Local Tech Startup Raises $12M to Transform Small Business Lending

A homegrown fintech startup is making waves in the small business lending space, securing $12 million in Series A funding to expand its AI-powered platform that promises to revolutionize how local businesses access capital.

LendFlow, founded in 2021 by former banking executives Marcus Chen and Jennifer Park, uses machine learning algorithms to assess creditworthiness beyond traditional metrics, potentially opening doors for thousands of small businesses that have been shut out of conventional lending.

"We've seen too many good businesses fail not because of bad ideas, but because they couldn't get the capital they needed at the right time," said Chen, CEO of LendFlow, during an interview at the company's downtown headquarters. "Traditional banks look at a narrow set of criteria. We're looking at the whole picture."

The funding round was led by Midwest Ventures, with participation from Silicon Valley-based Horizon Capital and several local angel investors. The company plans to use the investment to triple its engineering team, expand into three additional states by mid-2025, and enhance its proprietary risk assessment technology.

A different approach to lending

Unlike traditional lenders that rely heavily on credit scores and collateral, LendFlow's platform analyzes over 150 data points, including cash flow patterns, customer reviews, social media presence, and industry-specific metrics.

For Maria Santos, owner of Santos Family Restaurant in the Riverside district, this approach made all the difference. After being rejected by three traditional banks, Santos was approved for a $75,000 loan through LendFlow in just 48 hours.

"The big banks kept telling me my credit history wasn't strong enough, even though my restaurant has been profitable for five years," Santos said. "LendFlow actually looked at my business, not just a number."

Growing pains and opportunities

The company's rapid growth hasn't come without challenges. LendFlow faced scrutiny earlier this year when a group of rejected applicants complained that the AI system's decisions were opaque and difficult to appeal.

In response, the company introduced an "explainability feature" that provides detailed breakdowns of lending decisions and established a human review process for borderline cases.

"We take algorithmic fairness very seriously," said Park, who serves as the company's chief technology officer. "Our AI is a tool to help more businesses get funded, not to create new barriers."

Industry analysts see significant potential in LendFlow's approach. According to a recent report from the Midwest Business Council, small businesses in the region face a $4.2 billion annual funding gap, with traditional banks approving less than 20% of loan applications from businesses under five years old.

"There's a massive underserved market here," said Dr. Robert Kim, professor of finance at State University. "Companies like LendFlow are filling a critical gap, though questions remain about how these AI-driven models will perform during an economic downturn."

Looking ahead

With the new funding secured, LendFlow plans to expand beyond its current five-state footprint into Indiana, Iowa, and Kansas by June 2025. The company is also exploring partnerships with community banks and credit unions that lack the technology to implement similar AI-driven assessments.

"We're not trying to replace traditional banks," Chen emphasized. "We're trying to serve the businesses they can't—or won't—help. There's plenty of room for everyone in this market."

The company has also hinted at plans to launch a new product line focused on commercial real estate loans for small businesses, though details remain scarce.

For now, Santos and hundreds of other local business owners are grateful for the alternative. Her restaurant is undergoing renovations funded by her LendFlow loan, with plans to add 20 new seats and expand catering operations.

"Six months ago, I didn't know if we'd survive another year," she said. "Now I'm hiring more staff and planning for growth. That's what access to capital can do."