Lendtable helps people max out their 401(k)s. So what’s the catch?

A fintech startup wants to give people cash to take advantage of employer match programs that might otherwise be out of their reach.

Lendtable co-founders Sheridan Clayborne and Mitchell Jones

Lendtable co-founders Sheridan Clayborne and Mitchell Jones want to people maximize their 401(k)s.

Photo: Siddhi Surana

Mitchell Jones grew up in a predominantly Black, lower-middle income community in Dayton, Ohio, where his parents taught him to get a good education and save his money. “I didn't have any money, so I tried to get a good education,” Jones said.

He found himself at Yale, which led to an internship at Goldman Sachs and his first exposure to investing, a newfound interest he was eager to share with his parents. But Jones soon found out that his parents had never invested the money they made over their 20-year careers.

They certainly weren’t alone. A quarter of Americans have no retirement savings at all. For some, it's likely because their employers don’t offer retirement accounts. But for others, Jones said, cash flow is a problem. “The average American is choosing to rationally pay for their student's education or put food on their table or have a roof above their head,” Jones said.

But in bypassing their 401(k)s, these workers can miss out on money their employers would have contributed to their retirement accounts. So last year, Jones and his co-founder Sheridan Clayborne, whom he met through a mutual former colleague, launched Lendtable, a startup that helps people maximize their 401(k)s by giving them cash advances to offset the money they’re storing away. The company then takes a percentage of the money employers contribute.

The two co-founders — both in their 20s and decades away from retirement themselves — view Lendtable as a way to help cash-strapped employees prepare financially for retirement. Lendtable is part of a growing wave of fintech startups creating new financing models that are more accessible to the average consumer, and recently raised an $18 million funding round with participation from the SoftBank Opportunity Fund.

But consumer finance protection advocates fear that what Lendtable is pitching could make it so people who are already struggling financially end up in over their heads. “Like anything, the devil is in the details, and if it sounds too good to be true, it usually is,” warned Brent Adams, senior vice president of Policy and Communication at the Woodstock Institute, a consumer finance protection nonprofit.


When an employee signs up for Lendtable, they use their 401(k) in the exact same way that they normally would, explained Clayborne. After the employee contributes a percentage of their paycheck, Lendtable replenishes that money with cash. The unique business model has attracted employees from companies like Microsoft, IBM, Google and Amazon, who can enroll in the program without their employers’ involvement.

But investors weren’t immediately sold on the idea. Most of them didn’t even understand that receiving the full 401(k) match was a real problem. “When you think of the prototypical VC, this isn't someone who's low-income. Their parents don't work at Walmart, they're not paycheck-to-paycheck,” Clayborne said. Clayborne himself said he skipped three grades of high school to “start building companies and making money” in order to help support his family, and enrolled in Northwestern University at age 15.

It wasn’t until a year after Clayborne and Jones founded Lendtable that VCs fully recognized the opportunity. Those VCs included SoftBank’s Opportunity Fund, a fund dedicated to investing in Black and Latinx founders.

At first glance Lendtable’s business model looks like any other loan, but unlike most loans, the startup doesn’t charge compound interest, doesn’t require collateral and doesn’t run credit checks. Instead, Lendtable makes money by taking a percentage of an employer’s 401(k) match. At the end of one year, Lendtable customers have to pay Lendtable back, plus up to 20% of the match customers receive from their employers. Lendtable also charges $5 monthly “good standing” fees to ensure customers’ bank accounts are active, which count against the balance customers owe.

For employees below the age of 59 and a half, the penalty to withdraw from a 401(k) is 10%. In the end, Clayborne said, that leaves employees with the vast majority of their employer’s match still left in their retirement accounts.

But experts say there are other fees to consider, including income taxes on early withdrawals — a fact that Lendtable does not disclose in its FAQs. The company also allows repayment of its fees via credit card. That has benefits, since it doesn’t require people to withdraw from their retirement accounts, but Melody Brue, a fintech analyst for the market research firm Moor Insights & Strategy, said this feature “can put someone in a bad situation, managing payments that could damage their credit if lack of disposable income was the reason for using Lendtable in the first place.”

Kirsten Hunter Peterson, a director at Fidelity, said a better option — for employees whose plans allow it, that is — would be to take out a 401(k) loan to repay Lendtable’s advance and fees. Those don’t involve penalties or taxes but do require repayment over time, with interest and fees that vary from plan to plan. “We see that as a more positive behavior” than taking out a withdrawal, she said.

Lendtable also offers other, more complicated ways to pay the company back — including converting a 401(k) account from pre-tax to post-tax or rolling it over into an IRA, both of which have fewer liabilities for withdrawals. And if all of that doesn’t work, “then we're happy to accommodate our users over a monthly cadence,” said a Lendtable spokesperson.

‘That’s a loan’

The seeming lack of transparency around fees is one reason that Woodstock Institute's Adams is skeptical of Lendtable’s business model. “There are many layers of complexity on this that are potentially harmful to consumers that are not transparent in the product as it's described,” he said.

Lendtable acknowledges not all of the fine details of its services are on its landing page, but says it would be difficult to generalize this information when it varies by customer. But it does provide customers with this information in contracts and as they move through Lendtable’s process, the spokesperson said.

Adams also disagrees with Jones and Clayborne’s insistence that Lendtable isn’t providing loans. “Our view of a loan is: If money is provided to a consumer with a promise for the money to be repaid, that's a loan,” he said. Lendtable says the company doesn’t make money when a customer doesn’t, making it different from a loan.

Whether Lendtable is or isn’t a loan is more than just semantics. Other business models, including income-share agreements and “buy now, pay later” have recently come under regulatory scrutiny for also claiming not to be loans. Adams argues that income-share agreements may have a stronger case for that claim than Lendtable does. In those agreements, he said, “If you don't earn any income, you don't pay it back.” With Lendtable, you do.

But Brue thinks Lendtable could offer more long-term and sustainable benefits to workers than those models, if done right. “If the company can make the economics work, it could be a real winner on many levels, affecting future wealth, access to other financial services, employee retention and more,” she said.

Clayborne believes that even with Lendtable’s fees, the overall benefits for employees are still net positive. “To be clear, prior to using our service, they were getting 0% of their 401(k) match,” he said.

In order to succeed, Lendtable needs to not just get the economics right for its customers, but it has to educate employees who have never used a 401(k) before, ingest thousands of different policies, verify that employees actually work at their companies and monitor their contributions.

And the company’s vision extends far beyond 401(k)s. It also has services related to employee stock purchase plans and retirement plans for nonprofits. In the future, the company wants to help workers maximize every type of financial benefit their companies offer. “Lendtable is the seed capital right now for your investing journey,” Jones said. He envisions Lendtable working with health savings accounts, unused paid time off and additional types of stock plan benefits in the future.

But as Lendtable grows, so too will the scrutiny surrounding it.


Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep ReadingShow less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep ReadingShow less
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep ReadingShow less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep ReadingShow less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.


Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep ReadingShow less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories