Articles by deBanked Staff
Prosper Tightens Credit and Introduces HELOCs
November 14, 2018
Today, Prosper announced its third quarter financial results, showing that originations were $640 million for the quarter, down from $822 million last year. And net loss was $19.8 million, an improvement of $7.2 million from the previous year. The lending platform also announced today that it will launch a new digital Home Equity Line of Credit (HELOC) product in 2019.
“As Prosper continues to focus on meeting investors’ return expectations, we have tightened credit and increased borrower rates this year in a rising interest rate environment,” said David Kimball, CEO of Prosper. “We have also focused our efforts and resources on expanding our business beyond personal loans with the development of a new home equity line of credit product.”
Prosper’s new HELOC product will be offered in conjunction with banks and the company is currently working with bank partners and welcoming new ones, according to a company spokesperson. She could not give the names of any of the bank partners, although she said that Prosper’s role will be to deliver cost estimates for the product in a matter of seconds, as opposed to weeks that it might take a bank to make a decision about eligibility and terms for a HELOC. As for the underwriting process, the bank will dictate the underwriting criteria and Prosper will execute on them.
“We are taking advantage of our expertise in consumer credit and personal loans to build a product that removes the complexity and time-consuming barriers in applying for a HELOC,” Kimball said. “For many of our customers, a HELOC could be a better choice for their financial needs and we’re thrilled to be working with our bank partners to render the traditional process obsolete with a new digital HELOC process that is simple, fast and painless.”
How will Prosper make money from these HELOCs? Prosper will charge the banks a fee for every deal that originates through Prosper’s platform, according to the company spokesperson. Founded in 2005 and based in San Francisco, Prosper makes personal loans from $2,000 to $40,000 to prime customers, with loan terms up to five years. At the Money 20/20 Conference in October, Kimball spoke about his openness and his approach to working with banks.
“You don’t go in the thinking [the bankers] are stupid,” Kimball said. “Assume that you have a really good partner.”
To date, over $13 billion in personal loans have been originated through the Prosper platform for debt consolidation and large purchases such as home improvement projects, medical expenses and special occasions.
SoFi Has Another Loss in Q3
November 12, 2018According to the WSJ, SoFi experienced a $12 million EBITDA loss in the 3rd quarter. That follows a $150 million loss in Q2.
“We optimized for investing over profitability this quarter, and expect this to continue given the opportunity in front of us,” SoFi CEO Anthony Noto wrote in a letter to shareholders obtained by the WSJ.
At Money2020 last month, Noto suggested that the company would eventually need to open physical locations to manage cash transactions.
Newtek Announces Growth in SBA Funding
November 8, 2018In its third quarter financial statements released yesterday, Newtek Small Business Finance, LLC (NSBF) announced that it had funded $122.4 million of SBA 7(a) loans during the three months ended September 30, 2018. This is an increase of about 18% year over year compared to $103.6 million in Q3 2017. The company forecasts full year 2018 SBA 7(a) loan funding of between $465 million and $485 million.
“We are extremely pleased to report yet another strong quarter, with double-digit year-over-year percentage growth,” said NSBF Chairman, President and CEO Barry Sloane.
GreenSky Reports Record High Volume
November 8, 2018GreenSky reported record high transaction volume in the third quarter of $1.4 billion, up 33% year over year, from $1.05 billion in 2017. It also reported a record net income of $46 million and its revenue increased 29% to $113.9 million year over year.
Based in Atlanta, GreenSky (NASDAQ: GSKY) provides loans for home improvement and healthcare, among other purposes, and it has funded $15 billion to consumers and businesses.
Square Capital Loaned $405 Million in Q3
November 8, 2018
Square Capital originated more than 62,000 business loans for a total of $405M in Q3, up from $390M in the previous quarter, according to the company’s latest earnings report.
By contrast, OnDeck, a Square Capital competitor, reported loan originations of $648M for the quarter. Both companies find themselves facing new competition from a growing field of tech players like Shopify (who last quarter originated $76.4M in merchant cash advances).
Thanks to an early investment in Eventbrite, the online events company that went public in September, Square turned its regularly scheduled quarterly losses into a profit in Q3. On the company’s earnings call, Square CFO Sarah Friar said that the company would have had a $17 million loss if it weren’t for a windfall related to the IPO of Eventbrite.
The big news that Square CEO Jack Dorsey had to share on the earnings call was the introduction of Square Terminal, a portable, all-in-one payment device that prints receipts.
“People don’t want to use their personal device to accept payments,” Dorsey said of many small business owners.
Dorsey said that this device is essentially meant to replace “those black rectangular boxes,” referring to the ubiquitous credit card processing machines which he described as “dinosaurs.”
Another theme of the earnings call was Friar’s departure from Square. Friar announced in October that she will be taking the job of CEO at Nextdoor, a social network. Dorsey thanked Friar for her contribution to Square and in a tweet expressed sadness that she was leaving. He said that a search to replace Friar is currently underway.
Dorsey also expressed pleasure with the continued success of Square’s Cash app, a peer to peer payments app that he said allows the “underserved and unbanked” to transfer money.
“I’m excited [about] what we can build on top of it,” Dorsey said.
Elevate Posts Loss in “Unexpectedly Challenging” Third Quarter
November 7, 2018Elevate reported a $4.2 million loss for the third quarter of 2018 and also lowered its outlook for full-year 2018 net income to between $10 million to $14 million.
“Despite strong year-to-date growth in revenue and stable credit quality, the third quarter of 2018 was unexpectedly challenging,” said CEO of Elevate Ken Rees in prepared remarks. “We experienced delays in rolling out new technology and credit models that are needed to drive continued improvements in credit quality for our US products. As a result of these and other issues, new customer acquisition and credit quality were both relatively flat with the prior year and anticipated improvements in margins were not realized.”
Rees also explained in the company earnings call that Elevate incurred unexpected costs in its UK operation related to an increase in complaints about its Sunny product, encouraged by UK claims management companies.
“We found many batches of complaints from claims management companies in which the majority of complaints that are made about Sunny, don’t even come from actual Sunny customers,” Rees said.
Still, year over year revenue did increase nearly 17% for the third quarter of 2018, totaling $201.5 million compared to $172.9 million last year at the same time.
The third quarter loss comes not long after a robust first quarter of 2018 which saw a 459% increase in net income year over year from $1.7 million in Q1 2017 to $9.5 million in Q1 2018.
During the third quarter earnings call, Rees announced an agreement between Elevate (NYSE: ELVT) and Utah-based FinWise Bank that will expand Elevate’s RISE product to an additional 18 states. According to Rees, FinWise will use Elevate’s marketing and underwriting expertise for the RISE branded loans that the bank originates. This is similar to Elevate’s current relationship with Republic Bank, which originates Elevate’s Elastic line of credit.
“FinWise clearly appreciates what we’ve built and wanted to take this established product and offer it to more consumers in more places,” Rees said. “This will not only offer more Americans more and better credit options, but it will also make marketing the RISE product much more efficient, spreading out the per-loan cost of national advertising,” Rees said during the earnings call.
At Money 20/20 this year, Rees conveyed that he’s an advocate for banks working with fintech companies and expressed an interest in working with more banks.
Elevate offers three products to non-prime customers: RISE, a state-licensed online lender that offers up to $5,000 in unsecured installment loans and lines of credit, Elastic, a bank-issued line of credit, and Sunny, a short-term loan product for customers in the UK. RISE and Elastic serve the US market.
Founded in 2014, the Fort Worth, TX-based company has originated $6.3 billion in credit to more than 2.1 million consumers.
LendingClub Hits Another Record for Originations
November 7, 2018LendingClub’s Q3 earnings report yesterday revealed a record high in loan originations of $2.9 billion, up 18% compared to originations of $2.4 billion last year at the same time. Consequently, revenues increased, also to a record high of $184.6 million, up 20% year over year.
“The strength of our marketplace is enabling us to responsibly grow revenues and expand margins in a competitive and rising rate environment,” said LendingClub CEO Scott Sanborn. “Our strategy in execution is focused on borrower demand generation and conversion, broadening our investor base with products that meet their diverse needs and driving operating efficiency.”
The veteran online lending company has been growing steadily with originations of $2.8 billion in the second quarter of this year. Regulatory challenges, namely an April 2018 lawsuit filed against LendingClub by the FTC for misleading language to customers, seem to be resolving and have not impeded the company’s growth.
In October, Sanborn spoke at the Money 20/20 conference about the connection between financial health and physical health and LendingClub’s goal of trying to improve both for its customers.
“LendingClub wants to become America’s financial health club,” Anuj Nayar, Lending Club’s newly minted Financial Health Officer, told deBanked at Money 20/20. In his new role, Nayar, who also serves as head of communications, will communicate and try to affect better financial health.
Lending Club offers fixed rate business loans from $5,000 to $300,000 and personal loans of up to $40,000. The company also offers auto refinancing. Founded in 2007, Lending Club is headquartered in San Francisco and went public on the New York Stock Exchange in 2014.
Payroll Costs Still Exceed Revenues at StreetShares
November 7, 2018
According to the June 30 fiscal year-end earnings report for StreetShares, the veteran-run small business lender, the company’s annual payroll expenses of $4,580,130 exceeded its annual revenue of $3,078,766.
StreetShares, which focuses on lending to veteran-owned small businesses, posted a loss of $6,559,702, more than last year’s loss of $6,193,154. But revenue did increase year over year, from $2,168,067 to $3,078,766.
“Our patient approach means we’re not going to be profitable for a couple more years,” StreetShares CEO Mark Rockefeller told deBanked back in January in response to the fact that the company’s losses from 2017 exceeded its revenues by about 4 million. “But it also means we’ll still be here in 50 years.”
The gulf between StreetShares’ losses and revenues is narrower this year, but still considerable. In January 2018, StreetShares completed a $23 million series B funding round led by Rotunda Capital Partners, LLC.
StreetShares offers term loans and business lines of credit from $2,000 to $250,000. This in an increase from last year’s maximum loan amount of $150,000. Loans can be repaid between three months and three years.
Founded in 2013 and based in Reston, VA, StreetShares now employs 46 people, up from 32 last year.
