Small businesses are turning to loans that require zero human oversight

When Xiomara Rosa-Tedla needed a small loan in February 2020 to fund her e-commerce startup Unoeth, she didn’t reach out to a venture capitalist or a bank officer. She asked an algorithm.

Rosa-Tedla founded Unoeth with her dad in 2015. The company sells leather handbags and other accessories handmade in Ethiopia, and Rosa-Tedla was sitting on a backlog of unsold inventory. She needed a few thousand dollars to buy ads on Facebook and Instagram so she could get her products in front of the right customers and sell out her supply.

Rosa-Tedla didn’t want to sell a piece of her family business to a venture capital firm or jump through the hoops required to get a loan from a bank where, she jokes, you have to “give up your house, your car, and your firstborn” as collateral. Instead, she downloaded an app from a lending company called Clearco and gave it access to data about Unoeth’s sales, revenue, and website traffic on the e-commerce platform Shopify.

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