Empowering Small Businesses Ryan Rosett on Credibly’s Role in Fintech and Detroit’s Growth

Episode Overview

Ryan Rosett is a dynamic entrepreneur with a proven track record in fintech and real estate. A lifelong Michigander, Ryan’s entrepreneurial spirit first surfaced during his years at the University of Michigan, where he simultaneously pursued a law degree and managed a successful coffee shop in Birmingham, Michigan. This early venture into retail taught him the value of hard work, customer service, and the challenges of running a small business, experiences that would later inform his approach to fintech lending.

After completing his education, Ryan shifted gears into real estate development and bridge lending, where he gained significant insights into the world of finance and capital markets. These roles exposed him to the complexities of credit and lending, particularly during economic downturns, such as the Great Recession of 2008. Recognizing a gap in the market for small business financing, especially during tough economic times, Ryan co-founded Credibly in 2010. His vision was to create a company that could provide fast, reliable capital to small businesses when traditional banks were unwilling or unable to do so.

Under Ryan’s leadership, Credibly has grown into a fintech powerhouse, known for its innovative use of technology and its commitment to customer service. The company’s proprietary scoring models and use of machine learning have set it apart in the crowded alternative lending space, allowing Credibly to offer tailored solutions that meet the unique needs of its clients. Ryan’s passion for helping small businesses thrive, coupled with his forward-thinking approach to technology, continues to drive Credibly’s success and impact on the industry

Episode Transcript

 Kevin Rosenquis: Hey, welcome to Pay Pod, where we bring you conversations with the trailblazers shaping the future of payments and fintech. My name is Kevin Rosenquist, and thanks for listening. Today I’m chatting with Ryan Rosett, founder and CEO of credibly, a company that provides loans to small businesses. They help companies by saying yes when banks might say no, and they are able to provide working capital quickly. We talk about lending, machine learning and how the city of Detroit continues its comeback. Please welcome Ryan Rosett. You went to the University of Michigan. Congrats on your national championship last year, by the way. You also went to University of Detroit and you’re in Detroit now, are you a Michigan lifer?

Ryan Rosett : Yes, I am, I, I’ve lived elsewhere, but like my wife and I are both from Michigan. And so when we had kids, you know, the Michigan kind of drew us back. So where our families are.

 Kevin Rosenquis: Yeah. I’m originally from Chicago, so I spent some time in Michigan, mostly like vacationing, getting away from the city and all that stuff. And yeah, it’s beautiful. Absolutely beautiful. Yeah.

Ryan Rosett : Yeah, it’s a nice place to live.

 Kevin Rosenquis: I love the U.P.. Up is great. Done some snowmobiling up there. It’s a cool spot. It’s been a while since I’ve been to Detroit. Obviously the city went through some tough times for a while, but everything I hear is that it’s experiencing quite the turnaround. What, do you agree with that and if so, what? What do you think the biggest reasons are for its comeback?

Ryan Rosett : Well, I mean there’s a, you know, a certain person that has spent, you know, a fortune, you know, sort of redeveloping downtown Detroit. Dan Gilbert, you know, Rocket Mortgage. And he’s done an amazing job and an amazing the city has really sort of come back in certain pockets. It’s an enormous city. I think it’s the second largest city next to Houston. So it’s like landmass wise, it’s huge. So, you know, taking bite sizes, figuring out where to like the central business district has sort of had a comeback. Um, I will say that the pandemic, the momentum it had, it got pushed back a little bit with the pandemic because, you know, people were going to the offices and things of that nature. And, you know, that kind of stalled it for a bit. But, you know, there’s like new restaurants and the sporting events and all that. And, you know, so yeah, it’s not as I still say I’m from Detroit, I’m from the suburbs of Detroit. But it, you know, it gives me some street cred with some people that, you know, think about Detroit as a rough and tumble city.

 Kevin Rosenquis: So it’s every city has their rough and tumble parts. But yeah, Detroit was definitely seemed like it was kind of the whipping boy for a lot of people for a while there. But nice to see. Nice to see it coming back. And, even though I’m a bears fan, I’m still rooting for the city to come back.

Ryan Rosett : Yeah, absolutely. So it’s good to see I agree.

 Kevin Rosenquis: Yeah. For sure. So you founded credibly then retail capital way back in 2010. Fintech looked a lot different back then. What was the company mission? The same.

