50 Innovative Companies to Watch 2018

With a Wide Range of Credit Profiles: Breakout Capital Finance, a Technology-enabled Direct Lender, Brings Affordable, Fully Transparent Funding Solutions to Small Businesses


We hope that our peers join us in promoting and adopting industry-wide cost and product transparency/disclosure, as well as removing predatory practices that harm small businesses across the nation: Carl Fairbank

According to the Bureau of Labor Statistics’ Business Employment Dynamics, over 20 percent of new businesses fail during the first year of operation, and over half of new businesses fail by year five. For many the arduous journey of going from an idea to opening the doors of a new business can seem like the hardest mountain to climb in small business, but the truth is capital is the lifeblood of small business, and without funding, it can be impossible to keep your doors open.

The 2017/2018 Global Entrepreneurship Monitor stated that over half of all discontinued businesses halted operations because of lack of profits or financial funding. Money is the bloodline of any business; at almost every stage of the business, entrepreneurs find themselves asking – ‘How do I finance my start-up?’

Breakout Capital Finance provides working capital and business loans to small businesses. The company offers franchise loans, merchant cash advances, lines of credit, equipment leasing, debt restructuring and asset-based lending services. The company also offers FactorAdvantage, a solution for the factoring market.

Breakout was incorporated in 2015 and is headquartered in McLean, Virginia.

Carl Fairbank, Breakout Capital Finance Founder/CEO, spoke exclusively to The Silicon Review. Below is an excerpt.

Why was the company set up? And how did you expand your company and its offerings over the years?

Breakout Capital Finance eliminates the hidden costs that have significantly raised the cost of capital to small business owners, enabling the company to offer an affordable solution tailored to each business. The company was established with the goal of allowing small businesses to ‘break out’ of typical small business lending traps, such as lack of transparency around APRs, high broker fees, and predatory practices like double dipping and stacking.

We, as a company, have dedicated ourselves to being more than just a lender. We want small business owners to be educated so that they can be better positioned to make fully informed financial decisions. We have also made advocacy a primary component of Breakout. We actively promote the industry-wide adoption of cost and product transparency/disclosure, as well as working hard to remove rapacious practices that adversely affect small businesses across the country.

We have also recognized that there are gaps in the market which require true product innovation, beyond the traditional improvements in alternative lending (speed to approval/speed to funding). After two years of product testing, we launched FactorAdvantageSM in 2018, and we have launched HatchB Labs, a tech incubator within Breakout Capital, to really push forward our company’s ability to innovate in and out of the FinTech space. Our small business working capital product suite also includes Term Loans, Monthly Remits, and Bridge Connect.

How successful was your first project roll out?

FactorAdvantageSM was rolled out in January of this year and it has been incredibly successful both for small businesses and our factoring partners. It is a patent-pending, integrated solution for factors that clears liens, provides over advances, and enables factors to win and retain more clients. More importantly, FactorAdvantageSM insulates factors and their clients from predatory merchant cash advance companies. FactorAdvantageSM has had a zero percent unit loss rate and a significantly lower cost of acquisition compared to traditional working capital products.

What challenges did you face in your initial years? What can your peers learn from it?

Our biggest challenge was differentiating our lending products from other loan and cash advance providers. Our team really had to sit down and discuss how to best communicate to our customers the variety of complex predatory practices that take place in our field, so that they could understand how Breakout is different. This carried over to the lending process, where it was difficult to show how our products differed from other funding providers.

Our first step in conquering this challenge was to address the question of “How can I help small businesses understand the numbers and policies that make up their financing options”. Our team has created many calculators and in-depth explainers to answer this question, and then made them available online for free. Breakout believes that everyone should be educated in their finances, and our team is dedicated to covering everything a small business owner may have questions about. Our blog series is also filled with relevant information for prospective borrowers to make the most responsible and educated decision. No topic is too difficult or controversial for us to explain, no matter what our competitors say.

We also were early adopters and part of the original committee who put together the SMART Box™, a pricing and disclosure comparison tool.

