CRE meets AI in fintech's tool for lenders

A fintech called Blooma has launched an artificial intelligence product for commercial real estate lenders that it says will help them cut down on the time and money needed to vet prospective loans.

Blooma taps into databases such as the Moody’s Analytics REIS Network to extract data about local real estate markets, while also scouring the web for tidbits such as neighborhood crime statistics, building information and other relevant news.

The fintech then refines the data through machine learning and creates a profile of the property tied to a borrower’s application. Blooma also helps create credit profiles of applicants, which are often real estate firms.

Banks then can filter certain information about the property, such as prices for similar buildings in an area, through Blooma’s platform to determine whether the asset and applicant in question meet their lending requirements.

Properties and applicants are scored on a 100-point scale. The higher the score, the less risk there is to the bank to fund the property.

“Our goal is to obviously reduce the time it takes for banks to profile these deals, and ultimately reduce the time to gaining revenue for the lender,” said Shayne Skaff, Blooma's CEO.

originators of CRE loans

C3bank, which specializes in commercial real estate loans between Los Angeles and San Diego, is the first bank to use Blooma’s software.

“When we met with Blooma, we were intrigued that they were focusing on the artificial intelligence component,” said A.J. Moyer, CEO of the $350 million-asset C3bank. “They talked about artificial intelligence in terms of understanding our credit decision-making, and how this tool helps us determine the risks of leads coming in.”

As part of Blooma’s official introduction into the market this week, the San Diego-based fintech announced it had raised $2.75 million in a funding round led by Floodgate in Palo Alto, Calif. Abstract Ventures, Crescent Ridge Partners and Serra Ventures also invested.

C3bank integrated Blooma’s technology into its loan origination platform about three months ago. While Moyer said it is too early to quantify the return on investment, he pointed to the bank’s potential to approve more loans with the same 37 employees in four branches that it has now.

“We're looking for a more efficient way to do all of our processes, including loan origination, and also a more intelligent way to do it,” Moyer said. “That enables us to continue to grow while maintaining the overhead we have now.”

How much does Blooma claim banks could save? Skaff said the fintech conducted a cost analysis for a global bank with more than $100 billion in assets. Originations cost this bank $1,000 per loan, and Blooma's technology reduced that figure to $230, he says.

“We don’t promote, hey, you can take out half your underwriters,” Skaff said. “But we do promote that you can double your loan portfolio without adding headcount, and reducing costs.”

Moyer estimates Blooma’s technology could cut a few days from the approval process. “If I can get that return time down to three or four days, C3bank and the applicant are all winning,” he said.

The data supplied by Blooma could help give the bank an edge in commercial lending if the market takes a turn for the worse, Moyer said.

“Hopefully we're gaining a competitive advantage against our peers in lending against assets that we think are maybe not recession-proof, but recession-resilient,” he said.

Skaff, whose background is in software engineering, created Blooma’s platform last year when he was approached by the founder and chairman of C3bank, Michael Persall.

“He approached me because he knew that I knew how to build software around how to help him automate his loan-origination process,” Skaff said. “It’s an incredibly manual process. He had underwriters developing risk packages on all incoming loans, and it could take days or weeks to get a credit memo out and fund a deal.”

Skaff initially passed on helping Persall because he was unfamiliar with commercial lending, but he later developed the software through an incubator he owns in San Diego called the Sandbox.

Skaff eventually decided to take the foundation of the AI-powered platform and created Blooma. Persall helped provide initial financing through ABP Capital, where he is also the founder and chairman.

While Blooma is initially working with a smaller lender, Skaff said the software could be valuable to large global banks, private banks and insurance companies.

“There’s a huge amount of volume for larger banks,” he said. “Every single one of those deals needs to be vetted, so if I can vet a hundred deals in the same amount of time as it would take one deal, why wouldn’t I do that?”

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