Debt-as-a-service provider Sivo wants to power the next generation of lending startups

A startup called Sivo wants to do for debt what Stripe did for payments: Make it as easy to access a debt facility as plugging into an API. And just as Stripe helped unlock a slew of new businesses thanks to the ease with which they could embed payments into their apps and services, Sivo wants to power a new generation of lending offerings.

Early returns have been positive: In just about three months since launch, Sivo has received about $4 billion in demand and actually signed $1.5 billion in term sheets from originators who wish to leverage its debt-as-a-service offering. And, according to founder and CEO Kate Hiscox, the company is in the process of onboarding 600 originators who are hoping to tap into its programmatic debt lines.

Securing and proving out a lending model

Historically, when a startup would launch to spin up a new credit or lending product, it would have to lend off its balance sheet, which meant raising money through equity financing and then using those funds to test out lending models and build some history.

Then, when they had enough data, they would go to a bank or some other financial institution to raise a debt facility. That process could take months as the bank would ask for reams of data, negotiate terms and create complicated legal agreements around the terms of the debt funding.

In contrast, Sivo’s debt offering has no warrants involved, no advance rates, arrangement fees, facility fees or big complex agreements, according to Hiscox. Instead, Sivo works sort of like a secured credit card. That is, when companies sign up, they open a business banking account through Sivo’s platform and deposit some amount of collateral to secure the initial debt limit.

Originators on the platform can configure their debt line to match the needs of their business, and then Sivo evaluates how their lending programs are performing through its banking product. If originators prove their models by hitting certain pre-defined KPIs, Sivo will then extend more leverage that they can borrow against.