Michael Slavin is the Founder and CEO of California-based Privlo, which recently launched in Texas.

Every week, we ask a Houston real estate professional for their thoughts on the top three stories from the week before. This week, we spoke with Michael Slavin, founder and CEO of Privlo, which recently launched in Texas.

Houston Agent (HA): Privlo’s launch into Texas was done largely on the catalyst of helping the underserved, specifically small business owners, freelancers, entrepreneurs, self-employed borrowers and retirees. What is it that keeps them out of the financing process?

Michael Slavin (MS): I would say a lot of time business owners have opaque incomes, which means if you look at their taxes you’ll see a lot of deductions from expenditures that were made to build their business. And, of course, that’s allowable by the tax code, and business owners want to deduct as much as they can so they don’t have to report a high income at the end of the year so they can pay less than ordinary income. But, what’s also happening, is they have a lot more income coming in than what their tax return from a company level reflect. At that point, what we do is jump in and analyze their cash flows over time to justify the amount they can afford.

We still adhere to federal guidelines, but we’re taking a more flexible approach.

HA: There is obviously risk involved in Privlo lending to borrowers with less stable incomes. What precautions does the company take to protect itself from borrowers who default and mortgages going into foreclosures?

MS: We are using somewhat of an empirical model where we can look at a vast amount of incomes from a number of different professions overtime and reasonably ascertain how long that income is likely to be around and vary. Using a reasonable amount of data we can determine what they’re capable of paying back on time. We find the process to be extremely logical as we’re not assuming much more risk than any traditional lender. And since we’re using private capital, as opposed to just selling loans to the U.S. Government, we have a lot more flexibility. So we combine the flexibility of private capital with data science to produce a much better result for these particular borrowers.

HA: What is it about Texas’ market that made you want to expand into the state? What market are you hoping to break into next?

MS: We love the state for several reasons. On the surface, it’s one of the largest states from an available market perspective; it’s roughly above 10 percent above available market, which is something we get excited about, because as we roll out more into the U.S. we’re naturally going to drift toward where there is the greatest amount of market concentration. Second, the economic story is very positive. Texas has several fundamental industries it’s focused on that have proved to be somewhat resilient, even in market downcycles. Also, the tax treatment has been very positive. You have a lot of corporate relocations happening and baby boomers slipping into retirement that like the tax treaments, so you have a really compelling growth story.

To your earlier question, how do you de-risk borrowers? The only way a borrower isn’t going to be able to repay their loan is if they leave their job for whatever reason. And if you’re focused on a market or state, in this case, with strong economic factors, it only helps our performance.