Online lending startup AvantCredit, which is co-founded by two YC grads who previously worked on a personal finance app but saw greater opportunity in providing loans online to middle class, near-prime lendees, has raised $20 million in a Series B equity-based funding round. The new $20 million adds to their $34 million (which included $25 million in credit facility) in funding secured back in April.
AvantCredit is like a lot of other online lending platforms out there, according to co-founder and Chief Risk Officer John Sun. He explained in an interview that there are a lot of online lenders who target prime borrowers, and a lot who target those with bad credit, but the middle ground is a place that’s largely been unexplored. AvantCredit’s innovation isn’t so much in having an original idea, then, but in pursuing a market of people who may occasionally forget to pay bills on time with loans ranging from $1,000 to $20,000, with a payback period ranging from between one to five years.
“We primarily target what we call near-prime consumers,” he said. “It’s a totally online process, it takes about 10-15 minutes, and you’re either approved on the spot or it takes at max up to 24 hours to be approved, without having to visit a store or a bank or anything like that. You get money deposited into your account on the spot, and you can do all of this online without having to interact with a real-world loan store.”
“On the backend we’ve built quite a sophisticated suite of analytics technology that we use to be able to decision on these customers in real-time.,” Sun says. “That’s another challenge: how do you pull in the right amount of data, how do you sort out the relevant from the irrelevant data and how do you make decisions immediately. We believe we have a powerful foundation, and we’re continuing to improve that tech, too.”
Rates on these loans obviously aren’t going to be amazing; they range between 35 and 95 percent, which is a lot more than, say, a line of credit from a bank. But AvantCredit is targeting an audience that has likely been unable to secure a good rate through a bank because of their below-average credit status, or doesn’t have the kind of equity banks need to borrow against. Still, the opportunity is potentially huge, and the founding team previously built Enova, a Chicago-based online financial services company that’s thought to be mulling an IPO.
With this fresh round of funding from existing investor August Capital and Victory Park Capital, the firm wants to expand beyond its current availability in 16 U.S. states, as well as hire additional talent and improve its machine learning component. Sun says that no matter how good the automation gets for its product, however, it’ll retain a human element, lest the business of lending become completely removed from the people doing the borrowing.