While small businesses often struggle to get the attention of financiers, a new online company with the accessible name of Happy Mango is opening new financial doors for them through an online platform.
The tribulations of small business are well known. They create big jobs, adding nearly twice as many jobs as large companies from 2010 to 2019 — 10.5 million versus 5.6 million, according to federal Consumer Financial Protection Bureau. But small businesses are usually the first to succumb during an economic downturn. A third of small businesses have closed amid the Covid-19 pandemic, according to the CFPB
COVID-19 kind of pushed us. It was a great time for people to see that there was a lot that could be done online.
Kate Hao, Founder and CEO
Happy Mango Inc.
While the pandemic may be a passing phenomenon, a chronic disease plaguing small businesses is a lack of credit. About 27% of small businesses say they can’t get the financing they need, according to 2017 data National Small Business Association survey cited by the CFPB.
Fixing the “flawed” credit score system
The reasons for this credit starvation include a flawed credit scoring system and cumbersome underwriting and servicing processes that make loans below certain thresholds – which are often still marginal or unprofitable for many large banks, the claim Kate HaoFounder and Chief Executive Officer of Happy Mango Inc. She adds that these lending thresholds, while too low for many banks, are often still much higher than what a small business might need.
These are the problems in New York Happy Mango attacks through its online risk assessment and lending platform for community banks, credit unions and nonprofit community development financial institutions. In addition to business loans, the platform processes and manages auto, mortgage and personal loans for consumers. The three-tier platform also serves financial advisors as well as direct consumers, providing data and analytics to monitor financial health and improve creditworthiness.
In addition, Hao wanted her platform to streamline what she says are often inefficient processes related to loan applications, documentation and servicing. The platform supports these features as well as payment processing.
Anticipation of more accurate data on borrowers
Hao, who was born in China, received her B.A Albion College in Michigan and earned a master’s degree in business administration Harvard Business School, knows his way around the financial world. She spent about 12 years at Morgan Stanley, rising to executive director of the giant investment bank’s corporate treasury division before striking out on her own in 2014.
While at Morgan Stanley, Hao concluded that lenders do not have all the tools they need to assess the risks of lending to underserved consumers and small businesses. The scores obtained by the dominant credit reporting agencies — Equifax, Experian and TransUnion — are based largely on loan repayment data and are therefore “backward-looking,” Hao says. Helpful, yes, but not the whole picture.
Hao says developing online technologies to improve risk assessment was Happy Mango’s initial focus when it landed its first client in 2016. Her view was that data on a small business owner’s checking and savings accounts and cash flows would paint a more complete picture of risk than results alone. But the work can be difficult because “at the micro-business level, the owner’s personal and business finances are so intertwined,” she says.
So Happy Mango’s credit score differentiator emphasizes “recurring expense items, recurring income items,” Hao says. “We look at cash flow; others view payment history.’
Creating a new kind of lending platform
Another feature, she adds, is the Happy Mango platform’s ability to quickly adjust payment terms without forcing the business owner to beg for mercy from the lender when expenses temporarily exceed income. This is possible because of the insights that Happy Mango gets from its account and cash flow data.
“Payment flexibility is extremely important,” says Hao. “This kind of payment flexibility is almost as important as an accurate risk assessment.” The platform’s lending features are integrated with aspects of financial advice for consumers, small businesses and financial advisors, she adds.
Happy Mango, which has just four employees, developed the platform largely from scratch, Hao says. But some big-name tech firms are providing important behind-the-scenes support. There is one Plaid Inc., a big data aggregator for fintech that provides access to consumer bank account information. In addition, Dwolla Inc. manages automated settlement payments between borrowers and lenders.
Today, 10 community financial institutions located in the New York area use the Happy Mango lending platform. The business lending component was launched 18 months ago, and since then almost 400 small businesses have been lent through it. While Covid-19 has wiped out many small businesses, it has had the ironic effect of helping Happy Mango grow by enabling community lenders to distribute government Payroll Protection Program (PPP) loans through its platform.
Find out what you can do online
“That’s what got us started,” says Hao. “It was a great time for people to see that a lot of things can be done online.”
While larger banks often prefer to lend to businesses of $50,000 or more, the average loan amount processed through Happy Mango is just over $10,000, with actual amounts ranging from $3,000 to $400,000. says Hao.
Happy Mango’s pricing for financial institutions is subscription-based, with three plans ranging from $350 per month and a $2,500 one-time setup fee to $950 per month and a $5,000 one-time fee. Custom pricing for high volume users is also available.
Hao is coy about what big things she has planned for the future, though she notes that updates to the platform are made every two weeks. It doesn’t matter, her attention will remain the same.
“We’ve had a significant impact on a community that needs assets through loans,” she says. “I think we’ve made significant improvements in efficiency.”
Jim Daley is a Mount Prospect, Illinois-based freelance business and technology journalist.
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https://www.digitalcommerce360.com/2022/09/23/an-ecommerce-tech-entrepreneur-helps-small-businesses-get-financing/ An e-commerce entrepreneur helps a small business get financing