SoLo Funds

What is SoLo Funds?

SoLo Funds is a community finance platform that operates with a unique approach to lending, emphasizing community-driven financial assistance. Unlike traditional lenders, we leverage technology to facilitate peer-to-peer lending among our users. We allow individuals to borrow and lend small-dollar amounts directly, bypassing traditional costly options.

Our model aims to provide accessible financial solutions, particularly for those in the subprime market segment who may face challenges due to their inconsistent cash flow and living paycheck to paycheck. We’ve positioned ourselves as disruptors in the fintech industry by addressing gaps in traditional lending practices while producing industry-leading low costs for our borrowing members.

How did it all start?

My business partner and I founded SoLo Funds with a mission to empower underserved communities financially. It was deeply troubling to see some of our close friends and family members struggle with financial hardships caused by unexpected emergencies, especially when they were unsure of where to seek help. Their situation was far from unique—most Americans cannot afford a $1,000 surprise expense.

It was this realization that inspired us to launch SoLo Funds in 2018. Since then, we have steadily expanded our reach and impact within the financial services landscape, integrating more banking features and programs aimed at enhancing accessibility for underserved communities.

How did SoLo Funds initially start connecting with the market and informing people about this option? Were there any particularly effective methods for spreading the word?

Let me explain in two parts. The real story is that within five minutes of the app being released, someone requested a loan and another person funded it. It was really that simple. Roughly sixty percent of Americans live paycheck to paycheck, often facing emergencies and needing quick cash. That’s over 200 million people out of our 300 million population actively searching for solutions. The demand is substantial; people are actively seeking help — you just need to be there.

On the lending side, the rise of crypto, Bitcoin, NFTs, and meme stocks like those on Robinhood represent a shift towards democratizing investments. Traditionally, investing was seen as something accessible only to wealthy or institutional investors, but these newer forms of investments have opened up opportunities for regular people to participate in financial markets and potentially grow their funds. It’s this same demographic that often ends up becoming lenders on SoLo — very similar motivations. Interestingly enough, 82% of our total user base, both lenders and borrowers, live in underserved zip codes.

Today, we don't market ourselves in a traditional fashion. We emphasize concepts like ‘people helping people,’ community finance, borrowing on your terms, and lending to create a social impact. We deliberately avoid financial metrics or gimmicks like fast cash, instead focusing on the community. This approach sets us apart significantly when someone in need searches for solutions, and we’ve consistently followed this approach since 2021.

In terms of the community and marketplace, why do you believe we haven’t seen more structures like this facilitating lending and fostering financial growth?

Well, there are several reasons for this. Our technology innovation plays a crucial role; it has given us the ability to underwrite the marketplace risk effectively for a market segment historically considered difficult to assess. Large banks typically avoid offering small-dollar loans due to the perceived high risk associated with this segment, despite the fact that a majority of Americans fall into the subprime category and the technology exists to assess them differently.

The industry stigma surrounding this market limits innovation and attention. However, our approach has enabled us to effectively assess this segment without relying on traditional credit reporting or bureaus, which we consider irrelevant. Instead, we assess applicants based on their cash flow. When users sign up, they connect their bank account, allowing us to review their banking history over the past two years and generate a score. This scoring method has resulted in a repayment rate three to five times better than the industry average.

Our platform’s architecture supports this approach behind the scenes, ensuring everything functions seamlessly. For lenders, this translates into a positive experience, potentially the best they’ve experienced. For borrowers, SoLo provides a flexible lifeline for unexpected expenses like car repairs, vet bills, or utility payments. It’s a reliable option they can always count on in times of need, which has significantly contributed to our growth.

What challenges and obstacles have you faced in pursuing your vision, and how have you tackled them?

Our main challenge stems from the negative perception surrounding subprime lending. This perception often portrays subprime players as exploitative or charging excessive rates, influenced by what some call “incumbency bias.” This bias assumes that if large banks haven’t pursued this market, there must be something inherently risky or wrong with those who do.

Regulators, confronted with a lack of specific laws like those found in other countries for peer-to-peer or microfinance, often try to shoehorn us into existing frameworks. This approach can feel like fitting a square peg into a round hole, rather than fostering regulatory environments that adapt to new financial models and encourage innovation. Currently, we’re navigating various jurisdictions where regulators, perhaps unintentionally, impede rather than foster new models like ours.

For instance, in Connecticut, we entered into a consent order following a two-year investigation that found no wrongdoing, despite the press release being highly salacious. This makes the regulatory landscape unnecessarily challenging for innovative models. We’re not alone in facing such challenges; other innovative financial models, like earned wage access companies and Buy Now, Pay Later firms, encounter similar scrutiny and legal hurdles despite their beneficial impacts.

Despite these challenges, our achievements speak for themselves. We are recognized as a CNBC 50 Disruptor and Global Fintech Inclusion 50 company, and we hold B Corp certification. Our commitment to financial inclusion and affordability has been validated by independent research and acknowledged across industry and legislative platforms. We remain steadfast in our mission and are confident that we will win this fight in the long run.

Regarding the impact of technology and technological advancements on the company’s growth, how would you describe their influence on what the company does and its overall expansion?

As mentioned previously, our innovations in technology have allowed us to effectively evaluate and manage the risk of lending in a way that more traditional methods have not been able to match. However, our perspective on keeping up with the latest technology trends is that they are constantly changing—everyone who was into NFTs yesterday is now an AI expert today.

While we are always open to adopting emerging technologies that align with our goals, SoLo operates differently. We’re not chasing the latest tech fads. SoLo is a company with a lasting mission: to empower people financially, especially those who have been overlooked. Our focus is broad but purposeful — starting with short-term loans and returns, but with plans to expand into credit building, larger loans, small business financing, and even credit cards.

We envision SoLo as a new type of financial company, driven by the needs of our users and depositors, not just our own agenda. We like to think we’re the Uber or Airbnb for loans, ensuring fair treatment and setting clear guidelines. We’re here to ensure our technology works seamlessly, creating a safe marketplace. We’re facilitators, and we leverage the most advanced technologies in the world to deliver on our mission, not enforcers — that’s an important distinction.

What's next for SoLo Funds?

Our story started in 2015, and we launched 3 years later in 2018. It's been a long journey to where we are today. The product has definitely evolved and grown in that time—we have already expanded to offer a number of banking features such as a wallet, which is a consumer deposit account. Looking ahead, our roadmap includes developing innovative features and releasing numerous new products that benefit our members.

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