The North Carolina bank deployed Finxact's new technology, which runs on Amazon Web Services, to make Paycheck Protection Program loans and will use it next to offer business savings accounts and CDs.
The company, which has yet to turn a profit since it was spun off from Live Oak Bank, said it would use the proceeds for working capital and possibly to make acquisitions.
Ludwig, a former regulator and CEO of Promontory Financial, and Mahan, the head of Live Oak Bancshares, say they want to back tech startups that support community banks. The ABA and ICBA are among the fund's investors.
The core-banking vendor won the investment and ringing endorsements from the trade group and several banks because its open system and cloud delivery could eventually challenge entrenched tech players.
Live Oak Bancshares became an SBA juggernaut by making loans, selling them and making more. With economic conditions changing, it is retaining more credits.
Building alliances with startups is the most affordable route for community banks that want to offer innovative services, but industry officials cautioned that they must be balanced with smart internal investments, too.
