Los Angeles-based SoLo Funds Raises $ 10 Million to Offer Alternative to Predatory Payday Lenders
SoLo Fund wants to replace payday lenders with a market-driven community model for personal loans, and now has $ 10 million to expand its business in the United States
Payday lenders offer short-term, high-interest loans to the most vulnerable borrowers, and their loan terms often trap borrowers in a cycle of indebtedness from which there is no escape.
About 80% of Americans don’t have enough savings to cover unforeseen expenses, and it’s this statistic that has made payday lending such a lucrative business in the United States.
Over the past decade, websites like GoFundMe and others have sprung up to provide a space where people can donate money to individuals or causes which in some cases serve to supplement donations. income of those most in need. SoLo Funds works as an alternative.
It is a market where borrowers can set their loan repayment terms and lenders can earn extra income while supporting people who need help.
The company funds tens of thousands of loans per month, according to chief executive and co-founder Travis Holoway, and loan volumes are increasing by about 40% per month, he said.
Although Holoway did not disclose the book value of loans traded on the platform, he said the company’s default and delinquency rates were lower than its competitors. “Our default rate is about three times the industry average, which is the payday lending industry that we are looking to disrupt,” Holoway said.
The company also offers some sort of default insurance product that lenders can purchase to cover losses they incur, Holoway said. This service, rolled out in April of last year, helped explain some of the explosive 2,000% growth the company experienced during 2020.
SoLo saw the most activity in Texas, Illinois, California, and New York, high population states and cities with the highest cost of living.
“Our borrowers are teachers… are social workers. When you live in these big cities where the cost of living is higher, they can’t afford the financial shocks that they might experience if they lived in. Dayton, Ohio, ”said Holoway.
While the company’s borrowers represent a cross-section of America, lenders also tend not to come from the demographics that a casual observer might expect, Holoway said.
About half of the loans on the platform are made by people Holoway has called strong lenders, while the rest come from less frequent users.
“A majority of [power lenders] have a university education and the majority of them tend to be white males. These are individuals who you might not think will be powerful lenders… They can make $ 100,000 to $ 125,000 a year, ”Holoway said. “They are looking to diversify their capital and deploy it to generate returns. And they are able to help people who otherwise would not be able to pay their groceries, pay their rent, or cover their transportation costs. “
Given the growth of the company, it is no wonder that investors like ACME Capital, with the support of America Impact Fund, Techstars, Effort catalyst, CEAS investments and more have joined the new cycle. previous investors like Western companies, Taavet Hinrikus from TransferWise, Jewel Burks Salomon from Google startups, Zachary Bookman from OpenGov, Richelieu Dennis of Essence Ventures and technological innovation accelerators also participated in the financing of the company.
“For too long there have been limited options for people in need of immediate help funds due to unforeseen circumstances, such as a change in schedules, unforeseen car problems or other cases, ”said Holoway. “Solo was created to provide safe and affordable options for borrowers who need cash fast, while creating a market for lenders to grow their capital and help community members in need. We believe that at the end of the day people are inherently honest and tend to be generous, and the growth of our platform is further proof that people want to do good in the world and make an impact.