Under-the-radar fintech company charts fast growth

Aug. 27, 2018

The recently released Inc. 5000 list of fastest-growing companies had a surprising second-place finisher in South Dakota: Expansion Capital Group LLC, which has quietly grown into a 65-person operation based in Sioux Falls.

“We’ve stayed pretty under the radar the last several years, but we’ve had a pretty good run and are excited about what the next three to five years holds,” said Tim Mages, the company’s chief financial officer.

Expansion Capital was started in 2013 by a group of investors who learned about Sioux Falls when considering another fintech investment here.

“The debit card act hindered that business, but it gave the investors significant exposure to Sioux Falls from a regulatory and personnel standpoint,” Mages said.

The company caters to small businesses needing loans for capital from $5,000 to $500,000. Applications can be done online. A quote is returned in 24 hours, and money can be transferred to a business account in as few as two days.

“What we’ve done is focus on the analytical aspects of underwriting – our ability to pull in various data sources, externally as well as from business owners, to make quick and efficient decisions. We’re big on big data,” Mages said.

“We’ve got machine-based learning helping make credit decisions that can position us to figure out if we can fund the business in 24 to 72 hours.”

Small businesses going to other sources of capital could wait 30 to 90 days for an answer, he said.

“If they own a restaurant and the oven breaks and they need $60,000, they can’t wait 30 days. They’re going to open Friday and people will be coming to eat and they have to be up and running. So that’s really our unique value proposition to small businesses.”

Most of Expansion Capital’s business customers generate less than $10 million in annual revenue, Mages said. They’re required to have been operational for at least six months.

“What really created this unique opportunity was the regulatory environment and oversight that has effectively restricted banks’ ability to assume the level of risk in the small-business sector,” he said.

According to the Inc. 5000 list, Expansion Capital ranked No. 802 for growth nationally among companies that participated in the report, with annual revenue of $23.4 million and 627 percent growth since 2014.

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Expansion Capital is a welcome and needed addition to the market, said the company’s attorney, Amy Arndt, managing partner of Ballard Spahr LLP’s Sioux Falls office.

“There has been a significant lack of access to capital for small businesses throughout the United States, and this company has made significant strides to meet this gap and is expanding and doing great things in South Dakota,” she said. “South Dakota’s banking environment is drawing these types of businesses into the state, and it is benefiting many different sectors.”

The company makes loans to a range of industries from trucking and logistics to restaurants and medical offices, Mages said.

“Fifty percent of the capital has to go toward a growth initiative. That’s pretty critical,” he said. “That mind-set has served us well from a performance standpoint, and it’s served our customers well.”

Expansion Capital’s CEO is Vincent Ney, whom Mages calls a serial entrepreneur. He’s splitting time between Sioux Falls and Texas.

“He’s a CPA by training who got involved in various small businesses over his career, owned an advertising agency and was involved in an energy company, owned dry cleaners and has done some real estate and financial services more broadly,” Mages said. “He understood what small-business owners experienced because he was turned down numerous times by banks because he was too early stage or not the right profile, so having lived and breathed it, he understood what small-business owners go through.”

Expansion Capital has an office at 5020 S. Broadband Lane.

“Our growth plans in the next three to five years are to double or triple,” Mages said. “If we hit our objectives, we could easily be at 90 to 120 people.”

Positions include a core underwriting department, information technology department and a growing sales team.

“Sioux Falls has been fabulous,” Mages added. “The state and business community have been great to work with. We’ve been able to grab talented people with strong track records who wanted to be more entrepreneurial.”

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Under-the-radar fintech company charts fast growth

The recently released Inc. 5000 list of fastest-growing companies had a surprising second-place finisher in South Dakota this year: Expansion Capital Group, which has quietly grown into a 65-person operation based in Sioux Falls.

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