Ryan Rosett : It was. So if you think back to like when I started the business, I. Pardon. I have a partner named Stephen King and when we started it, it was a very contrarian time because there was we were coming out of this great recession, which, you know, everyone was talking about this double dip recession, and there was very little credit available for almost anyone, you know, whether you were in real estate or you were a small business or you’re a consumer, it was just like credit was very difficult. So starting it then turned out to be a great decision. And, you know, you often times hear starting a business during a recession, you know, and you know, certain people can argue based today is a, you know, certainly harder economic times that starting a business, you know, in these types of periods is like proving to be good. And it was good for us. I mean, we had the wind in our sort of in our back for several years and you know, which, you know, taken us all the way to 2020 when the pandemic hit, which, you know, is a whole second, you know, another issue, just because we’re a small business lender and lender to every small business in America was told to not halt doing business. But, you know, if you were relying on customers coming in, that sort of stopped. Yeah.

 Kevin Rosenquis: And what was the reasoning for your rebrand that you guys had to credibly.

Ryan Rosett : So the original name of our company was Retail Capital, and it’s still the holding company. It’s still like, you know, very much like a legal part of our business. The rebrand stemmed from we did a lot more than retail. So like right now we lend to, you know, three 400 different SIC codes. So it’s a much wider breadth than retail capital. When we originally started the business, we thought like, okay, we’re going to focus on on really like lending to the retail base, like restaurants, dry cleaners, any type of retail establishment. And since then it’s sort of broadened and incredibly, you know, a name that we acquired as a domain name that we felt like sort of fit what we were looking for in having sort of credibility among our customers. And so that was because you really want a lender you can trust. That is, you know, what we felt fit our sort of values better than being a, you know, retail capital.

 Kevin Rosenquis: You guys have been successful and growing over these past 14 years. Culture is a term people use a lot from companies to sports teams. How important has the culture at credibly been to to keeping that growth in the right trajectory?

Ryan Rosett : Super important. You know, I’m a big believer in culture, doing events. You know, having the teams like kind of do collaborative cross training and things of that nature. Leadership groups, I believe you spend more time at work than you do with your family or at home. And so you might as well like what you do. And, you know, while you know, there may be, you know, days that are more stressful than others, we still try to have a little bit of fun here and see that, you know, what we do is it’s important we are providing capital to small businesses. They it’s working capital effectively what we provide and I we just want people to have a good time and enjoy what they do and, you know, work hard but have a little bit of fun. And we’re also a big believer in like work life balance. So, you know, having time to go home. Those are important like functions of like our type of business and what we do. So I mean I will say that the pandemic has changed the culture somewhat just because we still have like a hybrid work environment. And so, you know, creating like an in-office culture is difficult when you don’t have in office employees at all times.

 Kevin Rosenquis: That’s an interesting part of the culture now is it’s changed and it’s hard to build culture on slack and, and zoom and, and things like that. Has it been a challenge to keep the spirits up and to keep the culture alive post-pandemic?

Ryan Rosett : I think it has, you know, it just it’s evolving and we’re using different, you know, technologies and different ways of communicating. And before we would do like a company huddle once a month, we now do a once a week. We’re very transparent with our metrics, you know, like how we’re doing from a profitability standpoint, origination standpoint. We’re and we’re proud of the company. We don’t need to do that. But we feel it’s important for our team members to know how the business is doing. I mean, they’re putting a lot of stock into us. And as leaders of the company, like we want them to know who they’re working for, how they’re doing, how the business is doing and how potentially they’re impacting our profitability. And so, you know, so if there’s good things to report we report it. If there’s not good things to report we report it. So it’s you know we’re not in. And we try to be somewhat motivational in the same token. So but when there’s good news it sort of it’s self-evident. And it doesn’t require more motivation when there’s bad news. We have to, you know, you may spin it somehow with some of the things you’re working on that are going to turn this around.

 Kevin Rosenquis: So where did you come from before founded credibly, what were you in leadership positions before this or or.

