Coaching to Capital

Pathway Lending (PL) proposes to expand the use of proven Fintech data driven models to create visual data analytics that will be utilized by the business owner to improve the business's economics and operational capacity. This project will utilize Adaptive Learning Technology (ALT) and Artificial Intelligence (AI) for the purposes of increasing access to capital and delivering scalable yet tailored Technical Assistance (business coaching).

Fintech has made great strides in democratizing access to financing by enhancing speed and access to capital for the most underserved small businesses. Fintech solutions have been disruptive in the financial industry and our target markets are the largest adopters. Fintech has used the data driven power of technology to advance its ability to grow market share and products. PL believes this model can also benefit underserved small businesses by using the same data analytics and insights, utilized by clients to benefit the business beyond a capital infusion. 

Responsible lenders must compete on speed and access while maintaining their Mission and Purpose of bringing access to responsible lending for vulnerable small businesses.

Pathway will utilize a data driven Fintech model to provide clear solutions for small business owners to strengthen their business—leveraging ALT and AI to expand to even the most vulnerable of businesses. PL’s focus on the relational and responsible small business lending, alongside scalable yet individualized technical assistance, will create a sustainable technical assistance model combining fintech and client data to deliver highly tailored technical assistance and insights to strengthen the business.   

Pathway Lending is committed to empowering entrepreneurs by leveraging a dynamic tech stack that augments a businesses’ journey to growth and success. Like our CDFI mission, our tech stack is focused on serving our communities by providing accessible capital and coaching. Our integrated solution combines a dynamic content management system (CMS), cutting-edge customer relationship management software (CRM), integrated marketing communication and engagement, and seamless marketing automation utilizing APIs and AI. This comprehensive tech stack leverages the personalized and relational approach we promote and is designed to provide our communities with unparalleled support.

This proposed project will utilize technology to facilitate equitable use of data small business lenders require in order to: offer an alternative to fintech through speed and easier access to credit for underserved markets, and make insights through data accessible to the client where it can be utilized to strengthen their business.

With this technology stack, entrepreneurs can control their online experience and have better actionable insights into the state of their business. An intuitive interface allows business owners to access various forms of content, coaching, and credit access support. Built into the CMS is a robust Learning Management System (LMS), allowing users to engage with lessons and courses. An Events Platform is built into the CMS, allowing entrepreneurs to register, access, and participate in live and virtual events. Our content isn't just about catching the eye; it's a gateway to valuable technical assistance and coaching. We're here to equip entrepreneurs with the knowledge and insights they need to take their business to the next level.

Our CRM goes beyond traditional customer management. We believe in meeting entrepreneurs where they are. By understanding their current state and needs, we can provide personalized support that propels their success. Our CRM acts as a data-driven compass, guiding entrepreneurs through the complexities of growing a business. We capture key data points and leverage advanced analytics to help entrepreneurs make informed decisions.

Our marketing engagement and communication platform lets us connect with entrepreneurs through multiple channels, including mobile. We're highly in-tune meeting entrepreneurs where they are, whether it's through email, social media, chat, or push notifications on their smartphones. Focused on engagement, our platform enables us to receive incoming communication initiated by the entrepreneur, as well as initiate automated or one-off outbound communication. Our goal is to forge meaningful connections.

Although software technology is utilized, the main driver is authentic relationship building. We understand the importance of community. Our tech stack combined with our methodology fosters a vibrant network of entrepreneurs. We facilitate in-person and virtual events, workshops, and networking opportunities, providing opportunities to forge valuable relationships and gain inspiration from others' success stories.

Pathway believes that technology should be a catalyst for entrepreneurial success. Our tech stack empowers entrepreneurs with the tools and resources they need to conquer challenges, seize opportunities, and achieve their growth goals. We're here to make the entrepreneurial journey as seamless as possible, so entrepreneurs can focus on what truly matters—building a thriving business!

As a CDFI, Pathway Lending identifies our target markets as:  

• Low to Moderate Income (LMI) entrepreneurs,  
• Black-owned businesses and  
• Businesses located in CDFI Investment Areas  

Over the years, we have demonstrated effective strategies in overcoming barriers to capital for underserved businesses, particularly with entrepreneurs and businesses generating revenue less than $1 million annually.  

