Even though he had previously started his own successful business from scratch, Hario Vasquez had a difficult time finding funding for the new company he had acquired, Avid Promotions. Vasquez went to his usual bank, but they weren’t able to provide him a loan because his new business had inadequate cash flow.
“It was frustrating at the time because I had a plan to grow my business,” Vasquez shares. “I knew I could do it because I was able to start a business from nothing [and grow it] to a $1.8 million business. Even though it’s not the same line of business, I had a plan and, if I executed it correctly, it would open up many doors—but I needed cash for that.”
Luckily, his bank recommended an alternative—Lendistry, an East West Bank client and small business lender that’s focused on helping underserved entrepreneurs. “They have a great team from the moment you call,” says Vasquez. “I talked to one of the reps, Janet, and I was able to get funding…and expand my relationships with the team. In a sense, it feels like I’m a part of their team.”
After he took out his first loan from Lendistry, Vasquez was able to take Avid Promotions from $520,000 in sales to a $1.3 million business in 2018. Now, Vasquez can focus on growing his company and reaching his goal of turning Avid Promotions into a $5 million business.
Everett Sands, the CEO of Lendistry, saw a gap in the banking industry where people like Vasquez were being underserved. After the 2008 financial crisis, a certain subset of entrepreneurs who were seeking loans above $100,000 but below $1 million suddenly had difficulty finding financing. And now with the COVID-19 pandemic and the new Paycheck Protection Program caps, many small business owners are having trouble getting funding from larger, more traditional financial institutions. To help these business owners, Lendistry has jumped into the fray and started offering PPP loans, as well.
Underserved communities often refer to people who occupy certain gender, racial and socioeconomic roles, but Sands realized that after 2008, when there was considerable merger-and-acquisition activity in the banking sector, “underserved” also came to mean business owners seeking certain loan amounts. The larger banks were taking over community banks, which left fewer options for small business entrepreneurs.
Not only was it an opportunity to fill a hole in the market, but Sands saw it as a chance to become a genuine partner to these entrepreneurs. “I think where small businesses are struggling is because of the lack of access to capital,” he says. “There is capital out there, but the capital comes in the form of what I would call payday lenders, or lenders that are charging higher interest rates, and/or lenders that might not truly take the time to understand what the business needs or its growth trajectory.”
Part of Lendistry’s success stems from their intentionality in understanding the needs and challenges that their clients face. With a $30 million credit facility and $20 million accordion feature that gives them the option to expand their line of credit from East West Bank, Lendistry can focus more on developing their loan portfolio and helping their core clientele build and grow their businesses.
“If we’re going to help women-owned businesses out, let’s go to where the women-owned businesses are,” Sands gives as an example of Lendistry’s mission. “Let’s hire people who are women. Let’s train our business development managers who are men to be able, with intentionality, to focus on women-owned businesses and the specific needs that might be related to them.”
Although Lendistry acts as a community bank, they also embrace more novel approaches to banking and servicing customers.
"By providing this type of financing to small businesses in those communities, you’re helping those communities to actually get out of that vicious cycle of being distressed."
Lendistry is a unique combination of a fintech company and a community bank, believes Mark Parsa, senior vice president of East West Bank’s structured finance group. “They are a certified Community Development Financial Institution, which is a traditional way of lending to small businesses that are in distressed areas,” he shares. “But at the same time, the company is utilizing new technology that is available for some of the most sophisticated private finance companies in the U.S., and they’re using that to help small businesses that are in minority communities or distressed areas, to help those small businesses grow.”
Their adoption of technology and newer methods comes from their strongly held desire to streamline the lending process for their customers. Sands, who has worked in the banking industry for years, saw a lot of redundancies that made the process more complicated and time-consuming than needed. He and his team found various ways to simplify processes and focused on thinking up new ways to make the customer experience smoother and more enjoyable.
The second thing, says Sands, was to allow greater flexibility for customers. Although banks are traditionally open from 9 to 5, they noticed that a lot of their customers were active during what Sands calls “5 to 9.”
“Going back to my women-owned business example—she’s a single mom potentially, a woman-owned business, and she’s trying to take care of the housekeeping of a business,” says Sands. “She doesn’t have time for a 9 to 5. She really has time for a 5 to 9. Really around midnight, that’s when she has time to take care of the business. So, how do you create tools and systems that are accessible to her at midnight that could help her move along the process?”
Of course, Sands admits that there are still limitations, but he and his team are constantly seeking out new ways to provide services to their customers when they need it.
“We try to have some intentionality about what the entrepreneur is going through, when they might be available,” he adds. “That doesn’t mean they can call us at midnight today—we’re not there yet—but that does mean there could be programs and ways that they can deliver documentation to us, get feedback, etc.”
Part of the reason Parsa thought Lendistry would make a good partner was because of the similarities between Lendistry’s mission and East West Bank’s own history of helping underserved communities.
“This is very similar to our background to help the communities that were neglected by other traditional lenders, or overlooked—communities that were underbanked,” says Parsa. “By providing this type of financing to small businesses in those communities, you’re helping those communities to actually get out of that vicious cycle of being distressed.” These small businesses increase employment rates, which then gives people in those communities more spending power, and with that, more demand.
Parsa adds, “It starts a cycle of growth in those communities, and will allow those communities to get out of the neglect that they have suffered from traditional lenders so far.”
For Vasquez, Lendistry’s mission impacted him on a personal level. His parents immigrated from El Salvador with $20,000 and were able to turn that into a successful real estate portfolio, but he often wonders where they would be if they were able to get a bank loan.
“They came here, they’re minorities,” Vasquez says about his parents. “What if my dad could’ve gotten a loan back in the day? Instead of only just having one shot, he would’ve had two, three shots, and it wasn’t his money that was working, it was a loan that was working. I think about those things because I think that’s what Lendistry is—they work with minorities. A lot of them are not educated about what’s out there.”
Sands adds, “I think the best thing East West did is they had respect looking at us and saying this team knows what they’re doing, they’re willing to take a risk. The small business market is about $1.4 trillion—at least that’s what our numbers say—and the more we can grow, the more of these businesses we can help. It’s a massive amount of opportunity for us.”