Ryan Rosett : Is this your first. So yeah, I’ve always yeah. No, I’ve always been sort of my own. Like I’ve always bet on myself. So I was in a real estate development for 15 years. Then I was in bridge lending on commercial real estate. And this is kind of like 2006 to 2009, when the recession was going on and there was a lot of activity with banks merging assets, which then led me to this opportunity. So this was something that I thought was quicker, required a lot of technology. The underwrite was was faster but yet different. And it was um, and the access to capital just wasn’t there for small businesses. So I felt and I was in a small business in the past, like when I was in law school, I opened I, like you mentioned, I went to University of Michigan. When I left Michigan, I moved to a town called Birmingham, Michigan, which is just right outside of Detroit, and there were no coffee shops. And, you know, not that. And I’m a coffee drinker, but not like, you know, like anyone else. But I just thought, wow, I came from Ann Arbor. There was 18 coffee shops and now I’m in Birmingham, there’s none. And this is when Starbucks probably had 150 stores nationally or globally, you know, or, you know, they didn’t start their global sort of dominance. And. Yeah. Yeah. So I so I opened a coffee shop in when I was in law school. That was my first like entree into entrepreneurship. Very successful. It was a great coffee shop, I learned quickly, I loved retail. Just because you’re always dependent on people showing up. And I found myself like anytime there was scheduling conflicts, I was working and it was a challenge. So especially when you’re.

 Kevin Rosenquis: Trying to go to law school at the same time.

Ryan Rosett : Going to law school. And, you know, I was still young and I had a social life and, you know, it was just the whole thing was like a challenge. So I learned a ton. And it was I sold my interest and moved on and, and went into, you know, real estate, which was less dependent on humans. So.

 Kevin Rosenquis: Yeah, I suppose that’s true.

Ryan Rosett : Yeah.

 Kevin Rosenquis: You mentioned, you know, incredibly gives provides funding for, for small businesses, loans for small businesses. What are the biggest hurdles that small businesses face when it comes to securing a loan? And how do you guys feel you fit into that ecosystem, so to speak?

Ryan Rosett : Yeah. So give you a sense of like what we do or we’ll lend up to 600,000. Our average loan size is around 65,000. And so it’s when you think about it in the scheme of like what banks like to do, a bank has issues lending $65,000 where it could be profitable. We and underwrite the loan in a responsible way. Were we from applications to offers or decision or running, you know, somewhere between two and a half to three hours right now and then the funding can be same day. So it’s just like we’re really focused on the customer and the customer experience versus and I’m not saying banks don’t focus on the customer and the customer experience. It’s just a different experience. So it’s a much longer process. If you can wait, you’re going to experience lower cost of capital just and you know, but if you have a need for working capital or you have an opportunity where you can buy something at a discount, but yet you don’t have the capital at your disposal, we’re we’re an amazing solution for that.

Ryan Rosett : You want to do an expansion. We’re a great solution for that. Where, you know, banks might might require construction draws or look at the profit loss. We’re just we work cash flow lenders. So we really just look at how much cash comes in, how much cash goes out, and really what the average daily balance is. And, you know, if there’s any negative days in the bank and the lumpiness of of the revenue. But like, those are the things that were heavily weighted when we underwrite a file. So, you know, you have a good business that does, $100,000 a month in revenue and you’re carrying $15,000 in average daily balance, like, you know, most likely, unless you’re, you know, something comes up like lawsuits or, you know, criminality or credit reports that, you know, if you’re below a 500 Fico, things like that, which, you know, would, would throw it off. But for the most part, we’re looking at the attributes and we’re trying to say yes to an application. We’re finding reasons to lend, not reasons not to lend. Mhm, mhm.

 Kevin Rosenquis: That’s a good way to put it. That’s really interesting. Yeah. You’re try you’re finding ways to help them rather than be concerned about that so to speak.

Ryan Rosett : That the you know of course we’re like you know we have a ton we spend a ton of time and, and resources on our data science team and really understanding the data and understanding the profile of the customers, the industry type, the seasonalities, the geography, like everything that sort of goes into it. But at the end of the day, you know, there isn’t like a I call it like a truth serum where if you lend the money to someone, are they going to pay you back? And if their intent is to pay you back, you know, but there’s which is great that, you know, and often there are times when we make credit decisions that the business doesn’t succeed. It goes out of business. And, you know, we lose. It’s the times where we make decisions and the small business owner is trying to fraud us. And, you know, so fraud is pervasive. You’ve heard it. You know, we’re an online lender or using technology. So you know so we have a on a different sort of data fraud detection tools that we leverage that, you know, kind of throw up a red flag when a customer comes in seeking something and, you know, that might be a decline very quickly because of a certain.

