STARTUP AIMS TO HELP SOLDIERS GET BETTER LOANS
Afghanistan war veterans Ceasar M. Munoz and Jason Smartt aim to upend traditional credit scoring for junior active- duty soldiers who often have no or low credit scores.
The two alumni of West Point, along with co- founder Nitika Nautiyal, created start- up company Credit Serve four months ago to match the soldiers with credible lenders who can give the soldiers more favorable, fixed terms and lower interest rates than they can get now.
The entrepreneurs are seeking angel funding totaling $ 1.5 million by the end of the first three months of 2015, partly to create an algorithm to show that soldiers are statistically better credit risks than their traditional scores reveal, they said. The goal is for the algorithm to take into account factors such as a service member’s deployments, awards, occupational specialty and length of service to produce the new type of credit score.
Credit Serve is part of The Bunker, an incubator for startup companies created by military veterans.
The Bunker will be housed in a 25,000- square- foot addition that opened Tuesday next door to 1871’ s home base on the 12th floor of the Merchandise Mart— a 50 percent increase in the much- publicized 1871 tech hub’s current size.
At an event Tuesday morning, Gov. Pat Quinn introduced representatives of the firms occupying the new space. The state of Illinois invested $ 2.3 million from the Illinois Jobs Now program to help get the original 1871 space started, and put in another $ 2.5 million for the expansion from the Illinois Department of Commerce and Economic Opportunity.
The new space is part of 1871 CEO Howard Tullman’s plan to support new companies that will disrupt a variety of entrenched industries.
Munoz and Smartt came up with their startup idea as part of their coursework in entrepreneurship while pursuing MBAs at the University of Chicago’s Booth School of Business. They also have taken advantage of resources at the university’s Polsky Center for Entrepreneurship and Innovation. They are set to graduate in June 2015.
Munoz, 30, served as a senior communications officer for the U. S. Army’s 2nd battalion, 1st Special Forces mission in southern Afghanistan, while Smartt, 29, served as a U. S. Army tactical and effects coordinator for the 5th Brigade, 2nd Infantry division, based in Spin Boldak on the Afghanistan- Pakistan border.
A beta trial with a soldier who needed a $ 17,000 loan resulted in the soldier saving $ 400 amonth with a halved interest rate ( 18 percent, instead of 35 percent) and a three- year loan instead of several loans due over three- or sixmonth periods.
Credit Serve’s target audience likely will realize negotiated interest rates from 10 to 25 percent, the co- founders said.
Todd Connor, CEO of the Bunker, said Tuesday that the idea is for the 10 to 14 veteran- run companies in the new space to generate revenue, hire people and grow to a point where they will move out after six months of meeting with mentors, strategic advisers and otherwise getting traction in the Bunker.