Fintech Lender Signals That Capital Markets Are Worried

Concern about the economy is real. Upstart, the publicly traded online consumer lending marketplace, is noticing such a shift that it felt compelled to publish a sneak peek of its Q2 earnings. And it’s not good.

“Inflation and recession fears have driven interest rates up and put banks and capital markets on cautious footing,” said Dave Girouard, co-founder and CEO of Upstart. Girouard followed that by saying that its marketplace is “funding constrained,” a challenge “largely driven by concerns about the macroeconomy among lenders and capital market participants.”

Originations in Q2 were down as a result.

Though the company is still optimistic that its risk models will perform, the economic headwinds come just as it was beginning to roll out its new small business lending product.

In May, Girouard said that their small business loan pricing model would include more than 500 variables about both the applicant and business.

“It will also feature our loan month modeling framework, which is one of the most impactful innovations added to our personal loan product a few years back,” Girouard said. “Our initial testing suggests that version 1 of our SMB model will deliver higher accuracy, as measured by Area Under the Curve, or AUC, than peer models that have been in the market for years.”

Upstart plans to publish its official Q2 earnings on August 8th. The price of its stock is down 93% since its all time high reached last October.