 Kevin Rosenquis: So you mentioned the data driven approach. How how does how do you guys use AI and machine learning? How do you how do you use technology to make a credit decision?

Ryan Rosett : So we have um, we have a proprietary scoring model. There’s a number of factors that go into it. You know, we pull all types of third party data that go into sort of our algorithm to score a customer when their application comes through. And then based on that score, they’re going to get bucketed into like certain risk pricing. So the lower the score the the lower risk they are. The way that we do it okay. So if you’re a 0 to 50 you’re a super high creditworthy, you know 50 to 100. And we have a bunch of different bands of credit bands. And so that’s basically how we do risk based pricing. So if you’re a high risk customer, of course you’re going to get more pricey because it’s going to have like a higher default rate potential or probability of default than a lower credit score on our books. So we have on the generative AI, I mean, the machine learning, we’ve been using machine learning for five years. So you know, like that’s like so you know, that’s something, you know, the generative AI is like certainly new. You know, we’ve been working on various we have two provisional patents pending, but we’ve been working on multiple different strategies on the AI front. One of them, just to give you an example that we have a patent pending on, is a is. And I kind of mentioned like the SIC, which is like a classification for a type of business. And so there and then there’s this also something called the Nexus code, which is a little bit more advanced government way of classifying businesses.

Ryan Rosett : And those have like I think like 2000 plus different Nexus codes. What we’ve done is we’ve used a workflow using GDI that establishes with and we get about a like a prior to using GDI, we were using it was done by humans. So a human would pick if it was. And I use this example just because I think this is kind of like indicative of of the business, but say by buy ABC electric. Are they an electrician? Are they an electrical supplier? Are they a are they manufacturing switches? Okay. Like I don’t know by that name okay. Nor does an underwriter. But they might just say it’s an electrician. And then an electrician is going to have a certain have different characteristics than a manufacturer or a supplier. And so that getting it right will gets us a lot better ability to price a deal down we and not having that right. So when what we found by using generative AI and using like sort of prompt engineering is that we can us, we get about a 25% lift of accuracy over humans by using the technology that we’ve created. So it’s something that like that’s just like one example that we’re using gen AI that, you know, I can disclose to you. And it’s working extremely well. And like, you know, by using that like, you know, we had a and we also have a team that in India that was doing like bank statement parsing and certain things of that nature, we were able to cut out by leveraging this technology. So that was kind of exciting to us.

 Kevin Rosenquis: Absolutely, absolutely. And people talk about how using AI and machine learning can help level the playing field when it comes to loans and banking in general. How big of an issue is bias in lending decisions?

Ryan Rosett : So, you know, we kind of follow like bank regulations. So we have like multiple asset backed securitizations and we have a. Guard rails around these securitizations. So for example we can’t have a certain. Too much concentration in any one given industry any any certain zip code. There’s a number. You know, we’re not as tight as banks, but we sort of act like a bank. Okay. So, you know, whether and we do look at discriminatory nature of like anything that we do in our models because our models are vetted by the banks also. So like nothing we’re doing, to my knowledge, has any negative impact on a disparate group so that, you know, it. Certainly. And if it was, it was it’s completely unintended consequences of like, you know, the way the models are working.

 Kevin Rosenquis: Okay, okay. That’s cool. Do you feel like I mean, obviously there has been bias in the past. We all know that. And Mary, every, every facet of culture. But as far as lending is concerned, the technology of machine learning has that helped to make it better and has it improved over the past decade or two?

Ryan Rosett : Absolutely. I mean, you know, when you think about, like, we’re trying to create a customer experience that is very seamless. If we can have a customer to our website, apply, get approved and go through an online checkout and where they don’t really speak to any human and the money gets dumped into their bank account, that’s a great experience. And keep in mind, this is not like a small loan. It’s still, if our average loan size is $65,000, it’s not like consumer lending where the average ticket size is 2 or $300, where they can, they can afford to make some mistakes. We can’t afford that many mistakes. So there are like checks and balances that we have. And even like if you go through our online checkout experience, you’re could get kicked out. And it goes to what we call rapid response Team. They then, you know, review something and then they’ll kick it back into the process so that the customer can complete it without like, you know, exactly where they were in sort of their in their user experience. So in, in the flow.