We hope that our peers join us in promoting and adopting industry-wide cost and product transparency/disclosure, as well as removing predatory practices that harm small businesses across the nation.

How do you stay relevant to consumer interests and needs in this highly volatile market?

We address this in a few ways. The most relevant is product innovation. In alternative lending, true product innovation must happen to push the industry forward. FactorAdvantageSM is just the tip of the iceberg for Breakout. We also do our best to stay on top of the latest predatory practices that are negatively affecting SMBs, so we can educate our borrowers on what to look out for. There is a lot of dialogue around regulation and laws at the state and federal level which could impact the small business borrowing industry. We actively advocate for Main Street and encourage responsible lending and borrowing practices nationwide.

How often do you innovate? Is it only when there is a need in the market?

There is too little effective, disruptive innovation in FinTech, especially using blockchain and AI techniques. We have launched HatchB Labs, a tech incubator within our company, which allows us to continue to innovate by incubating new tech solutions (either organic or acquired) that can directly impact our core business (small business lending solutions and payments) and gives us the ability to monetize non-core solutions.

FactorAdvantageSM is our latest big innovation, but there are other innovations with our traditional loan product that we’ve been recognized for: monthly payback options, zero double dipping, consolidations, aggressive repayment discounts (BridgeConnect). Now, with HatchB, our innovations will increase with efforts in machine learning, AI, and blockchain.

Customer service varies, but companies can still be successful. How do you maintain your customers’ trust and loyalty?

Honesty and transparency is the key, but it does not account for the entire formula. We have a dedicated customer success team, which includes a direct point of contact for each merchant we work with.

  • Our goals are always the same as the merchants’. For example: if they are looking to graduate to an SBA Loan, we help them stay on track through resources and guidance so they can achieve their objectives.
  • There are multiple ways they can communicate with us (customer portal, online chat, email, phone) and it’s important that our response times are as fast as they can be.
  • Unlike many brokers or other lenders/funders, we do not share customer information unless the situation requires it and we receive approval first.
  • We offer additional resources and consultation, beyond financing, in case our customers have questions (accounting software, marketing, business structure, etc.)

How does your company contribute to the competitive global IT platform at large?

We believe in open source and are contributing in the areas of machine learning, cloud computing, and blockchain. When we work with open source software and improve it, we are able to contribute back to the community. We are also working on universal standardized processes in our industry that will help in both transparency and efficiency.

Do you have any new products ready to be launched?

There are always new products or processes being tested or formalized within Breakout. Internally, there are numerous products being deployed from our amazing technology team, which will improve efficiency and accuracy in underwriting amongst other operational areas. FactorAdvantageSM is the latest financing product that we launched, and our next one is just around the corner.

As a question on sustainability, where do you see your company a couple of years from now?

We’ve been in growth mode with our lending operations for the past three years and will double origination volume this year, and double it again next year. This is based on strong demand for our customer-framed product, coupled with the operating efficiency we get from tech innovation. Breakout is going to continue to be an innovator and a leader in FinTech for many years to come.

Carl Fairbank: A Brief Background

Carl Fairbank is the founder and CEO of Breakout Capital Finance. Through a decade of work as an investment banker in the alternative finance industry, he identified market inefficiencies and widespread industry practices that made it extremely expensive for many small business owners to secure funding. Typical small business credit products often carry additional costs frequently not fully understood by business owners. Carl founded Breakout Capital in an effort to bring affordable and fully transparent funding solutions to small businesses with a wide range of credit profiles.

Prior to founding Breakout Capital, Carl worked as an Investment Banker at FBR & Co. and in the Corporate Strategy Group at Capital One Financial Corporation. Mr. Fairbank graduated from American University with a B.S. in Business Administration and Economics. He was recognized in the 2016 Trending 40’s list of D.C.’s top entrepreneurs under 40 years old and is a member of the Forbes Finance Council.

“Our team really had to sit down and discuss how to best communicate to our customers the variety of complex predatory practices that take place in our field, so that they could understand how Breakout is different.”