Local startup updates business strategy, to expand nationwide

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A local startup that connects banks and nonprofits has updated its business strategy, secured more venture capital and plans to expand nationwide by the end of the year.

FindCRA helps connect nonprofits seeking support with banks looking to invest in their communities to comply with federal regulations.

Co-founder Brian Waters generated the idea for the business in 2012 when he attended a luncheon at which Louisville nonprofit organizations were trying to make connections with banks to secure resources – while banks were trying to find projects to help them comply with the Community Reinvestment Act.

The CRA, a federal law from 1977 passed to end discriminatory credit practices, requires that depository institutions help meet the credit needs of their communities, especially in low- and moderate-income neighborhoods.

Waters, a former compliance officer for Republic Bank, told IL that over the years, the CRA had been expanded, and regulators now look at where banks provide services (including where they have branches and ATMs), where the employees volunteer, and to whom the institutions are providing help with financial literacy.

Poor marks from regulators can damage a bank’s reputation, require costly fixes and reduce the institutions’ ability to expand or merge, Waters said.

Making the connections is tough for both partners: Nonprofits have to navigate a confusing and intimidating process, while banks, especially smaller ones with limited resources, often struggle to narrow down projects that meet their needs from the many applications they receive. And as banks continue to consolidate, management teams have fewer insights into the nonprofit community in the areas where they’re purchasing branches.

FindCRA previously would identify community projects that would help a bank meet its CRA requirements, then find a bank to support the project and charge a fee for a successful connection. However, brokering the deals demanded lots of staff time, for phone calls, emails and other services, especially as the business grew: About 1.7 million nonprofits operate in the U.S., including 20,000 in Kentucky and 4,000 in Louisville.

Waters and co-founder Ben Loehle realized that they needed to change the business model to provide information and an interface that allows banks and nonprofits to connect without requiring personal facilitation from findCRA staff.

The company pulls publicly available data from about 20 government and industry sources, including census, tax and treasury records — covering nearly 1,400 individual data points — and, with the help of a proprietary algorithm and further curation, determines which nonprofits align with the CRA. Waters said that for Kentucky, one of the smaller states, the basic IRS data exceeds 300 megabytes.

FindCRA has identified 1,300 Kentucky nonprofits (out of 20,000) that have passed the company’s qualification process. Those nonprofits have customized profiles and a list of their projects on the findCRA website. Banks can come to the site and run searches by location and claim available projects.

The company now generates revenue by certifying the nonprofits for an initial cost of $300, and an annual fee of $150; and charging banks $250 per month or $2,500 per year per user to access the database.

The service can save banks cash and/or improve a bank employee’s effectiveness: If a bank’s CRA officer took just one minute to look up each of Louisville’s 4,000 nonprofits, it would take him eight full working days — and at that point, she hasn’t called anyone, and almost all of the work is still ahead of her.

An example of search results on findCRA’s website. | Courtesy of findCRA

Waters said that rather than bog down an employee with many hours of manual research, banks can pay a fee to access the information that findCRA already has compiled. The company no longer charges a successful connection fee.

The service is “invaluable” especially for smaller banks,” said Debra Stamper, executive vice president and general counsel for the Kentucky Bankers Association.

At many smaller banks, CRA officers have other duties, which can include generating loans, and if those officers spend less time to identify CRA-compliant projects, they can spend more time generating revenue or making sure the bank complies with other federal regulations, she said.

“It’s going to allow them to be more efficient,” Stamper said. “I just think it’s great.”

The KBA provided some feedback to findCRA to help the company fine-tune its service.

For nonprofit clients, meanwhile, findCRA issues a certification document and a narrative that they can present to lending institutions to increase their chances of securing funding.

FindCRA is nearly finished with analyzing nonprofits in the Midwest and plans to continue with the mid-Atlantic states, the Southeast and then move westward. Some of the states won’t require much time — Wyoming has about 4,000 nonprofits — but others will be tough: California has 160,000.

The company’s co-founders expect that they will have covered the entire nation by the end of the year — and expect to reach profitability in 2018. And despite the national aspirations, they said they plan to remain in Louisville.

“We’re very excited about where we’re taking the business,” Wilson said.

A recent infusion of $380,000 in venture capital is helping. The money allowed findCRA to hire contractors to do social media marketing, sales and data research. Last month, the company was selected as a finalist for the 2017 Inc.Credible awards from the local chamber of commerce. The co-founders also have started a free online learning center to provide information about the CRA.

The Louisville-based startup also is getting some national exposure: The co-founders will give a presentation before 700 bankers at the CRA & Fair Lending Colloquium in Nashville in November. They also plan to release at the event a self-published book that compiles 40 opinions on the CRA, to coincide with the law’s 40th anniversary.