 Kevin Rosenquis: Okay.

 Kevin Rosenquis: That’s cool.

 Kevin Rosenquis: When you think about where the technology was in 2010 when you started this adventure to where it is now, what has had the biggest impact in the the lending space from a fintechs perspective?

Ryan Rosett : The biggest impact from. Yeah.

 Kevin Rosenquis: How is it like what is what is what have you seen has caused the biggest changes as far as fintech is concerned? In your in your experience since you started, how has it changed?

Ryan Rosett : I would say it’s just it’s the data. You know, it’s like and really like leaning into the data, leveraging the data, figuring out what’s working, what isn’t a B testing and trying to figure out, you know, I know I said this before how to say yes more and no less. So like that’s like, you know, where we can get go a little deeper into the credit profile, even if we have to price for it. So where we, we build in a little bit of loss rate. So, you know, certain customers that are may have to pay for not other customers who are going to potentially default. But like those are what we’re learning. And if we can learn and we can offer that customer lower cost of capital in the future, we will work for profit companies, so we need to lend. You know, each one of our loans has to be the way that we originate. It’s for profit. So there are certain lenders that will originate the first for added at a loss, thinking that the customer is going to renew. We just don’t do that. And it’s, you know, not and I’m not saying it’s like a business model that doesn’t work. It’s just not a business model that we adhere to.

 Kevin Rosenquis: Mhm I hear you.

 Kevin Rosenquis: What are you most bullish about as far as where fintech will head over the next few years.

Ryan Rosett : You know I think generative AI is going to play a big role in lending. I mean I think our business is like a perfect use case. I would say that like categorization is like one example that I think has like a great use case. There’s others that we’re working on. So I just think like, you know, the more we can leverage to make the customer go through quicker and manage our sort of charge offs and, and performance, the more we’re going to do so it’s, it’s really it just that is the way we continue to invest our money is in in the tech, in our tech platform, data science platform, and really just kind of try to put ourselves in the shoes of the customer as to like, what does the customer want so that we can offer that and be the best in class.

 Kevin Rosenquis: People sometimes will worry about working with alternative lenders instead of big banks. Whether the concern is risk or higher rates, or the service that they might not get if they have, if they don’t work with innate kind of name brand, if you will. What do you say to people who voiced those concerns?

Ryan Rosett : Well, like one thing I’d say is like, you know, if you can be patient and, you know, and your business is bankable. Go to a bank. I’m not saying that there is no place in the market for a bank. We borrow money from banks. So, you know, like, I mean, so of course we are going to be more expensive than a bank. I mean, just, you know, level set, you know, so but where we win is.

 Kevin Rosenquis: We’ll.

Ryan Rosett : Say yes when banks say no and like. And banks just aren’t lending at, you know, under two, 50, 500. Whatever the case may be, the larger banks just are they’re not interested in these small credits and this is what we do. So, you know, there’s a I would say, you know, if there’s a need for working capital quickly, I think we’re like an amazing solution for it. And it’s something that can get done in a day. And you have the capital and you know you can use it on, you know, business uses that you think make sense to improve the profitability of your company. And that’s really that’s it. If there’s a if even if it’s a bridge to an SBA, we can do that. You know. So I mean there’s a ton of different solutions. But like even paying taxes, you know, while sometimes taxes catch you off guard, and you’re not prepared and then, you know, April 15th or October 15th or whatever date you’re paying your taxes, they come. That date comes and you’re not prepared. We’re a good use for that. And would you rather owe us or the government? You know, I think you’d rather owe us, but literally, you know. Yeah. So, you know, like, really the, the, the use of the capital, you know, when someone can put it in their business, buy inventory, do some type of improvement and they can say, hey, I can get. If I put this patio on this restaurant, I can get 20% more tables, and therefore my revenue should increase because I can see everybody inside. It should pencil like our capital, and our capital is not that expensive.

 Kevin Rosenquis: Well, Ryan, thanks for being here. The company is credibly I appreciate your time and then letting us know all the info about the small business loans.

 Kevin Rosenquis: Great.

Ryan Rosett : I appreciate your time. Thanks for, thanks for having me on your podcast.

 Kevin Rosenquis: Thanks, Ryan.