LA-based SoLo Funds raises $10 million to offer an alternative to predatory payday lenders
SoLo Funds wants to replace payday lenders with a community-based, market-driven model for individual lending, and now has $10 million to expand its business in the U.S.
Payday lenders offer high-interest, short-term loans to borrowers who are at their most vulnerable, and the terms of their loans often trap borrowers in a cycle of debt from which there’s no escape.
Around 80% of Americans don’t have adequate savings to cover unforeseen expenses, and it’s that statistic that has made payday lending a lucrative business in the U.S.
Over the past decade websites like GoFundMe and others have cropped up to offer a space where people can donate money to individuals or causes that in some cases serve to supplement the incomes of people most in need. SoLo Funds operates as an alternative.
It’s a marketplace where borrowers can set the terms of their loan repayment and lenders can earn extra income while supporting folks who need the help.
The company is financing tens of thousands of loans per month, according to chief executive officer and co-founder Travis Holoway, and loan volumes are growing at about 40% monthly, he said.
While Holoway would not disclose the book value of the loans transacted on the platform, he did say the company’s default and delinquency rates were lower than that of its competitors. “Our default rate is about three times better than the industry average — which is the payday lending industry that we’re looking to disrupt,” Holoway said.
The company also offers a sort of default insurance product that lenders can purchase to backstop any losses they experience, Holoway said. That service, rolled out in April of last year, helped account for some of the explosive 2,000% growth that the company saw over the course of 2020.
SoLo has seen the most activity in Texas, Illinois, California and New York, states with large populations and cities with the highest cost of living.
“Our borrowers are school teachers… are social workers. When you live in those larger cities with higher costs of living they can’t afford the financial shocks that they could if they lived in Dayton, Ohio,” said Holoway.
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