Legionnaire hopes to 'democratize' lending
Mark L. Rockefeller hopes to help entrepreneurs of all means and backgrounds fund their businesses. And he's starting with veteran business owners.
Rockefeller, a member of the Legion's Business Task Force and Air Force veteran, recently founded StreetShares.com - a revolutionary online platform that allows hopeful entrepreneurs to pitch their businesses to a sea of willing investors through 21st century means.
He calls it a new "democratic" form of lending because it cuts banks out of the equation, connecting borrowers with SEC-accredited investors who don't necessarily hold the purse strings for major financial institutions. Borrowers from all walks of life - with businesses big or small - can sign up for StreetShares and solicit funding from investors who compete to back the loans that they deem credit-worthy.
Rockefeller designed the system specifically with veteran entrepreneurs in mind. He says the bid-lending system uniquely benefits veterans who have entrepreneurial skills but can't get access to business loans because of rigid requirements that banks have in place.
"Our focus is on veteran-owned small businesses," Rockefeller said. "Veterans face some unique challenges sometimes in receiving small business loans. The rigors of military service and frequent deployments, often those things can get in the way of having great credit or owning a home for the amount of time that you might need to serve as collateral."
Rockefeller describes StreetShares as a cross between EBay and the popular television show Shark Tank. Everyday, average people can log onto the site and pitch their business plans in front of an audience of investors who can "bid" a loan amount and interest rate. The investor pool is a members-only group which includes dedicated venture capitalists, "angel investors" with wealth to spread and even several deep-pocketed veterans, Rockefeller says.
Borrowers start the process by submitting their business plans and financial information to StreetShares. StreetShares then underwrites the loan and contributes an initial amount - usually about 10 to 20 percent of the principal.
"We co-invest in the loan," Rockefeller said. "We put our money where our mouth is."
The investors' loans with the lowest interest rates are then combined until the borrower's requested loan amount is met.
StreetShares services the loan, charging the borrower an average interest rate from the accepted bids, and then distributing payments pro-rata to the pool of investors.
Rockefeller dubs the system "social lending" because it gives underserved demographics that normally wouldn't qualify for bank loans access to capital.
It's also a social model in that it awards loans based on something other than credit ratings and number crunching, Rockefeller says. A borrower who is submitting a request for a loan can overcome a poor credit score by telling "his story" - stressing social factors at play, like for example how he is a veteran who hasn't been able to establish his credit due to numerous deployments. An investor may be keen to help out a local business or an entrepreneur who has a relatable story, Rockefeller explains.
"You can't make up for a low credit score by explaining your circumstances to a bank," Rockefeller said. "You have to reach a certain FICO score, and if you don't, that's it."
Rockefeller's inspiration for starting StreetShares comes, in part, from the veterans who came before him - the "Greatest Generation" that rebuilt America after returning from war theaters in Europe and the South Pacific. Those veterans came home and helped jumpstart the formerly depressed U.S. economy by starting small businesses.
Rockefeller says modern veterans who are returning from Iraq and Afghanistan have the same entrepreneurial drive, but the problem is they don't have the same access to funding. The lending climate is much different than it was 60 years ago when our country boasted nearly 13,000 banks and a general willingness to lend to small businesses.
In the fallout of the recent economic crisis, lending has become more strictly regulated, Rockefeller says, and the banks - which are nearly half in number from the post-World War II era - have consolidated and ultimately become less likely to hand out small business loans.
Rockefeller hopes to rectify this by getting capital into the hands of the newest generation of veteran business owners so they can rebuild the U.S. economy as their forefathers did 70 years ago.
"I believe veterans are uniquely qualified to do this," Rockefeller said. "I think there is a very strong historical precedent for veterans returning from military service or foreign battlefields and starting businesses, driving recovery of the U.S. economy."