The Echo Chamber That Almost Killed Fintech’s Small Business Lending Landscape

On one of our diligence calls before BankTech Ventures invested in SOLO, Carey Ransom said something that stuck with me (I still have the notes):

“There are three types of small businesses." He went on to break it down:

1. Small by Age: New businesses aiming to grow into something much larger. This is the smallest group.
2. Small by Choice: Lifestyle or family-run businesses where the income is solid—and that’s enough. This is the largest segment. 65.3% of small businesses in the U.S. are profitable, thriving without aggressive growth ambitions.
3. Small-Minded: Businesses with limited direction or ambition. This is the second-largest segment, and many fall into the 50% of small businesses that shut down within five years — the ones no lender should target.

When we started automating small business underwriting, we (incorrectly -- several years ago) thought most businesses fit into bucket #1 — ambitious, growth-driven. The reality? Most borrowers are in bucket #2 — small by choice.

And that changes everything.

Here’s why:

• They often don’t have up-to-date financials unless it’s tax season.
• They’re profitable but unsophisticated in financial management.
• Lenders require paperwork they don’t have.

Where Fintech Got it Wrong

Companies like Ampla, ClearCo, Pipe, Stenn (the list goes on) tried to solve this problem but built products based on their own biases. They were “small by age” high-growth startups building for businesses just like themselves — tech-savvy, growth-obsessed, and operationally sophisticated.

So, what did they build?

• Interfaces that look great
• Easy integrations with Stripe, QuickBooks, Shopify, etc.

But here’s the problem: Most small businesses don’t run like venture-backed startups. They’re not living inside SaaS dashboards or keeping books updated in real-time.

So, these solutions ended up being just that — pretty interfaces. If your onboarding looks good and connects accounts but doesn’t generate financials for the borrower during onboarding, or feed into the back-end systems—to run spreads, calculate debt service coverage ratios, assess credit quality — then it’s just a glorified (and super expensive) google form.

You’re not solving the problem. You’re just making it look better.

Digital Onboarding is Not a UX Problem

It’s a data problem, and the real challenge isn’t just missing paperwork — it’s re-engineering the data to fit your lens because of the variance in how it’s provided.

One of our clients said something recently that stuck with me: “The enemy of automation is variance.”

And small businesses are full of it:

• Different industries
• Different accounting methods (cash-based, accrual, hybrid—you name it)
• Inconsistent financial records

This variance is why underwriting small business loans is so hard. It’s not about data quantity—it’s about data quality and standardization.

How We've Designed Digital Onboarding at SOLO

We realized the problem isn’t just about collecting data—it’s about transforming it into something lenders can actually use.

• Our Digital Onboarding doesn't just ask small businesses to connect into data sources that don't have readily available reports, it guides small businesses through the process of building their financials (and any other documentation required) — in under five minutes. They can connect bank accounts, upload tax returns, and we generate AR/AP schedules, financial statements, cash flow statements, and balance sheets, even business plans.
• Our Spreading Technology for Underwriting Teams: We standardize that data on the back end, so you can run it through: your risk models, spreads/workbooks, industry benchmarks, or custom dimensions you need for credit decisions.

This isn’t just about making underwriting easier (though it does that).

It’s about:

• Helping small businesses get their financial house in order
• Creating more qualified borrowers
• Giving underwriters better visibility, control, and traceability

Because at the end of the day, it’s not just about collecting data. It’s about making that data work—for both the lender and the borrower.