In 2022, Pathway Lending (PL) originated nearly $51 million in loans with 80% of these loans by number going to our target markets. Additionally, Pathway created a Rural Opportunity Fund which, since inception on 2007, has originated over $55 million in loans- 50% of those loans going to LMI businesses, 34% to women-owned businesses and 23% to minority-owned businesses located in rural communities across the state. PL has also developed multiple education programs and partnerships to provide deeper reach in our target markets, such as an Emerging Developers program, and a Real Estate Mastermind Group which combined currently serve more than 250 entrepreneurs and business owners, 95% of whom are Black (nearly 50% are women).   

A frequently cited barrier to accessing capital is a fundamental lack of trust between clients in our target markets and traditional financial institutions. PL regularly conducts client surveys and solicits real-time feedback in our digital or live training and coaching to not only improve the quality of support, but to build trust with our clients. This project promotes trust through a) transparent use of the data by the financial institution and b) use of that data, transformed into insights, leveraged by the business to build financial capacity and address issues. Ultimately utilizing these trusting relationships helps to better access quality capital and elevate individuals, businesses and communities out of cycles of poverty. 

This project influences the future of entrepreneurship in the US as it addresses one of the many components of systemic capital gaps for under-served and under-resourced entrepreneurs.

One of the major reasons many small diverse businesses were left out of the initial rounds of PPP was the lack of financial data and systems to reflect that financial data to the lender. As a CDFI, we work one-on-one with clients to help the client improve their business's financial capacity. This project will scale that type of assistance through the technology stack and methodology described in this project's core technology portion.

This project will utilize data to allow the client to visualize the most critical components of their business, generating insights, and producing strategies through a digital and interactive business growth plan. The Business Growth Assessment and Plan are tailored to the each individual business and will be continually expanded and automated to provide a real time snapshot of the business's financial health and options to strengthen. This project pivots from utilizing extractive technology to assess the risk of a credit applicant's business, to analyzing and visualizing the data to allow the entrepreneur to create an evidence based strategy, better understand their markets, and increase overall productivity.

Information is power. This logic model intends to facilitate increased access to critical business data that will provide the entrepreneur with aggregated, analytical insights about their business and increase their financial and managerial capacity. For 24 years, Pathway Lending (PL) has worked with thousands of underserved entrepreneurs to help them start and grow their businesses. There are significant increases in our target markets becoming prey to high fee and high interest capital products. PL intends to change that.  

Despite significant efforts, access to capital has remained inequitable among entrepreneurs of diverse backgrounds. As we have seen with our own clients, client data can be utilized by credit providers to create further disadvantages and obstacles for the business with difficult and hard to decipher terms. This engenders further distrust between financial institutions and diverse communities.

This project will improve diverse entrepreneurs’ financial and managerial capacity by utilizing the data provided in credit applications and elsewhere to produce visually represented insights on the health of their business.

• Activities: Client provides data through various portals; assessments, one-on-one coaching, credit applications, financial documents, training participation.
• Outputs: Visually represented data-driven insights create individualized and real-time Business Growth Plans.
• Short-term outcomes: Client gains greater understanding of business credit; shows improved financial practices in business functions. 
• Mid-term outcomes: Improved managerial confidence; greater number of diverse businesses accessing responsible capital; fewer number of diverse businesses become embroiled in high interest/fee loans. 
• Long-term outcomes: Entrepreneurs utilize data to assess and address risks in their business as a best practice; trust between financial institution and underserved communities increases through transparency; diverse businesses have greater access to capital through self-funding and credit facilities. 

Data analytics and data-driven insights are integral to business by allowing entrepreneurs to create an evidence-based strategy, understand customers to better target marketing initiatives, and increase overall productivity. 

PL utilized 11 research and reports, including our own market study, to support the following assumptions. (Character limits preclude listing here.) Minority owned businesses are accessing capital through high interest fintech applications more than their white peers. Minority owned businesses are more likely to transact business with a smart phone.  

In 2022, PL education team served 1795 clients. 350 of these clients utilized deeper assistance including one on one business coaching and technical assistance individualized to their businesses.  

