Veterans of Live Oak Bank, one of the top SBA lenders in the US, have joined the Wilmington, North Carolina fintech startup world to help small businesses get more access to financing options.
Lumos was co-founded in 2021 by Youri Nelson, Brett Caines, and Stephen Hayes, who worked as Live Oak Banks’ Vice President of Analytics, Chief Financial Officer, and SVP of Analytics, respectively.
The team realized that there was a gap in the market for small dollar lending — business loans under $500,000. Those loans take the same amount of work as higher dollar loans. But the revenue opportunities down the road just aren’t as big, making it more difficult to justify. Lenders need better tools and data to make those loans worth it for them.
Playing The Efficiency Game
“The name of the game for small dollar loans is efficiency,” Nelson added.
Lumos is a data platform that gives banks, credit unions, and non-bank lenders more efficient, personalized data around whether or not a small business loan is a good fit for them. The Lumos Prime + platform and its predictive models are based on 30-years worth of loan data. The model takes into account more than just the business owner’s credit score. It also looks at macroeconomic and local business factors that could impact the likelihood of a loan defaulting. It also pulls in a business’ online presence so that an underwriter doesn’t have to spend hours researching.
This allows a bank to approve more loans while also decreasing the number of non-performing loans.
This is an innovation in how small business loans are scored, added Nelson.
“If you think about lending to a small business traditionally, the bulk of that credit decision is based on that small business owner’s personal credit score. And that’s not really a good indication of how that small business may perform.”
Because according to Caines, a person with a “perfect” credit score may have a business fail, but you may have a person with a less-than-perfect credit score who can build a successful business.
To date, Lumos has onboarded more than 80 financial institutions as customers and raised its pre-seed funding from Summit Technology Group in 2022.
A Wilmington FinTech Story
The coastal city of Wilmington, North Carolina has made a name for itself as a growing FinTech hub. Banking software giant nCino, Apiture, Live Oak Bank, and the FinTech-focused venture capital firm Canapi Ventures all call Wilmington home. Lumos has built up its entire team to date with Wilmington talent.
And as it looks to scale, Lumos has the backing of other FinTech veterans in the city. The team announced this week it had raised a $2 million funding round. Two FinTech giants in the city, Chip Mahan and Neil Underwood, joined the round as individual investors.
