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Small Business Success Story: Solé Bicycle’s Collaboration With Funding Circle

Feb. 25, 2015
Small Business
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Solé Bicycles isn’t your typical bicycle company. Founded in 2009 by two college buddies, Solé offers stylish and affordable bikes that can be purchased directly online, shipped to your door and assembled within 10 minutes.

“We wanted to do just a simple bike for someone who wants to get back into biking,” says Jimmy Standley, president of Solé Bicycles in Venice, California.

In 2009, custom-made, fixed-gear bicycles commonly known as “fixies” were soaring in popularity at the University of Southern California and at campuses around the country. But often a buyer had to build the bicycles piece by piece and they cost $1,000 to $2,000 each, according to Standley.

So Standley, along with founders Jonathan Shriftman and Jake Medwell, decided they wanted to create their own high-quality, easy-to-use bikes and offer them for a fraction of the cost. The first Solé bicycles were sold for $200 to $250 to students on campus; today’s bicycles range from $399 for single-speed or fixed-gear cruisers to $499 for city cruisers, and can be shipped to your door for $25.

“Our highly functional, fashion-forward bicycles meet the demand in the market space for a bicycle that’s as much a personal statement as it is a mode of transportation,” Standley says.

While still in college, Shriftman and Medwell got a $15,000 grant to start the business, which they used to buy the company’s first inventory, according to Standley. After they graduated, they shifted the company’s focus from selling bikes on campus to selling them online, direct to consumer, using social media as leverage and cutting out distributors, manufacturers and other parts of the supply chain.

“We all graduated and had been really tied into social media and how the online world worked, so we said, what if we tried to switch and make an online business out of this?” Standley says. “And with us, selling directly to the end user on our site, we are able to sell the bikes for a fraction of the cost of bicycle shops.”

They’ve been selling bikes online and reinvesting the profits to grow the business ever since. So far, the plan has worked: Solé has increased its sales every year since inception, and from 2011 to 2013, it doubled its growth each year, Standley says. The company has a large following on Facebook, where its page has more than 52,000 likes.

But as Solé’s business grew, so did its need for capital to purchase inventory. Solé tried to get a traditional loan from a bank, but was repeatedly declined due to strict lending standards, Standley says.

“A business our size needed to have more collateral in order to get a loan,” he says. “After four years of business, it’s still tough to go that route because of all of the requirements.”

The company was offered loans through loan sharks, but they came with super-high interest rates and an APR of more than 60%, according to Standley. Friends and family helped out the company in its early stages, but could lend it only so much.

“We were fortunate enough to find someone in the middle ground in Funding Circle, to help us take the next step with our business,” Standley says.

Turning to Funding Circle for help

Funding Circle co-founder Sam Hodges knows firsthand the financing challenge Solé faced. A small business owner himself, Hodges couldn’t secure financing to expand his gym franchise in 2007.

He saw an opportunity to bridge this financing gap and help small business owners get access to capital they needed to expand. In 2011, he founded Funding Circle USA, an online marketplace that gives investors the opportunity to lend money directly to small businesses, cutting out banks from the process.

“Great businesses all across the country and the world are having a heck of a time getting loans,” Hodges says. “We’re really excited to help great small businesses get the money they need to expand and grow.”

Solé was able to land a $75,000, three-year term loan on Funding Circle in March 2014, but the company was growing so fast that it needed even more money for inventory. So Solé increased the loan size to $150,000 with a four-year term at 16% APR in December, Standley says.

The process was fast and simple, Standley notes. He applied to boost the size of the loan while in the airport waiting for a flight to China and got an email back from Funding Circle when he landed that said the loan was being processed. Solé closed on the loan about a week later.

Solé is an excellent business for Funding Circle because the company has a “great product with really strong traction and clear demand,” Hodges says.

“The business is really clean, financially it was performing well, and fundamentally what they were looking for was expansion capital, to ramp up production and build up working capital,” he says.

Standley and the team at Solé couldn’t be happier with the results.

“It’s been great,” Standley says. “It helped us get more inventory in probably our biggest summer to date, and we just had a great holidays. Now we’re keyed up to have an amazing year in 2015.”

Solé’s plans for this year include a website redesign, new bicycle lines like a three-speed city cruiser (to be released by summer) and an international expansion into Australia and Europe.

“These guys are fast, and the terms and rates are reasonable, so I think it’s a really awesome option for small businesses,” Standley says about Funding Circle.

Tips for other small business owners

Hodges offers three main tips for small business owners looking for financing with Funding Circle or other similar lenders.

1. Be transparent and honest about why you need the money

“The problem is, if someone gives us an answer that doesn’t really make any sense, that’s almost a decline outright, simply because we don’t believe that the operator is credible and will use the money in a responsible way,” Hodges says.

2. Gather all of the necessary paperwork in advance

Every lender, including Funding Circle, will ask for a standard set of information, including a couple of months’ bank account statements, two years’ worth of tax returns, interim financials, and basic documentation that shows the individual borrower is legally tied to the business, according to Hodges.

“So it’s really helpful for a small business owner to make sure you have all that stuff; put it into PDF files on your computer — that way when you apply for the loan, it’s all there and it’s an efficient transfer of information,” Hodges says.

3. Clean up your credit

Small business loan applicants should take a hard look at their credit history and clean up any errors before applying, as credit scores affect your ability to get a loan, and the size and cost associated with the loan if you are approved.

“It’s really important to know if you’ve been delinquent on any payments,” he says. ‘If you’ve been bankrupt, when was it? If it was recently, you kind of have to have an explanation on that. Do you have any tax liens on your business? Are there any other adverse actions on your credit profile, like any bills outstanding?”

The good news is that a negative credit report can be cleaned up. Reach out to whomever you owe money to, pay it off and have the credit bureau remove the negative mark. “It’s very much worth doing that work,” Hodges says.

Steve Nicastro is a staff writer covering personal finance for NerdWallet. Follow him on Twitter @StevenNicastro and on Google+.

To get more information on and compare funding options for your small business, visit NerdWallet’s Best Business Loans page. For free, personalized answers to questions about starting and financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.

Images of Jimmy Standley and a Solé bicycle via Solé Bicycles.