Online Lender SoFi Seeks $500M In New Funding, Projects Profit Soon

Social Finance is reportedly seeking $500 million in new funding to help it expand nationally and go after mass-market borrowers.

The Wall Street Journal said it reviewed a presentation that the San Francisco-based online lender is making as it tries to attract one of the largest private company fundings of the year.

The Journal cited unnamed people it said are familiar with the matter who said a round is likely weeks away from being completed. It said it couldn’t determine who is leading the investment nor the valuation that SoFi is seeking.

The company, led by CEO Mike Cagney, an Upstart 100 honoree this year, is already the top-funded startup in the fintech sector. It raised more than $1 billion from investors who include Baseline Ventures, Discovery Capital, Morgan Stanley, DCM Ventures and former PayPal CEO Peter Thiel. Most of that funding came in a huge round led by Softbank Group last year that valued the company at nearly $4 billion.

But the sector was roiled earlier this year by slowing growth as money managers who back the loans made by alternative lenders became concerned about credit quality and turned to higher-yielding alternatives. Then a loan-disclosure scandal forced the exit of LendingClub’s founder and CEO, reinforcing those concerns.

Technology provider Orchard Platform reported that there was a 34 percent decline in industrywide loan volume between the second and first quarters,

The Journal reported in July that in the face of these trends, SoFi was considering applying for a banking charter in Utah, offering deposit accounts and credit cards and partnering with a large financial institution.

The company was built on making loans to students, primarily those with clean credit histories that it refers to as “Henrys,” or “high earners not rich yet.” Now it is looking at lending to prime borrowers with slightly lower but still good credit scores, according to the Journal.

Quoting from the presentation to potential investors, the Journal said SoFi told them, “Between Brexit impacting U.K. student loans to the insatiable demand for [euro]-denominated assets, the macro tailwinds support European expansion.”

Financial disclosures that also reportedly come with the presentation show SoFi expects to be profitable this year. Its adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, are projected to be $81.3 million in 2016 and $262.5 million in 2017. It said in the presentation that it lost $2.8 million in 2015, by that measure.

The company also reportedly said it expects $357.4 million in revenue in 2016 and $638.1 million in 2017, up from $114.7 million in 2015.

It this is true, SoFi is on track to pass LendingClub in revenue. Analysts project that San Francisco company’s (NYSE:LC) revenue to be $469.7 million in 2016 and $569 million in 2017.

Source: Silicon Valley Business Journal, Cromwell Schubarth
Photo: Mike Cagney, CEO of SoFi, is reportedly projecting that the online lender’s adjusted earnings will be in the black soon. That projection comes from a presentation he has made to investors that he is seeking $500 million in new funding from. (Todd Johnson, San Francisco Business Times)