New Company Uses Veterans to Back Veterans’ Entrepreneurship

Mark Rockefeller just launched a new peer-to-peer lending site that focuses on serving veterans called StreetShares. Veterans are significantly more likely to become entrepreneurs than other Americans. StreetShares works to fund veterans’ entrepreneurship with money from other veterans.

Mark Rockefeller

To learn more about the company, I caught up with Mark and this is what I learned.

Mark, what inspired you to launch StreetShares and why the special interest in veterans?

As an Iraq war veteran and former securities attorney, I know firsthand the challenges veterans face as they transition to civilian life and the struggle business owners have had finding capital since the recession dried up credit. The military instills many traits that have made veterans successful entrepreneurs for generations. But the rigors of military service (frequent deployments, frequent moves, and geographic instability) also make it difficult for veterans to establish the credit or home-ownership that are important to getting a small business loan.

At the same time, veteran business owners are facing the same challenges as any other small business owner in the country, including the fact that strict lending regulations, big bank consolidation and dwindling community banks leave small businesses with very few options for finding affordable capital. Business owners get to choose between difficult-to-obtain bank loans and costly online loan sharks.

Veterans are an underserved population when it comes to business loans. This is why we created StreetShares.

How is serving veterans as entrepreneurs different than serving other entrepreneurs?

It is a joy to support entrepreneurs of all kinds. But it is a particular joy to support veteran entrepreneurs. Shouldn’t those who fought to support this country be the first to benefit from the economic opportunities that this country provides?I enjoy working with veterans. We are a diverse community that shares a common commitment to something bigger than ourselves – nation, family, community – that binds us together. Veterans also have the discipline to create a detailed plan and execute on that plan. I’d bet on my fellow veterans to successfully run a small business.

How does your platform work for borrowers?

While we focus on veteran business owners, any small business owner can apply through our platform.

The steps are simple:

1. Small businesses apply to post their loan request on StreetShares.com.

2. StreetShares provides small businesses with the unique opportunity to “pitch” their loan request directly to StreetShares member investor. Where else can borrowers be heard? Certainly not at the bid banks.

3. StreetShares also co-invests in every loan in a fully transparent way. We share how we priced the loan and the predicted chance of default that we assign to the loan. We then place the loan on the StreetShares market.

4. Investors than survey the loan requests and bid to fund a portion of the loan request. Investors name both the amount of the loan they wish to provide and the interest rate that investor would require.

5. Finally, StreetShares combines the lowest bids into a single loan for the borrower.

It’s like Shark Tank meets eBay for small business loans.

Borrowers must meet the following criteria before their loans are underwritten: a U.S. citizen or permanent resident, in business for at least a year, earning revenue, and have their business be incorporated or an LLC.

What can borrowers do to strengthen their pitches?

One of the most unique things about StreetShares is that borrowers can tell their story directly to investors. Investors want to hear from borrowers:

Why do they need the loan?

What do they plan to do with the money?

What makes their business unique? How will the loan help the owner achieve the business’s goals?

At a big bank, a borrower becomes nothing more than an index number. But there is so much more to a business owner than the financials. Sure, investors also have the financial information and vital signs of the business to help them decide if they want to invest in the business. But hearing from the borrower directly gives the investor the whole picture.

Direct communication from borrower to lender is how banks used to be. StreetShares uses technology to bring that back.

How do investors go about lending on the platform?

Investors must apply to join StreetShares as investor members. For right now, all investors must be accredited investors. But we try to make the process as easy and efficient as possible. When a prospective investor signs up on our site (for free), they are guided through our questionnaire and process of verifying their accredited investor status. Investing on StreetShares is not for everybody, and we want to make sure the investor has the financial know-how and experience to understand how to properly evaluate a business borrower.Once they are verified and approved, they can then fund their account. Once this step is complete, investors can start viewing and bidding on open loans.

What should borrowers expect to pay in fees and interest rates and what should investors expect to earn?

StreetShares is paid a one-time origination fee from the amount raised for the borrower. This is between 1.5% and 4.95%. This fee is borne by the borrower.

StreetShares services the loans and takes a 1% servicing fee of all repayments. This fee is borne by the investors.

Investors may bid between 1% and 29%. We have seen 1% bids and we have seen 29% bids. The lowest bids are combined to form the loan, and the borrower pays the average rate of the bids. Our average borrower interest rate is in the mid-teens, with borrower rates as low as 5%.

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