Becoming a Micro Lender
Welcome!
Adding Lending: Why?

Lack of micro loan access for your
clients

Clients need $ to grow businesses to
sustainability level

Ready to expand services beyond
classes and one-on-one counseling

What else?
What it Takes
I.
Plan and Program Design
II.
Lending Capital
III. Funds
for Operation Expenses
IV.
Microlending Management System (MMS)
V.
Staff Capacity
VI.
Organizational Change
Plan and Program Design

Mission, Goals, Leadership, Funding

Loan Product, Underwriting, Outreach

Servicing, Delinquencies, Portfolio
See “Steps for Becoming a Microlender”
for more detail
Lending Capital

Grants (equity). Ideal for higherrisk, labor-intensive micro loans.

Debt. Funds you borrow at a low rate
and with a long term. You lend out at
a higher rate and shorter term,
allowing you to keep the “spread.”
Use for lower-risk deals.

Sources: SBA, CDFI Fund, EQ2 loans
from banks, RMAP, IRP, RBEG, HUD,
foundations, corporate donations
Funds for Operations

Loan officer

Back office staffing

MMS and loan servicing fees

Time from ED, board or loan committee,
accounting staff and TA staff

Good mobile technology and web
interface
MMS Overview
Supports lending here
Outreach
Risk
Assessment
Application
Underwriting
Document
Collection
Closing
Credit Memo
Servicing &
Collections
Solution: MMS Online

Automated screening
Spend minutes instead of hours
finding eligible deals

Sort deals quickly
MMS gives a risk rating to each application

Fast and reliable underwriting
Rely on successful underwriting team for
quality deals and portfolio strength
How Does It Work?
Three step process:
1. Online application
2. Auto Review: five-minute
risk assessment to establish eligibility
3. Underwriting: Two-day turn
around on underwriting
Auto Review
Using 13,000+ loan portfolio, Accion Texas
has built a risk assessment tool. It
measures:

Capacity: Is there enough global cash flow
to
make loan payments?

Credit:
the
Is historical use of credit in
ball park?

Risk:
that
Does borrower’s profile match
of successful borrowers in AT
Auto Review Results: Five Minutes
Your Agency:

Directs potential borrowers to online
application

Pulls credit report and marries it to the
application

In five minutes, Auto Review gives risk
assessment
Green: Borrower meets all three measures
Yellow: Borrower lacking one measure
Red: Borrower fails two measures
Give Client Same-Day Results
You contact client same day with
application results. Proceed with approved
deals:

Gather documents to verify application
information and underwrite loan.
Green: MMS Generates Required Document List
Yellow: After consultation with MMS Underwriting, RDL generated

Upload docs to MMS
Underwriting: 48 hours
MMS Underwriting department reviews
documents
Provides final decision and terms
Provides credit report
Is available for questions, discussion,
consultation
Closing and Servicing
Proceed with your own closing documents,
collateralization and funding processes.
Your Participation
CAMEO requests participating members:

Run all deals through Auto Review

Accept MMS underwriting grid

Participate in monthly calls for
individual and peer learning
Staff Capacities

Basic business training background

Sales approach to deal development

Underwriting basics

Servicing & deal restructuring capacity

Portfolio, accounting capacity
Probably not all skills in one person
Organizational Change

Traditional TA and a long “get to know
you” process. Staff and clients get
close.

Understand difference between a good TA
client and good loan client

MMS underwrites on current cash capacity
and credit

Less on projections or long-established
relationships – “character”
TA Clients vs Loan Clients

To use MMS to its fullest, integrate system into staffing
expectations and client interface – working faster and more
based on the numbers

MMS creates scale but does cut some clients out of the

Each organization must find a way to help these clients
Commitment
Directors must:

Desire growth and increased efficiency

Provide hands-on leadership for change
In addition, staff needs to be open to changing roles and procedures.
ML Industry Transforming
Microlending being transformed:

Common now to build or buy behavioral
models with big data

Coupled with online applications

Coupled with a fully online automated process

Leads to fast risk assessment, decision
making, loan closing

For-profit lenders moving into this field
ML Industry Transforming
Add to that:

Crowdfunding

Profit-making possibilities

Lots of new lenders cropping up everyday

Borrowers realize they have other options
NEED TO CHANGE TO STAY IN THE GAME
Questions?
Thanks!!