Brad Halsey is a problem-solver. After serving in the U.S. Navy and as the head of a think tank focused on futuristic challenges, he went to the Middle East as a consultant for the Army. “I ran around Iraq for about a year just MacGyvering stuff together,” he says, “whether it was welding and soldering, or making something robotic or something sensor-related.”
During that time, he developed a program to train other engineers. At the urging of a Marine Corps general, he applied for an award to build a mobile lab that would enable him to train Marines across the country.
He won the award, but he needed money to get started. He sought a loan from his bank and through the Small Business Administration. When he didn’t hear back, he turned to an online lending platform called StreetShares to borrow $25,000.
There is about one veteran-owned firm for every 10 veterans, according to the SBA, but like Halsey, many struggle to secure a traditional bank loan. To help meet that need for capital, in 2014 two military veterans, Mark L. Rockefeller and Mickey Konson, founded StreetShares.
The firm originally operated as a peer-to-peer lender, where veterans could pool money used for loans to veteran-run businesses. After two years, StreetShares began using its own capital for loans, paired with its efficient underwriting technology.
As a prospective borrower fills out a loan application, StreetShares’ platform uses more than 400 data points for intelligent, dynamic underwriting, adjusting subsequent questions based on the applicants’ earlier responses, according to Rockefeller, StreetShares’ CEO. The application also collects data in real time from social media, Google Earth storefront images, seasonal industry trends and more. “It’s able to do it in a smart enough way that we don’t even have to do a hard credit pull,” he says.
Last year, StreetShares began partnering with banks. Known as “lending as a service,” the model enables banks to integrate StreetShares’ technology within their websites to digitally underwrite loans and to use StreetShares’ capital to fund all or part of the loans. Banks also have the option to invest in the loans. The interest rate is typically in the midteens— lower than the rates offered by many online lenders, which can be as high as 40%.
StreetShares’ lending-as-a-service technology can also be used by nonbanks. The firm plans to expand its partnerships to organizations—such as consulting firms, or an online community like Pinterest—whose clients or users might need a business loan.
Although StreetShares no longer serves military veterans exclusively, they still make up 80% of borrowers.
Several months after Halsey paid back his initial loan to StreetShares, he finally heard back from his bank. It had rejected his loan application, as had the SBA.
He has since taken out two more loans from StreetShares—both of which he’s paid back—and he currently has a line of credit through the firm. Today his company, Building Momentum, occupies a 20,000 square-foot facility in Alexandria, Virginia, and employs a staff of 13.
“All of it would have been nearly impossible without that first $25,000 from StreetShares,” Halsey says.
This story originally appeared in the September/October print edition of Middle Market Growth magazine. Read the full issue in the archive.
Kathryn Mulligan is the editor-in-chief of Middle Market Growth.