Biz2Credit, Profiting from an Overlooked Market
Country of Origin: India
Emigrated to U.S.: 2002
Launched Biz2Credit: 2007
Annual Revenue: $14 million
Jobs Created: 14
By Anne Field
If you want to find an entrepreneur who has made the most of his foreign advantage, Rohit Arora fits the bill. While working in strategic consulting for a firm in New York City, the native of Delhi noticed an interesting phenomenon: Indian and other entrepreneurs from South Asia were having trouble getting bank loans. With a deep understanding of this population, as well as the banking industry, he and his brother launched Biz2Credit, a company to help small businesses owned by immigrants from the region find bank financing. Then he branched out, building an online platform that matched interested small business owners to potential lenders. Now the firm has 14 employees with about $14 million in revenues.
Discovering a Gap in the Market
Arora came to the U.S. in 2002 to get an MBA from Columbia University’s School of Business. Shortly after graduating, he got a job with the management consulting firm Deloitte Consulting, focusing on business strategy. While working on a project investigating the most profitable portfolios for banks, he made a surprising discovery: Small businesses were the most profitable clients for banks when it came to loans and lines of credit, as well such products as checking accounts. When he dug deeper, he found that immigrant-founded startups were the fastest-growing category of small business in the country.* What’s more, they were highly profitable—generally frugally run and usually funded by the owner’s family.
Immigrant-founded startups were the fastest-growing category of small business in the country.*
* Source: Intuit Future of Small Business Report, 2007.
Yet few immigrant entrepreneurs sought bank loans and, on the whole, only a minority of banks had a policy of targeting such small businesses. And that raised an interesting question. “I wondered: What was preventing the small business owner and banks from forging a profitable relationship?” says Arora. What Arora learned was that many immigrant entrepreneurs avoided banks because they didn’t understand how to navigate the system. And, in some cases, he says, “they perceived bankers as Americans who would report them to the INS.” For their part, bankers saw the businesses as too costly, cumbersome, and inefficient to target. What’s more, they tended not to understand the cash-flow issues faced by many small, family-run immigrant businesses.
Many immigrant entrepreneurs avoided banks because they didn’t understand how to navigate the system.
Birth of Biz2Credit
It all meant one thing for Arora and Ramit, his brother, an accountant who was working at another financial-services-strategy consulting company: There was an opportunity for a business that could help immigrant businesses and banks work together. Because they had a particularly deep understanding of the South Asian entrepreneur, they decided to begin with that population. But eventually, they reasoned, they would branch out to all small businesses struggling to get financing by creating a web platform allowing banks to scrutinize their documentation easily and quickly. In 2007 they launched their business, calling it Biz2Credit.
There was an opportunity for a business that could help immigrant businesses and banks work together.
Tapping Their Own Ethnic Market
Their first step was to focus on entrepreneurs from India and surrounding areas. “Being from India, it was easier to do that,” says Arora. That approach also allowed the brothers to test their hypothesis and see if there was the potential to broaden the approach to other small businesses. Initially, they did the work manually, helping clients to complete the appropriate paperwork and navigate the banking system. In addition, they started working with entrepreneurs to get bank financing for business acquisitions. And, over about a year, as more banks indicated an interest in working with them, they discovered their initial hunch was right: There was a larger market for their service.
Their first step was to focus on entrepreneurs from India and surrounding areas. “Being from India, it was easier to do that.”
Using Resources from Home
All the while, however, they gathered information to use in building an online platform. But to develop the site, they used their foreign advantage in another way: They set up an office in Delhi and tapped Indian programmers. “We were able to leverage that talent better than somebody born and brought up in the U.S.,” says Arora. For example, they could locate programmers faster than non-natives could. And, because they had an office in India, they were able to entice better talent, because, according to Arora, working for companies linked to the U.S. is considered more prestigious. The brothers paid about 50% less than they would have if they had hired programmers in the U.S., and Arora gained access to professionals with more advanced skills than he was able to find in this country at an affordable price.
The brothers paid about 50% less than they would have if they had hired programmers in the U.S.
In early 2008, the brothers released their first version of the platform. It allowed entrepreneurs to fill out all the documents and information that banks required and get access to them in one place. It also helped small businesses to determine the most suitable type of product to seek, such as a line of credit or a term loan, for example. “We became their virtual CFO,” says Arora. In addition, business owners were able to get an answer quickly, rather than the usual one- to two-month wait at banks. Not long after launching the platform, the brothers added a management-support service, through which, for a monthly fee, entrepreneurs could receive online and phone help.
“We became their virtual CFO.”
Benefit for banks
The platform also gave banks an easy, efficient way to study small businesses looking for money. To help banks make decision faster, Arora struck a deal with Equifax that allowed bankers to gain access to business credit reports in real time. To attract banks, the brothers focused on a handful of institutions, showing them the platform and asking them to try it out. After Banco Popular, which focuses on Latinos, and Citibank signed on, according to Arora, more banks became interested. Now, 250 banks are on the platform.
Initially, the brothers funded their business with savings, severance they had received, and, ironically, money from family and friends. But within a few months of starting up, they were able to finance the company through cash flow. Revenues now come from fees paid by banks and businesses that use the firm’s support services, as well money garnered from Equifax and other credit partners.
“We’ve built this business one brick at a time,” says Arora, “and that’s worked out well for us.”
1. Look to your own ethnic community for opportunities.
Many times, American businesses don't recognize the value of a particular ethnic market, especially in its infancy, or they see it as too small to focus on. That's going to create gaps for you to fill. You've got the contacts, market knowledge, and access that your native-born competition doesn't. Example: Arora noticed that entrepreneurs from his home country were having a tough time securing bank loans because they didn't understand the process or because banks didn't understand their needs. From the banks' perspective, the immigrant-owned small business market was too small to focus on. These market conditions created an opportunity for a business that could provide a bridge between an immigrant entrepreneur and the banking industry.
2. Use resources from your home country.
Where applicable, access resources from your home country. It could save you money and give you access to labor with more advanced skills. Example: To create Biz2Credit's online platform, Aurora set up an office in Delhi and employed Indian programmers. The benefits were: *Cost savings of 50%. *Attraction of more qualified talent. Of course, we’re not advocating taking jobs away from Americans. We suggest looking for suppliers overseas when you can’t find a supplier or qualified talent locally for an affordable price. That's just my opinion. Agree or disagree? I’d like to hear your comments. Please post them below.
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Fascinating success story. Congratulations to Arora and Ramit.