Can a credit card teach entrepreneurs how to run a business? | PaymentsSource

Working for the Peace Corps in Bolivia many years ago, Elizabeth Gore saw groups without access to capital and business skills trapped in poverty.

Years later, when Gore became a successful entrepreneur and investor, she and her friend Carolyn Rodz realized a dream by launching the website Hello Alice to help marginalized groups across the US start their own businesses.

“From day one, our focus has been on helping women, people of color, veterans — groups with no credit and limited access to capital — to start their own micro-enterprises,” Gore said.

Since launching in 2017, the site, named after the oddity and confusion of Alice’s Adventures in Wonderland, has amassed 1 million users. Hello Alice offers small business owners free resources, referrals, and the opportunity to win grants ranging from approximately $5,000 to $25,000 to improve their businesses. Last year, Hello Alice awarded more than 2,100 scholarships totaling more than $16 million.

More than half of the site’s users are black, and the majority are also women, in part because the NAACP has played an advisory role from the start, according to Gore.

“Our data shows that 80% of small business owners have no business credit. Only 25% have ever applied for a business credit card, and of those, most were declined,” she said.

Hello Alice has so far generated most of its revenue through affiliate marketing and commissions, connecting users with resources such as custom mentoring, networking, educational modules, and links to business service providers and lenders such as Kabbage, Kiva, Credably, and various community development financial institutions and nonprofit microlenders .

Now the startup is launching its first credit card, the Hello Alice Small Business Mastercard, which Gore hopes will become the site’s main revenue driver.

The Hello Alice business card is issued in partnership with the First National Bank of Omaha and has no annual fee. Like many small business cards, it offers 4x points for every $1 spent on business-related purchases like cell phone service and software, 3x points on office supplies and mail order purchases, 2x points on restaurants and ridesharing, and 1x on everything else.

A unique twist on the Hello Alice credit card is the way it rewards users for completing educational milestones. Users can earn 150 points for creating a full profile on Hello Alice, 100 points for logging in regularly, and 100 points for competing educational modules on topics such as dealing with taxes and managing cash flow.

Hello Alice card customers will also receive reminders of best practices for using a credit card and building credit, including tips for users on how to contact credit bureaus to ensure their credit card payments are being recorded on time.

“For most of our users, their problem with accessing capital isn’t bad credit history, it’s no credit history,” Gore said.

Customers who do not qualify for the traditional small business credit card can apply for a secured version of the card, and after 11 months of on-time payments, they are eligible to upgrade to an unsecured card. The effective annual interest rate is between 15.74% and 24.74%, depending on the creditworthiness of the applicant. Users receive a $50 statement credit after spending $1,000 in the first three billing cycles.

“We worked hard to create a map that is fair and has built-in tools for financial health and business success,” Gore said.

Machine learning is an important part of Hello Alice’s growth formula.

“The data insights we use to design offers are constantly changing,” she said, noting that every applicant for a Hello Alice Small Business Card receives a credit card offer based on their risk profile with full transparency.

During the pandemic, Hello Alice has retooled its platform to automate many functions that were previously manual, including compliance with payment card industry data security standards and other requirements.

“We have almost completely rewritten the platform to accommodate our growth plans while delivering a significant set of new features to our owners,” said Kelsey Ruger, vice president of product at Hello Alice.

Offering grants to eligible Hello Alice users drives traffic to the Hello Alice website and the company regularly works with other companies to expand its reach.

Until October 14, Hello Alice users can apply for a $5,000 grant funded by Mastercard. Massachusetts-based Stacy’s Pita Chips is offering $15,000 in grants to 10 female food and beverage entrepreneurs through Hello Alice through October 21.

Since 2020, eBay’s annual Up & Running grant program has awarded 50 notable eBay online sellers in partnership with Hello Alice with $10,000 each.

Several small business owners who recently won $10,000 in eBay program grants told American Banker that they first filled out a questionnaire on Hello Alice’s website, which took about an hour. So far, none of those addressed have applied for the Hello Alice credit card.

eBay seller Jaster Nyasulu, a Malawi-born immigrant living in Seattle, was fired from a website he was helping to develop during the pandemic. He plans to use the $10,000 to buy inventory for his eBay shop, which sells fitness orthotics to relieve elbow, knee and ankle pain.

“Getting capital to buy inventory is always my biggest challenge,” Nyasulu said.

Jonathan Proulx of Alpine, Utah, won $10,000 which he said gave him the latitude to buy a home with an attached workshop so he and his wife could use the thousands of pieces of equipment and supplies they buy and work in his ebay shop we can list, sort easier sell this.

“I had to hire someone to help me move stuff, but getting more space solves that problem,” Proulx said.

Adina Ringler, another $10,000 grant winner, runs Adina’s eBay wedding shop online in Northridge, California. Ringler said she will use the money to hire a part-time employee during her busiest season.

“I also use Hello Alice to apply for other grants,” Ringler said, noting that she’s also tapped into some of the site’s educational resources for businesses.

Based in Houston, Hello Alice has raised more than $22 million in venture capital funding since its inception. With 64 full-time employees, the company hopes to award $70 million in grants to business owners by 2025, with a focus on the marginalized groups mentioned above, as well as LGBTQ+ entrepreneurs and people with disabilities who own small businesses with fewer than 50 employees to lead.

“Our data shows that getting a loan or line of credit is difficult for any small business in the first 24 months, and we want to close that gap,” Gore said.