Small Business Social Funding

Social lending is partially based on credit rating

There is no commercial credit rating

Commercial loans are based on business plans, balance sheets, etc...

Subjectively adjudicated loans

Existing businesses or new businesses trying to borrow money to grow their business

Today there are two places businesses can go: banks and SBA, plus friends and family

Rotary clubs has a limit on similar businesses: one dentist, one lawyer

How do you create peer pressure for businesses who borrow?

Trickle down lending, the first borrower gets the lowest risk, but the highest interest rate. The second in line has higher risk that the money will be there for them, but pays a lower interest rate

You don't get group lending without group commitment

Understand the inflow and outflow of cash, you can understand their business

If existing businesses upload their transactions, you can assess their risk

Three tiers: open up people's transactional data to give them a better sense of their cash flow, tier two is that with a good commercial credit rating based on transactions you can get investment from the community, third tier is opening it up to startups once you have a thriving community

Spread the risk among many more people, have access to a larger number of potential investors

Risk could be partially assessed by passion of pursuit and not just solidity of business model (art gallery vs. plumber)

A mashup between many different sources: Yelp, LinkedIn, Amazon, eBay, put together a combined picture to get a sense of viability of a business

People are likely looking for significant sums, a company needs more than $25k for an operating loan to do anything different