Rural businesses, especially startups and those operating on a shoestring, have long found it difficult to qualify for traditional bank loans.
An app under development in Durango could be a game-changer. It promises to open new avenues for small businesses to find financing, especially in underserved communities.
The idea for HelloBello.biz came from Kent Curtis, CEO of 1st Southwest Bank in Durango, a Community Development Financial Institution, which are institutions certified by the U.S. Treasury Department to help finance businesses in low-income and underserved communities.
An inspiration behind Hello Bello, Curtis said, was his banking experience, which led him to believe if a database of all available financing sources existed, far more loans could be structured in creative ways to help struggling rural businesses obtain loans.
Hello Bello provides a central database that combines numerous sources of financing open to an underserved business – from U.S. government small business loans, traditional bank loans, CDFI loans (that have access to federal funding to help disadvantaged business owners), to private foundations.
“Hello Bello serves to mitigate risk for banks and open the complete capital stack for small businesses,” Curtis said.
The federal government alone has $250 million a year in funds in its budget set aside to assist small, struggling businesses and businesses owned by disadvantaged owners, but many of the programs are underutilized, he said.
The Telluride Foundation, a private foundation that provides grants to struggling communities and loans to underserved businesses in San Miguel, Ouray and Montrose counties, is excited to participate as one of the lenders accessing Hello Bello when it begins testing in January, said Paul Major, president and CEO of the Telluride Foundation.
“We’re really excited about how this app could be applied to address many different issues in financing underserved areas,” Major said. “Navigating financing and finding money for small businesses is complex, and anything that can simplify that is going to be extremely useful.”
Many small-business owners, Major said, are unaware of financing opportunities through the U.S. Small Business Administration, CDFI loans, such as those made by 1st Southwest Bank, and loans made by private foundations such as the Telluride Foundation.
“It will make more avenues of finance accessible to small businesses, particularly if they don’t know where to look or if they don’t know some of these options even exist,” he said.
Major also noted that Hello Bello could be used to identify special tax breaks allowed for banks that invest in blighted or underserved areas that was created in the recent federal tax-reform bill, which created opportunity zones to spur investment in poor communities.
Software for Hello Bello is also being developed locally by Gestalt Development.
Jay Marqua, Gestalt Development managing director, said his firm is a network of consultants that is able to tap in to expertise in various fields to assist clients in development of apps, including the financial industry.
“I think Hello Bello has been in Kent’s head for quite a while, and now it’s ready for a beta test. I think he’s filling a void in financial services that a lot of banks have.”
A small business looking to use Hello Bello would answer 20 questions about the business. The questions serve to define the business for various funding requirements needed by the lenders using the app. The app would then try to assemble a loan for the business.
Curtis envisions the 120 Community Development Financial Institutions in the nation would serve as “hub” banks for Hello Bello, and more traditional banks serving rural or blighted areas could serve as feeder banks for loans assembled by Hello Bello.
Economic development agencies, accountants and other people involved in small-business financing also might have an interest in using Hello Bello, Curtis said.
Hello Bello would be financed by licensing fees paid to the company by CDFI Hub banks and monthly subscription fees to community banks that would serve as feeder banks and by fees for other users such as accountants.
“This can be transformational in the way capital is deployed in rural communities, and it helps make rural banks relevant again,” Curtis said.
Curtis is in the process of creating a separate business entity for Hello Bello. Once that is done, he will begin looking for $500,000 to $1 million to finance the next version of Hello Bello that will allow it to grow by collecting more users.
Several dozen banks, private foundations and CFDI institutions and accountants will use a beta version of Hello Bello for the next year and provide feedback for further refinement of the app.
“We help customers walk out of a bank happy because they got something done where before they couldn’t qualify for a loan. And, we help banks become better and more creative,” Curtis said.