The Executive Interview Series provides readers with exclusive insights from movers and shakers in the payments industry. The Payments Industry is under continuous transformation, as such this series provides diverse perspectives on everything from strategy to payments technology and to the future of the industry.
In this interview, TSG’s Market Intelligence team-member Alex Ferguson sat down with Jon Fry, CEO and Founder of Lendflow to learn more about his entrepreneurial history and how Lendflow is building a flexible platform to revolutionize small business lending and enable others to offer expansive lending products downstream.
Background: Jon is a serial entrepreneur who has built several successful companies in the fintech space. Prior to founding Lendflow in 2020, Jon founded ChannelGrowth and Quicklinecredit both fintech startups tackling different aspects of the SMB lending industry. While in college, Jon built and operated hundreds of websites across financial services, restaurants, home services, and several others as an origination point of his entrepreneurial career.
Q: Alex F.
Tell me about yourself. How did you find yourself becoming a fintech entrepreneur?
A: Jon F.
I’ve always been passionate about entrepreneurship, thanks to my dad, who is an entrepreneur and a small business owner. During my master’s program in Accounting, I started working in financial services and became passionate about how technology could help improve outdated systems widely used in the industry.
Q: Alex F.
Tell us more about Lendflow. How did this venture begin?
A: Jon F.
I’ve built several startups in the lending space since then and learned about the many inefficiencies of the lending ecosystem, both on the customer experience as well as the processes throughout the entire lending process – from origination to decisioning, underwriting, onboarding, servicing, and collections. There were are many unmet needs in the industry:
- Lenders needed more automation and efficiency in their processes
- SaaS companies needed an easy way to integrate financial products and services to better serve their customers
- Most importantly, customers – SMBs and consumers – needed easier, fairer, more transparent and timely access to capital or other financial products that traditional institutions can’t always provide.
I’ve identified a problem in the industry and a big, untapped opportunity, and set out to build the best solution for it. That’s how Lendflow was born.
Since then, we’ve built the infrastructure that lenders and fintechs need to automate the underwriting and origination processes, as well as the framework to embed financial services and address the distribution challenges and connect SMBs to capital in a more efficient way.
Q: Alex F.
So, we’ve already touched on this a little bit, but you’ve previously founded Quickline Credit and ChannelGrowth. How has your past startup experience influenced the development of Lendflow?
A: Jon F.
ChannelGrowth was the first company I founded in 2014, where we provided loan originations to financial service companies. Quickline Credit was the second company I founded a few years later, where we built some of the technology used in underwriting and the foundation for what Lendflow is today. The lessons I’ve learned from founding ChannelGrowth and Quickline Credit were incredibly valuable. The lending industry is incredibly complex and the current infrastructure is in desperate need of automation and modernization. This is where fintechs like Lendflow can add a lot of value by not only building modern infrastructure but also enabling other fintechs to build onto it and accelerate innovation.
Q: Alex F.
Lendflow has a different sale approach selling to verticalized SaaS providers instead of merchants and there’s now several merchant facing cash advance and funding options popping up in recent years especially through payment processing entities such as Stripe and Square. What makes Lendflow’s offering different than some of the other competitors present in the market?
A: Jon F.
Great question. They deserve a lot of credit for being first to market in this very complex industry that is embedded credit for SMBs. Since then, there has been a lot of innovation in this area and a lot of other companies that help support an embedded lending infrastructure have been founded, such as data aggregators, payment processing, loan repayment companies, which enabled the recent boom in embedded financial services – from payments, to lending and insurance.
Now we can partner with a variety of fintech companies that operate in these different areas to provide an end-to-end platform that allows companies to build, embed and launch credit products quicker and more efficiently, tailoring those products to their existing customers or entering new markets faster than ever before. Companies can now bring their credit products to life, embed them into their existing product workflow, reducing friction and improving their customer experience, while giving their customers access to working capital that they may not have had access to before. Rather than being the embedded lender ourselves, we’re enabling others to do that more easily and efficiently.
Q: Alex F.
