Despite struggling online lending market, Payoff lifts another round – TechCrunch

Payoff, a 7.5-year-old start-up from Costa Mesa, Calif. That provides loans to people looking to pay off their credit card debt, has just raised a lot of money and is looking to raise even more . According to a new filing with the SEC, the company raised $ 46.7 million in a round that is expected to close at $ 67.4 million.

The company previously raised $ 38.4 million from investors including FirstMark Capital, Great Oaks Venture Capital and Anthemis Group.

Payoff apparently targets millennials, with 10-minute quizzes to help users understand their financial ‘personality’, understand what their overall financial situation looks like, and assess the impact of financial stress on them.

The company has achieved a lot of results, especially thanks to a recent study it conducted that showed that 23% of 2,011 survey respondents had symptoms commonly associated with post-traumatic stress disorder related to their finances. . Among millennials, Payoff said, the number is 36%.

Beyond its content, Payoff offers loans ranging from $ 5,000 to $ 35,000, with terms of two to five years, and for fixed rates between 8 and 22% APR. Borrowers also have to pay a one-time fee of 2-5% when their loan is issued.

The gains appear to be moving away from “subprime” borrowers, the kind of loan that companies like LendUp lend at outrageous rates (although those rates drop with every loan paid off in full). Rather, it requires applicants to have a minimum credit score of 660 and a minimum credit history of three years. The borrowers are also limited to using the loans to pay off credit card debt.

As for the money that Payoff lends, much of it comes from Eaglewood Capital Management. According to the WSJ, Payoff secured up to $ 250 million in debt financing from the company last summer to increase its unsecured loan supply.

The online lending industry was hit hard in 2016. As Todd Baker, consultant to the financial services industry, recently told us, it only took one ‘hit’ in capital markets. last summer for banks, hedge funds and other institutions that provided capital to online lenders to get nervous about risk. When these lenders couldn’t offer them better rates on loan sales while remaining profitable, these investors “started looking for greener pastures,” Baker noted, adding that “Wall Street works when the going gets nervous.”

Baker expects that in order to survive, more online lenders may have to transform into the institutions they have promised to replace, either by becoming banks, buying or selling to banks, or entering into partnerships. with banks.

The gain already seems to be going in this direction. In January, he partnered with Moven, an institution focused on money management. Additionally, co-founder and CEO Scott Saunders told the Journal last year that the company hopes its content and quizzes help it grow into a wealth management organization over time.

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David A. Albanese