How CircleUp Credit Advisors Uses Helio to Help Entrepreneurs

Talk to any small business owner in the U.S. today and they’ll tell you about how hard it is to get a loan. Obtaining a line of credit can be difficult for any entrepreneur and consumer businesses are no exception. CPG companies are often asked to pay their suppliers well before they get paid by their customers, which creates what is known as a working capital gap or “cash crunch.” They need money to fulfil an order, but don’t get paid until months after the order is delivered. Many traditional lenders won’t even consider lending to cash flow negative businesses because it’s perceived as too risky.

After years of working with high growth consumer companies as they raise equity, it became increasingly clear to us that the credit financing options in the market weren’t cutting it.  That’s why we launched CircleUp Credit Advisors. We now extend revolving lines of credit (typically $20k – $1M) backed by a company’s working capital assets, which include accounts receivable (AR), purchase orders (POs), and inventory. CircleUp Credit Advisors is changing the small business lending landscape – with transparent rates, low-friction onboarding, and no lock-in period.

Most asset-backed lenders don’t play in this space because the cost of acquiring, underwriting, and onboarding loans below the $1M threshold just isn’t scalable. It’s the classic Innovator’s Dilemma – lenders quickly march up market to serve more lucrative customers, which leaves a financing gap for early-stage businesses. Helio is what allows us to fill this gap.

Helio is our machine learning platform that lowers CircleUp Credit’s cost of identification, underwriting, and servicing, enabling us to offer larger lines, at lower rates, than others in the market. Let’s take a closer look at the value of Helio along these three dimensions:

Identification

Industry norm – Most lenders are dependent on trade shows, brokers, and purchased lists to identify their borrowers. These approaches drive up customer acquisition cost and require higher rates or larger loans to rationalize costs.

CircleUp Credit – We use Helio to identify the right companies at the right time, with very little cost. Of the 1.3 million companies tracked in Helio, we can filter for company size and sub-industry to best match our product – this yields hundreds of thousands of prospects. Our algorithms will then flag companies as they enter new retailers and build distribution – a sign that they will need working capital.

Underwriting

Industry norm – It can often take lenders 2-6 months to underwrite a $250k line of credit, which is very cumbersome. Think warehouse site visits (paid for by the potential borrower), manual invoice verification, and countless document requests. Ultimately, most early-stage companies will be turned town.

CircleUp Credit – We can fund in as little as two days once we’ve received a company’s materials – and we typically provide a larger line than others given our information on the market overall. Helio enables this expediency as some of the retailer verification work is already complete. Additionally, many of the outputs from Helio act as early filters and allow for almost instantaneous pre-approval.

Servicing

Industry norm – With growth comes a need for additional financing, which can be an operational nightmare for small businesses. Most lenders have line caps and minimums, which can limit growth and add extra fees.

CircleUp Credit – We have worked to streamline the redraw process to a same-day wire. Without defined line caps or minimums, the financing mirrors the needs of the business.

Helio Leads The Way

We are working towards a model where Helio will also let us help entrepreneurs after we have already extended them a loan, something that most lenders wouldn’t even consider. We’ll be able to bring these entrepreneurs data and insights from Helio that help their businesses grow.  

Helio is by no means perfect. Occasionally, it will make a mistake like classifying a company in the wrong category, but these missteps are what train the machine learning algorithms and make them better. The algorithms become more precise every day and the technology that drives down the cost of capital for our borrowers will only continue to improve.  

By focusing on consumer businesses, CircleUp Credit Advisors is able to create an underwriting model that fits the needs of our borrowers rather than a one-size-fits-none lending product.