Accelerating Credit for Small Businesses

  • Bessie Chu
    Bessie Chu
  • Dave Kim
    Dave Kim
Accelerating Credit for Small Businesses

Thriving small businesses today struggle with getting loans because of archaic banking practices. Harbr and Cape have joined forces to automate away the manual overhead. Instead of taking 3-5 business days, Harbr, using Cape as its privacy engine, determines the credit-worthiness of an application in seconds. This means faster turnaround and more business for financial institutions and access to credit to help businesses grow.

The Big Problem

Financial services can’t meet the demand from small businesses today because of the manual steps required in underwriting.

Small businesses struggle with getting loans because they don’t have the cash flow, collateral, or long credit histories to access services from what people may think of traditional banking. The truck driver that has $50k owed for hauls delivered that will take 90 to 120 days to settle but needs cash flow now to keep their truck running requires a different category of service.

The Federal Reserve describes the problem as an “informational opacity issue” in which: “The heterogeneity across small firms, together with widely varying uses of borrowed funds and smaller loan sizes, has impeded the development of general standards for assessing applications for small business loans and has made evaluating such loans relatively expensive.”

The current process for loans they have access to, such as with asset-based lending, is extremely manual so many applications just don’t get processed. Meanwhile, months go by where a business could have been growing, but they couldn’t take on projects without the cash on-hand.

What is Asset-Based Lending

Asset-Based Lending works by pledging future receivables, for example accounts receivables, which can be understood as future payments a business will receive from completed sales or services, as collateral. Learn more about the typical customer journey in invoice factoring. The diagram below also shows different categories of secured finance and their growing markets.

Asset-based lending market _Source_

Current Inefficiencies in Asset-Based Lending

Dave Kim, CEO of Harbr, explains that typically a small business owner wants to leverage their business assets or sell their future receivables to a lender or purchaser. Banks want to underwrite these small businesses.

When businesses pledge their future receivables, banks need to know merchants or vendors this business works with and processes their payments. Banks use this information to determine the creditworthiness of a business’s customers and vendors, assessing the quality of the accounts receivable in order to provide a loan.

In this process, business owners need to provide confidential information as part of the process, even scanning Driver Licenses and Passports, not to mention other documents with sensitive information such as financial reports, bank statements, vendor information, and accounts receivable tables. This also becomes a data security issue. Today, this is done in a manual fashion, often involving the verification of paper documents.

Dave also notes Harbr can help small and minority owned businesses because it’s not often a rejection problem, the processes are so manual loan applications don’t make it in front of a human. He explained that, “If there’s a hundred funding apps in a month and 10 of them are for $500K each and the other 90 are for $50K each, it takes the same time to underwrite a 500k and 50k application, so those 50k deals don’t get looked at.” What ends up happening is many businesses looking for these smaller loans who do have healthy account receivables can’t find a lender.

The Solution

What Harbr offers is a way to pull the relevant information out of the documents and parse out the key-value pairs needed in an automated and secure fashion. In data parlance, this means Harbr can pull information needed (eg. City: Chicago) from documents for banks to evaluate credit worthiness.

Harbr provides the service for this, while Cape Privacy ensures the security of those documents. Harbr nor Cape never sees the entirety of raw information businesses upload. All the documents are client-side encrypted when uploaded and processed using a secure OCR (Optical Character Recognition) service hosted in Cape’s secure enclaves. This happens in seconds in real-time so a lender can understand the credit-worthiness of applications versus the 3-5 business days it can currently take. Cape ensures that data stays secure throughout the journey.

Untrusted Workflow without Cape Trusted Workflow without Cape

For example, a small business might have 50 merchant vendors and associated legal documents that need to be searched through - e.g. extracting out what values are associated with payments from Venmo, Stripe, and Cash App that plugs into a bank’s underwriting process that inspects, indexes, and translates these values to create datasets used for determining if a loan can be approved.

How it Works

A Harbr customer gets a script to embed on their website. As a prospect fills out and uploads a form, Harbr provides the services that extract the aggregates from the form, eg. Credit Bureau data, while Cape keeps that data secure. The processed information returns into OneDrive or destination specified for the underwriting process.

The Problem Size

Factoring Services Market Growth


Small businesses are underserved in the credit market. Asset-based lending is an area that can help, but current processes are far behind what technology could do for them. Harbr and Cape bridge that gap by automating time-consuming processes in the data gathering and organization process while data remains protected. Moving this process from days to seconds means helping businesses grow.

To learn more about Cape contact us.

VIPs get special access to Harbr. Learn more.

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