithms to match up business owners with appropriate sources of capital. Not to mention, they have a pretty great personal story, too.
You see, the twin brothers recently launched Camino Financial, an online platform aimed at connecting small businesses in need of capital with the lenders who can provide that capital. At the heart of their startup is an online credit assessment tool. Essentially, a business owner logs onto Camino’s website and in about 10 minutes fills out an application with information, like their employer identification number, personal credit score and operating income.
In about two business days, Camino uses that information to deliver a nine-page credit assessment and a menu of suitable loan options that are then followed up with a phone counseling session to help the business owner choose the best loan for his or her business. Presently, the Salas brothers have partnered with lenders like OnDeck, Fundation and NOWAccount, though they hope to expand their reach.
“The way our online lenders are pricing these loans is using these different data fields that can be captured within a 10-minute assessment. They’re using statistical pricing models, or algorithmic based pricing models, that in real time can pre-qualify the loan with minimal manual adjustments to it,” Sean said.
Coming To Terms
The heart of Camino’s expedited loan process is big data. Big data, in a nutshell, is the term given to raw data sets so large and complex they cannot be processed by way of traditional data processing software.
“Everybody wants to talk about big data,” said David O’Connolly, a senior analyst at the Boston-based research firm Aite Group.
But for all the buzz about it, O’Connolly said most banks “have more small data headaches than they do big data opportunities.” What he means is that by and large, it’s not easy for banks to integrate all their already available data well enough to do things like business analytics and performance management, and therefore opportunities to use big data are few and far between.
One exception, however, is in the small to medium-sized business lending space, he said. While it’s traditionally been very difficult for a bank to scale underwriting down to a small or medium-sized business, big data capabilities change the picture a little bit.
Sentiment analysis is one example. Suppose you are lending to a retail shoe store and revenues begin declining. Is it a problem with supply, or a problem with demand? Using big data, you might be able to comb the web to find out why, exactly, revenues have been sliding. Sentiment analysis can tell you whether consumers have been complaining about how lame those particular shoes are – or whether they’re griping about how they can’t find their favorite kicks.
And while there are plenty of reasons to take any big data buzz with a healthy dose of skepticism, O’Connolly thinks that small business lending is one area where big data may have practical applications.
“We’re getting through the scale problem and we’re finding diamonds in the rough, the rough being the obscuring of lending opportunities because of the rather blunt and binary analysis that the ratings agencies do,” O’Connolly said. “Big data in this situation can do what human beings can’t.”
Kenny and Sean’s story actually begins during the recession of the early ’90s. While the brothers were a little too young then to be entrepreneurs, their mother was a successful businesswoman, managing around 30 taco stands all over Southern California at the zenith of her career.
Then the recession hit.
“She started to struggle to manage all those stores, and she didn’t have a network of people who could get her access to capital or even expertise to help deal with those issues, and she had to throw in the towel,” Kenneth said.
The brothers grew up, finished college and ultimately worked on Wall Street – mainly at investment funds focused largely on Hispanic-owned businesses and urban and underserved communities. It was there that they dreamed up Camino Financial, which they launched while attending Harvard Business School. Though they began the startup in Southern California, they brought it to Boston earlier this year.
“Seeing that need just hit home for us. We realized there are a ton of people like our mom who struggle, and they have great businesses, they really do,” Kenneth said. “With some guidance and some money backing them, we can help them take their businesses to the next level and create jobs.”
Laura Alix is a staff writer at The Warren Group.
This article first appeared in the Dec. 8, 2014 issue of Banker & Tradesman.