CEO of Starbucks, Slauson & Co. back Bags, a LendingTree for minority-run businesses

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Bagsa lending marketplace focused on underrepresented businesses, raised $3 million in seed funding led by Slauson & Co.

  • Other investors include Connecticut Innovations and the Schultz Family Foundation’s Entrepreneurs Equity Fund (founded by Starbucks founder Howard Schultz).

why is it important: Fintechs focused on small business lending have exploded in recent years, but the market remains fragmented. Bags aims to make finding capital easier for business owners who have the hardest time obtaining it.

Details: Founded in 2020, Bags connects small business owners, especially women and minority entrepreneurs, with potential lenders.

  • While small business loans often require at least three years of operating history, Bags aims to do so with at least one year of history. It also aims to serve businesses with lower incomes than banks are typically willing to underwrite.
  • Bags also focuses on companies in industries such as consumer packaged goods, which typically don’t get much venture capital attention.
  • Bags currently charges an origination fee of approximately 0.5% to 2.5% on each loan. The company has so far channeled about $5 million in loans. : Players like LendingTree, NerdWallet, and Credit Karma operate similar business models, although they serve a broader customer base.

What they say“What we’ve found is that the big retail banks aren’t a good fit,” says CEO Daniel Taylor, noting that the platform currently doesn’t feature the lending options of many high street lenders such as Bank of America.

  • Bags’ clientele has “a credit rating which is not necessarily excellent. And therefore, they are often refused by traditional institutions”, he says.