Currently,  this deeper, one on one assistance is constrained by our staff's capacity. This project will allow PL to scale meaningful Technical Assistance (TA) to clients and serve a larger percentage of our clients with data driven assessments and hands on assistance.  

End of Year 1: 500 clients access deeper technical assistance through this project.  

End of Year 5: 1500 unique clients will access scaled technical assistance through this project.  

Pathway's community is the entrepreneur, who utilizes the coaching and capital resources Pathway provides in each of our target markets. This small business owner is our primary stakeholder and we utilize the client voice into development strategies in our footprint.  We serve or facilitate on advisory boards in Middle Tennessee, Memphis and Chattanooga, which convene partners and stakeholders to broaden the impact in entrepreneurial communities. PL staff are frequent panelists at events serving our markets and have hosted opportunities for clients and potential clients to learn from partners and stakeholders.

Pathway's partners and stakeholders include: investors, federal and private foundations, and entrepreneurial support organizations across TN. As well as an extensive partner network, including the SBA, Tennessee Department of Economic and Community Development, Tennessee Valley Authority, the USDA, Tennessee Small and Minority Owned Business, State and local Chambers of Commerce and Member Banks of the Tennessee Bankers Association.

PL adapts its strategies for diverse communities, language and geographical barriers to guide our approach to reach our target markets.

Earn Trust through Partnerships and Community Leaders: Consistent contribution to community efforts build trust.

Communicate for Understanding: This includes respecting cultural norms. Language translations and interpretation must be accurate and culturally competent. PL has bilingual staff and utilizes 3rd party interpreters as needed.

Be Accessible: Provide quality content with equitable access.  Investment in accessibility requires continuous improvement as technology is adopted in the community.  A multichannel digital approach enables PL to meet underserved entrepreneurs where they are, using technology platforms they find most familiar. Pew Research, 100% shows people between the ages of 18 to 49 have a smart phone and the majority conduct most of their business there. Mobile accessibility is a critical component with the potential for outsized impact compared to other channels. 

As a Community Development Financial Institution (CDFI) Pathway Lending's mission is to provide lending solutions and educational services that supports the development, growth, and preservation of underserved small businesses, affordable housing, and sustainable communities. With a full implementation of this project, Pathway Lending expects to scale meaningful technical and business advisory/coaching to our target markets: Low-to-moderate income census tracks, black owned businesses and CDFI Investment Areas. 

The fundamental impact Pathway Lending hopes to achieve with this project will increase the following in our target markets. 

• Business Growth: Empowering business owners to become loan-ready and expand.
• Community Impact: Supporting sustainable business practices that positively impact communities, generate jobs, and grow wealth in opportunity areas.

Our barriers are inherent to the nature of smaller (relative to banks) nonprofit financial institution. This project expands our capabilities to reach more underserved entrepreneurs, but the investment in expertise and technology creates challenges outside of the organization's normal course of business. This is a socially responsible and effective enhancement to lending and business coaching that will require significant investment in technical expertise. This partnership would add value to the initiative through the following ways:

• Technical Expertise: Although Pathway has recruited internal expertise, this project will require extensive investments in external technical assistance and expertise in building tech stack and project implementation.
• Trust factor.  As a relatively small financial Institution, Pathway Lending has built a reputation as a trusted partner for entrepreneurs.  However, our ability to compete with larger and many times predatory lending practices are hampered by lack of general awareness of better tools and credit facilities available to the underserved credit seeker.  In addition, financial institutions in general have still to overcome the mistrust created when unfair financial practices were systematically directed at marginalized groups. An innovative use of data, accompanied by the support of the MIT and Truist Brands will bring more awareness, openness and visibility to this project. 

As a CDFI, Pathway Lending has built a robust staff of lenders and technical advisors to support our business mission and model: To provide lending solutions and educational services that supports the development, growth, and preservation of underserved small businesses, affordable housing, and sustainable communities. As our organization focused on the most underserved entrepreneurs, investments were made in staff to provide intensive business personalized business coaching and advising.  Our lending staff and advisor teams remain fairly equal in number.  Client service has been the priority.  Although, we have made significant investments in our technology stack this project will require a level of expertise that is not generally feasible for an organization of our size.