In 2009, Louis Beryl applied for a private loan to help pay for his tuition at Harvard Business School.
The experience gave Beryl the idea to found Earnest, a startup that provides small loans to individuals based on their earning potential rather than credit history.
Earnest is one of several young companies using new technologies to offer loans to individuals and small businesses that wouldn’t qualify for traditional loans.
Kabbage scans the Web for customer reviews of small businesses before deciding whether to provide them loans.
Since opening to residents of Massachusetts and Florida earlier this year, Earnest has processed hundreds of thousands of dollars in small loans to people with FICO credit scores as low as 608 – a score that would be considered subprime by traditional lenders.
Borrowers can apply for one-year loans at a 5.5% interest rate or two-year loans at 6.5% interest for up to $20,000.
Earnest doesn’t take an origination fee on the loans.