Taylor Simpson says the coronavirus outbreak is “the perfect launchpad” for his Indianapolis startup, The Halo App.
If that sounds cold, it’s not, he insists.
Simpson explains that lending money to people in need has always been his primary mission and making money—for himself and his partners—is secondary.
This month, in response to the pandemic, Simpson is putting his money where his mouth is—even if that means his firm will be giving up a six-figure revenue stream.
Simpson, 29, started working on his idea for a peer-to-peer money lending app in 2015. “I spent every single dollar I had developing this app.”
In 2018, shortly after his daughter was born and his power was shut off, the need for his app hit home. “The power company wanted $800 to turn the electricity back on,” he said. I’ve got a child. I can’t be without power.”
Simpson said he just needed a little short-term help to get through.
“I got disregarded by banks and financial institutions,” he said. “I understand what people do when they panic. They get themselves in a bad cycle that can lead to a lot of debt. Payday lending is the most atrocious industry in the world. We have to change it.”
Simpson said he became bent on making sure others in a tight, short-term financial spot have a place to turn and not get charged outrageous interest rates.
He got the power turned back on in his house and also powered up efforts to launch his company.
“In 2018, I jumped in with both feet, and I’ve been kicking and screaming ever since,” he said with a laugh.
Since then, Halo won a local Pitch Feast competition and won awards in some national pitch competitions, as well as a “Best in Cohort” award from Founder Gym, an online accelerator program.
The app launched last September.
Halo, which was co-founded by Simpson; his wife, Ariana Williams; and Mario Barron, has a set up that is similar to the ride-share app Uber. But instead of setting up a network or drivers, Halo has set up a network of lenders—mostly individuals with some extra cash—and locates people who need small, short-term loans.
The loans available are between $100 and $1,000.
“We don’t do school loans, we finance books, and we don’t do car loans, we do flat tires,” Simpson said.
Halo typically charges borrowers a 10% service charge based on how much is borrowed and the lenders charge a service fee up to 35%. Each lender sets its own service charge.
Using the Halo app, prospective borrowers request a loan; stipulating how much they need and how long they need to pay it back. After being vetted by Halo officials, the request is put out to Halo’s network of lenders, and if they’re interested in loaning the person the money, states their service fee terms.
For a typical $300 loan through The Halo App, borrowers pay less than half of the charge they would through a credit card or a payday lender, Simpson said. And borrowers often get more time to pay back their loans, he added.
“This part of the lending industry has gotten out of hand,” Simpson said. “It’s predatory and it takes advantage of people in need. We felt we had to do something.”
And now, Simpson wants to do more.
This month, his company will not charge service fees on the next $1 million in loans issued through The Halo App. That means $100,000 in lost revenue for the firm, no small chunk for a mostly self-financed startup.
Simpson reached out to his firm’s network of lenders about his plan to eliminate user fees, and while the lenders can still charge a service fee, he added “they’ve responded in a big way.” The average fee charged by Halo’s network of lenders has dropped from 17% to just more than 5% in recent weeks, Simpson said.
“I just think it’s so important to pass that revenue on to our customers in their time of need,” Simpson said. “And for a lot of people, there’s never been a bigger need than there is right now.”
Simpson isn’t worried that making such an offer will be overwhelming for his four-employee company or attract high-risk borrowers.
Halo has a 6% failure rate, and Simpson thinks that will decline as the company matures. Simpson credits the low default rate to the screening process he developed.
“We do a 15-minute welcome call with everyone who requests a loan through our app,” Simpson said. “That’s right, we’re the tech company that does welcome calls. That sounds so Indy. And it is.
“We don’t use traditional credit scores,” he added. “We’ve built our own credit scoring system. What we stress is being trustworthy.”
Simpson makes no apologies for how quaint—and possibly naïve—Halo’s system sounds.
During the welcome call, a Halo staffer—often Simpson himself—explains how the borrowing process works and discusses how much time to request to pay the loan back.
“First, we let them know you have to pay back, we set that tone all the way,” Simpson said. “These aren’t big institutions you’re borrowing from. These are people—just like you.”
Simpson also often recommends that borrowers take longer to pay back the money than they think they’ll need, often advising paying back in 12 weeks what a borrower thinks they can pay back in eight to 10 weeks.
Simpson, who graduated from Ball State University with an architecture degree and later worked as a senior business consultant for HomeAdvisor, is hopeful this strategy helps build his company.
“Our platform is built for times like this,” Simpson said. “Situations like the one we’re in now are when we shine the best. We’re looking for people to help.”
Since the coronavirus outbreak hit the U.S. in early March, Halo has seen 60% month-over-month growth. And even though he and his small staff deal with each loan applicant personally, he said Halo, which is currently handling about 20 loans applications a day, is nowhere near capacity and can ramp up to do much more.
Halo is just starting its first round of marketing, and Simpson said planning has begun for a Series A round of funding. He has little concern about the tightening capital markets due to the pandemic.
“I don’t think we’ll have a problem attracting investors,” he said. “We’re a recession proof company.”