Newark-based fintech startup Credibility Capital is disrupting small business lending

It was a big deal when fintech company Credibility Capital moved to Newark from Lower Manhattan this year to open its offices in the newly renovated Hahne & Co. building. There was a ribbon-cutting, and dignitaries spoke about how growing startups like this one could help elevate Newark’s economy.

The company’s move was helped by a $6.5 million award that will be disbursed over 10 years by the New Jersey Economic Development Authority under the Grow New Jersey Assistance Program. Credibility plans to add 50 to 70 jobs in Newark during this time frame.

The two co-founders — CEO Brett Baris and President and Chief Operating Officer Mark Rambler — are New Jersey natives with a history together that goes back to their high school years at Dwight-Englewood School, in Englewood. Though they went to different colleges, they remained in touch, and both ended up in the New York/New Jersey area.

In 2013, the duo began discussing ways to improve the small business lending landscape. Baris explained that one of the adverse consequences of the 2008 recession was that fewer and fewer banks were making loans under $400,000 to small businesses.

Out of these talks, Credibility Capital emerged nearly four years ago, with the mission of providing an easier, online matching platform to enable high-quality small businesses to obtain transparent, fair term loans, Rambler told in a recent interview. The company offers loans from $10,000 to $400,000. They are paid monthly and are fully amortizing. On the funding side, the company originates prequalified loans that banks and other institutions can purchase.

When Credibility Capital started, Rambler said: “I was with a credit fund and Brett was doing fintech venture capital. We immediately focused on borrower acquisition,” finding those small businesses in need of capital. The company now has a relationship with Short Hills-based Dun & Bradstreet that helps it to attract small businesses across the country.

From the perspective of small businesses, the need for this financial product was glaring. “It’s incredible how many small businesses are bombarded with expensive lending offers, essentially payday lending, and the terms often aren’t properly disclosed,” noted Rambler. “Most don’t have a (chief financial officer) to help them with finances, and they don’t have a lot of time to compare opportunities. Small businesses with better credit profiles should be able to get lower-APR loans with properly disclosed terms. Our idea was to fill that gap for these businesses between a bank loan and higher-cost products.”

Small business lending is complicated. “If you are doing consumer lending, everyone has a FICO score, and whatever your FICO score, that’s pretty much what your credit profile is. For a small business, it’s not so easy, and that’s one of the reasons why some banks struggle to make these loans,” Rambler said. “It’s difficult to cost-effectively find small businesses looking for loans and then quickly underwrite and originate in a low-friction process.”

Credibility has developed a platform that matches high-quality businesses with high-quality loan options. When the company launched in 2015, it was using a customized third-party solution, but the company’s in-house team of engineers then developed a propriety platform, which specializes in small business originations. Called the “Loan Origination and Referral Platform,” it funnels a small business applicant through the process of document collection and origination. Banks and other institutions buy Credibility’s loans, and they have very specific buying requirements. “We’ve developed LORP to help us efficiently acquire customers and underwrite loans that we’ll be able to originate,” Baris explained.

LORP also automatically refers applicants that don’t make the credit cut to partners who may be able to handle their needs. “Because we sometimes have to decline applicants, we’ve made sure we can refer them to other providers. If it’s a startup business, if there have been recent commercial bankruptcies, or if a small business owner’s credit isn’t good, for example, Credibility’s flagship product won’t be a good fit, and they’ll likely be a candidate for a more expensive, shorter-term product.”

Baris elaborated on Credibility’s partnership with Dun & Bradstreet. “The partnership we have with D&B is really why we started the business. D&B does much of our front-end sales. They provide us with referrals every single day. When they have an opportunity to talk about access to capital, they mention the exclusive partnership with Credibility. We have an API that is built right into their system.”

The company is still developing, and Rambler candidly spoke about the biggest obstacle to its success: “We are a [matching] platform, and we have to manage the supply and demand of lender capital and borrower interest. As we grow our infrastructure — our reputation, our brand, our sources — there is going to be a certain amount of borrower interest that we are going to have to satisfy. At the same time, we are talking with potential new lenders who are interested in funding loans. So we have to find that balance. We can’t go out to a new lender and say, ‘We can promise you a half-billion dollars’ worth of loans in 12 months,’ because we’re not there.”

Where does Credibility Capital go from here? “We’re always searching for new borrower channels and lending partnerships,” Baris said. “We’re excited about what 2019 will bring.”