Currently, Lendflow markets serving a few key verticals including construction, trucking/transportation, accounting, home services, and B2B. Why the focus on these specific verticals? Are there other verticalized markets that Lendflow is targeting on the product roadmap?
A: Jon F.
There’s a big gap between the capital needs within those industries and the financing options available. These are often cashflow intensive businesses in which seasonality plays a big role. Their operations tend to be more manual, they have lower access to financing compared to other industries that are more automated. Their recordkeeping tends to be done offline in many cases, making them more complex to evaluate and less likely to be approved by traditional lending institutions.
That creates a big opportunity for software companies that already serve these industries and have access to their business data – from invoicing, to payments, operations, payroll and beyond – to create financing products that are tailored to their customers’ needs and offer a better, faster, more streamlined experience to apply for working capital.
We also partner with lenders that specialize in specific industries, which increases those businesses’ likelihood to get approved for financing way faster than going through traditional financial institutions, which can be critical to their success.
For example, if you own a construction company and you win a big contract, you have to acquire supplies, hire additional workers, maybe buy extra equipment. You have to make payroll and sustain the business until you get paid, which could be 30,60,90 days out. That inherently creates a lot of cash flow gaps that makes it difficult for those companies to manage today’s cash flow while investing in future growth. The same goes for other industries such as personal services, hospitality, transportation industries where cash flow gaps are constant and access to capital is limited.
Q: Alex F.
In March of this year Lendflow announced the introduction of a new credit decisioning engine product. How does this tool fit with Lendflow’s other services and help make the underwriting and lead qualification process more efficient?
A: Jon F.
This was a big step for us, because this is where a lot of the complexity comes in. In order to build proper decisioning and underwriting capabilities, companies need to connect into multiple data providers, pull in lots of business data, build decisioning models that match their own criteria, in addition to all the technology and talent required to build, iterate and optimize this kind of platform. Lendflow has built all the pieces from scratch in a way that provides the flexibility, customization and controls that companies need to operate in this space without the huge upfront and ongoing investments that are required.
We offer specialized knowledge built over more than a decade, human support from underwriters and credit experts and the technology that powers it all. What used to take 12+ months to build, now can be launched into the market within a day on our platform. You login into the Lendflow platform, build your decisioning workflow from scratch with our drag and drop functionality and you’re ready to process credit applications right away. The ability to stand up credit operations – from decisioning to underwriting and servicing – is a game changer for both the fintech industry and the vertical industries they serve.
Q: Alex F.
Lendflow was recently a part of the Y Combinator W21 batch. Tell me about the experience and how you feel it helped benefit the development of Lendflow.
A: Jon F.
Being part of Y Combinator was an amazing experience. My co-founder and I met a network of incredibly talented founders that are building amazing companies solving really hard problems in many industries. Y combinator can really help you get the right mindset for building, growing and scaling a successful business. I had built and run other companies before, and those were valuable experiences as we discussed earlier, but there was still that we needed to learn. Quickline Credit and ChannelGrowth were bootstrapped and we didn’t raise outside financing. In order to build something at a bigger scale, we need to raise capital and think about the business in a completely different way that’s more pragmatic and iterative. We had a great foundation from the start, given our industry knowledge and prior experience, but YC really helped us fill in a lot of those gaps.
In addition to the knowledge and framework for growing and scaling a successful company, the YC provides a great network of founders and talent that we can tap into to share experiences and help each other troubleshoot and overcome difficult challenges. Building a company from the ground up and growing it as fast as we have is very challenging, so having that network of founders and other like-minded technologists is extremely important.
Q: Alex F.
What’s next for Lendflow? Where do you see Lendflow five years down the line?
A: Jon F.
We continue to focus on our vision to make the financial system accessible to all by enabling as many companies to provide better, faster, easier access to capital as possible. At Lendflow, we are quickly becoming the platform in which new innovative credit products are built on, whether companies are using one of our features, or our entire credit operating system. We want to usher in a new wave of growth for both the SMBs by making capital more accessible and affordable, as well as the fintechs that are serving those businesses by enabling them to build and launch their own credit products and bring their own vision to life.