Sean (left) and Kenny Salas
Photo courtesy of Camino Financial

Sean (left) and Kenny Salas
Photo courtesy of Camino Financial

Twin brothers Kenny and Sean Salas (both MBA 2015) grew up with firsthand knowledge of what it takes to be an entrepreneur: Their mother opened more than 30 Mexican restaurants in the Los Angeles area. But after 25 years, the business went bust, and she relocated the family to her native Mexico when the Salas brothers were 12 years old.

It’s a fitting origin story for Camino Financial, an online lending platform focused on the Latinx small-business community; today, the Salas brothers are working to help finance entrepreneurs very much like their mother. Founded in 2014 and with offices in Los Angeles and Mexico City, Camino got its start while Kenny and Sean were still students at HBS. In addition to enrolling in the Rock Accelerator program, the brothers took space at the i-Lab, where classmates Wombi Rose and John Wise of LovePop and Michael Martin of RapidSOS were neighbors. To date, Camino’s loans have totaled about $70 million, with average amounts of $16,000 per member (Camino’s term for its clients).

“We started with a blind belief that the Latinx small-business loan market was being mispriced and underserved,” says Sean, who serves as CEO (Kenny is COO). It’s an assumption that required finding early stage funding partners willing to take the risk necessary to validate the concept—a task made much easier thanks to the HBS network, he notes.

That leap was necessary because Camino’s members—whose businesses include restaurants, construction companies, beauty salons, and small manufacturers, among many others—don’t fit the traditional categories for risk assessment. Twenty-five percent of its borrowers, for example, don’t have the credit history or FICO score necessary to access the capital necessary to launch a business or take an existing venture to the next level. Their businesses could be described as “microenterprises,” with annual revenues of around $183,000—about a third of the average small business. In addition, the typical Camino business is underbanked and informally run, lacking the data footprint that regular cash deposits and a digital bookkeeping system provide. Finally, some of Camino’s borrowers are undocumented immigrants to the United States. “We’ve found an applicant’s immigration status to be a neutral factor when it comes to credit,” says Sean, “but of course not everyone is going to be comfortable with that as a perceived risk. I think it’s a misplaced concern, however—and it’s given us an edge in accessing that market.” Over time, he adds, Camino’s accumulated data on member businesses and borrowing habits have unlocked more affordable loans and created increased transparency around (and investment in) a loan market the firm estimates at between $15 billion and $20 billion.

As the coronavirus pandemic enters its third quarter, a survey of Camino’s members shows that 85 percent are reporting sales below pre-COVID levels, a figure that tracks closely with figures represented by small-business owners overall; yet only one in five of Camino’s members has received some form of government relief. “Credit models have been turned upside down,” notes Kenny. “We’re serving a market that was impacted just as hard but received less assistance.” In response, Camino expects to come to market with a recovery loan that lowers the cost to borrowers and lends to nonessential industries that have been heavily impacted by COVID-19. “We’ve added a supplement to our application that helps us understand our members’ resiliency,” Kenny says. “We’re taking a proactive approach and basically doubling down on them.”

Camino is also intent on expanding education opportunities for borrowers. With an extensive library of bilingual content and video workshops on topics ranging from digitizing business processes to the differences between commercial construction and regular business loans, Camino also offers tips on navigating government-sponsored COVID-relief programs. “We have a great member-services team that is there for people when they need to speak to someone, and I don’t want to play that down,” says Sean. “But we also envision a world where business content and financial products and services will be integrated seamlessly into the member experience—all driven by unique user data and machine learning models.”It’s a development that ties in with Camino’s mission to empower Latinx small business, he notes; traditionally, offering technical assistance to small business owners has been an onerous, difficult-to-scale process, resulting in drawn-out learning curves and missed opportunities: “AI enables us to sift through massive amounts of data in real time and offer targeted insights at a specific point in time, which accelerates the decision-making process.”

The education and insights flow both ways. Every quarter, Camino releases a research report based on survey data from its loan applicants and documents emerging macroeconomic trends in the Latinx business community. “We need to think about how we leverage data to become a bigger authority and voice to drive change in our community,” says Sean.

“In many ways, COVID revealed fundamental weaknesses in the US economy and our politics, as evidenced by the Black Lives Matter movement,” adds Kenny. “Now I’m at a 12, on a 1 to 10 scale, in terms of wanting to continue to drive change through what we’re doing at Camino.”

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