Big banks are stepping up their game when it comes to new services and the technology that underpins them, and in many cases they’re borrowing directly from the tech world’s playbook: instead of building in-house , to speed things up, they are bringing in third parties who have already found a solution to a tricky problem, integrating their breakthroughs through APIs.
In the latest development, a startup called Able has built an engine to speed up the processing of documents and other data needed for commercial loans (usually $100,000 but sometimes up to $100 million in value), which it sells as as a service to banks and other lenders. Today, it’s coming out of stealth mode with $20 million in funding and a wider market launch.
The Series A is led by Canapi Ventures – an investor specializing in fintech – with participation also from Human Capital, which also led the startup’s seed round. Diego Represas, the CEO of Able who co-founded it with Andrew Hurst, noted that there are also a few strategic investors – financial services companies that are already using Able’s technology – but they don’t disclose those names for the moment.
I write that he’s getting into a broader market because although he’s coming out of stealth, Able has actually been around since 2020, and the customers he’s picked up are already using Able’s technology – which involves RPA, computer vision and other forms of AI to ingest and process loan data as part of their appraisal process.
The part of the loan market that it focuses on is made up of larger commercial efforts and is therefore done at much higher values than the typical small business loan. It also means more analysis of documents related to a loan application, a cumbersome process that Able aims to reduce by up to 30% on a typical application.
Represas said he came up with the idea to fix this after meeting his cousin who worked in corporate finance and told him about the painful process that had gone on behind the scenes.
Both Represas and Hurst at the time were engineers at another fintech, Digit, and so Represas’ natural inclination was to think there was probably already a solution on the market to reduce this.
It turned out that there was none. He couldn’t believe it, he said: business lending is a $6 trillion annual market, but globally banks were spending about $60 billion a year to process these demands loan.
Perhaps the larger size of the market has kept many incumbents from wanting to fix what didn’t seem really broken. But we know how this song plays out: there are now a number of companies also building to solve this problem, and so it was perhaps only a matter of time before they saw their grip ineffective. on interrupted business loans.
“So we dove into solving that problem,” he said.
The company picks an interesting time to announce funding and open its doors. Inflation is on the rise and interest rates are rising in an attempt to contain it.
That means it’s a complicated, but potentially interesting time to be a fintech startup developing technology to power commercial lending services for big banks and other large lenders.
On the one hand, higher interest rates and the presence of inflation could make obtaining loans and taking any business leaps or risks less attractive; on the other hand, it may be precisely the right time to offer a product that takes the friction out of the process and therefore speeds up the transaction and reduces the costs around it.
Businesses, on the other hand, will always need funding to grow, and in some cases companies will invest in it because their products are breaking through, perhaps because of the current state of the market. (As tech folks like to point out, Google and Airbnb were launched during recessions after all.)
You could say the same for Able. Its own product crosses several different competitive spaces. There are a number of startups already working directly with companies or providing their technology to be integrated elsewhere to power business lending with new approaches that leverage AI and big data analytics. (Some like Kabbage end up being picked up by incumbents: Amex acquired the SoftBank-backed startup in 2020 after struggling through the first year of the pandemic.)
Along with this, there is a wave of companies targeting fast-growing companies and making it easier to obtain revolving credit and debt facilities as an alternative to equity financing that they might typically consider. These include Hum (formerly called Capital) which provides services directly to businesses; and Sivo, which provides debt as a service; Clearco and Wayflyer both targeting e-commerce and online businesses; and more.
I should also point out that there is another fintech startup called Able, although it focuses on personal money management and is not connected to this Able at all.
Represas notes that Able is focused on the technology used for processing, but not decision-making or risk profiling (which, according to Represas, is only a small aspect of loan approval and not the problem); its focus on commercial lending and not SME lending (too small an opportunity, he said); and that it doesn’t interface directly with the borrowers itself, but goes through the banks, all of this sets it apart from the rest of the pack (why create new channels when these banks already have these deep relationships, it was the rhetorical question from Represas when I asked why not). Overall, Able is disruptive, but not a threat to its customers.
And that makes it one to watch.
“Able is a game changer. Their team is already working with several banks in the Canapi network on use cases that span the entire lending lifecycle,” said Neil Underwood, general partner of Canapi Ventures and president of Live Oak Bank, in a statement. “Able reduces the time and resources required to process any commercial loan. Lenders get better economics and a scalable platform for growth. Everyone benefits from a modern digital experience. It’s a win-win situation for all parties involved.